Amer Group (Amer) reported its 1Q16 financial and operational results. Reported revenue was healthy, driven by accelerated deliveries across Amer’s retained projects (post the spin-off of most real estate operations to Porto Group), but margins were weak, which we attribute to unfavourable delivery mix. Net income was up 48% Y-o-Y, helped by EGP38mn worth of gains from FX, excluding which net income would have fallen 10% Y-o-Y. Amer’s restaurants and Porto Vacation Club showed decent improvement, while the hotels and malls divisions continued to be weak. Balance sheet remains highly unleveraged, with the quarter closing with a net cash position of EGP263mn, despite the newly-raised debt. Land liability dropped, following the pay-off of a large portion of the Porto Heliopolis land. Going forward, Amer aims to pursuit further land acquisitions, with “good progress” made on the matter, according to management. Amer is also planning to expand Porto Vacation Club outside of Egypt, with plans to extend the offering to Dead Sea.     Main positives: Revenue grew 18% Y-o-Y to EGP544mn, driven by higher revenue from real estate division. Revenue from real estate reached EGP442mn (81% of total revenue, +18% Y-o-Y) on deliveries across retained projects, namely: Porto Marina, Porto Sokhna, Golf Porto Marina, Gold Porto Sokhna, Porto Matrouh, Porto Sham, Porto South Beach and Porto Marina Residence Despite the rise in total debt (49% Y-o-Y to EGP275mn), the company continues to hold a net cash balance of EGP263mn, available for investment and/or distribution. Raised debt was utilised to finance the acquisition of Genwa for Touristic Investment as well as the due payments related to Porto Heliopolis land Decent drop in land liabilities to EGP286mn from EGP396mn in December 2015, on the back of repayment of a big portion of Porto Heliopolis land   Operating profit for the restaurants segment was in the black, reporting EGP1.4mn in operating profit (1Q15 operating loss of EGP1.6mn), driven by 18% growth in revenue to EGP53mn (10% of revenue), which management attributed to increased marketing and operational efforts Porto Vacation Club starting to show profits, with net income before tax at EGP9.2mn (comparative figure in EGP13.6mn in 1Q15)                                                                                              Main negatives: Lower contracted sales number in 1Q16, at EGP172mn, down 42% Y-o-Y on depleting inventory   Gross margin dropped by 11pps to 25.5% in 1Q16, which we attribute to an unfavourable delivery mix at the company’s real estate division Operating losses from hotels widen, to EGP7.3mn (EGP5.4mn in 1Q15), despite 48% Y-o-Y growth in revenue to EGP17.1mn (3.2% of revenue). Management attributed the rise in operating costs to the opening of two new hotels, increased utilities and maintenance costs Operating losses from malls, of EGP4mn, versus operating income of EGP7.1mn in 1Q15 on 18% drop in revenue to EGP12.6mn (2.3% of total revenue), which came mainly on the back of lower occupancy rates (1Q16: 62%, 1Q15: 73%) Net income was helped by EGP38mn worth of gains from FX (EGP13mn in 1Q15), with reported growth at 48% Y-o-Y to EGP68mn, excluding which net income fell by 9.6% Y-o-Y. We note that c58% of Amer’s cash balance is USD-denominated, which triggered the FX gains. (Company disclosure, Mai Attia, Sara Boutros)