MENA Property- Egypt. Egypt s residential property sector: A true inflation & FX hedge? Summary of recommendations. S e c t o r C o v e r a g e

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1 S e c t o r C o v e r a g e J u n e Mohammad Kamal mohammad.kamal@arqaamcapital.com Emad El-Hage emad.elhage@arqaamcapital.com Mohamad Haidar, CFA mohamad.haidar@arqaamcapital.com MENA Property- Egypt Egypt s residential property sector: A true inflation & FX hedge? Property in Egypt is perceived as a hedge against macro risks, which continue to erode wealth as wage growth lags inflation, and currency devaluation adds further shocks Though rentals in new build districts do grow by at least the inflation rate, prices have ran far ahead, due to government land auctions, in which prices have grown >50% in the past 3 years. Yields have tightened. Real estate in Egypt lacks a self-correction mechanism as mortgage penetration is minimal. Rental yields do not influence home ownership decisions, allowing asset prices to move aggressively into bubble territory There are limits to growth in residential asking prices. We believe prices have already moved out of affordable range for most residents in Cairo This scenario has led to the appearance of land donors and home builders : Developers that own large swathes of cheap land are increasingly replacing government auctions as a source of raw land. Builders with strong brand equity and track record take on the sales risk. JVs have appeared across the board as a result. Though the economics favour home builders, we prefer to play this via land donors, where execution risk is mitigated, RoE enhancement is easier to achieve, and NAV is cemented by land monetization. We play codevelopment themes through MNHD and Heliopolis (not covered) but also like SODIC and PHD on sheer value. Earnings multiples are not indicative, as IFRS adoption is >12M away. Cheap on P/E is not an argument for value. We prefer P/NAV where NAV is conservatively calculated. We see strong upside even though P/NAV in line with regional peers: MENA property trades at P/NAV of 0.6x, and Egypt is in-line with regional comparables. We target P/NAV of 0.8x for strong balance sheets, brand equity, and recurring income. MNHD and SODIC fit the bill. Where we see execution risk, but deep value: TMG comes with execution risk over its 15 year development timeline, and NAV is extremely sensitive to land treatment (60% of NAV). PHD holds deep value, but due to leverage, requires greater confidence in future sales and uptake levels than has been experienced so far (49%). Operating cash flow pressure can be demonstrated at a sales uptake threshold of <25%). ERC is highly reliant on third-party land demand along the Red Sea coast- the tourism situation is far from supportive at current. Summary of recommendations Bloomberg code MNHD EY Company name Madinet Nasr Housing Price target EGP 27 Rating Buy Bloomberg code OCDI EY Company name Six of October Price target EGP 17.9 Rating Buy Bloomberg code PHDC EY Company name Palm Hills Developments Price target EGP 4.3 Rating Buy Bloomberg code TMGH EY Company name Talaat Moustafa Price target EGP 8.8 Rating Buy Bloomberg code EMFD EY Company name Emaar Misr for Development Price target EGP 2.7 Rating Hold Bloomberg code EGTS EY Company name Egyptian Resorts Company Price target EGP 0.7 Rating Sell Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice.

2 Real estate Table of contents Contents Coverage Universe... 3 Market Analysis Valuation Company profiles Six of October Madinet Nasr Housing Palm Hills Development Emaar Misr Talaat Moustafa Egyptian Resort Company Appendix Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 2

3 Aldar REIT DAMAC Emaar Malls Mabanee Emaar DIC PHD EMFD MNHD SODIC Eshraq TMG SRECO Alarkan UP ERC DAMAC REIT EMFD Emaar Malls Mabanee SRECO Aldar DIC Emaar SODIC PHD UP TMG Alarkan MNHD ERC tp/nav CMP/NAV Coverage Universe Egypt property names in a regional context Exhibit 1: MENA Real estate coverage universe Rating Upside TP TP/NAV Current P/NAV Discount/premium P/E FY 16e P/E FY 17e EV/EBITDA FY 16e EV/EBITDA FY 17e P/BV FY 16e RoE FY 16e Dividend yield FY 16e Emaar Buy 59% % % 3% Aldar Buy 38% % % 4% Damac Buy 38% % % 11% DIC Buy 54% % % 6% UPP Sell -22% % nm nm nm nm % 4% Eshraq Hold -34% % nm 43.0 nm % 0% Emaar Malls Buy 33% % % 3% REIT Buy 28% % % 8% UAE % % 4.8% TMG Buy 49% % % 3% SODIC Buy 58% % % 0% MNHD Buy 82% % % 1% ERC Sell -11% % % 0% EMFD Hold 12% % % 0% PHD Buy 73% % % 1% Egypt % % 0.7% Arkan Hold 14% % % 0% SRECO Hold -4% % % 5% KSA % % Mabanee Buy 42% % % 2% Kuwait % % 1.9% Exhibit 2: tp/nav Exhibit 3: CMP/NAV Exhibit 4: RoE vs. NPM FY 16e NPM 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% SRECO Alarkan TMG DIC REIT Mabanee Emaar Malls Aldar ERC EMFD Emaar SODIC MNHD DAMAC 0.0% Eshraq -5.0% -10.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% UP -20.0% PHD FY 16e RoE Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 3

