Earnings Report /
Egypt

SODIC: Q2 20 review – Sales performance holds its ground

  • Sales in 2Q20 reached EGP1.0 billion, down 33.3% y/y and up 17.9% q/q, not bad given 1H20 challenges.

  • Decline in delivered units resulted in decline in revenue.

  • Company is on track to beat our FY20 sales forecast of EGP3.0 billion; maintain Overweight.

Al Ahly Pharos Securities Brokerage
12 August 2020

OCDI’s gross contracted sales in 2Q20 reached EGP1.0 billion, down 33.3% y/y and up 17.9% q/q, bringing 1H20 sales to EGP1.9 billion, down 25.8% y/y, not bad given the challenging circumstances in 1H20. Residential sales in 1H20 reached EGP1.8 billion, down only 1.6% y/y. Commercial sales in 1H20 constituted 3.2% of total sales, compared to 27.0% in 1H19, in line with the company’s strategy to keep commercial assets as recurring income sources. In addition to the sequential rise in 2Q20 sales, sales performance continued to improve beyond 2Q20, with gross contracted sales in July 2020 alone at EGP756.0 million, putting 7M20 sales performance on par with its 7M19 counterpart.

Sales cancellation rate declined in 2Q20 following the spike in 1Q20, with 2Q20 sales cancellation rate at 13.0% of gross sales, compared to 9.0% in 2Q19 and 22.0% in 1Q20. Sales cancellation rate dropped further to 10.0% in July 2020. Delinquency rate in 1H20 reached 13.0%, compared to 7.0% in 1H19, with the rate having increased y/y in 1H20 but decreased in June 2020 from April-May 2020 levels.

Revenue in 2Q20 reached EGP644.9 million, down 40.0% y/y and up 50.2% q/q, mirroring the 35.0% y/y decrease and 56.0% q/q increase in 2Q20 deliveries to 156 units. The annual decline in deliveries is due to the majority of FY20’s deliveries being scheduled for 2H20. Indeed, deliveries in July 2020 alone stood at 161 units, higher than the 156 units delivered in the entire 2Q20. GPM reached 32.7% in 2Q20, compared to 33.5% in 2Q19 and 26.5% in 1Q20, while NPM decreased to 6.2% in 2Q20 from 16.3% in 2Q19 and 6.5% in 1Q20.

Net cash decreased from EGP0.7 billion at the end of 1Q20 to EGP0.3 billion at the end of 2Q20. These net cash figures respectively exclude project maintenance deposits of EGP1.2 billion at the end of 1Q20 and EGP1.2 billion at the end of 2Q20. Receivables remained stable at EGP13.0 billion at the end of 2Q20.

Company is on track to beat our FY 20 sales forecast; maintain Overweight

OCDI’s 7M20 sales of EGP2.6 billion put it on track to beat our FY20 sales forecast of EGP3.0 billion incorporated in our FV of EGP17.11/share, especially given the likelihood of a better 2H20 compared to 1H20. We maintain our Overweight recommendation.