We maintain our ACCUMULATE rating on TMG, revising down our target price to EGP 11.29 per share as the unresolved Madinaty case continues to take its toll on investors’ sentiments. Our last recommendation in September expected TMG’s share price to track the upsurge in the Egyptian stock market and benefit from the large foreign inflows mostly into the real estate sector. Our expectations came in line with the company’s financial results and TMG shares rallied to its highest level in 6 years after breaking the EGP 11.5 level in September. However, concerns over land ownership pressured the company’s share performance which witnessed a sharp downtrend following the court hearing for Madinaty on September 24 as the hearing was postponed till the 24th of February 2015 and the case remained unresolved with no final verdict.
TMG’s revenues rose by 2.2% y-o-y to reach EGP 3.3 billion during the first nine months of 2014. Sales from real estate units, which represent 82% of revenues, declined by 1% to EGP 2.7 billion, mainly due to lower delivery units during Q3 2014. As for earnings, they surged by 16.9% to reach EGP 488 million, further supported by EGP 110 million foreign exchange gains and EGP 20 million lower interest expenses. Going forward, we estimate 2014 earnings at EGP 638 million, expecting higher revenue recognition, no major delays in deliveries, and cancellations within manageable rates.
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TMG – 2014 Q3 Update