Porto Group (Porto) reported its financial and operational results for 2Q16. Contracted sales met our estimate, coming in at EGP628mn and showing a sequential improvement over EGP446mn recorded in 1Q16. Reported revenue missed our estimate by 34% to reach EGP231mn in 2Q16 and EGP422.2mn in 1H16, putting our EGP1.3bn estimate at risk. Gross profit margins were maintained at c35%, while EBIT margin was squeezed (-570bps) on a 31% Q-o-Q hike in S,G&A. Porto reported net loss for the quarter, pressured by the hike in S,G&A and lower interest income and a large minority interest charge.   Key positives: Contracted sales figure for 2Q16 meets estimate, coming in at EGP628mn (EFGe: EGP600mn), with sales coming from Porto October, Porto New Cairo, Porto Island, Porto Matrouh, Porto Lagoons and Porto Pyramids. 1H16 figure is EGP1.1bn (full year 2015 was EGP2.3bn). Number of units sold in 1H16 was 660, implying 393 units in 2Q16. Sale of primary homes contributed c70% of total sales in 1H16 and 2Q16. We expect EGP2.8bn for 2016e, helped with the launch of Heliopolis Housing in 2H16 Gross profit margin was maintained, at 35.4% (1Q16: 35.8%)   Key negatives: Weaker-than-expected revenue, at EGP230mn, missing our estimate of EGP350mn by 34%, albeit showing a 21% Q-o-Q rise. 1H16 revenue is at EGP422.2mn, which puts our EGP1.3bn estimate for the year at risk. 184 units were delivered in 1H16, implying 102 units in 2Q16, up from 82 units were delivered in 1Q16, albeit lower than our estimate   Rising SG&A expenses, +31% Q-o-Q to EGP60.9mn, putting pressure on EBIT margin (2Q16: 7.9%, 1Q16: 13.6%, EFGe: 14.0%, 1H16: 10.5%) Income before minority interest was EGP15.6mn down from EGP27.8mn in 1Q16, reflecting the sequential weakness in EBIT and on lower interest income (-57.3% to EGP5.9mn) Reported losses after minority interest of EGP0.2mn in 2Q16 (1Q16: EGP28.3mn, EFGe: EGP35.0mn, both in profits), whereby minority interest eroded all profits made during the quarter (Earnings release, Mai Attia, Sara Boutros)   Porto Group: EGP0.31 as of 16 August 2016, Rating: Neutral, FV: EGP0.28 per share, MCap: USD159mn, PORT EY / PORT.CA