Cairo – Mubasher: MubasherTrade 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 on Wednesday, Emaar Misr reported a 23% year-on-year increase in profits o EGP 539 million for the second quarter of 2017 from EGP 436.8 million in Q2-16.

These results were “in line with consensus estimates at EGP 494 million (variance: +9%)”, the note by MubasherTrade 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 Q2-17 from EGP 121.4 million in Q2-16.

Revenues declined 8% year-on-year to EGP 1.09 billion in Q2-17, 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 Q2-17, from EGP 587.7 million, representing 49% of revenues in Q2-17. Moreover, revenues from Emaar Misr’s Uptown Cairo project retreated 52% year-on-year to EGP 142.8 million in Q2-17, compared to EGP 295.4 million, representing 13% of total revenues in Q2-17.

Despite these declines, the research firm said it had “no concern” on the lower revenues in Q2-17, 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,” MubasherTrade Research noted.

Gross profit fell 20% year-on-year to EGP 347.2 million, with gross processing margin (GPM) retreating to 32% in Q2-17 from 36% in Q2-16.

“Investigating projects' margins, Marassi, the largest contributor to gross profit, reported lower GPM at 27% in Q2-17, versus 37% in Q2-16”, the report said, noting that Mivida's GPM retreated to 31% in Q2-17, versus 38% in Q2-16, “offsetting higher GPM recorded by Uptown Cairo at 50% versus 34% in Q2-16.”

Selling, general, and administrative expenses soared 46% year-on-year to EGP 111.1 million from EGP 76.3 million in Q2-16, representing 10% of total revenues in Q2-17 compared to 6% in Q1-17.

“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.”