Palm Hills Developments Company (PHD) has reported its financial results for 4Q2015. The strength seen starting earlier in 2015 across the company’s operational metrics, was maintained. Reservations were up 57% Y-o-Y, contracted sales up 7%, construction spending doubled and deliveries increased. Reservations for the year grew 61% Y-o-Y to reach EGP6.3 billion, while contracted sales grew 49% Y-o-Y to reach EGP4.4 billion. On a negative note, we highlight lower gross profit and EBITDA margins and the jumps in operating expenses as the two main negative aspects of the results. The company’s board has proposed EGP0.15/share in cash dividends, implying 6.4% on the last closing price. This is in addition to a 1:20 bonus share distribution.   Main positives: Strong growth in reservations, growing 57% Y-o-Y (-15% Q-o-Q) in 4Q2015 to reach EGP1.7 billion. This was driven by strong pre-sales in East Cairo, including EGP628 million from Capital Gardens, following its launch in mid-December. Reservations in 2015 reached EGP6.3 billion, up 61% Y-o-Y. Management had targeted reservations worth EGP5 billion for the year. Contracted sales added 7% Y-o-Y (-15% Q-o-Q) in 4Q2015 to reach EGP1.1 billion, with the growth attributed to increased sales in East Cairo. Contracted sales for the year reached EGP4.4 billion, up 49% Y-o-Y. Construction spending doubled Y-o-Y and Q-o-Q to reach EGP0.6. billion. Total spending for 2015 reached EGP1.9 billion (management’s target: EGP2 billion), up 89% Y-o-Y. Collections totaled EGP3.1 billion for the year, up 48% Y-o-Y. Reported revenue increased by 23% Y-o-Y (-15% Q-o-Q) to reach EGP957 million. Revenue in 2015 was up 69% Y-o-Y to reach EGP3.6 billion on higher deliveries in CASA and VGK and Hacienda Bay (management’s target: EGP3.5 billion). 540 units were delivered in 4Q2015 (421 in 3Q2015), and a total of 1,573 units in 2015 (981 units in 2014, management’s target: 1,500). Net income more than doubled Y-o-Y (+31% Q-o-Q) to reach EGP204 million in 4Q2015, bringing 2015 net income to EGP1.0 billion (in line with management’s target), up 192% Y-o-Y and 71% Y-o-Y, excluding one-off gain on investment booked 2Q2015. Net-debt-equity reached 0.33x in December, roughly at par with the corresponding figure of 0.31x in September 2015 and December 2014.   Main negatives: Lower gross profit margin for the quarter, averaging 24.9% in 4Q2015, down from 27.1% in 4Q2014 and 29.5% in 3Q2015. We attribute the drop in margin to higher contribution from lower-margin apartments to the delivered units. Gross profit margin was roughly unchanged in 2015, averaging 33.7%, versus 33.5% in 2015. EBITDA margin averaged 21.6% for the year, short of management’s target of 26.0%. Big jump in operating costs, 38% Y-o-Y in 4Q2015 and 22% Y-o-Y in 2015, weighting down on EBITDA margins (-620 bps Y-o-Y in 4Q2015 to 10.1%, -160 bps Y-o-Y in 2015 to 21.6%)     Short and medium term management targets: Launches planned for 2016 include: Phase 2 of Palm Hills Katameya extension (East Cairo) in 1Q2016 and NUCA co-developed project in 3Q2016. The final agreement with the government for the co-development of the 500 feddan-plot in East Cairo is expected to be reached in 1H2016. The company is considering a number of land opportunities in the North Coast. Guidance for 2016: EGP2 billion in construction outlay (EGP1.9 billion in 2015), EGP6.5 billion in gross sales (EGP6.3 billion in 2015) and deliveries of 1,600 units (1,573 in 2015). (Earnings release, Mai Attia, Sara Boutros)   Palm Hills: EGP2.32 as of 7 February 2016, MCap: USD644 million, PHDC EY / PHDC.CA