SODIC
OCDI
OCDI
NBK Capital reinstated its coverage of SODIC, with a fair value of EGP 17.5 per share and a ‘Buy’ recommendation.
The research firm believes SODIC has an established track record in the attractive Egyptian real estate market, which enjoys solid fundamentals.
SODIC’s existing dispute-free land bank provides ample visibility on the company’s future performance, which could see it generate sales of around 12x its TTM revenue over the next five to seven years. In addition, SODIC has strengthened its balance sheet significantly, and this should help the company proceed with its current development ambitions, NBK Capital said.
A sizeable land bank implies sufficient room for growth in the coming years. SODIC currently has an unlaunched land bank of around 2.4 million sqm, from which the company intends to generate cumulative sales of around EGP 17 billion over the next five to seven years compared to its TTM revenue of EGP 1.3 billion. Most of this land is situated in the eastern part of Cairo, which is currently seeing more demand due to proximity to the airport and better connectivity to other parts of the city, NBK Capital said.
Attractive market drivers remain supportive of sales potential. The key underlying drivers of the Egyptian real estate market such as favorable demographics, undersupply, a hedge against high inflation/currency depreciation, and improving employment prospects following relative political stability remain intact. The supply of new housing units in greater Cairo remains far lower than the demand (supply of around 10-11K units vs. estimated demand of around 60-65K units per year). Unsurprisingly, the Cairo real estate market has seen significant price rises. For example, selling prices at SODIC’s Eastown project have increased by +66% since mid-2013. Therefore, the sustained drivers of the market make us confident about the sales potential of SODIC’s existing land bank, according to the report.
Clean land bank and strengthened balance sheet. After settling its disagreements with NUCA and Solidere, SODIC’s existing land bank appears dispute-free. Furthermore, having signed agreements for medium-term loans of EGP 1.3 billion and recently completed an EGP 1 billion rights issue, SODIC’s balance sheet is now in good shape. This also provides the company with sufficient financial strength to advance its current development projects. The additional capital should also help the company meet its near-term land payment obligation of around EGP 1 billion.
Key risks: A significant rise in real estate prices could affect buyers’ ability to afford property. Political instability could lead to a material reversal in the current upbeat sentiment and hamper real estate sales across the country.
Photo Credit: Arabianeye-Reuters
The research firm believes SODIC has an established track record in the attractive Egyptian real estate market, which enjoys solid fundamentals.
SODIC’s existing dispute-free land bank provides ample visibility on the company’s future performance, which could see it generate sales of around 12x its TTM revenue over the next five to seven years. In addition, SODIC has strengthened its balance sheet significantly, and this should help the company proceed with its current development ambitions, NBK Capital said.
A sizeable land bank implies sufficient room for growth in the coming years. SODIC currently has an unlaunched land bank of around 2.4 million sqm, from which the company intends to generate cumulative sales of around EGP 17 billion over the next five to seven years compared to its TTM revenue of EGP 1.3 billion. Most of this land is situated in the eastern part of Cairo, which is currently seeing more demand due to proximity to the airport and better connectivity to other parts of the city, NBK Capital said.
Attractive market drivers remain supportive of sales potential. The key underlying drivers of the Egyptian real estate market such as favorable demographics, undersupply, a hedge against high inflation/currency depreciation, and improving employment prospects following relative political stability remain intact. The supply of new housing units in greater Cairo remains far lower than the demand (supply of around 10-11K units vs. estimated demand of around 60-65K units per year). Unsurprisingly, the Cairo real estate market has seen significant price rises. For example, selling prices at SODIC’s Eastown project have increased by +66% since mid-2013. Therefore, the sustained drivers of the market make us confident about the sales potential of SODIC’s existing land bank, according to the report.
Clean land bank and strengthened balance sheet. After settling its disagreements with NUCA and Solidere, SODIC’s existing land bank appears dispute-free. Furthermore, having signed agreements for medium-term loans of EGP 1.3 billion and recently completed an EGP 1 billion rights issue, SODIC’s balance sheet is now in good shape. This also provides the company with sufficient financial strength to advance its current development projects. The additional capital should also help the company meet its near-term land payment obligation of around EGP 1 billion.
Key risks: A significant rise in real estate prices could affect buyers’ ability to afford property. Political instability could lead to a material reversal in the current upbeat sentiment and hamper real estate sales across the country.
Photo Credit: Arabianeye-Reuters
Source:
Mubasher