4 DAMAC MNHD PHD SODIC Mabanee EMFD ERC Emaar Malls Emaar Aldar REIT DIC TMG SRECO Alarkan Eshraq DAMAC MNHD PHD Emaar Malls ERC Mabanee Emaar Aldar EMFD DIC REIT SODIC SRECO TMG Alarkan Eshraq TMG SODIC MNHD PHD EMFD SRECO Alarkan Emaar Emaar Malls Mabanee Aldar UP DAMAC DIC REIT ERC Eshraq DAMAC PHD SODIC ERC TMG DIC Aldar REIT Emaar EMFD Alarkan Mabanee SRECO MNHD Emaar Malls Alarkan TMG UP SRECO DIC PHD REIT ERC Eshraq Aldar Emaar SODIC EMFD DAMAC Mabanee Emaar Malls SODIC MNHD REIT Emaar Aldar SRECO PHD Emaar Malls TMG Alarkan Mabanee Eshraq DAMAC DIC EMFD ERC UP Coverage Universe Egypt property names in a regional context Exhibit 5: P/E FY 16e Exhibit 6: P/B FY 16e Exhibit 7: Revenue growth % 80% 60% 40% 20% 0% -20% 77% 67% 25% 21% 21% 11% 10% 9% 9% 8% 4% 2% 0% -2% -7% -16% -40% -38% -60% Exhibit 8: RoE FY 16e Exhibit 9: RoA FY 16e Exhibit 10: EPS growth FY 16e 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% 38.2% 30.0% 19.8% 15.8% 14.9%14.1% 13.6% 12.3%11.5%11.1% 8.2% 8.0% 5.8% 5.0% 2.3% 0.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% 19.6% 12.7% 8.0% 7.9% 7.8% 7.0% 6.4% 6.4% 5.7% 5.6% 4.8% 3.8% 3.0% 2.7% 1.7% 0.0% 150% 100% 50% 0% -50% -100% -150% 112% 96% 66% 50% 30% 21% 19% 18% 15% 4% 2% 0% -1% -4% -35%-36% -91% Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 4

5 mn sqm EGPm Coverage Universe Land banks Exhibit 11: Land bank area (mn sqm) Exhibit 12: Value of land bank (marked to market) Exhibit 13: NAV value of land bank (discount to M2M) , , ,008 16,000 14,000 12,000-93% 13,646-41% ,000 10,000 8,000 7,778-40% ,000 6,000 5, EGTS TMG PHD MNHD OCDI EMFD 50,000-18,566 13,282 8,268 3, TMG EGTS MNHD PHD OCDI EMFD 4,000 2, % -95% -50% 1, TMG MNHD PHD OCDI EGTS EMFD Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 5

6 EMFD PHD TMGH OCDI MNHD EGTS EMFD PHD TMGH OCDI MNHD EGTS Coverage Universe Development pipelines Exhibit 14: Development portfolios: Projected sales (by unit count) Exhibit 15: Development pipeline: projected sales (by value, EGPmn) Exhibit 16: Development pipeline: CAPEX, EGPmn 70,000 60,000 50,000 40,000 30,000 20,000 10, ,641 51,600 21,000 8,500 6, TMG MNHD PHD EMFD OCDI EGTS 120, ,000 80,000 60,000 40,000 20, ,000 56,000 30,000 11,000 7, ,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,710 24,709 13,500 6,600 2, Exhibit 17: Uptake levels: reported/observed, since launch (overall portfolio) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 92% 92% 90% 80% 76% 49% EMFD SODIC ERC TMG MNHD PHD Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 6

7 m sqm EGPm m sqm m sqm Coverage Universe Recurring income Exhibit 18: Recurring income revenues Exhibit 19: Gross Leasable Area Exhibit 20: Contribution to total revenues 1,200 1, , TMGH SODIC PHD 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-46,745 46,745 SODIC 12,920 PHD 12,920 16% 14% 12% 10% 8% 6% 4% 2% 0% 14% 8% 7% 3% 3.3% 0.6% TMGH SODIC PHD FY 16e FY 18e FY 16e FY 18e FY 16e FY 18e Exhibit 21: Breakdown of recurring income 120% 100% 7% 80% 60% 40% 100% 100% 83% 20% 0% 9% TMGH SODIC PHD Retail Hospitality Commercial Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 7

8 Coverage Universe Key views We are conviction buyers of MNHD and SODIC, but also see deep value in PHD MNHD (Buy, EGP 27, +82% upside): Though the stock was our top pick in 2015, and subsequently closed out most of our estimated upside to fair value, MNHD continues to hold the highest quality earnings in Egypt, thanks to its positioning as a mid-income residential developer, while ROE remains best in class (35%) thanks to ultra cheap land. The business is pursuing co-developed projects, in which it contributes land towards JVs, and accrues a substantial portion of the economics for very little risk. We continue to think that P/E is not a useful yardstick for value, as long as IFRS 15 is not adopted. On P/NAV, MNHD trades at 0.44x 16e NAV, at a 10% discount to the broader MENA sector (and we see a target P/NAV of 0.8x). We reiterate our Buy rating and raise TP to EGP 27/share (+13% vs. our old TP of EGP 24/share) on more inclusive land valuation and a robust sales outlook. We model for property + land sales of EGP 7.1bn in our explicit forecast period, and 26% 5-yr EPS CAGR. Our NAV now stands at EGP 34/share, composed of 82% land, 13% developments, and 5% recurring income. Current market price resides at 0.44x P/NAV, leaving +80% in highconviction upside to our TP. SODIC (Buy, EGP 18, +58% upside): SODIC holds the best NAV profile under coverage, as our math is 70% driven by visible cash flows derived from the next 5 years of handovers, covering 6.7k units (EGP 18.3bn revenues), plus recurring income. Sales underpinning our cash flow projections are 91% pre-booked, rendering our NAV calculation highly robust, and only subject to downside risk emanating from project execution. We reiterate Buy and further raise TP to EGP 18/share (+13% vs. old TP of EGP 16) to reflect (i) the newly signed JV with Heliopolis Housing (EGP 1.8/share, +12% to TP), which we now still partially account for, through land reval rather than project DCF, (ii) the impact of rising land prices across Cairo (>20% y/y) on SODIC s land bank, and new launches (+EGP 1.1/share, +7% to TP), and (iii) DCF rollout (-5.7% To TP). We estimate 30% 4-yr EPS CAGR, excluding the JV with Heliopolis (>40% to EPS). True value in the stock is not a function of cheap P/E (5.8x/5.4y 16e/17e), since this is again a function of accounting (Egyptian GAAP), but rather more demonstrable in P/NAV, which stands at 0.51x (vs. our target of 0.8x across quality MENA names), and is 70% driven by cash release against execution, plus recurring NOI (i.e. highly visible). PHD (Buy, EGP 4.3, +73% upside): PHD is a play on the high-end residential property space and secondary homes in Egypt. Reading through from Q1 16A sales data (EGP 2.2bn, +62% y/y), we continue to see reasonably strong uptake across launched projects (49% of 21k units sold, 39% of EGP 56bn), helped by PHD s brand equity. Our newly-revised EGP 4.5/share TP (+30%, +77% vs. CMP) is a product of (i) a development portfolio of 21k units (sellable value of EGP 56bn), which is 49% sold, and of which 45% has been handed over. (ii) Recurring income assets, via 13k sqm of incoming GLA (>25% of EPS by FY 20e). Margins remain solid on efficient cost management (EGP 2.7k/sqm BUA cost, 20% lower than the peer average), and growth in selling prices (>15% FY 15A). Furthermore, the monetization of PHD s land bank of 26m sqm (44% under development) and disposals of non-core plots, along with the adoption of revenueshare schemes with JV partners (which involve lower initial cash outlays, resulting in significantly higher project IRRs), add further upside risk to EPS growth. We exclude PHD from our conviction Buy list due to the demonstrability of balance sheet pressure in the event that sales uptake weakens to <25%, at which point debt service potentially comes under pressure (net debt/ebitda 4.2x, interest cover 2x). Less levered peers in the Egyptian property space can arguably withstand a market correction more robustly. Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 8

