• Expect weak contracted sales figure for 1Q16… Based on Emaar Properties’ 1Q16 release yesterday, we expect 1Q contracted sales for Emaar Misr of cEGP1.6 bn (AED683 mn, as reported), down 18% Y-o-Y. Nevertheless, we see limited risk to our 2016 contracted sales forecast of EGP10.2 bn, given our expectation of relatively stronger 2Q-4Q16 contracted sales numbers. We expect 1Q16 reported revenue of EGP800 mn (+7% Y-o-Y) and net income of EGP207 mn (+20% Y-o-Y).
• …but weakness should be offset by a better 2Q-4Q16 We expect Q2 contracted sales numbers to be supported by sales contracted at cityscape in April, which saw new launches across its development portfolio, complemented with a special payment terms package, “Grow.” Q3 numbers will be boosted by contracted sales at North Coast (Marassi), in line with the historical trends and particularly with the launch of Marina Residence. The launch of Uptown Residence (UTC) is planned for Q4 and is expected to lead contracted sales numbers in the quarter. A successful launch of Cairo Gate continues to represent upside risk to our numbers, should the project development plan be finalised and launched this year.
• Maintain Buy rating; strong fundamentals, comfortable upside We slightly raise our FV by 2.5% to EGP3.74, which implies healthy upside of 43%; we reiterate our Buy rating. We believe that Emaar Misr’s fundamentals are very strong, given: i) well-located land plots within its land bank, secured at good prices, and currently carrying limited land liability; ii) backing of the parent/sister companies, particularly once its ambitious plans for its investment portfolio kick-off; and iii) strong balance sheet, with room for leverage. We highlight the execution of the company’s EGP14.4 bn plan to develop and grow its investment portfolio as the company’s main challenge, given the size of the planned investment and the country’s increased economic challenges. Emaar Misr’s investment portfolio represents c16% of our valuation.

Mai Attia
Sara Boutros