STRATEGY PRESENTATION MARCH 2019
STRATEGY PRESENTATIONMARCH 2019
Investor presentation 2
About TMG Holding
Disclaimer
Certain information disclosed in this presentation consists of forward looking statements reflecting the current view of the company with respect to future events, and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking statements, including worldwide account of trends, economic and political climate of Egypt, the Middle East, and changes in business strategy and various other factors. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described in such forward looking statements.
Talaat Moustafa Group Holding (TMG Holding) a leading conglomerate with special emphasis on developing integrated
communities, including but not limited to mixed-use real estate and hospitality projects across Egypt’s key cities. It has an
outstanding track-record in creation of large, vibrant and diverse communities, providing high- quality housing accompanied
by superb amenities and embodying the company’s unmatched experience in planning, execution, management and
maintenance of large-scale developments. Constant execution of the company’s bold and ambitious vision has been
redefining and reshaping Egypt’s property landscape over the past two decades, dictating new trends and higher standards
and substantially contributing to sustainable economic growth and improvement in quality of life for local communities.
TMG Holding is the developer of Al Rehab city in New Cairo, Al Rabwa in Sheikh Zayed city, Mayfair in Al Shorouk city and
Madinaty, its flagship mega-development occupying a whopping 33.6mn sqm in East Cairo, in addition to “Celia” its recently
launched project in the New Administrative Capital. TMG Holding also own three luxurious Four Seasons hotels in Sharm El
Sheikh, Alexandria and Cairo, where it also owns the Kempinski Nile Hotel. Having 875 upscale hotel rooms in total and is
currently expanding its portfolio by 443 additional rooms in two new upscale hotel properties in Sharm El Sheikh and Cairo.
It is also the owner of over 127 thousand sqm of prime retail space located across its integrated communities and is an
emerging dominant player on Cairo’s sporting club scene, with two operational integrated sporting clubs accommodating
about 200 thousand members and an additional club under construction.
The company is publicly held since 2007 and is the largest listed developer by market capitalization, at EGP23.6bn as of
today. It has a total land bank of 45mn sqm, the largest land bank held by a listed developer in Egypt. TMG Holding has the
largest backlog among local developers, at EGP41.7bn and to be fully delivered within the coming four years.
Market capitalization
EGP23.6bn
Annual turnover
EGP10.9bn
Backlog
EGP41.7bn
Total assets
EGP96bn
Investor presentation 3
FY2018 milestones
■ Achieved record-high sales of EGP21.3bn, the highest in the history of the company and over 50% higher than
any other competitor in the market
■ Launch of the New Administrative Capital project Celia which saw stellar performance, with sales reaching
EGP12bn in 2018
■Sales in just 25 days since launch reached EGP7.2bn, reflecting the strong brand equity and capability of
the Group
■ Total habitants and commuting population reached 700k turning TMG Holding’s projects into self-sustained
cities
■ Succeeded at attracting major renowned names to partner with TMG Holding, including GEMS Education, JLL
MENA, Carrefour, among others
■ Began embarking on implementing smart city solutions through partnerships with Huawei and Telecom Egypt
■ Implemented upgrades to all existing facilities which significantly improved costumer satisfaction and
reflected in stellar sales performance in FY2018
Investor presentation 4
TMG at a glance [TMGH.CA/TMGH EY] as at end-2018
Note (1): Includes Four Seasons Sharm El Sheikh extension (under construction) and Four Seasons Madinaty (in design phase)Note (2): Includes Open Air mall (plan to open in 2019, Carrefour operating since October 2018, achieving the highest Carrefour sales per sqm in Egypt)Note (3): Substantial high-margin revenue stream with limited CapEx needs overlooked by the market, to deliver exponential growth mimicking accelerated population build-up. Capacity does not include Celia club which is under process of licensing.Note (4): Contributed 25% in 2017.Note (5): By number of units delivered.Note (6): Preliminary figure