9 Coverage Universe Key views We are also positive on TMG, on deep value despite risk, and negative on ERC. EMFD in our view holds limited upside at 0.75x P/NAV at current share price TMG (Buy, EGP 8.8, +40% upside): With EGP 2.3bn (+1.2x y/y) worth of contracted sales booked in Q1 16A, TMG continues to show solid sales uptake for its residential product that targets the undersupplied mid-income segment. We model for the sale and handover of c.13k units worth EGP 30bn over FY 16-25e (6% revenue CAGR FY 15-18e). Nevertheless, disputes on land plots, and delays in licenses should continue to hinder near-term land monetization. This compels us to lower our NAV numbers on land by 30% (-8% to TP). We roll our DCF forward (-2% TP), and tweak our operating assumptions in light of recent management guidance on recurring income (-2%), which has been influenced by the deterioration in the security of air travel to and from Egypt. All in, this prompts a 12% cut to TP to EGP 8.8/share (+50% vs. CMP). Our assigned 0.70x TP/NAV suggests a bare bones notional TP of EGP 7.1/share, implying strong potential for a re-rating. TMG s share price performed well YTD (+10%), leaving 50% in current upside. The market in our view is fairly responding to sales weakness at EMFD (Hold, EGP 2.7, +12% upside): Both handovers and newly-booked sales arrived weak in Q1 16A (-20% y/y), suggesting slower-than-expected execution, as well as a demonstrably declining demand on super prime residential product, particularly villas. EMFD continues to focus on the upper-end home market, in which the demand pool is smallest in Egypt (3-5% of population). This in our view has led to a decline in newly-booked sales at EMFD, as demand shifts to more affordable upper-mid product in apartments and townhouses. We see little value being unlocked out of the planned recurring income portfolio (retail and hotels) in the current macro environment, while the company still has not engaged in any new land asset acquisitions since IPO in Q2 2015, limiting the scope for growth in the next 5 yrs+. We downgrade to Hold and revise TP to EGP 2.7/share. Downside risk: Concentration risk in 3 main projects, execution risk, and negative real growth in residential prices. Upside risk: Strong sales uptake in Emaar Square, and new land acquisitions. ERC (Sell, EGP 0.74, -10% downside): The tourism and secondary home markets in Egypt have been adversely affected by recent security threats. The tourism sector in Egypt incurred EGP 2.2bn in direct losses from travel bans imposed following the aviation incident involving Airbus A321, operated by Metrojet, in October We estimate EGP 17bn in losses from tourism receipts (-29% y/y) in A rebound in tourist flows is contingent on EGP devaluation (-9% YTD) and the handling of security concerns, particularly in air travel, alongside the eventual removal of travel bans and restrictions from key feeder markets. ERC s ability to sell land plots to 3rd party developers along the Red Sea coast is highly sensitive to macro sentiment, and this may not necessarily improve in the near term. We roll-forward our DCF, cut our NAV numbers on land by 8% (-5% to TP), and lower our occupancy rate assumptions across ERC s rental outlets (-3%). All in, this cuts our TP by 8% to EGP 0.74/share, suggesting 10% in downside vs. CMP. Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 9

10 Market Analysis At the source of property price growth is land auctions, not demand Land auctions prices can no longer be passed on- development margins should compress Land auction prices have grown >50% since This has been a function of a revival in end-user homeownership demand, as well as government auctions, which arguably provide a means by which to plug near term gaps in government finances. In our view, any further increases would not be passable into residential prices. Exhibit 22: As an exercise, assuming growth in selling prices winds down to <10%, a continuing surge in land prices (>10% per annum) can squeeze margins by at least 300bps, per year 25,000 20,000 15,000 10,000 30% 27% 23% 20% 16% 13% 35% 30% 25% 20% 15% 5,000 10% 7% 10% 5% % Land cost Construction cost Selling Price Margin Source: JLL, Company Data, Arqaam Capital Research Exhibit 23: Government-auctioned land prices in East Cairo rose by >50% since 2013, with recently-concluded auctions settling in the range of EGP k/sqm Auctions JVs Seller Buyer Location Land area (sqm) Price (EGP/sqm) Marina Way Lagoon East Cairo 630,000 3,290 NUCA Al Hayat Development East Cairo 357,000 3,191 Masr Al Mahrousa East Cairo 147,000 3,625 NA Al Oubor City NA 975 NA Badr NA 780 MOH NA 10th of Ramadan City NA 700 NA Sadat City NA 600 NA New Salheya NA 565 MNHD PHD East Cairo 433,642 4,693 Heliopolis SODIC East Cairo 2,750,000 3,311 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 10

