• Contracted sales to grow 20% Y-o-Y in 2Q16 We expect aggregate contracted sales for 2Q16 to grow a healthy 20% Y-o-Y, with a well-attended cityscape exhibition (held in April) and the companies’ new launches driving growth. We expect these two factors to more than offset a weak end to the quarter, with Ramadan falling in the last three weeks of it, leading to lower real estate activity.
• SODIC and PHD to score well on contracted sales growth SODIC had five launches in the quarter, which despite their relatively small sizes, are expected to help it bring-in the largest growth in contracted sales Y-o-Y (61%) within our coverage. Also, supporting its contracted sales growth is the extension of its newly-introduced seven-year payment plan to all its recent launches (was limited to one project in 1Q16, namely Courtyards). We also expect contracted sales of Palm Hills Developments (PHD) to show robust growth of 56% Y-o-Y, despite the absence of new project launches in 2Q16, owing to continued strong demand for its recently launched projects, Capital Gardens and Palm Valley.
• Reported numbers mostly weak, but no concerns on execution On reported figures, we expect the increased pace of deliveries in Emaar Misr’s Marassi project, typically high in 2Q before the summer months, to help its revenue and bottom line. For TMG, 2Q15 net income was hit by EGP288mn of notes receivable factoring expenses; thus we expect net income number to compare favourably Y-o-Y. On the other hand, we expect SODIC and PHD to show some weakness, but we dismiss any execution/delivery concerns. Such weakness can be mainly attributed to seasonality factors (Ramadan falling in 24 days of quarter, versus only 12 days in 2Q15), less favourable mix of delivered units for SODIC and the recording of EGP426mn of capital gains on investment property (a result of the sale of a land plot) for PHD in 2Q15. For Porto Group, we have no comparable numbers.
• Heliopolis Housing may surprise positively; ERC to post weak results Heliopolis Housing may surprise positively in 2Q16 if its planned factoring agreement, set to bring in EGP179mn in discounted cash (and revenue) was signed before the quarter’s close. ERC, on the other hand, is expected to show the weakest set of results, showing net losses, with expectations of no new land sales and minimal cash collections, if any, falling shy of the threshold for revenue recognition for older sales.

Mai Attia
Sara Boutros