Orascom Development Egypt SAE (CAI:ORHD) Q2 2024 Earnings Call Highlights: Strong Revenue ...

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Wed, Oct 9, 2024, 4:13 PM 4 min read

Revenue Growth: Up 25% in Q2 2024 compared to the same period last year.
Adjusted EBITDA: Increased by 69% year-over-year for Q2 2024.
Net Profit: Up 54% in Q2 2024 compared to the same period last year.
First Half Net Profit (Adjusted): Increased by 37% when excluding one-off effects.
Real Estate Sales: Up almost 60% to CHF 433 million in the first half of 2024.
Real Estate Revenue: Increased by 9% to CHF 167 million for the first half of 2024.
Hotel Segment Revenue: Up 8% in the first half of 2024.
Hotel Operating Margin: Increased by 13% in the first half of 2024.
Recurring Revenue Growth: Up 15% in the first half of 2024.
Operating Profit from Recurring Revenue: Increased by 55% in the first half of 2024.
El Gouna Hotel Occupancy Rate: 73% in Q2 2024.
Average Room Rate (ARR) in El Gouna: CHF 90, an 11% increase compared to the first half of 2023.
O West Villa Deliveries: 316 villas delivered in the first half of 2024.
Makadi Heights Land Agreement: $5.6 million payment over 10 years for development timeline extension.
Salalah, Oman Real Estate Sales: Up 88% compared to the same period last year.
Salalah Hotel Occupancy Rate: Increased to 65% from 62% year-over-year.
Gross Profit Margin Improvement: Attributed to land sales.
SG&A Expenses: Remained stable despite revenue growth.
Cash Flow from Operations: CHF 88 million compared to a negative CHF 13 million last year.
Monetization Achievements: CHF 230 million realized from asset sales since August 2022.

Warning! GuruFocus has detected 3 Warning Signs with CAI:ORHD.

Release Date: August 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Orascom Development Egypt SAE (CAI:ORHD) reported a 25% increase in revenues for Q2 2024 compared to the same period last year.
Adjusted EBITDA rose by 69% and net profits increased by 54% for the same period, indicating strong operational performance.
Real estate sales for the first half of 2024 were up nearly 60%, providing a healthy deferred revenue balance.
The hotel segment saw an 8% increase in revenues and a 13% rise in operating margin despite geopolitical challenges.
The company successfully monetized CHF230 million over a two-year period through strategic land sales and asset transactions.

Negative Points

The company faced a negative impact from the devaluation of the Egyptian pound, affecting year-to-date net profits.
Finance costs increased due to a 6% rise in Egyptian debt rates and additional withdrawals for construction projects.
The geopolitical situation in Gaza led to the mothballing of the Taba destination, impacting hotel revenues.
The O West project saw an 18% decline in contracted units sold, attributed to local market dynamics and devaluation effects.
The company's stock performance has not aligned with its operational success, prompting discussions on improving stock liquidity and shareholder engagement.

Q & A Highlights

Q: The number of contracted units sold in O West was down 18%. Is there a specific reason for this, and can you provide some guidance for the second half of the year? A: The decline is due to local market dynamics, particularly following a devaluation which typically causes a temporary pause in real estate transactions. We expect the total number of units sold to be higher by the end of the year compared to last year. Regarding guidance, we are optimistic about the company's outlook, expecting healthy growth across hotels, real estate, and commercial segments for the rest of the year.

Q: There seems to be a disconnect between the company's operational performance and stock performance. What measures are being discussed to support stock performance? A: We are actively discussing with the Board about initiating dividends from Orascom Development Egypt (ODE) to Orascom Development Holding (ODH) and subsequently to shareholders. This would be a significant milestone as dividends have not been paid in recent years. Additionally, we are planning investor roadshows to increase engagement with potential investors.

Q: Can you elaborate on the impact of the Gaza conflict on Taba and how long it would take to get Taba back up and running? A: Operationally, Taba can be up and running within three to four weeks. However, commercially, it may take longer, possibly a year to a year and a half, to regain tourist confidence and reach viable occupancy levels. We have maintained minimal operations to ensure a quick restart when conditions improve.

Q: How much room is there to increase rates in Egypt given the high foreign occupancy rate? A: We believe there is significant room to increase rates. Our new head of hotels has been focusing on commercial yield and revenue management, and we expect to see further improvements in average room rates (ARRs) as we roll out new pricing strategies and e-commerce initiatives across our hotel portfolio.

Q: When is the rest of the group, excluding ODE, expected to become a positive contributor to EBITDA? A: We are close to achieving positive EBITDA contributions from Montenegro and expect Oman to follow within a year or two. The trends are positive, and we are working on ramping up these destinations to move past the negative part of the J-curve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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