11 Market Analysis Average household incomes are insufficient for home ownership Exhibit 24: Property prices appear severely dislocated from average wages Monthly salary (EGP) Segment Development Developer Average price Implied property value Implied monthly payment Maximum eligibility (EGP/sqm) * EGPm/unit) to developer (**) (monthly installments) Accessibility Hadayek Al Nasr MNHD 2, ,500 Y 18,000 Low-income Tag Sultan MNHD 7, ,000 Y 9,000 Palm Parks PHD 12, ,000 N Allegria SODIC 33, ,000 N Hadayek Al Nasr MNHD 2, ,500 Y 32,000 Mid-income Tag Sultan MNHD 7, ,000 Y 16,000 Palm Parks PHD 12, ,000 N Allegria SODIC 33, ,000 N Hadayek Al Nasr MNHD 2, ,500 Y 60,000 High-income Tag Sultan MNHD 7, ,000 Y 30,000 Palm Parks PHD 12, ,000 Y Allegria SODIC 33, ,000 N 50,000 Expatriate (GCC) Southridge Emaar 3, ,387 14,387 Y *our assumed monthly wages accounts for 2 income earner/household **incl. of interest In the context of wages, we believe that residential property is now out of affordable range for the average Cairo resident, but still affordable to mid-high income expatriate residents of neighboring GCC states. A crude calculation of wage bands in Cairo suggests and average monthly salary of EGP10,000-16,000 for a middle-income household (with 2 income earning individuals), and EGP 30,000 for high-income households, and EGP 9,000 for low-income households. Using repayment plans offered by developers such as TMG (in which interest costs are embedded into selling prices, and loan books are then sold to commercial banks), we calculate a broad indicator of affordability. Our math suggests that at current prices, property in general drains households of c.50% of their annual income, which relative to developed markets in which a mortgage approval threshold stands at 30% net of all household debt, is extremely high. This implies that property prices should not grow much further, and certainly not due to any cost-push factors such as government land auction prices. Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 11

12 Q1 13A Q2 13A Q3 13A Q4 13A Q1 14A Q2 14A Q3 14A Q4 14A Q1 15A Q2 15A Q3 15A Q4 15A Q1 16A Q3 12A Q4 12A Q1 13A Q2 13A Q3 13A Q4 13A Q1 14A Q2 14A Q3 14A Q4 14A Q1 15A Q2 15A Q3 15A Q4 15A Q1 16A Market Analysis Residential New Cairo districts have experienced a surge in demand- this is a result of sprawl, migration and expatriate demand for new homes: We believe East Cairo will continue to outperform districts in the West, as pricing has diverged markedly, helped by end buyer preferences. The outlook in the medium term across districts remains strong, with uptake numbers averaging 70% across developers. This should continue in 2016 as further currency devaluation, a primary driver of demand, factors into home ownership decisions. The North Coast secondary home market has also flourished: Demand for secondary homes rebounded in 2015, evident in increased land sales liquidity in the North coast (>EGP 5bn YTD), and to a lesser degree, the Red Sea. Supply growth should remain strong in FY 16e with +28k units (+25%) in the pipeline, but decelerate in FY 17e with under +4k units (+3%) due for handover. In the context of an addressable population base of 2.5m high-income earners (of which 0.4m are expatriate residents of the GCC), the supply pipeline is relatively small. This provides some reassurance with regards to uptake, though the downside risk to Red Sea tourism numbers remains real in the near-medium term. Asking prices up >20% y/y. Developers continue to operate in a market that allows >20% in selling price increases across Cairo. Stripping out inflation (10-12%), prices by our estimates have strengthened by 8-10% y/y (vs % Dubai and KSA). In USD terms, selling prices have slightly weakened in Q1 16A by 3% y/y, due to EGP devaluation (- 13%). Villas in the 6th of October (+16% YTD) district are the only exception, given a shortage of new units. We expect the upward trend to soften in the next 2 years as developers seek to pass <5-7% y/y increase in prices, given guidance. Exhibit 25: Incoming residential supply in Cairo- formal housing sector (under coverage) Exhibit 26: 6 th of October district: Apartment prices up 15% y/y, villas + 6% in EGP terms Exhibit 27: New Cairo: Apartment prices, in EGP terms, up 10% y/y, villas +9% during Q1 16A FY 11A FY 12A FY 13A FY 14A FY 15A FY 16e FY 17e 6th of October residential price performance 1,500 1,400 1,267 1,300 1,200 1,100 1, ,317 1,305 1,279 1,173 1,111 1,111 1,111 1,111 1,163 1,067 1,189 1,190 1,071 1,094 1, ,357 1,370 1,255 1,355 New Cairo residential prices performance 3,200 2,700 2,200 1,700 1, ,813 1,974 1,741 1,609 1,659 1,136 1,198 1,180 1,125 1,125 1,732 1,700 1,100 1,125 1,305 2,522 2,522 2,146 2,232 2,044 1,331 1,331 1,438 1,452 2,471 1,394 2,777 2,749 1,581 1,506 Units ('000) New supply ('000) Apartments Villas Apartments Villas Source: JLL, Company Data, Arqaam Capital Research Source: JLL, Company Data, Arqaam Capital Research Source: JLL, Company Data, Arqaam Capital Research Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 12

13 Market Analysis Developer footprints: across Cairo Cairo Exhibit 28: Cairo sprawl: Residential developers are largely concentrated around urban districts in Six of October, and New Cairo Porto october The Strip The Polygon Westown The Courtyards Al Rabwa Allegria Casa Forty West Uptown Cairo Nozhat Oboor, 1258 Suez Rd -Al Waha -Primera Teegan Porto Cairo Residence + mall Festival City Porto New Cairo Al Rehab -Palm Hills Katameya -Extension -Village Garden Eastown Mivida Madinaty Villete KM 45 Nasr Gardens -Palm Hills October - Palm Valley - Golf extension - Gold views -Bamboo extension - Botanica -Woodville Village Gate Kattameya Plaza + Commercial TMG SODIC PHD MNHD Emaar Misr Amer Heliopolis Landmarks Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 13

14 Market Analysis Developer footprints: Cairo Exhibit 29: Regional breakdown of projects between developers under coverage Region Developer Total land area (m sqm) Total BUA (m sqm) Total project value (EGP m) % West Cairo East Cairo North Coast PHD ,452 58% MNHD % EMFD % SODIC ,348 35% TMGH ,687 6% Total , % PHD ,250 19% MNHD ,384 3% EMFD ,965 39% SODIC ,989 4% TMGH ,835 34% Total , % PHD ,807 18% MNHD % EMFD ,464 80% SODIC % TMGH % Total , % Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 14

