Flash Report /
Egypt

Orascom Development Egypt: Management webinar key takeaways

  • Hotels continue to face challenging times

  • Real estate continues to do well

  • ORHD is planning to push aggressively with real estate sales in FY21

Al Ahly Pharos Securities Brokerage
17 January 2021

Hotels continue to face challenging times

  • Making use of the Central Bank of Egypt’s program to support the tourism sector, ORHD pushed EGP380.0 million in 1H20 interest and principal payment forward, opened a USD50.0 million credit line at the 8.0% preferential interest rate to be used over the next two years to renovate hotels, and is looking into the 5.0% interest rate financing option to fund working capital.

  • In November 2020, ORHD signed a USD265.0 million seven-year term loan to refinance existing debt, securing a grace period of 2.5 years.

  • With the hotel occupancy cap still at 50.0%, occupancy rate in El Gouna reached 45.0% in October 2020, 26.0% in November 2020, and 32.0% in December 2020.

  • With the Covid-19 situation currently still in place, the company is going into tight cash burn rate management mode.

  • In Taba Heights, the company has gone into hibernation mode, with only very limited capacity open for local visitors, but is simultaneously making sure to have Taba Heights up and running at full capacity quickly when circumstances improve and tourists return.

  • The company is planning over the next couple of years to reduce its dependence on tour operators to mitigate the negative effect of cyclicality when times are tough. Its current dependence on tour operators is 70.0%-80.0%.

  • The company is focusing on its town management revenue segment given it is cycle-independent.

Real estate continues to do well

  • ORHD did better in 4Q20 sales, compared to 4Q19 sales which had recorded EGP1.4 billion.

  • The company will continue to increase its selling prices across all its destinations.

  • The company expects real estate revenue to continue to take up the largest portion of total revenue in FY21. Real estate represented 59.0% of total revenue in 9M20.

  • The company is accelerating its construction pace across all its destinations. The benefits of delivering ahead of time lie in the speedy activation of a destination and the ability to increase selling prices even more aggressively.

No extension in installment schedules

  • The company still maintains its five-year payment plan and two-year delivery schedule in El Gouna, with the collections of the first two years almost entirely covering cost.

  • The company still maintains its eight-year payment plan and four-year delivery schedule in O West, with almost 55.0% of the unit’s value collected by the time of delivery.

  • The company offers a seven-year payment plan and four-year delivery schedule in Makadi Heights.

More launches coming up in FY21

  • ORHD launched a phase in El Gouna in December 2020, with more launches expected in El Gouna, O West, and Makadi Heights throughout FY21.

  • The company does not intend to sell raw land in its destinations, but will do so only in cases that provide an opportunity to accelerate the reaching of critical mass in a destination or in cases that bring in a partner to offer particular facilities.

  • In similarity to FY20, ORHD is abstaining from providing FY21 guidance because of the variability of circumstances, but the company is planning to push aggressively with real estate sales in FY21.