• Raise our FV on potential increases in land prices We expect land prices to rise over the coming few months to reflect the current inflationary pressure and continued scarcity of premium located land plots. We raise our assumed selling price for the company’s land bank: New Heliopolis (22.8mn sqm) by 22% to EGP1,100/sqm, Heliopark (4.3mn sqm) by 50% to EGP3,000/sqm, and plots in Heliopolis (2.5mn sqm) by 40% to EGP3,500/sqm. Thus, we raise our FV to EGP99.0 (from EGP75.3).
• Assume no change to assigned discount-to-NAV We maintain our assigned discount-to-NAV at 70%, in line with the average cycle discount, which carries a potential for an upgrade, in our view, pending further clarity on Egypt’s economic outlook and thus the fundamentals of the real estate sector. Moreover, the successful launch of the co-development project with SODIC, set for 2H17, will also likely warrant a lower discount-to-NAV; so would the start of talks of similar agreements with other developers, further confirming its migration to the more common off-plan business model, which would trigger faster monetisation. It is worth noting that it might increase its dividend payments following the launch of its project co-developed with SODIC, where we estimate additional cash inflow of EGP240mn per annum.
• A preferred name within our Egypt real estate coverage universe Heliopolis Housing continues to be one of our preferred names within our Egypt real estate coverage universe. Its low cost, undisputed, large and appreciating land bank makes it an attractive investment opportunity, in light of increased market uncertainties. We also note that should the market regain further strength, leading to improved market activity, this would boost its ongoing migration to the new business model and thus warrant a lower discount-to-NAV, implying further upside to our valuation.

Mai Attia
Sara Boutros