EUR 21.76 For Business Accounts Only

Upgrade on North Coast inclusion, remain top pick

North Coast acquisition main reason for upgrade. We upgrade our TP by c20% to EGP32.0/share (c49% upside). SODIC announced the acquisition of a 300-feddan plot in the North Coast on 11 March. This plot’s inclusion adds EGP2.60/share to our TP (9% of EV). We expect the project to be launched this summer, as inventory in Caesar is almost fully-depleted, with cEGP1.4bn (16% of 2018e sales) expected to be generated from the project this year. We believe the project will be fully sold over a period of seven years, with total proceeds of cEGP13.7bn, c9% below the EGP15bn guided for by the company. With this positive development, SODIC’s shares continue to stand out on several valuation metrics.

Reiterate SODIC as our top pick in Egypt. Management guided for a c55% y-o-y growth to presales (EGP8.7bn driven by SODIC East) and c70% y-o-y growth to revenue (EGP3.9bn, driven by deliveries in Caesar and Villette) in 2018 – the highest within our Egyptian coverage. SODIC now trades at an EV of EGP1.0k/sqm, at a c33% discount to peers, despite the stock price’s recent c25% rally since early February (avg. of 20% for peers). Additionally, SODIC trades at a c50% and 60% discount to other Egyptian active developers, in terms of EV/receivables and EV/backlog, respectively.

Room for further upgrades. Despite the c49% return implied by our current TP, we still see several imminent upsides to our current valuation. In chronological order, as per our expectations, these include: i) the 500-feddan plot offered for co-development by NUCA, for which SODIC was the highest bidder, with final results expected early-2Q18 (cEGP3.80/share), ii) the potential rezoning of Al-Yosr to a residential plot, after being included under the new Sheikh Zayed boundaries, expected during 2018 (cEGP1.20/share), and iii) further acquisitions in the North Coast, be it through the back-plot of Caesar or the other 300-feddan MoU.