#1 Egyptian RE developer
by market cap
30+ years track record
86k+ / 5k+ units sold
(since inception / 2018 only)
c90k+ units delivered
(since inception, including ministry units)
Highest cumulative deliveries by a
single MENA developer
875 operational hotel
rooms
443 rooms under development(1)
New sales [EGPbn]
127.5k sqm GLA
portfolio(2)
40k sqm GLA leased
c16mn sqm
remaining BuA
c3.5mn BuA commercialBTS and BTL
197k club membership
capacity(3)
Sold c45k memberships, c152k memberships yet to be sold
Egypt’s leading developer of premium master planned communities with sufficient land bank for 17 Years and Sizeable Portfolio
of Recurring Income Assets contributed 30% of GOP for 2018(4) and planned to increase to 40-45%
MENA’s leading developer(5)
Backlog [EGPbn](6) Remaining collections [EGPbn](6)
Expected net cash flow from backlog
and delivered units [EGPbn](6)
Net cash position [EGPbn]
13.1 21.3
2017 2018
30.0 41.7
2017 2018
9.0 12.5
2017 2018
1.55 3.13
2017 2018
21.3 31.2
2017 2018
+62% y-o-y
+39% y-o-y
+46% y-o-y
+102% y-o-y
+39% y-o-y
Investor presentation 5
Key financial highlights of FY2018
6,406 7,495 2,128 3,432
-
2,000
4,000
6,000
8,000
FY2017 FY2018
EGPm
n
Revenue
Development revenue Recurring revenue
+17% y-o-y
+61% y-o-y
2,339 2,834 779 1,223
- 500
1,000 1,500 2,000 2,500 3,000
FY2017 FY2018
EGPm
n
Gross profit
Development Recurring
+21% y-o-y
+57% y-o-y
1,327 1,705 -
500
1,000
1,500
2,000
FY2017 FY2018
EGPm
n
Net income
+28% y-o-y
25% 30%0%5%
10%15%20%25%30%35%
FY2017 FY2018
Recurring GP as % of total
+5pp y-o-y
73,119 96,274 -
20,000
40,000
60,000
80,000
100,000
120,000
FY2017 FY2018
EGPm
n
Total assets
+32% y-o-y
17.9% 16.9%16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
FY2017 FY2018
Debt-to-equity
-1pp y-o-y
75%
13%
12%
68%
15%
17%
Annual improvement in revenue mix with strong growth in recurring income achieved in FY2018
Development Hospitality Others
FY2017 FY2018
■ Revenues of EGP10.93bn, up 28.0% y-o-y, of which 31% or EGP3.43bn generated from hospitality and other recurring income lines, growing 61.3% y-o-y
■ Gross profit of EGP4.06bn, up 30.1% y-o-y; gross profit margin of 37.1%, up 0.6pp y-o-y
■ Net profit before minority interest of EGP1.77bn, up 28.0% y-o-y
■ Net profit after tax and minority interest of EGP1.70bn, up 28.5% y-o-y
Investor presentation 6
We continue to deliver on our key strategic priorities previously communicated to the market
Achieving robust growth in sales
FY2019 sales target: EGP24bn, up 13% y-o-y
New upscale launch planned in Madinaty in mid-2019
Continue building our recurring income portfolio –
- target 40-45% of Gross Profit by 2020, up from 30% in 2018
Executing the Group’s strategy of monetizing non-core assets
Disciplined approach for land acquisitions while managing
financial risk
Preserving capital appreciation while providing a dividend
streamNo equity increases since IPO, moderate leverage, stable dividend payout since 6 years
Mission: Provide exceptional services to all our clients and ensure great customer experience and capitalize on such client base for new projects
New sales [EGPbn] Backlog [EGPbn]
Hospitality EBITDA [EGPmn]The Group invested EGP1bn to increase its stake in ICON to 83.3%Signed JLL to manage and operate Open Air Mall in MadinatySigned Carrefour as anchor tenant in Rehab & Madinaty malls, opened in Open Air mall in October 2018
EGP1bn proceeds from the
transaction
Strategic
land
EGP12.0bn sales
in 2018
13.1 21.3
2017 2018
428 695
38.1% 42.8%
2017 2018
30.0
41.7
2017 2018
Investor presentation 7
We are on track to achieve all-time high sales
■ Strong brand equity, and development progress drive strong growth residential and non-residential sales since 2017
■ Achieved EGP3.6bn in non-residential sales in FY2017 and EGP2.9bn in FY2018 as sales efforts were concentrated on the residential launch of Celia since mid-year
- 2.0 4.0 6.0 8.0
10.0 12.0 14.0 16.0 18.0 20.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
EGPb
n
Evolution of residential sales across all projects
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
EGPb
n
Evolution of non-residential sales across all projects
-
5.0
10.0
15.0
20.0
