Earnings Report /
Egypt

Palm Hills Developments: 4Q19 results – A great quarter

    Al Ahly Pharos Securities Brokerage
    25 February 2020

    Sales surge annually and sequentially

    • Sales in 4Q19 surged 159.1% y/y and 228.6% q/q to EGP6.8 billion, taking FY19 sales to EGP14.9 billion, 19.6% higher than FY18 sales, 6.5% higher than the company’s FY19 sales target, and 49.1% higher than our FY19 sales estimate. Sales in FY19 were mostly supported by Badya, The Crown, Palm Hills Alexandria, and Palm Hills New Cairo.
    • The increase in sales, coupled with the sequential increase in deliveries, led to the 47.4% y/y and 135.7% q/q rise in 4Q19 revenue (the land portion of sales is immediately recognized as revenue). Gross profit and net profit followed suit, both exhibiting annual and sequential jumps. GPM reached 33.9%, higher y/y but lower q/q, while NPM reached 11.6%, higher y/y and higher q/q.
    • Receivables increased from EGP17.9 billion at the end of 3Q19 to EGP21.3 billion at the end of 4Q19. Net debt decreased from EGP2.7 billion at the end of 3Q19 to EGP1.7 billion at the end of 4Q19.

    Targeting stable sales in FY20

    Palm Hills Developments (PHDC) is targeting FY20 sales similar to FY19 sales of EGP14.9 billion. This seems to be the general direction Egyptian real estate companies are taking this year with their targets: flat y/y growth in FY20. Our EGP3.53/share valuation assumes a FY20 sales forecast of EGP7.4 billion. 

    Maintain Overweight

    We maintain our Overweight recommendation of PHDC based on our FV of EGP3.53/share.