15 Market Analysis Yield analysis: No further room for pricing growth Exhibit 30: Implied yields across developer portfolios are demonstrably negative in real terms Development Developer Rental rate Selling price Implied gross Implied Implied monthly Implied net rental (EGP/month) (EGPm/unit) rental yield net rental yield mortgage payment (EGP) yield post-financing The Village Gate PHD 7, % 4.9% 17,780 (7.43%) Nasr Gardens MNHD 1, % 12.9% 1, % Allegria SODIC 35, % 2.5% n/a n/a Forty West SODIC 25, % 4.5% 54,000 (5.80%) Al Rehab TMG 6, % 3.8% 18,360 (8.72%) Madinaty TMG 8, % 2.2% 42,336 (10.56%) Mortgage penetration is near-nonexistent in Egypt: And this is due to a range of economic and social factors. Property purchases are typically achieved by a mix of long term savings, and inter-generational gifts. Much of the housing sector is informally built. A large portion of the property market shows negative implied yields, when mortgage costs are introduced: We believe that a hypothetical mortgage calculation shows that net of finance costs, most property in Egypt would produce negative yields. Eventual formalization of the sector, and increased commercial lending into residential property, would force a correction in either rental rates (via upward pressure to restore yields), or prices (via downward pressure). Exhibit 31: The total value of mortgage loans outstanding as a % of GDP remains negligible for Egypt, at 0.2% Total Value of Mortgage Loans outstanding (LC bn) GDP (LC bn) As a % of GDP Egypt 4.3 2, % UAE , % KSA 147 2, % USA 13,795 17, % UK 1,300 1, % Eurozone 5,874 10, % South Africa 1,200 3, % It will most likely appear in prices, rather than rents: Given that rental controls apply to a portion of old build residential stock in Cairo, and that rental growth roughly equates to inflation across new build (post 2013), the eventual yield correction of property in Cairo would most likely take place via prices, rather than rents. This implied that price stabilization/weakness is the more likely scenario going into Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 15

16 Market Analysis Market solutions: Land donors and home builders Land auctions prices have appreciated strongly- developers not likely to raise residential prices as aggressively in order to preserve margins (latest auction EGP 3.k/sqm, vs. EGP 2.5k/sqm SODIC max) This has produced 2 types of real estate names in Egypt: land donors (Helopolis), and builders (PHD, SODIC). MNHD has also allocated land towards co-development. JVs have emerged, and typically split the economics in favour of builders We however believe that land donors enjoy the bulk of the benefits, as they monetize assets and take on minimal execution and sales risk. Plots can be re-appropriated in the event that a JV fails, whereas WIP cannot be liquidated. We believe MNHD is very well-positioned Exhibit 32: Land donors vs. home builders: The split of project economics works in favour of builders, but land owners enjoy better RoE and margins CAPEX/unit for CAPEX/unit for NPM NPM RoE RoE Land Home Revenue Margin/unit sold Margin/unit sold land donor home builder Land home land home donor builder split (%) (land donor) (home builder) (EGPm) (EGPm) donor builder donor builder Heliopolis - SODIC project Heliopolis SODIC % 40% % 25% 72% 12% MNHD - PHD: Capital Gardens MNHD* PHD % 54% % 42% 90% 32% *On a one-off basis with PHD How we play this trend: Our calculations above demonstrate the effective split of the proceeds of existing JVs, in terms of margins and RoE. Though the allocation of revenues typically favors builders (e.g. SODIC, PHD), the effective net margin is stronger for land donors (average 66% vs. 35% builders). This also applies in terms of RoE (average 88% vs. c.20% builders). Cheap land is the primary reason. Furthermore, we believe that project execution risk and cash flow burden are substantially lower for donors, adding further arguments in favor of playing the theme via land donors. Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 16

17 Valuation Regional context: NAV analysis MENA property is currently trading far below a warranted P/NAV range. Currently, MENA property is trading at 0.6x P/NAV- this is 30-40% below the range it traded within during the last cyclical de-rating (2009). The currently macro picture is hardly as onerous as the previous one, in our view. In particular, UAE property (as below) currently trades below SoTP value, and in some cases (Emaar, Emaar Malls, Emirates REIT), even below the DCF-backed value of rental assets. The resultant distribution yield across the 3 names is 5.5%, vs. a simulated UAE 10-yr bond yield of 4.3%- this demonstrates solid value, in our view, in the context of P/NAV discounts. As for Egypt property, we remain buyers of names trading below our base case scenarios, and see deep value in those trading below our bare bones assumption (SODIC, TMG, PHD, MNHD). Exhibit 33: NAV scenarios: Egyptian property names trade at deep discounts to base case scenarios, and in some cases (SODIC, TMG, PHD, MNHD) below bare bones value 200% 150% 100% 50% --% (50%) 38% 73% 82% 14% 49% (16%) (22%) (34%) Damac UPP ERC Eshraq PHD MNHD Arkan TMG Emaar Misr 12% 58% 54% 42% 44% 59% (4%) 28% 33% SODIC DIC Mabanee Aldar Emaar SRECO REIT Emaar Malls (100%) (150%) Blue skies Base case Recurring only Bare bones CMP Linear (CMP) Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 17

18 Valuation NAV analysis How we define our valuation scenarios Blue skies: Development pipelines and rental growth are modeled at 100% of management guidance. Base case: Projections are made on average at 70% of guidance (sales guidance taken at 50%). This is our chosen set of parameters for our revised projections across the sector. Bare bones: Projections capture only 3 years of visible cash flows, and projects beyond this timeline are excluded (removing both CAPEX and returns). Recurring-only: NAV is purely derived from existing recurring income assets, and assumes no growth beyond inflation in rentals. Exhibit 34: Breakdown of NAV scenarios Base case scenario PHD TMG SODIC MNHD ERC Emaar Misr Recurring assets- existing Recurring assets- future Property development- existing Land Other assets 0.2 (4.4) (0.4) (0.0) 0.3 (1.5) Net debt 0.8 (1.6) (2.4) NCI & JVs NAV/share Bare bones scenario Recurring assets- existing Recurring assets- future Property development- existing Land Other assets 0.2 (4.4) (0.4) (0.0) 0.3 (1.5) Net debt 0.8 (1.6) (2.4) NCI & JVs NAV/share Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 18

