CAIRO: Egypt's Talaat Moustafa (TMG) said on Wednesday the government had given commitments to respect its contracts, a day after a court upheld a ruling that could threaten the real estate firm's flagship project. TMG stock had slid 11.7 percent by 1002 GMT, adding to a 7 percent drop on Tuesday after the court decision, which dashed investor hopes for an end to uncertainty over the $3 billion Madinaty project. Egypt's High Administrative Court on Tuesday upheld a ruling that a housing ministry body broke the law by selling the land without putting it up for public auction. The court rejected appeals filed by TMG, Egypt's biggest listed developer, and the ministry. "Foreign investors who look for quality stocks with medium and long-term value have been selling TMG given that it looks so risky," said Amr El-Feky, head of technical analysis at Cairo Capital Securities. Analysts said the ruling could slow TMG's home sales and increase its cancellations. Executives and legal experts said the government was likely to adjust the company's flagship Madinaty deal's terms without affecting customers who hold contracts there. "The government has announced more than once its commitment to respect all its contracts and pledges to all investors, and to the completion of all real estate projects," Chief Financial Officer Jihad Sawaftah said in a statement sent to the bourse. Echoing comments made by the group's legal adviser Shawky El-Sayed on Tuesday, the statement said the group would seek to overturn the latest court decision. TMG board member Hany Sarie El Din said that overturning the court ruling was "exceptional and difficult, but it was a legal option." Legal expert Mohamed Hesham Mahran said that, after the failure of the initial appeal, TMG still had another legal recourse that could lead to Tuesday's ruling being overturned. CFO Sawaftah said the latest decision was part of a process that will not harm the company or its clients as they should not pay a compensation fee and the land will not be confiscated, according to a note from Beltone brokerage. "We believe, however, that the ruling should result in a slowdown in sales in the coming quarter, as well as increased cancellations," Beltone said in the note. HC Brokerage Senior Analyst Ankur Khetawat noted that TMG stock was trading at LE 7-8 before the dispute blew up, and investors were unlikely to take positions as long as the case remains unresolved. "The plot under dispute is the seed for the survival of the company," said Khetawat. "It is still very difficult to predict the outcome of this judicial review process. There are many political factors involved and it's very hard to speculate." He said one scenario might be that the company would be forced to pay the difference between an estimated fair value for the Madinaty land and the amount it actually paid. A 2008 valuation report by CB Richard Ellis estimated the Madinaty project was worth about LE 17.8 billion ($3.1 billion). An investigation showed the deal brought the state a value of LE 13 billion. –Additional reporting by Marwa Rashad and Tom Pfeiffer
