• New FV set at 0.7x 2016e NAV; maintain Buy rating Our new fair FV for Emaar Misr of EGP3.65 offers 65% upside, and thus we maintain our Buy rating. We have raised the assigned discount to our 2016e NAV to 30% (from 15% used to derive our previous FV of EGP4.40), and thus our FV has been cut 17%. We opt to use a higher discount to our calculated NAV to account for what we believe are currently more stable market conditions rather than expectations for further exponential growth in sector activity, with selling prices growing at annual double digits and contracted sales exponentially increasing annually.
• Sales remain strong; launches in Marina Residence and Uptown Residence key for 2016 In 2015, Emaar Misr managed to close the year with total contracted sales of EGP8.6 billion, according to the earnings release by its parent company Emaar Properties. We estimate contracted sales of EGP10.2 billion in 2016e and EGP10.1 billion in 2017e. We forecast that the increase in 2016e sales Y-o-Y will be primarily driven by sales in the Marina Residence (Marassi) and the launch of Uptown Residence (UTC). Both launches, target the high end of the market. Additionally, management has previously indicated that it will finalise the project development plan for Cairo Gate and launch sales, however, we have not included this in our numbers and thus this offers upside to our sales numbers should the project be launched in 2016.
• Execution of planned investment portfolio is key The investment portfolio, including hotel assets and properties in the lease portfolio, represent 16% of our valuation and hence are key to deriving our FV for Emaar Misr. We estimate a total investment cost of EGP14.4 billion (USD1.8 billion) to develop the company’s hotel assets and rental portfolio, which is scheduled to be spent over the coming eight to ten years. The major challenge that faces the company over the coming few years, in our view, is the actual execution of the plan given the huge size of investment and the current relatively challenging economic conditions in Egypt.

Mai Attia