Sodic outshines peers in Egyptian property

Sodic may be the first Egyptian property company to remerge from the country's strife.

The Egyptian property industry has taken a beating since Hosni Mubarak was forced from the country's presidency on February 11, with many companies facing legal challenges over land deals.

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But Sixth of October Development & Investment Company (Sodic) may be the first property company to give a strong showing after Egypt's turmoil, according to JPMorgan.

Sodic's share price is down sharply since the protests in January and February, but the company has outperformed its peers by 55 per cent, JPMorgan noted in a report.

"We expect Sodic to continue outperforming peers in the near [to] medium term with its historically transparent land acquisition policy," JPMorgan noted. "This should allow Sodic to benefit from the expected recovery in Egypt's political and economic landscape over the next 12 to 18 months."

Sodic still faces challenges in a tough market, JPMorgan said. The company lowered its revenue forecast for Sodic by 19 per cent and dropped its share-price target to 80 Egyptian pounds from 135 pounds.

But Sodic is better positioned than its competitors to take advantage of Egypt's increasing stability, and most of the negatives have already been priced into the stock, the report said.

Sodic was expected to benefit from increasing handovers and better earnings, as well as "the expected recovery in Egypt real estate as the political and the economic landscape improves, leading to increased confidence by real estate investors".

Sodic should get a revenue boost from the completion of 600 homes in Allegria, a master-planned development in Sheikh Zayed City, on the road between Cairo and Alexandria.

Construction is proceeding on other phases of the project, which includes a Greg Norman-designed golf course and is next to the British International School of Cairo.

JPMorgan also applauded the company's balance sheet and its "conservative policy of revenue recognition".

Sodic announced this year that it had more than 700 million pounds of cash and more than 2 billion pounds of receivables, with 800m due this year.

"We have conducted a full legal due diligence on our land, which confirmed that all Sodic lands were acquired according to the applicable laws," Maher Rafik Maksoud, Sodic's managing director, said in a letter to shareholders.

Sodic shares closed at 61.99 pounds yesterday, down from a high of 111.69 pounds on December 12.