EUR 40.57 For Business Accounts Only

ORHD EY | Monetary value in the works; A pick for 2H21

Several reasons to favour the stock. We look for robust growth (FY21-23e revenue CAGR: +30.8%, margin expansion: +14.1pp), as the FY18-20 contracted sales CAGR of c65% reflects on the reported numbers, further boosted by expected recovery within hotels. We also like ODE’s: i) solid track record and capable management, ii) diverse offering/revenue sources, iii) limited debt repayment needs through FY24, iv) sufficient land bank, and v) attractive valuation (EV-to-receivables at a c60% discount to historical average).

COVID-19: Not all cruel. El Gouna emerged as a clear beneficiary from the shift to WFH/distant learning, triggering: i) a rise in enquiries from potential buyers on both off plan/completed units, and ii) high homeowner occupancy (c65% in FY20), inducing improved cash collection within RE and town management. Similar trends were also witnessed at Makadi, while launches at O-West continued to be well received, owing to their unit diversity and attractive pricing.

Robust RE performance yet to reflect on valuation. The momentum witnessed within second homes (units sold in El Gouna, Makadi: +63% y-o-y in 3Q20-1Q21) should continue, driving c25% y-o-y growth in FY21e contracted sales. We factor in more normalised growth in contracted sales thereafter (FY21-24e: +12.9%p.a.). ODE’s real estate operations have proven to be solid, be it for first or second homes, with an evident ability to sell, pass on healthy price increases, and deliver timely, while maintaining healthy operating CFs (positive throughout our forecast horizon).

Hotels: ST triggers, full recovery in FY24. Hotels continue to suffer in the absence of international guests, pushing revenue to one-third its average run rate. This should improve, starting 2H21, as: i) travel restrictions ease, ii) vaccine rollouts continue, and iii) local occupancy caps are lifted (raised to 70%, effective 6 July, from 50%). We expect meaningful recovery starting FY22 (revenue growth: +82% y-o-y), ahead of full recovery in FY24. The return of Russian flights (negotiations progressing positively) would also directly support tourist inflows into Taba and indirectly into El Gouna.