Egypt’s Sixth of October Development and Investment (SODIC) reported on Sunday a drop in first quarter earnings (Q1) for 2019, while revenues rose sharply on the back of early handovers at one of its projects.

The company’s Q1 2019 consolidated net profit amounted to 162 million Egyptian pounds ($9.51 million), compared to 212.1 million pounds in Q1 2018, a 23.62 percent drop.

SODIC’s revenue, however, surged 83.8 percent to 941.2 million pounds in Q1 2019, from 512.1 million pounds in Q1 2018.

Emad El-Hage, senior associate of equity research at Arqaam Capital, told Zawya by email that the reason behind the revenue hike was a higher level of handovers, especially at the Villette development, which is a residential, commercial and lifestyle compound located in New Cairo.

“The business handed over 201 units (compared to 167 units in Q1 18), circa 50 percent of which emanated from early-stage deliveries in Villette,” El-Hage said.

He said that although the early stage handovers at fuelled revenue growth, margins and earnings per share (EPS) were weaker. Gross margins were diluted by 22 percentage points to 29 percent, while EPS weakened by 24 percent year-on-year, he added.

In a press release following the earnings announcement, SODIC said that it is targeting 7.2 billion pounds of contracted sales for 2019.

“SODIC contracted EGP 881m in off-plan sales during Q1 19A (12 percent of target), which suggests downside risks to achieving their FY 19 expected sales target of EGP 7.2bn (billion). This is largely attributable to minimal new launches during Q1,” El-Hage added.

Hover, he added that sales figures are expected to “regain momentum starting Q3, spilling over into Q4”.

The company’s shares were trading 4.937 percent lower on Monday at 12.9 pounds by 14:22 GST and had dropped 2.87 percent on Sunday, when the company announced its earnings.

“We maintain Buy on deep value and strong earnings momentum,” El-Hage said.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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