Sodic losses up but outlook healthy

Sixth of October Development & Investment widened its loss in the first three months of the year but is a strong candidate to weather the country's financial crisis.

Sixth of October Development & Investment, Egypt's third-biggest listed developer, widened its loss in the first three months of the year.

However, the company is still seen as a strong candidate to weather the country's financial crisis.

The company, also known as Sodic, posted a first-quarter net loss of 16.1 million Egyptian pounds (Dh9.9m), compared with a net loss of 10.9m pounds in the same period last year.

Analysts said its conservative accounting policy, which did not recognise revenue until units were handed over, was behind the net loss.

The company delivered just 22 units in its flagship Allegria project in west Cairo, worth 52m pounds, less than it had previously expected, but said deliveries would be back to normal by the second quarter.

It is on track to deliver 500 units this year, the company said.

The luxury property developer said it owed 154m pounds in land dues to be paid over the next five years. Net revenue stood at 41.5m pounds in the first quarter, up from 15.4m a year earlier.

Analysts said it was difficult to compare quarterly revenues for developers because the number of units handed over can vary monthly.

"During a rough quarter, Sodic managed to keep to its 2011 plan by focusing on unit delivery, continued project execution while adjusting its strategy to accommodate the post revolution environment," the company said.

Sodic has been viewed as the more resilient among its Egyptian property peers, including Palm Hills and Talaat Moustafa, and least affected by legal challenges over land deals.

Analysts at JPMorgan said in a recent note to investors they expected Sodic to "continue outperforming peers in the near [to] medium term with its historically transparent land acquisition policy".

"This should allow Sodic to benefit from the expected recovery in Egypt's political and economic landscape over the next 12 to 18 months," the note said.

The company was also initiated with a "buy" rating at Beltone Financial with a price target of 76 pounds.

Planned investments for this year have been cut to 1.2 billion pounds from 1.8bn pounds, but prospects for the company have also improved on the back of the resignation of Magdy Rasekh, who stepped down as chairman this month. His link to the former Mubarak regime, as the father-in-law of a son of former president Hosni Mubarak, may have moved business away from the company, some analysts have speculated.

Shares of the company yesterday closed 1.2 per cent higher at 66 pounds on the country's benchmark EGX 30 index.