Stable real estate sales and higher bottom line
ORHD reported stable 1Q22 sales of EGP2.0 billion, down 3.6% y/y and down 32.0% q/q. Out of 1Q22 sales, El Gouna contributed EGP861.8 million, O West contributed EGP1.0 billion, and Makadi Heights and Byoum contributed EGP146.9 million. Number of units sold in 1Q22 decreased 25.1% y/y and 44.1% q/q to 266 units. Average selling price in 1Q22 increased 27.1% y/y to EGP77,355/sqm in El Gouna, 17.7% y/y to EGP33,336/sqm in Makadi Heights and Byoum, and 21.6% y/y to EGP34,753/sqm in O West.
Hotel revenue in 1Q22 reached EGP260.6 million, up 173.7% y/y and down 23.4% q/q, driven by an occupancy rate in El Gouna of 61.0% in 1Q22 compared to 26.0% in 1Q21 and 69.0% in 4Q21 and an occupancy rate in Taba Heights of 10.0% in 1Q22 compared to 4.0% in 1Q21 and 13.0% in 4Q21. 1Q22 ARR increased 13.5% y/y to EGP1,313 in El Gouna and increased 39.5% y/y to EGP470 in Taba Heights. Foreign tourists represented 54.0% of occupied hotel space in El Gouna in 1Q22. We forecast FY22 hotel revenue of EGP1.2 billion in our EGP10.77/share valuation.
Real estate revenue increased 18.1% y/y to EGP1.4 billion in 1Q22, supported by accelerated construction, and town management revenue increased 50.5% y/y to EGP276.1 million in 1Q22, supported by destination events, bringing 1Q22 total revenue to EGP1.9 billion, up 32.3% y/y and down 10.3% q/q.
Gross profit in 1Q22 reached EGP681.1 million, up 18.5% y/y and up 11.6% q/q, translating into a GPM of 35.3%, lower annually and higher sequentially.
Net profit in 1Q22 increased 2.7% y/y and 377.9% q/q to EGP420.1 million, despite FX losses of EGP105.0 million given EGP devaluation, giving way to an NPM of 21.7%, lower annually and higher sequentially.
Real estate cash collections increased 27.6% y/y to EGP1.4 billion in 1Q22.
Real estate receivables decreased from EGP18.5 billion at the end of 4Q21 to EGP17.2 billion at the end of 1Q22.
Net debt increased from EGP322.9 million at the end of 4Q21 to EGP594.4 million at the end of 1Q22 given EGP devaluation since ORHD’s debt is mostly foreign currency-denominated.
According to ORHD, despite current uncertainties such as the Russian-Ukrainian conflict, there are no signs of material impact on the company’s operations. Egyptians represent more than 46.0% of ORHD’s hotel occupancy, and foreign tourists mainly come from Western European countries, with demand from ORHD’s German target market for El Gouna expected to increase. ORHD plans to renovate some hotels in FY22 to attract higher ARR clients, with The Chedi set to be operational in 2H22. Flights from Poland to Taba Airport resumed in 2Q22, paving the way to better performance in Taba Heights. ORHD also plans to continue expediting the construction of real estate units to mitigate any potential inflationary effect on costs and plans to continue increasing average selling prices across all destinations to absorb any expected escalation in costs. We maintain our Overweight recommendation based on our FV of EGP10.77/share given stable sales performance and solid recurring income.