Most of the major real estate companies in the Egyptian Exchange (EGX) have posted positive financial indicators, according to an analysis conducted by Daily News Egypt on the financial positions of the six largest companies.
The analysis included Talaat Moustafa Group (TMG) holding companies, Palm Hills, the Sixth of October Development and Investment (SODIC), Heliopolis Company for Housing & Development, Madinet Nasr for Housing & Development (MNHD), and Emaar Misr for Development.
Daily News Egypt’s review of the company’s revenues, earnings data, and profit margins indicated that the six companies posted positive growth due to accelerated attempt to complete projects and units delivery rates. Current financial indicators do not incorporate the sale value of housing units as revenue until the delivery of the real estate property.
The increase in sales was a surprising development for the majority of companies that recorded a growth in sales.
This development reflects three dimensions. First, most of the companies have set up new projects in several areas, either in Greater Cairo or along coastal areas. Second, the companies have intensified corporate marketing campaigns for their new projects and ongoing ones.
The third dimension concerns the shift in focus by real estate companies from the commercial to the residential sector.
The analysis indicators included monitoring development of land portfolios, which are the least developed portfolios at real estate companies. Only a few companies, such as Palm Hills and SODIC depend on the purchase of lands offered by the government. Others enter into partnerships with companies that own land portfolios which they seek to develop, such as Heliopolis and MNHD.
In another financial indicator, Daily News Egypt assessed the company’s financial leverage in relation to its level of debt compared to the rights of shareholders. As the ratio becomes lower, the companies gain greater access to financing at competitive rates.
Most of the companies enjoy good financial leverage at a ratio that does not exceed 0.5. However, Heliopolis Company for Housing & Development, which rely on over-drafting from banks to finance their obligations, have posted a financial leverage ratio that surpassed 1.
The final financial indicator Daily News Egypt considered in its assessment is related to the share multiplier profit, of which there is significant divergence between the companies. This indicator is derived by dividing the market price per share on the share’s quota from the company’s profits. A low multiplier is indicative of greater opportunities for profit per share.
It should be noted that the analysis did not include Porto Group, which branched out from Amer Group Company, because its financial statements were limited to only five months, between August and December 2015.