EUR 22.09 For Business Accounts Only

HELI EY | New development plan, recent land deals bode well

New development plan leads to TP upgrade. We upgrade our TP by 20%, to EGP10.5/share, implying an upside of 62%, warranting an Overweight rating. We account for the new development plan recently published by the company, with the majority of the land bank offered for co-development, and only 12% of the remaining land bank in New Heliopolis City and HelioPark (total of 2.5mn sqm) earmarked for self-development by the company. This implies an average EV of EGP720/sqm, at a c75% discount to NAV based on recent land sale transactions completed by local peers (average of EGP2,500/sqm), and a 40% discount to the average EV/sqm implied by our valuations for peers (cEGP1.2k/sqm).
 
Recent land deals could trigger rerating. This comes as MNHD [Overweight | TP EGP5.85] is in talks to sell c30% of its land bank (c2mn sqm in Taj City), in close proximity to Heliopolis Housing’s plots. If any transaction is concluded, this may have a positive impact on the market’s valuation of Heliopolis Housing, in our view, especially if the deal is done at a favourable price. Additionally, TMG [Overweight | TP EGP15.0]’s recent land sale was made at an implied price of EGP11.7k/sqm. However, based on an exercise we ran, if we account for the company’s in-kind repayments, we estimate the floor net EV for TMG on the deal at cEGP1k/sqm, at a c40% premium to our valuation for Heliopolis’s land. We see this could also bode well for the company’s valuation, and, in turn, the market perception of the company.   
 
New development plan set to become visible in 2022. We anticipate 2021 to be largely centralised around finding co-development agreements, with any launches by the potential partners not taking place before 2022. Additionally, we do not expect to see the company launching any self-developed projects during 2021, with the launches likely to come on the back of the launches made by potential partners. On our numbers, the self-developments should be fully sold by 2030, assuming the projects are launched during 2022.
 
Kicking off the revised development plan key watch factor. Our main watch factor for Heliopolis Housing is the company’s ability to achieve this development plan, with numerous plans previously announced to the market without materialising. Accordingly, we believe the stock rerating would be largely dependent on the company’s ability to reach value-accretive agreements for co-developments and launching new projects in an efficient manner.