25.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
EGPb
n
Evolution of total sales across all projects
Investor presentation 8
Strategic vision allowed for early foothold in rapidly urbanizing East Cairo
Population: 1.5mn
Population: 4.5mn Expected population: 10mn
Population: 30k
Investor presentation 9
Case in point: successful launch and sales of Celia – a testament to the strength of TMG brand
14%
86%
Units breakdown by type
Villas Apartments
Unmatched brand equity of TMG in the Egyptian market■ Celia is a new mixed-use development located on 500
feddans in the New Administrative Capital (NAC) – largest land plot launched in NAC to date
■ Total residential BuA of c1.03mn sqm, in addition to 148k sqm of non-residential space
■ Launched in June 2018, to be completed within the next 5 – 7 years ■ Very good market reception as a testimony to brand
equity■ Significant pent-up demand in location despite earlier
launches by smaller companies before the launch of Celia
■ Good outlook on demand dynamics following launch■ More than 16% of clients are returning clients
■ Well-diversified offering portfolio:■ Four types of multitenant buildings, 8 floors each■ Five types of stand-alone units ranging from 213 to 373
sqm per unit■ Master plan accommodates for a sporting club and
basic services
■ Land purchased in 2017 for EGP2,100/sqm, payable over 9 years (10% down payment, 2 years grace period + 7 years installments, interest of 10% only)
500 feddansCelia land area
1.03mn sqmTotal residential area
cEGP12.0bnTotal net sales since launch
until end-2018
7,561 unitsTotal residential units for
sale
3,125 units (c41%)Units sold until
end-20182,718 407
3,778 658
0%
20%
40%
60%
80%
100%
Apartments Villas
Sales status as at end-2018
Units sold Units unsold
22%
65%
13%
BuA breakdown by type
Villas Apartments Services
Investor presentation 10
Continue investing in hotel portfolio – significant improvement across all KPIs
Four Seasons Nile Plaza, Cairo
[366 keys, opened 2004]Four Seasons San Stafano, Alexandria
[118 keys, opened 2007]Four Seasons Sharm El Sheikh
[200 keys, opened 2001]Kempinski Nile Hotel, Cairo
[191 keys, opened 2010]
■ Freed liquidity from monetizing non-core assets and invested EGP1.0bn in ICON in a value accretive transaction, increasing stake in TMG’s yielding hospitality segment to 83.3%
■ Appointed Hotel Chief Operating Officer in 2019 to oversee existing portfolio and its expansion
■ 443 new keys under development:■ 346 keys in FS Madinaty + 121 residential units,
construction breaking ground in 2018, to be completed in 2021
■ 97 keys in FS Sharm El Sheikh ext. + 69 residential units; under construction, to be completed in 2020
■ Ongoing phased renovation of FS Nile Plaza
608
356
421
378
551
702
748
1,12
3
1,62
5
322
95 145
105
221
308
320
509
816
261
68 113
79 182
266
382
428
695
0%
10%
20%
30%
40%
50%
60%
0200400600800
1,0001,2001,4001,6001,800
2010
2011
2012
2013
2014
2015
2016
2017
2018
EGPm
n
Hospitality segment performance
Revenue GOP EBITDA GOP margin (RHS) EBITDA margin (RHS)
Investor presentation 11
Continue building our recurring income portfolio – target 40-45% of consolidated gross profit
Revenue and occupancy rate
EBITDA and EBITDA margin
Hotel rooms evolution
Short-term initiatives - ongoing
Four Seasons Sharm El Shaikh§ 97 hotel keys§ 69 residential Units
§ Licenses/permits Issued
Four Seasons Nile Plaza§ Renovation plan ongoing§ Execution to start in 2018§ Self-funded from existing
cash resources
Four Seasons Madinaty§ 346 Hotel Keys§ 121 residential units§ Design ongoing
1,123 1,625
58%
68%
0200400600800
1,0001,2001,4001,6001,800
2017 2018
EGPm
n
Revenue Occupancy
+45% y-o-y
428 695
38%43%
0100200300400500600700800
2017 2018
EGPm
n
EBITDA % margin
+63% y-o-y
87597
346 1,318
2018 1H2020 FS Sharm El Sheikh Ext. Jan-2022 Four SeasonsMadinaty (construction to start in
2019)
2021 target
Investor presentation 12
Significant improvement across hotel KPIs
3,08
2
4,03
9
5,51
0
54%65%
76%
0%
20%
40%
60%
80%
100%
01,0002,0003,0004,0005,0006,000
2016
2017
2018
EGP
ARR Occupancy (RHS)
420
620
956
0200400600800
1,0001,200
2016
2017
2018
EGPm
n
Revenue
Four Seasons Nile Plaza KPIs Kempinski Nile Hotel KPIs
Four Seasons Sharm El Sheikh KPIs Four Seasons San Stefano KPIs
2,72
6
4,26
9
4,86
4
25%29%
41%
0%
10%
