New Madinaty settlement is net positive; could further add EGP3-7/share to valuation
Settlement of Madinaty’s land acquisition issues with the government. TMG announced that it has reached an agreement with the government which resolves all disputes related to the interpretation and determination of the 7% of the total BUA representing the in-kind payment due to the New Urban Communities Authority (NUCA) for the value of Madinaty land. Under the new agreement, the 7% of BUA is calculated at 3.2mn sqm of fully finished apartments (up from the 2.7mn as per the original contract) to be delivered over the lifetime of the project. The minimum value of the in-kind payment is kept unchanged at EGP9.9bn. Also, it has been agreed that TMG would pay a premium of EGP2.9bn (incl. interest) in cash over 10 years as a result of increasing the services and commercial areas versus what was approved in the original master plan. The new payment terms lead us to reduce our TP by a total EGP1.6/share—the additional BUA accounts for EGP0.7/share (i.e. lower BUA available for sale and higher construction costs) and we add EGP0.9/share for the cash payment. We need to point out that our forecasts assume an annual price increase of 10% across TMG’s projects and we do not incorporate either i) further selling price hikes by the company or ii) changes in the project’s master plan to absorb the additional land acquisition cost similar to its peers (e.g. SODIC raised its selling prices in Eastown project by c20% to offset the impact of the additional land cost following the legal settlement with the government).
Talaat Moustafa Group is the a community real estate developer in Egypt, with a land bank of 50 million square meters. Co. is engaged in "community development" through establishing self-sustained residential city and community complexes for the upper and middle classes. Co.'s prominent development projects include Al Rehab City, East of Cairo, and the "Madinaty" project spanning over 33.6 million sqm of land with 600,000 target residents. Co.'s developments also include compounds such as May Fair in Al Shourouk, East of Cairo and Al Rabwa I & II in Six of October City, West of Cairo. Co.'s activities also extend to the hotels and resorts.
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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