• SODIC continues to be our top pick in Egypt We raise our FV 5% to EGP15.2/share as we adjust our contracted sale estimates upwards to account for more-frequent-than expected launches, particularly in Westown Courtyards. Our valuation is based on an unchanged 0.8x 2016e NAV, in line with the stock’s trailing five-year average. This is the lowest within our coverage, which we believe is justifiable, given SODIC’s leading position vis-à-vis its peers, in terms of the pace of land bank monetisation. SODIC, our top pick within our coverage in Egypt, was up 44% since March outperforming its peers. Positive stock triggers include: i) announcement of strong contracted sales numbers, starting 2Q16 and onwards; ii) acquisition of new land plots; and iii) launch of co-development project with Heliopolis Housing (expected in early 2017).
• Weakness in 1Q16 contracted sales to be offset in 2Q-4Q16 We expect weak contracted sales figure for 1Q16 (cEGP500mn) as the new launches during the quarter were limited to one at Courtyards (which we estimate at cEGP450mn). We expect such weakness to be compensated for during the remaining of 2016. In April, at Cityscape, SODIC showcased three new launches, with a combined value of cEGP900mn-1bn. Earlier this month, SODIC launched its final launch at Courtyards and additional launches in Villette, Forty West and the Terraces in Eastown. SODIC’s recent launches came with a limited seven-year payment term, which we believe should help contracted sales numbers. In 3Q16, SODIC is set to launch a final phase at its North Coast project, Caesar, which we estimate at EGP500mn. Other launches include further launches in Villette, Eastown, SODIC West, in addition to 30-acre project in West Cairo.
• Market unjustifiably discounts a bear set of assumptions We introduce bull-bear case scenario analysis. Our bull case (EGP24.1/share) assumes successful launch of co-development project with Heliopolis Housing in 2017, faster sales pace and no discount-to-NAV. Our bear case (FV: EGP10.3/share) assumes weaker operating environment; warranting lower sales pace and weaker price escalations, lower occupancy and rental rates at SODIC’s investment portfolio, in addition to higher discount-to-NAV of 40%.

Mai Attia
Sara Boutros