HC Brokerage issued an update on Egypt’s real estate sector, highlighting Orascom Development Egypt’s performance and noting their expectation for significant value to be unlocked for ORHD.
Mariam Elsaadany, real estate analyst at HC Brokerage commented that: “Red Sea land revaluation and strong tourism revenue unlock significant value for ORHD: We expect 2026e to be a challenging year for the residential segment of the real estate sector, triggered by 1) high price level of real estate units amid weak affordability, 2) aggressive buying over 2023–2025 leading to a higer market supply of units, 3) declining interest rates, reflecting negatively on customers’ ability to finance units through interest income from certificates of deposit (CDs), and 4) easing inflation and stable EGP make investment demand less attractive. Accordingly, we do not expect a recovery in real estate demand before 2H26, which could lead to a market correction, with developers offering limited price increases on new launches. Also by 2H26, we expect the Central Bank of Egypt (CBE) to cut interest rates by a further 300 bps on top of the 725 bps in 2025, improving the purchasing power of Egyptian real estate buyers. Based on this sector view, we opt for companies with exposure to the hospitality sector, allowing them to bypass any potential residential slowdown and capitalize on the government’s focus on growing the tourism sector, especially following the official opening of the Grand Egyptian Museum (GEM). We believe ORHD is well-positioned to benefit from Egypt’s story in the short- to long-term. The unlocking of value in the Red Sea triggered by the announcement of Emaar Misr’s (EMFD EY) Marassi Red Sea bodes very well for the company’s c15m sqm of undeveloped land in El Gouna, in our view, as our calculation for Marassi Red Sea implies an NPV/sqm of EGP3,765/sqm. We believe this will reflect positively on ORHD over the medium term, despite expected higher competition in the short term. Additionally, we like ORHD’s impressive ability to market its units internationally, with c49% and c33% of 1H25 El Gouna sales and O West sales sold abroad, respectively. Given the government’s direction to increase tourism revenue and the increased demand for hotel rooms, we expect the CBE to launch additional initiatives to expand Egypt’s hospitality inventory, which would benefit ORHD.”
“We increase hotel room rates to account for improved hospitality operations, and normalize growth in real estate selling prices: With Egypt’s ambitious tourism targets, we expect a 4-year hospitality revenue growth of c20% for ORHD, along with an average GPM of c36% over FY25–29e on the back of an average occupancy rate of c75% in El Gouna and c40% in Taba Heights. We increase TRevPar in El Gouna to EGP8,891 by 2028e, from EGP5,713 in 3Q25, and in Taba Heights to EGP2,683, from EGP1,687. We expect the segment to contribute to consolidated revenue an average of c22% over FY25–29e. Our estimates point to a 4-year CAGR of c26% for hospitality EBITDA. For the real estate segment, we expect revenue to grow at a 4-year CAGR of c23%, representing an average contribution of c60% to total revenue over FY25–29e. Our total real estate revenue recognition over our forecast period is EGP238bn, including EGP43.3bn from its deferred revenue balance and EGP195bn of new sales. We expect an average real estate GPM of c36% over FY25–29e. O West dominates new sales as we account for the entire project in our DCF valuation. Our estimates include collections of EGP208bn and CAPEX spending of EGP102bn for real estate operations over our forecast period. Our remaining c18% of revenue over our forecast period is from the company’s town management segment, while we account for no land sales. For the company’s debt level, we understand from management that it may increase debt to finance O West’s land liabilities. Our interest expense estimate is EGP9.73bn over FY25–29e; we expect lower interest rates to partially offset the increase in debt levels.” Mariam Elsaadany concluded
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