x Abu Dhabi, UAEWednesday 24 January 2018

Orascom Development steers clear of peers

Orascom Development's expansion plans don't include the UAE, the company's chief executive says.

The founder of Orascom Development, the expanding Egyptian resort developer, says he has been "scared away" from the UAE.

Samih Sawiris, the company's chief executive, labelled the UAE a "mature market" with too many local players, in an interview this week with The National.

"I don't like competition, and there is too much competition in the UAE," Mr Sawiris said. "I will go to where there is not so much competition."

Orascom, which developed The Cove, a 300,000 square metre resort in Ras al Khaimah, is expanding in the Middle East and Europe, with projects under development in Jordan, Morocco, Montenegro, the UK and Romania.

The company's newest project to open is in Andermatt, Switzerland, a resort that will eventually include six hotels and more than 500 residential units. Orascom recently announced sales of 100 million Swiss francs (Dh384.59m) worth of apartments in the project.

Oman is also a key target for the company, Mr Sawiris said.

"Oman is the best hidden jewel of the Middle East," he said. "It has a long way to go. It's very early in development."

Orascom Development is part of the Orascom group of companies controlled by the Sawiris family. Mr Sawiris's brother Nassef runs Orascom Construction; another brother, Naguib, operates Orascom Telecom and Orascom Technology Solutions.

Orascom Development operates independently of the other companies. It is listed on the Swiss stock exchange; it is 60 per cent owned by Mr Sawiris and his family.

The company is best known for developing El Gouna, a 36.8 million sq metre resort on the Red Sea that is now home to more than 12,000 people. The project includes 15 hotels, three marinas and more than 100 restaurants and bars.

With El Gouna as a model, the company specialises in developing self-contained towns. It also built Taba Heights in the Sinai, as well as The Cove in RAK. The Cove was started in 2005 and is now almost fully built out.

Egypt remains the company's core market, including developments in Amoun Island, Berenice and El Fayoum.

"They haven't had great sales over the year [in Egypt], but the tourist industry has been strong," said Patrick Gaffney, an analyst with HSBC Securities.

The company reported 171m Swiss francs of property sales for the first nine months of last year, an 8 per cent drop compared with the same period in 2009. Gross profit fell 5 per cent in that period to 118m Swiss francs.

The expansion into new territories has also added an element of risk to the company's portfolio, analysts say. After hitting a high of 90.25 Swiss francs in September 2009, the company's stock was trading at about 54.3 Swiss francs this week.

"Going out of Egypt will be very difficult for them," Mr Gaffney said. "They are creating something unique and different that will also have a lot more competition."

Orascom is "still in full expansion mode in the Middle East", Mr Sawiris said. But it is also looking for areas outside the region where it can build self-contained projects without direct competition.

The company is taking a conservative approach to choosing locations, he said.

The next projects to begin construction are likely to be a development with eight hotels, 1,800 residential units and a marina in Chbika, Morocco; and a low-cost housing development in Romania, Mr Sawiris said.

Orascom is also exploring affordable housing projects in Iraq.

"We really develop opportunistically," Mr Sawiris said.

He expects the company to maintain 8 to 12 per cent annual growth in net profit in the next year. It recently raised 120m Swiss francs in credit financing.

"It should last five years," Mr Sawiris said. "It is more than enough for current projects."