SODIC (OCDI EY): The company’s FY20 gross contracted sales rose c2% y-o-y to EGP7.4bn, representing 1,361 units sold, with residential sales growing c19% y-o-y to EGP7.2bn and non-residential sales accounting for c3% of SODIC’s gross contracted sales in FY20 versus c17% in FY19, it announced in a release. Sales performance for the year exceeded management’s guidance after excluding Malaaz, as it had guided for EGP8.4bn in gross contracted sales including EGP1bn from Malaaz, and the launch of the project has been postponed to 2021, it added. West Cairo contributed c61% of the yearly gross sales figures vs. c39% by East Cairo and cancellations accounted for c14% of our FY20 gross contracted sales, and were negatively affected by client’s initial response to the outbreak of COVID-19, in addition to the cancellation of a bulk transaction in 3Q20. Excluding the effect of the bulk transaction, the cancellation rate for the year would stand at c10% of gross contracted sales, and it recorded cancellations of c7% of 4Q20 gross contracted sales. The company delivered 1,162 units in FY20, it also said. (Company release)
Our comment: This implies a c13% y-o-y drop in 4Q20 gross contracted sales to EGP3.30bn, divided into EGP3.24bn in residential sales and EGP60m in retail sales, a c17% drop in net contracted sales to EGP3.06bn, a c22% y-o-y drop in number of units sold to 616 units, and an c11% y-o-y drop in number of units delivered to 376 units. Having said that, we perceive the company reporting such y-o-y drops in operational figures as understandable given the impact of COVID-19 on its operations since March, and we positively perceive the impressive q-o-q growth in operational figures. Gross contracted sales grew c49% q-o-q, net contracted sales grew c77% q-o-q, number of units sold grew c57% q-o-q, while number of units delivered dropped c29% q-o-q. We attribute this impressive q-o-q growth in quarterly sales to a recovery in real estate investment demand following the 400 bps policy rate cuts that took place in 2020 (following a 450 bps rate cuts in 2019) rendering investment in real estate more appealing, despite suboptimal real demand, the company’s attractive product offering especially in West Cairo mainly in Vye and The Estates projects, and more y-o-y relaxed payment terms to make units more affordable to buyers. This helped the company to report almost flat growth in operational figures in FY20, despite COVID-19.