Palm Hills Developments (PHD) management (Yasseen Mansour, Chairman and Tarek Abdel-Rahman, Co-CEO) held a conference call to discuss 1Q16 results. Below are the main highlights from the call.
• New accounting standard applied in 1Q16 PHD has adopted the percentage of completion method in 1Q16 for the recognition of revenue from villas and standalone units, as per the recent amendments in the Egyptian Accounting Standards (EAS), which would allow for smoother revenue recognition, in management’s view.
• 2016 outlook: three new major launches, finalising a new land acquisition Three major launches are planned before year-end: i) 2.1mn sqm project in partnership with NUCA (East of Cairo), expected to be launched in 4Q16, for which the master plan is set to be finalised before the end of 2Q16; ii) 600,000 sqm project in the North Coast, planned to be launched this summer; and iii) Phase II Palm Hills Katameya Extension (185,000 sqm project). Management is also looking to launch Phase II (700 units of total 2,500 for the project) of Capital Gardens, with a chance to launch Phase III as well during the year. A new land acquisition (150-200 acres) in West Cairo is expected to be finalised soon, this will be an extension to the company’s flagship project, Palm Hills, in Sixth of October city. Following the acquisition of this land plot, management believes that its land bank would be sufficient for four years, targeting sales growth of 30% per annum.
• Guidance for 2016 sales raised to EGP7bn The guidance for contracted sales has been raised to EGP7bn (versus EGP6.5bn); while guidance for units’ deliveries is 1,600 units (377 units were delivered in 1Q16, versus 256 units in 1Q15). Management is still committed to its dividend pay-out policy, which remains unchanged at 40% of free cash flow.
• Decent progress made on recurring income Share of recurring income has grown to 11% of net income, mainly derived from PHD’s club and hotel portfolio. This comes in line with PHD’s target of deriving 25% of net income from recurring income streams by 2020. Latest developments has been encouraging with 81% of the rental space at Street 88 mall (West Cairo) leased out, with a revenue backlog of EGP29mn. At Street 88 mall, two tenants have officially commenced operations, while the others are set to commence operations before year-end. Indicative interest has been received for 70% of Phase 8 Office building gross leasable area (GLA). Two malls in East Cairo are under development (VGK and Village Gate) with interest received for c52% of the available GLA in VGK, implying a revenue backlog of EGP163mn.

Mai Attia
Sara Boutros