• A single launch during the quarter; contracted sales of EGP673mn Net contracted sales were weak in 1Q16, coming in at EGP673mn, albeit higher than our forecast for the quarter (EGP500mn). New launches were limited to a single launch (at the Courtyards), explaining the expected and the reported weakness. We note that management is guiding for EGP4.9bn in contracted sales in 2016e (+11% Y-o-Y), while our numbers incorporate EGP4.6bn (+5% Y-o-Y); thus, implying a much-better outlook for the rest of the year. Cancellations were high, at 8%, but we note that management clarified that two returned units at Villette explained c26% of the total cancellations reported in 1Q16. On a more positive note, cash collections continued to be healthy, coming in at EGP662mn, above the trailing eight-quarter average by 19% and the trailing four-quarter average by 11%.
• Weak reported figures on low deliveries 1Q16 revenue was weak (EGP187mn, -34% Y-o-Y, -68% Q-o-Q, -48% vs. EFGe, -56% vs. Bloomberg consensus estimate), on limited unit deliveries during the quarter. Gross profit margin (GPM) was decent despite the slight drop, averaging 41.3% in 1Q16 (-371bps Y-o-Y, with 1Q15 GPM boosted by the delivery of three high-margin in Allegria, -184bps Q-o-Q). Net income missed estimate, coming in at EGP51.2mn in 1Q16 (-32% Y-o-Y, -35% Q-o-Q, -27% vs. EFGe, -42% vs. consensus estimate), as a result of lower-than-expected revenue recognition. We expect deliveries in Eastown, started in 2Q16, to drive revenue growth during the rest of the year. Our numbers incorporate EGP1.82bn in revenue, 33.9% in GPM and EGP321mn in net income for the full year.
• SODIC continues to be our top pick in Egypt SODIC continues to be our favoured name within our coverage universe in Egypt. The stock has outperformed its local peers YTD (SODIC: +13%, peers: -10%), which we believe is justifiable, given its leading position vs. its peers, in terms of the pace of land bank monetisation. 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).

Mai Attia
Sara Boutros