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Mubasher Trade maintains ‘Buy' rating for Emaar Misr with price target of EGP4.04/shr The research firm says that the company's results in Q2 come in line with expectations
Mubasher Trade Research has maintained its "Buy/Moderate Risk" rating for Emaar Misr for Development, at a price target (PT) of EGP 4.04 per share, implying a 52% upside potential. Earlier last week, Emaar Misr reported a 23% year-on-year increase in profits to EGP 539 million for the second quarter (Q2) of 2017 from EGP 436.8 million in Q2 2016. These results were "in line with consensus estimates at EGP 494 million (variance: +9%)," the note by Mubasher Trade Research showed, attributing the surge in bottom-line profits to the growth in interest income by "more than two-folds" of 163% year-on-year to EGP 319 million in Q2 2017 from EGP 121.4 million in Q2 2016. "Revenues declined 8% year-on-year to EGP 1.09 billion in Q2 2017, versus EGP 1.18 billion, missing consensus estimates at EGP 1.21 billion (variance: -10%) on the back of lower revenues from Marassi," the report said. Revenues from Marassi dropped 9% year-on-year to EGP 537.2 million in Q2 2017 from EGP 587.7 million, representing 49% of revenues in Q2 2017. Moreover, revenues from Emaar Misr's Uptown Cairo project retreated 52% year-on-year to EGP 142.8 million in Q2 2017 compared to EGP 295.4 million, representing 13% of total revenues in Q2 2017. Despite these declines, the research firm said it had "no concern" on the lower revenues in Q2 2017, owing to Emaar Misr's "large backlog on the company's books as of December 2016, amounting to EGP 19.5 billion, which would support the performance in the coming period." "Emaar Misr for Development has treasury bills balance on its books worth of EGP 4.32 billion as of June 2017," the Mubasher Trade Research noted. Gross profit fell 20% year-on-year to EGP 347.2 million, with gross processing margin (GPM) retreating to 32% in Q2 2017 from 36% in Q2 2016. "Investigating projects' margins, Marassi, the largest contributor to gross profit, reported lower GPM at 27% in Q2 2017, versus 37% in Q2 2016," the report said, noting that Mivida's GPM retreated to 31% in Q2 2017, versus 38% in Q2 2016, "offsetting higher GPM recorded by Uptown Cairo at 50% versus 34% in Q2 2016." Selling, general, and administrative expenses soared 46% year-on-year to EGP 111.1 million from EGP 76.3 million in Q2 2016, representing 10% of total revenues in Q2 2017, compared to 6% in Q1 2017. "This resulted in lower EBITDA that stood at EGP 292.6 million in Q2-17, compared to EGP 363.9 million in Q2 -16 (-20% year-on-year), translating into an EBITDA margin of 27% in Q2-17, versus 31% in Q2-16."