20%
30%
40%
50%
01,0002,0003,0004,0005,0006,000
2016
2017
2018
EGP
ARR Occupancy (RHS)10
4
174
261
050
100150200250300
2016
2017
2018
EGPm
n
Revenue
2,49
9
3,65
3
3,96
1
61% 64%71%
0%
20%
40%
60%
80%
100%
0
1,000
2,000
3,000
4,000
5,000
2016
2017
2018
EGP
ARR Occupancy (RHS)
143
189
232
0
50
100
150
200
250
2016
2017
2018
EGPm
n
Revenue
1,34
1
2,07
4
2,37
9
63%73%
81%
0%
20%
40%
60%
80%
100%
0
500
1,000
1,500
2,000
2,500
2016
2017
2018
EGP
ARR Occupancy (RHS)
81
140
176
0
50
100
150
200
2016
2017
2018
EGPm
n
Revenue
Investor presentation 13
Continue building our recurring income portfolio – target 40-45% of consolidated gross profit
40
88
127.5
0
20
40
60
80
100
120
140
Leased GLA Open Air mall opening(start operations in
2019)
Total GLA
k sq
mRetail GLA
Remaining CAPEX EGP1.1bn
Target 2020e revenue EGP723mn
Target EBITDA margin 92.5%
Target 2020e EBITDA EGP669mn
Retail revenue grows in significance
143 1800
20
40
60
80
100
120
140
160
180
200
FY2017 FY2018
EGPm
n
+26% y-o-y
■ Retail revenues benefit from continuous population build-up in TMG Holding projects
■ Some 8k sqm of GLA in Open Air mall already signed or under negotiation as of mid-February,
■ Carrefour hypermarket, opened in October 2019, achieves the highest sales per sqm in Egypt.
Investor presentation 14
Continue building our recurring income portfolio – target 40-45% of consolidated gross profit
45
152197
0
50
100
150
200
250
Sold memberships Memberships to be sold Total memberships
k m
embe
rshi
ps
■ Emerging player on Cairo sporting club scene – revenue up +62
y-o-y to EGP426.1mn in FY2018, unrecognized revenue backlog
of cEGP0.7bn as at end-FY2018
■ One time life membership sold for cEGP130-150k, below market
rates as memberships are not yet availed to non-residents
■ Maintenance and operation covered by annual renewal fees
■ Additional sales reached EGP107mn in FY2018 (FY2017: nil)
Club memberships – sold and remaining
Remaining CAPEX EGP872mn for extension, main club is already
completed and operational
Avg. membership EGP130-200k
Target aggregate cash inflows from memberships sold
EGP22-25bn in the next 10 years
EBITDA margin 85%
Target 2020e EBITDA EGP500mn
Club revenue grows in significance
263 426
0
50
100
150
200
250
300
350
400
450
FY2017 FY2018
EG
Pm
n
+62% y-o-y
Investor presentation 15
Maintain robust growth in sales in existing projects
Note (1): Areas subject to change as per the final master plan and utilization
Note (2): Including c1.2mn sqm of garage BuA
The Spine(1)
Fully integrated residential complex including retail, leisure, hospitality, and offices designed to international standards
2.7mn sqm land area4.5mn sqm total BuA(2)
13 years of development
2.3mn sqm of residential BuA
Downtown
Civic Spine
Uptown
Strategic location Unique accessibility
Quality infrastructure Superior quality standards
Investor presentation 16
Continue building our recurring income portfolio – target 40-45% of consolidated gross profit
Note (1): Areas subject to change as per the final master plan and utilization
The Spine(1)
400k sqm of retail portfolio
35:65% / BTS:BTL
635k sqm of office GLA25:75% / BTS:BTL
Uptown
600+ hotel keys to be managed by operators
Investor presentation 17
Historical sales
Unlaunched residential BuA
Non-residential BuA/land
Maintain robust growth in sales in existing projects
Note: all estimates stated at today’s market prices, figures as at end-1Q2018
■ EGP12.5bn of net cash flow from backlog and delivered units
■ 12.5mn sqm■ Target gross profit margin 30% - 35%
■ 6.3mn sqm of land (of which 237k sqm in Alrehab) translating into BUA of 3.5mn sqm
■ This area will be split between BTS and BTL assets
■ Average gross profit margin for BTS 75%
■ EGP41.7bn of backlog■ Avg. gross profit margin 30%-35%
■ Land bank sufficient for the next 17 years■ Sell all remaining units in Alrehab and
Alrabwa in the short term■ Target 3,500 residential units to be
launched each year
■ BTS strategy preferred over land sales to unlock additional value
■ Plan to sell over the next 10 years, assets that are non core to our recurring income hold / BTL strategy
Significant cash flows expected from the sale of residential and BTS commercial units to fund:
Dividends Building recurring income portfolio Acquisitions of land
Investor presentation 18
