Earnings Report /
Egypt

SODIC: 4Q19 – Ending the year with a fantastic quarter

  • Sales beat our estimates

  • OCDI is targeting 15.1% y/y growth in sales in FY20. Board proposed the distribution of EGP0.55/share cash dividends

  • We maintain our Overweight recommendation of OCDI based on our FV of EGP29.87/share

Al Ahly Pharos Securities Brokerage
27 February 2020

Sales soar to impressive heights

  • Net contracted sales in 4Q19 surged 168.5% y/y and 516.6% q/q to EGP3.8 billion, supported by the launch of VYE and The Estates, taking FY19 net contracted sales to EGP6.7 billion, 29.5% higher than its FY18 counterpart, 34.0% higher than our FY19 sales estimate, and 6.9% lower than the company’s FY19 target due to the technicality of delayed permits for projects on the North Coast this past summer, affecting Malaaz which was part of the sales target. The company’s FY19 sales target excluding Malaaz would have been EGP6.5 billion, in which case its actual sales of EGP6.7 billion would have shown a 3.1% rise above the target.
  • Sales cancellation rate remained stable at 8.3% of gross sales in FY19, compared to 8.0% in FY18. Excluding the effect of Malaaz cancellations due to delayed permits for projects on the North Coast would translate into a lower cancellation rate of 6.5%.
  • Revenue in 4Q19 rose 8.9% y/y and 38.5% q/q to EGP1.9 billion. Net profit in 4Q19 rose 28.2% q/q to EGP215.0 million, compared to 4Q18 net loss of EGP162.9 million that had been the result of the SODIC West settlement. GPM in 4Q19 reached 25.6%, up y/y and up q/q, and NPM in 4Q19 reached 11.2%, up y/y and down q/q.
  • Net cash slightly decreased from EGP2.3 billion at the end of 3Q19 to EGP2.1 billion at the end of 4Q19, and receivables increased from EGP11.1 billion at the end of 3Q19 to EGP13.1 billion at the end of 4Q19.
  • Board of Directors proposed the distribution of EGP0.55/share cash dividends, implying an attractive DY of 4.4%.

Aiming for more

SODIC (OCDI) is targeting FY20 gross contracted sales of EGP8.4 billion, 15.1% higher than FY19 gross contracted sales of EGP7.3 billion, rendering OCDI the only listed Egyptian real estate company thus far to be targeting growth in FY20, compared to flat performance targeted by the rest of the sector. OCDI’s FY20 sales target of EGP8.4 billion includes Malaaz sales and excludes commercial sales, and, therefore, represents a 38.0% increase compared to FY19 residential sales. Our EGP29.87/share valuation assumes a FY20 sales forecast of EGP5.8 billion.

Maintain Overweight

We maintain our Overweight recommendation of OCDI based on our FV of EGP29.87/share.