Amer Group: Real estate

THE COMPANY: Amer Group Holding specialises in the development of mixed-use resort destinations under the Porto World concept, including residential units, hotels, malls and restaurants, thus providing it with multiple revenue streams. The company applies the principles of sharia law in its operations. Amer Wakf and Mansour Amer are the main shareholders, with a combined stake of 35.6%, followed by SOL Global Holding, which owns 35%, while 19% is free float.

HOUSING: Since 2005, Amer Group has launched a total of 10 real estate projects under the Porto World brand with a total area of 5.8m sq metres located on Egypt’s Mediterranean and Red Sea coasts, as well as in Cairo and Syria. The real estate segment accounts for the bulk of revenue, historically contributing an average of 75%. Margins on the company’s residential developments average 55%. Amer Group has managed to sell a total of 15,345 units since 2005, with 34% of total units sold coming from Golf Porto Marina. In 2012, Amer Group sold 1426 units worth a total of LE2.4bn ($341m) and delivered 934 units for LE851m ($121m). Its backlog currently stands at LE4.1bn ($583m).

DINING: The company operates six casual dining brands: Chili’s, Studio Masr, Carino’s, Halaket El Samak, Alain Le Notre and Freshi Ice Sticks, which was launched in 2012. Amer Group has 57 dining outlets, which generated revenue of LE214m ($31m) in 2012. The restaurant business is the second-largest contributor to the group’s revenue, accounting for an average of 18%.

HOSPITALITY: The holding company also runs a hotel business across Egypt’s coasts, with Porto Marina, Porto Sokhna Beach, Porto Marina Golf and Cancun Resort & Spa currently operational with a total of 919 rooms. The group is expected to add 2310 rooms to its hotel portfolio between 2013 and 2015. Hotel revenue came in at LE67m ($9.53m) in 2012, accounting for 5% of revenue. Higher hotel revenue is expected when the additional rooms become operational.

RETAIL: Although Amer Group’s retail business contributes less to revenue than any other segment, growth potential exists, with 12 malls yet to be launched with a total gross leasable area (GLA) of 320,750 sq metres. Five malls with a GLA of 52,087 sq metres are currently operational (Golf Bay Mall, Old Town, Meeting Point New Cairo, Porto Marina and Porto Sokhna) and generated revenue of LE24m ($3.42m) in 2012.

REVENUES: In 2012 the company’s revenue increased 10% year-on-year (y-o-y) to LE1.15bn ($163.65m) with a gross profit margin of 47% versus 39% in 2011. Nevertheless, net profit fell 34% y-o-y to LE163m ($23.2m), mainly on the back of higher selling, general and administrative expenses. As of December 31, 2012, the company was in a net cash position of LE96m ($14m), which implies a net debt/equity ratio of -5%, among the lowest in its peer group. Cash stood at LE364m ($52m) and receivables at LE239m ($34m).

DEVELOPMENT STRATEGY: With off-plan sales and advance payments, the company’s business model helps it expand aggressively. Its land acquisition process consists mainly of acquiring government-owned land through competitive bidding or joint ventures with third parties. Land liabilities stood at LE62m ($8.82m) in December 2012. The company’s development strategy is to shift its focus gradually to capturing market share in the primary-home rather than the second-home market. That said, in 2013-14 the company expects to launch four new projects (Porto October, Porto Pyramids, Porto New Cairo and Porto Sokhna Islands) to be developed on 3m sq metres. It also aims to increase its recurring revenue streams and pay yearly dividends when possible; a total of LE300m ($42.69m) has already been distributed. It also seeks to expand its operations regionally by launching Porto Agadir in Morocco and Porto Dead Sea in Jordan.

LEGAL ISSUES: Two lawsuits have been filed against Amer Group: the New Urban Communities Authority claims that the company owes LE70m ($10m) in relation to Porto Marina land; and Genoa for Touristic Investments claims it owes LE50m ($7m) in liabilities and compensation for the Porto South Beach project.