ODE ventures into primary market, remain OW
ODE signs co-development deal with NUCA. We upgrade our TP by c40% to EGP45.0/share, implying an upside of c34%, almost fully on the back of the inclusion of the recently-signed 1k-feddan co-development in West Cairo (30-70% revenue share) between NUCA and a new company, under the name of Orascom Real Estate, 70% owned by ODE and 30% by Samih Sawiris. We view this venture into primary homes as a highly positive step from ODE, further consolidating itself as a real estate player, and mitigating the risk of being a purely touristic name. ODE announced a DPS of EGP1.0 for 2017, yielding c3%, which we believe is at least sustainable, with FCF growing at a 2017-20e CAGR of c76%.
Cairo project adds cEGP9.00/share to our TP. We assume a starting price of EGP20k/sqm (finished units, EGP15k/sqm if not finished – at a c25% discount to SODIC and PHD in West Cairo), with cEGP2bn of sales in 2019 and the balance (cEGP85bn) over a period of 10 years. The project is expected to be sold over 6-7 year instalments, with delivery expected 4 years after sale. We assume that price growth will be at a slight premium to inflation, implying a gross margin of c25% for the project, at a steep discount to El Gouna’s 55% margin. Accounting for the aforementioned assumptions, the project comprises c15% of our valuation.
El Gouna still holds the lion’s share. Despite this sizeable addition, El Gouna continues to dominate our valuation (c70% of EV), with the majority coming from the residual land in El Gouna, which we assume monetisation for over the next 25 years, implying an 80% discount to NAV. Hotels in El Gouna comprise c26% of our valuation, with occupancies maxed-out, in our view, and growth coming from ARR increases, with current pricing still at a c15% discount to pre-devaluation levels in USD terms. We assume no further room openings in Taba, while considering real estate sales in Makadi an upside to our valuation. That said, we view the potential North Coast acquisition as the main upside to our valuation.
Orascom Development Egypt SAE Formerly known as Orascom Hotels & Development. Orascom Hotels and Development SAE (OHD), a member of Orascom Group, is an Egypt-based company engaged in the hotel and tourism development sector. The Company focuses on developing a 3,356 million squire meter area for tourism purpose, and providing it with utilities and infrastructure to develop El Gouna area in Al Gardaqa, Red Sea Governorate, on the basis of 50% hotels and 50% tourist accommodations. The Company is active, along with its subsidiaries, in a range of sectors, including hotel, car rental, real estate and development, hospital, education, real estate mortgage, town management, leasing, agriculture, housing and tourism, among others. As of December 31, 2011, the Company's subsidiaries included, among others, Taba Heights Co., Orascom Limousine Co., Misr El Fayoum for Touristic Development Company SAE and El Gouna Hospital Company.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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