SODIC’s management (Magued Sherif, Managing Director and Omar El-Hamawy, CFO) held a conference call to discuss 1Q16 results. Following are the main highlights from the call:
• On track to meet EGP4.9bn contracted sales target; as per management In 1Q16, contracted sales of EGP673mn was within management’s expectations, with the Y-o-Y weakness attributed to a strong 1Q15, which included two (one of which was in late December 2014) large launches at Villette (cEGP1bn each). Management has confirmed that this relative weakness is not attributed to either lower risk appetite from the company or lower market appetite for real estate units, but rather to the company’s roll-out plan for launches during the year. The EGP4.9bn sales target for the year remains unchanged, with a concentration in 2H16. Our numbers incorporate EGP4.6bn in contracted sales in 2016.
• Cancellations are not of concern; market remains healthy  The quarter’s high cancellation rate (8%) is not of concern to management, given that two large units represented 26% of total cancellations. The number of cancellations is down Y-o-Y in 1Q16, at 19 units, vs. 21 a year ago. Management reiterated its guidance for a 10-12% increase in selling price in 2016. Construction costs have grown at slower rates.
• Securing land at good prices identified as main concern Management has identified securing new land plots at good prices as its main concern, particularly in Cairo (not yet a concern in the North Coast). Management hinted that revenue-sharing agreements would be the way to go forward, in line with its agreement with Heliopolis Housing (project to be launched in 1Q17; master-plan currently underway). Management stated that it is currently looking to close a land acquisition in the North Coast in the short term.
• A challenge: longer payment terms by competition Management has identified longer payment terms offered by competition as a challenge, explaining that the company had to follow the market and extent payment terms (to seven years in recent launches). 
• EGP devaluation is not of concern; so is revenue weakness 95% of the company’s units are delivered in core and shell form, which leaves the representation of the imported element (and FCY exposure) very limited. Management mentioned that the EGP devaluation is healthy for the market, although it is somehow hindering its ability to offer more finished products than it wanted. As for revenue weakness, deliveries in 1Q16 were limited to 101 units. The plan is to deliver 935 in 2016 (vs. 721 in 2015), of which 450 is in Eastown, which kicked off in May for units sold in the company’s May 2013 launch.

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