NBK Capital MENA Research issued a report on property developer Talaat Moustafa Group Holding (TMG), raising the stock fair value from EGP 7.84 to EGP 9.16 per share. It also maintained a Hold recommendation on the stock.
“This mainly reflects the rolling over to FY2014 of the start of our DCF-based valuation. We forecast strongly increasing cash generation from FY2017 onwards on the back of the start of land sales to sub-developers, and bringing forward these cash flows has a significant effect on our forecasts,” NBK Capital said.
“Moreover, we have accounted for the additional EGP 500 million generated over and above our estimates in 4Q2013. Finally, we have revised down slightly our valuation for the hotels division. We have left our new sales forecast for FY2014 broadly unchanged at +15%. This is higher than management's guidance of no growth, a conservative stance influenced by the possible negative impact of political events in 2Q2013. We do not share these concerns, as the market has in the past proved quite resilient in the face of serious political disruption and has recovered strongly after quarters in which growth was slowed by violence on the streets. We see no reason why this should be different in FY2014,” added NBK Capital
The report issuer said TMG remains its favorite pick in the sector, as it has the largest land bank, best track record and best product positioning. It is also the share that offers the highest upside potential based on our and the Bloomberg consensus's fair values for the sector.