■ We believe that today the market does not ascribe value to most of our recurring
income portfolio (namely hotels, retail, clubs, and non-residential land bank) which
offers a significant long-term upside for equity investors
■ We will keep monitoring the performance of such businesses and invest to grow
them over the coming period provided such new investments meet our target
returns criteria
■ Once these assets reach a stage of maturity to run on their own and continue the
current growth trend independently we will start exploring our monetization options
■ Such monetization options will include either IPOs or M&As that would create value
to the Group
■ For smaller non-core assets, we will aim to fully divest to an Operator that would
create further value to our communities
■ Proceeds from such monetization plan will finance dividends and business growth
Monetize value of certain assets at the right timing
Potential monetization plan
In that regard we have successfully monetized EGP1bn from the schools that we have built in our projects to GEMS /
EFG as operators, which had very minimal contribution to our
profits and used the proceeds to invest in the hospitality business
in what we believe is a value accretive transaction
Investor presentation 19
Strategic acquisition criteria Financial acquisition criteria
■ Large plots that allow for the development of urban
communities targeting the middle to upper middle
classes
■ Focus on Greater Cairo primarily, and the North Coast
can also be selectively considered
■ Preference towards cash acquisitions to manage
financial risk
■ Opportunistically consider JVs or revenue / profit
sharing while maintaining control
■ Target minimum gross profit margin of 30%-35%
Disciplined and selective land acquisition approach
Current land bank sufficient for 17 yearsIn line with development timeframe allowed by land contracts
Investor presentation 20
Preserving capital appreciation while providing a dividend stream
Net cash from contracted sales
Net cash from future residential launches
Cash profits from BTS commercial sales
Cash inflows from club memberships sold
Value realization from recurring income portfolio
■ cEGP12.5bn net cash flow pre-tax from backlog sales
■ 12.5 mn sqm (BuA) of BTS residential assets to be launched and sold in the next 10 – 15 years
■ Average GP margin of 30-35%
■ 2.1 mn sqm (BuA) (1.5 mn sqm of net sellable area) of BTS commercial assets to be launched and sold in the next 10 years
■ Average GP margin of 75%
■ EGP22-25bn of aggregated cash inflows in the next 10 years ■ Based on target to sell 152k additional memberships in Al Rehab Club and Madinaty Club (only
EGP1.3 – 1.4bn CAPEX remaining)
■ 2020e EBITDA EGP669mn for retail (existing & under-construction) ■ 2020e EBITDA of at least EGP720mn for operational hotels■ 2020e total recurring income of at least EGP1.6bn with significant upside risks■ Market does not assign value to these assets in management’s views. We will plan to realize
value from these once they reach a state of maturity
Avg. sales price of at least EGP17k/sqm at current market prices
Avg. sales price of at least EGP100k/sqm at current market prices
Investor presentation 21
Share price performance beating the indices since 2H2017
Note: pricing data as of 26 February 2019
■ Listed on EGX since 2007
■ c2,063mn shares outstanding
■ No foreign ownership limits
■ Shariah observant
■ Reuters/BBG: TMGH.CA/TMGH EY
■ Member of EGX30 index and MSCI Small Cap Egypt index
■ The only active primary real estate developer listed on EGX capable of sustainable dividend distribution
Key facts
Proposed FY2018 dividend
+4% y-o-y, 21% payout
EGP0.176/share
44.7
%
11.4
%
10.4
%
6.4%
-8.7
%
-24.
6%
-24.
9%
-43.
9%
-44.
4%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
TMGH OCDI EGX30 EGXRE PHDC HELI MNHD PORT AMER
Share price returns since July 2017 of select real estate companies
listed on the EGX
6.0 7.0 8.0 9.0
10.0 11.0 12.0 13.0 14.0 15.0
2-Ju
l-17
2-Au
g-17
2-Se
p-17
2-O
ct-1
7
2-N
ov-1
7
2-De
c-17
2-Ja
n-18
2-Fe
b-18
2-M
ar-1
8
2-Ap
r-18
2-M
ay-1
8
2-Ju
n-18
2-Ju
l-18
2-Au
g-18
2-Se
p-18
2-O
ct-1
8
2-N
ov-1
8
2-De
c-18
2-Ja
n-19
2-Fe
b-19
EGP
TMG Holding share price performance compared to key EGX indices
TMGH [44.7%] EGX30 (rebased) [10.4%] EGXRE (rebased) [6.4%]
Thank you