Palm Hills Developments shrugs off land deal lawsuit

The Egyptian developer shook off a lawsuit challenging one of its land deals as it reported a surge in net profit in the third quarter.

The Egyptian company Palm Hills Developments shook off a lawsuit challenging one of its land deals as it reported a surge in net profit in the third quarter.

The country's second-biggest listed property developer posted earnings of 345.1 million Egyptian pounds for the first nine months of this year, 16 per cent up on 290.5m pounds for the same period last year.

The results translate to a third-quarter profit of 153.7m pounds, up from 133.2m pounds last year and exceeding analysts' expectations of about 100m pounds. Palm Hills rose 3 per cent to 6.2 pounds on the news yesterday.

"This is happening because the company is definitely starting to deliver units and the delivery process is taking hold," said Hany Samy at Commercial International Brokerage in Cairo.

Mr Samy recommended a "strong buy" on the company with a target price of 7.6 pounds.

The company has been embroiled in a land dispute after a recent court ruling stated the government had broken the law by selling land to another developer, Talaat Moustafa Group (TMG), without a bidding process.

Concerns over land disputes in Egypt and fears the country is in the middle of a slowdown in sales of high-end residential and holiday homes have shaken the country's property industry.

But Mr Samy said the portion of land concerned was "insignificant" and unlikely to affect the company's share price. The legal challenge in Palm Hills's case involves a 96-hectare plot in a Cairo suburb, which represents less than 2 per cent of the company's landbank.

TMG faces a bigger challenge with the courts as 66 per cent of its land bank is contested, Mr Samy said. Under regulations due to be finalised by the Egyptian cabinet, TMG and Palm Hills will be ordered to meet new requirements that landbanks should be acquired through a bidding process.

Palm Hills, with a market cap of 4.7 billion pounds, was launched in 2005 and is listed on the Egyptian Stock Exchange with a free float of 35 per cent.