Contracted sales of EGP6.6bn through 10-Aug; guidance raised for the year 
Contracted sales YTD through 10-Aug totalled EGP6,598mn, implying EGP2,320mn from 1-Apr to 10-Aug, with the 1Q17 figure boosted by EGP2.5bn worth of sales from commercial units at Madinaty. The Q2 contracted sales figure has yet to be reported. Management indicated that the quarter saw no further selling price increases after the c30% rise which took place following the EGP devaluation in Nov-16; average prices at Madinaty were unchanged Q-o-Q at cEGP12,500/sqm. Management raised the contracted sales guidance for the year to EGP11.4bn (from EGP9.4bn); on plans to launch its last phase at Al Rehab Ext. (1,480 units) in 2H17. This, together with another likely launch of commercial units at Madinaty and the stronger-than-expected sales figure YTD were the main drivers for the guidance upgrade. Our model assumes 2017 contracted sales of EGP9.3bn. We await the launch of Al Rehab and/or the launch of commercial units at Madinaty, before we upgrade our numbers. 
 
Strong set of reported numbers; boosted by increased deliveries & better hotel numbers 
Reported revenue in 2Q17 came in at EGP1.98bn (+15.6% Y-o-Y, +53.8% Q-o-Q, EFGe: +21%). Revenue from hotels rose 29.6% Y-o-Y and 7.9% Q-o-Q to reach EGP256.1mn, and was up 41.1% Y-o-Y in 1H17 to reach EGP493.4mn, indicating an underlying improvement in operations. Gross profit was EGP675mn (+15.7% Y-o-Y, +33.4% Q-o-Q), translating into a gross profit margin (GPM) of 34.1% (2Q16: 34.1%, 1Q17: 39.4%). Net income was EGP384.0mn (+69.2% Y-o-Y, +33.1% Y-o-Y, EFGe: +27%). 1H17 revenue totalled EGP3.26bn (+11.6% Y-o-Y), gross profit was EGP1.18bn (+26.2% Y-o-Y), translating into a GPM of 36.2% (1H16: 32.0%). Net income grew 54.7% Y-o-Y to reach EGP672.5mn in 1H17. Our full year estimates are unchanged at EGP7.0bn for revenue and EGP961mn for net income. We note that our net income estimate includes EGP564mn in impairments on financial assets, similar to last year, excluding which our estimate for net income for the year would be cEGP1.5bn.
 
Reiterate Buy rating: value stock with attractive upside potential 
We are buyers of TMG, with our TP of EGP13.0 offering 73% upside. We favour the company’s large land bank, its strong earnings and cash flow visibility, as well as its exposure to the tourism sector, which has started to show some signs of recovery. Strong sales, successful project launches, further improvement in hospitality numbers could all act as positive triggers to the stock.

Mai Attia

Sara Boutros