• Robust operating metrics with contracted sales of EGP1.4bn SODIC reported strong 3Q16 contracted sales of EGP1.4bn (+66% Y-o-Y, +17% Q-o-Q, in line with EFGe). 9M16 contracted sales reached EGP3.3bn (+11% Y-o-Y). Two new launches took place in 3Q16, the final phase of Caesar and a new phase at Villette. 55% of 3Q16 sales were from projects in East Cairo, 27% from Caesar, and the rest came from SODIC West. Cash collections continued to increase, up to EGP778mn in 3Q16 (+56% Y-o-Y, +12% Q-o-Q), bringing 9M16 total to EGP2.1bn (+27% Y-o-Y). Cancellation rate was down to 4%, from 7% in 2Q16 (3Q15: 6%). Management indicated that returned units were sold back at better margins. SODIC continues to be one of our top picks, with our FV implying 26%, even after its recent stock outperformance.
• Strong revenue, but signs of margin weakness Revenue came in at EGP530mn (+74% Y-o-Y, +22% Q-o-Q, EFGe: +25%) and EGP1.15bn in 9M16 (+29% Y-o-Y). 286 units were delivered in 3Q16 (3Q15: 151, 2Q16: 201) bringing 9M16 total to 588 units, of which 32% were in Eastown (9M15: 425 units). Management target to deliver 935 units in 2016. Net income came in at EGP108.1mn (+38% Y-o-Y, +12% Q-o-Q, EFGe: +41%) and EGP256.3mn in 9M16 (+14.3% Y-o-Y). Net cash (as of September 2016) was EGP1.0bn (June 2016: EGP847mn), a reflection of its healthy cash collection.
• No new launches till year-end; majority of launches expected in 2H17 We expect a limited number of launches for SODIC in the ST, with most projects to be launched towards 2H17; most prominently the 30-acre project (West of Cairo) and the co-development project with Heliopolis Housing (East of Cairo). We estimate selling prices to increase c20% in 2017 on its overall project portfolio, to pass on the rise in construction costs. However, this might be at the expense of extending payment terms and/or smaller unit sizes offered. We estimate contracted sales of EGP5.0bn in 2017 (+9% Y-o-Y). As for land acquisitions, we do not expect any acquisitions until mid-2017, at least, pending clarity on market dynamics. Moreover, we expect the revenue-sharing model to appeal more to the company, especially given our expectation of rising land costs and higher cost of funding.

Mai Attia
Sara Boutros