19 NAV/share NAV/share Valuation NAV analysis Exhibit 35: Base cases Exhibit 36: Base cases: composition of NAV/share % 90% 80% 70% 31% 54% 50% 4% MNHD SODIC TMG Emaar Misr PHD ERC 60% 50% 40% 30% 20% 10% 0% 64% 34% 5% 12% 32% 82% 81% 13% 18% 89% 18% 5% 2% 7% PHD TMG SODIC MNHD ERC Emaar Misr Recurring assets Property development- existing Land Recurring assets Property development- existing Land Exhibit 37: Bare bones cases Exhibit 38: Bare bones case: composition of NAV/share % 90% 80% 70% 60% 50% 84% 53% 61% 32% 65% 8% 77% 68% MNHD SODIC TMG PHD Emaar Misr 0.3 ERC 40% 30% 20% 10% 0% 10% 6% 20% 27% 25% 14% 3% 15% MNHD SODIC TMG PHD Emaar Misr 29% 3% ERC Recurring assets Property development- existing Land Recurring assets Property development- existing Land Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 19

20 Valuation Anomalies in market valuation: Implied WACC, and implied land prices Exhibit 39: Market implied WACC Developer Target WACC Market-implied WACC pps MNHD EY 17.2% 36.4% 19% OCDI EY 18.5% 26.6% 8% TMGH EY 18.3% 28.7% 10% EGTS EY 18.7% 18.7% -- PHDC EY 16.8% 18.4% 2% EMFD EY 15.6% 21.5% 6% Average Egypt 17.5% 25.1% 7.5% An angle through which to demonstrate the anomaly in market valuation is to infer the implied cost of capital at which the market is discounting real estate cash flows. As above, property names in Egypt appear are effectively being assigned an average cost of capital that is 7.5% above what we use in our models (WACC 17.5%, rf 12%, MERP 9%, CMRP 3%, tax rate 23%). This would imply equity risk premiums that are 2x our assumed 9%, which we find erroneous. Exhibit 40: Market implied land prices Developer Target average land price (EGP/sqm) Target average land price (discounted) Market-implied land price (EGP/sqm) MNHD EY 2,343 1, (34%) OCDI EY 2, (82%) TMGH EY 2,048 1, (12%) EGTS EY % PHDC EY (63%) EMFD EY 1,222 1, (41%) Average Egypt (33%) Thinking in an NAV context: From another perspective (NAV), and assuming development proceeds and recurring income are being priced in correctly, the residual discount on land mark-to-market valuations is on average 33% greater than what we use in our models (already 50% below M2M). We again find that this is excessively punitive, especially since land monetization is far more immediate in Egypt than elsewhere in MENA. % Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 20

21 Market Analysis Developer portfolios: key details Exhibit 41: MNHD development portfolio Project name Launch date Target market Total BUA (sqm) Launched units Sold units Delivered units Delivery start date Average selling price EGP/sqm Expected revenues (EGP m) CAPEX (EGP m) Hadayek Al Nasr 2011 Low 44, , Tag Sultan 2012 Upper/middle 300,300 1,700 1, ,700 2, Hayy Al Waha - Phase Middle 81, , Primera 2014 Middle 58, , T Zone 2015 Upper/middle 321,606 1, ,000 2,700 1,020 Total 807,210 4,752 2,680 6,620 5,473 2,136 Exhibit 42: MNHD land bank Plot Area (m sqm) Price EGP/sqm Nearby asking prices EGP/sqm Teegan 2.8 2,200 3,000 40% KM ,400 1,800 25% Legacy land 0.1 5,144 Total 8.0 1,414 Footprint Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 21

22 Market Analysis Developer portfolios: key details Exhibit 43: PHD development portfolio in West Cairo Project name Launch date Type Project land area (sqm) Total BUA (sqm) Land area (sqm) Launched units Sold units Delivered Delivery start date Average BUA selling price/sqm Average land selling price/sqm Expected revenues (EGP m) CAPEX (EGP m) West Cairo Palm Hills October Golf Views Jun-05 Villa - Town/Twin House 2,049, , , ,000 11,450 3,995 1,579 Casa Jun-07 Apartments 294, ,837-1,154 1,129 1, ,840 1, Palm Parks Dec-07 Apartments 474, ,788-1, ,475 2,419 1,509 Palm Hills October Bamboo extension Palm Hills Golf Extension Dec-07 Jan-08 Woodville 2014 Palm Valley (formerly VGO) Smart Village Residence 2015 Villa - Town/Twin House Villa - Town/Twin House Villa - Town/Twin House Villa - Town/Twin House 168,000 65,397 75, ,250 5, , , , ,500 7,750 3,728 1, , , , ,780 7,450 1, , , , ,575 4,800 1, Apartments 100,000 53, , Total 4,622,980 1,974,386 1,435,414 5,283 3,562 1,718 6,867 9,071 14,758 7,080 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 22

23 Market Analysis Developer portfolios: key details Exhibit 44: PHD development portfolio in East Cairo Project name East Cairo Palm Hills Katameya Launch date Jul-06 Type Project land area (sqm) Total BUA (sqm) Land area (sqm) Launched units Sold units Delivered Delivery start date Average BUA selling price/sqm Average land selling price/sqm Expected revenues (EGP m) Villa - Town/Twin 928, , , ,250 8,160 2, House The Village Nov-06 Apartments 105,151 67, , The Village Gate Jun-08 Apartments 131, , , Village Gardens Katameya Palm Hills Katameya Extension Mar-09 Villa - Town/Twin House 284,794 35,851 36, ,000 7, Mar-09 Apartments 202,700-1,004 1,004 8, Apr-10 Villa - Town/Twin 275, , , ,000 8,830 1, House Palm Hills Katameya Extension 2 Sep-16 Stand Alone units 150,409 68,271 81, ,500 9,818 1, Village Avenue Katameya Dec-13 Apartments 34,906 28, , Feddan - JV with NUCA Sep-16 Stand Alone units 527, ,635 1, ,000 7,500 4,855 2,100, Apartments 1,768, ,916 4, ,500 3,076 11,897 Capital Gardens Nov-15 Apartments 433, ,985-2, ,250-5,064 1,375 Total 4,443,563 3,727,844 1,615,600 11,317 3,142 1,264 7,404 6,447 28,335 11,513 CAPEX (EGP m) 6,659 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 23

