Sales rise annually
TMGH achieved 1Q21 sales of EGP3.5 billion, up 55.8% y/y and down 23.1% q/q, mirroring the general real estate trend whereby 1Q usually witnesses a sequential decrease in sales due to the strength of 4Q.
Revenue in 1Q21 reached EGP2.9 billion, up 27.5% y/y and down 20.7% q/q.
Gross profit in 1Q21 increased 12.7% y/y and 18.5% q/q to EGP942.0 million, leading to a GPM of 32.2%, compared to 1Q20 GPM of 36.5% and 4Q20 GPM of 21.6%.
Net profit in 1Q21 increased 19.1% y/y and 334.8% q/q to EGP447.1 million, implying a NPM of 15.3%, compared to 1Q20 NPM of 16.4% and 4Q20 NPM of 2.8%. The sequential surge in net profit is the result of 4Q20 having witnessed an accounting adjustment that added a non-cash cost reflecting the discount on receivables of delivered units.
We maintain our Overweight recommendation of TMGH based on our FV of EGP16.22/share, which projects FY21 sales of EGP17.3 billion. Our sales forecast seems achievable especially in light of the upcoming launch of the company’s Capital Gardens project in possibly June 2021 which serves as a significant potential catalyst, given that this launch would be the inception of monetization of a project of considerable size (21.0 million sqm), comparable to that of the vast Madinaty (33.6 million sqm). If the Capital Gardens project is launched in June 2021 as expected, 2Q21 is positioned to be the year’s star quarter, since launches of brand new projects, as opposed to launches of new phases within existing projects, usually result in a sharp jump in sales, an example of which was the Celia launch in 2Q18 which had brought sales to EGP10.0 billion in a single quarter.