24 Market Analysis Developer portfolios: key details Exhibit 45: PHD development portfolio in North Coast Project name Type Project land area (sqm) Total BUA (sqm) Land area (sqm) Launched units Sold units Delivered Average BUA Average Delivery selling land selling start date price/sqm price/sqm Expected revenues (EGP m) CAPEX (EGP m) North Coast Hacienda Bay Villa - Chalet - Town/Twin House 2,410, , , ,300 9,420 2, ,362-1,637 1,271 16,035-2,410 1,301 Hacienda W1 Villa - Chalet - Cabin 215,024 17,709 42, ,600 10, , , Hacienda W2 Villa - Chalet - Cabin 472,262 64, , ,600 14,000 1, , , Total 3,098, , ,595 3,320 2, ,957 10,362 8,071 2,864 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 24

25 Market Analysis Developer portfolios: key details Exhibit 46: PHD land bank Plot Location Area (sqm m) Price/sqm MV (EGP m) Botanica West Cairo ,213 Sahl Hasheesh Red Sea , Galala North Coast , Riyadh plot* KSA ,000 Total ,009 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 25

26 Market Analysis Developer portfolios: key details Exhibit 47: TMG development portfolio Project name Type Gross land area (sqm) Sellable BUA (sqm) Launched units Sold units BUA sold (m sqm) Average selling price/sqm Most recent price/sqm Booked revenues (EGP m) Delivered units Madinaty phase 1 2,688,000 2,831,520 20,598 Apartments Madinaty phase 2 3,135,300 3,133,423 24,030 34, ,324 10,002 23,617 20,575 Madinaty phase 1 Villas 6,670,440 1,438,755 4,395 3, ,121 16,382 12,067 1,149 Al Rehab 1 (6) 791, , Villas 1, ,505 16,029 6,857 Al Rehab 2 1,238, ,803 1,232 30,459 Al Rehab 2 Apartments 1,654,237 1,838,145 12,732 11, ,934 9,289 10,294 Al Rabwa 1+2 Villas 760, ,159 1, ,469 15,098 1,687 Total 16,938,398 10,179,545 64,641 51, ,384 11,291 54,522 52,183 Exhibit 48: TMG rental portfolio Project name # of keys Occupancy* FY 18e revenues (EGP m) Four Seasons (Sharm EL Sheikh) % 147 Four Seasons (Nile Plaza) % 167 Four Seasons (San Stefano) % 52 Kempinski (Cairo) % 53 Four Seasons (Sharm EL Sheikh) 96 NA 54 Marsa Alam 750 NA 129 * we note that occupancy rates are ranging 30-40% at Sharm hotels Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 26

27 Market Analysis Developer portfolios: key details Exhibit 49: TMG land bank Plot Area (sqm) Market price/sqm Madinaty ,184, Al Rehab 924,225 1,200 Marsa Alam 3,256,285 1,400 Sharm extension and golf land 957,634 30,000 Total 23,322,414 2,048 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 27

28 Market Analysis Developer portfolios: key details Exhibit 50: SODIC development portfolio Project name Gross land area (sqm) Sellable BUA (sqm) Launched units Sold units Delivered units Delivery start date Average selling price/sqm Expected revenues (EGP m) CAPEX (EGP m) West Cairo Allegria 2,428, ,783 1,255 1,239 1, ,776 4,423 2,238 The Polygon 43,783 55,558 NA , Forty West 40,196 39, , Forty West II 9,869 12, , The Strip 105,776 22, , Westown Residences 584, ,663 1,391 1, ,480 2,234 1,189 CASA - 15, , NA The Courtyards 96,421 75, , WT Hub 50, Total 3,358,751 1,135,665 3,333 3,111 1,946 8,231 9,348 5,220 East Cairo Kattameya Plaza 126, , , Kattameya Plaza Commercial NA 1, , Eastown 401, ,127 1,588 1, ,466 3,032 1,189 Villette 338, , ,737 2, Total 866, ,970 2,485 2, ,522 5,989 2,125 North Coast Caesar 370,669 63, , Total 4,596,300 1,827,908 6,003 5,588 2,398 8,390 16,273 7,720 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 28

29 Market Analysis Developer portfolios: key details Exhibit 51: SODIC recurring income portfolio Project name GLA (sqm) Rent/sqm FY 18e revenues (EGP m) West Cairo The Polygon 18,247 1, Forty West 4,736 2, The Strip 6,534 3, Westown Retail Hub 13,254 2, Total 42, Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 29

30 Market Analysis Developer portfolios: key details Exhibit 52: SODIC land bank Plot Use Gross land area (sqm) Market price/sqm Total BUA Gross sellable BUA Gross Leasable area Gross Leasable BUA Land cost (EGP m) West Cairo Westown Residual Land Residential 229,031 1, , , Westown Residual Land Retail & Commercial 138,276 1,300 70,807 61,029 2,744 9, Strip Extension Commercial 82,025 1,300 16,500 16, Polygon Commercial 10,944 1,300 18,122 9,061 7,249 9,061 2 Al Yosr Land Mixed Use 1,260, acre Residential 126,000 2, Total 1,846, , ,019 9,993 18, East Cairo Eastown Residual Land Residential 298,436 1, , , Eastown Residual Land Retail & Commercial 158,393 1,900 80,544 34,115 37,143 46, Villete (301 Acre Plot) Residential 714,538 2, , ,761 2,430 Villete (301 Acre Plot ) Retail & Commercial 210,700 2,713 13,431-10,745 13,431 Heliopolis land Mixed Use 2,751,000 3,311-3,311 Total 4,133,068 12, , ,188 47,888 59,860 6,495 North Coast Caesar 70, ,083 21, Total 6,049,674 8,820 1,041, ,290 57,881 78,698 6,876 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 30

31 Market Analysis Developer portfolios: key details Exhibit 53: EMFD development portfolio Project name Type Use Gross land area (sqm) Sellable BUA (sqm) Launched units Sold units Delivered units Delivery start date Average selling price/sqm Expected revenues CAPEX % (EGP m) (EGP m) completion West Cairo Uptown Cairo Mixed use High end residential & retail 4,500,000 2,000,000 2,398 2, ,500 38,760 21,888 10% Marassi Mixed use High end residential & hotels 6,500,000 2,400,000 2,619 2,357 1, ,000 48,464 26,556 10% Mivida Mixed use High-end Mixed Use 3,700,000 1,800,000 4,286 3, ,500 22,205 13,401 20% Total 14,700,000 6,200,000 9,303 8,373 2, ,429 61,845 Exhibit 54: EMFD land bank Total land area (sqm m) Total GFA (sqm m) Residential GFA (sqm m) Retail GFA (sqm) Office GFA (sqm) Hospitality GFA (sqm) Other GFA (sqm) % launched Uptown Cairo ,000 98,000 79,000 26,000 30% Marassi , ,000 25,000 20% Mivida , ,000 10, ,000 80% Cairo Gate Total , , , ,000 Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 31

32 Key calls Sixth of October Development. Egypt Real Estate. Six of October: High quality cash flows and NAV at a discount Land auctions prices have run aggressively, but developers are not likely to seek further growth in residential prices. Margin growth likely to stall (latest auction prices EGP 3,500+/sqm, vs. SODIC peak of EGP 2,500/sqm) This has produced 2 types of real estate names in Egypt: land donors (Heliopolis, and on a one-off basis, MNHD), and builders (PHD, SODIC). JVs have emerged, and typically split the economics in favour of builders. We believe that builders take on almost all the execution and sales risk. Selectivity is key SODIC as a builder is not incongruent with our thesis. JV with Heliopolis brings SODIC s development pipeline up by 2.3x to 15.3k. We estimate the project to add >40% to EPS once developed. We currently acknowledge via 12% TP uplift on an NPV basis. Moreover, 70% of our DCF valuation exercises is driven by visible handovers and recurring income, and only 30% by land-this is the most defendable valuation profile in Egypt Future sales portfolio would be heavily concentrated (75% vs. 45% currently) in East Cairo (West previously) where demand for property is positively skewed. We estimate 30% 4-yr EPS CAGR, excluding the JV with Heliopolis We reiterate our Buy rating and further raise TP to EGP 18 (+58%) Land bank limitations circumvented: SODIC s land assets are far smaller than those available to other builders (5.7mn sqm, 50% NAV, vs. 80% peers), and have historically been geographical concentrated in West Cairo. SODIC s JV with Heliopolis enabled the business to significantly expand its access to fresh land, which now stands at 6.05m sqm (+1.8x), at minimal initial cash outlays. The project would also shift SODIC s portfolio from West Cairo to East Cairo (75% of total units vs. 45% currently), in which demand remains heavily skewed, triggered by the establishment of the new administrative capital in the area. SODIC s development pipeline is due for massive expansion as 15.3k units (+2.3x) go on sale, an equivalent of EGP 49bn in sales value. SODIC and Heliopolis will co-develop c.2.75m sqm (8.6k residential units, commercial/retail areas) in New Heliopolis in East Cairo, over the next 10 years. The JV marks SODIC s first revenue-sharing venture. Management guidance suggests the project would generate c.egp 30.35bn in revenues, 70% of which accrues to SODIC. This implies a land price of EGP 3.3k/sqm, within the range of the recent auction asking prices of k/sqm in East Cairo. We currently value the project through land markup rather than a full-fledged development DCF, at EGP 1.8/share (+12% to TP of EGP 16/share), until further guidance is provided. We reiterate Buy and further raise TP to EGP 18/share (+13% vs. old TP of EGP 16) to reflect (i) the newly signed JV with Heliopolis Housing (EGP 1.8/share, +12% to TP), which we now still partially account for, through land reval rather than project DCF, (ii) the impact of rising land prices across Cairo (>20% y/y) on SODIC s land bank, and new launches (+EGP 1.1/share, +7% to TP), and (iii) DCF rollout (-5.7% To TP). SODIC s launched sales portfolio stands at 6.7k (EGP 18.3bn revenues), 91% of which is already pre-booked. We model for the sale of the remaining 570 units (EGP 2.6bn) in FY 16-17e and the full handover of future units (4.0k units, EGP 10.9bn revenues) by FY 20e. We estimate 30% 4-yr EPS CAGR, excluding the JV with Heliopolis (>40% to EPS). BUY EGP 18 Real Estate / Egypt Bloomberg code OCDI EY Market index EGX Price target (local) 18 Upside (%) 58.0 Market data 02/06/2016 Last closing price Week range Market cap (EGP m) 3,833 Market cap (USDm) 432 Average Daily Traded Value (EGP m) 14.6 Average Daily Traded Value (USD m) 1.6 Free float (%) 65% Year-end (local m) e 2017e 2018e Revenues 1, , , ,294.7 EBITDA ,062.0 EPS P/E (current price) Net debt (797.0) (2,459.6) (3,230.5) (3,732.0) BVPS P/B (current price) EV/EBITDA (current price) Div. yield (%) FCF margin (%) (6.7) Net debt/ebitda (x) (2.0) (3.1) (4.3) (3.5) We maintain our Buy rating in place and raise TP to EGP 18/share on solid fundamentals and new catalysts. The business would almost double its sales portfolio going forward, providing fresh cash flow visibility over the next 10 years. Risks: Downside: CAPEX overruns, sales slowdown, and a flattening in prices. Upside: better margin generation from the Heliopolis JV (+EGP 0.9/share, +5% to TP). Copyright 2016, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 32