MENA Consumer & Retail. Evolving Consumer Preferences in MENA Identifying value and growth in a changing landscape

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1 MENA Consumer & Retail Evolving Consumer Preferences in MENA Identifying value and growth in a changing landscape Sector Report January 18, 2013

2 S e c t o r C o v e r a g e J a n u a r y Mohammad Kamal mohammad.kamal@arqaamcapital.com MENA Consumer and Retail The evolving MENA consumer Consumer preferences in MENA are changing, and retailers, food producers, and service providers are adapting to them. Rising disposable income and a persistent low interest rate environment in GCC states will cause an increase in consumer spending on (i) discretionary goods, including electronics and apparel, (ii) transportation and (iii) tourism. Changing dietary habits will play out in terms of a shift in preferences towards higher quality, healthier and fresher food options. Governments in MENA have and will increasingly adjudicate on matters of food and fuel subsidies with the consumer as priority beneficiary, rather than incumbent businesses and private sector commercial interests, in light of the civil unrest of the past 2 years across MENA. Adapting to the new MENA consumer is key: Consumer and retail businesses in MENA that are successfully transforming their product offerings and delivery formats will be winners in the sector over the next 12 months. Key areas are 1- Vendor formats: organized retail, via hypermarkets and branded convenience stores will override the fragmented/unorganized retail format dominant in MENA over the next 5 years. The region s improving logistics infrastructure and urbanization via new economic cities are highly supportive of organized retail in MENA. 2-Product mix: Businesses that are catering to changing consumer preferences are winners in the space- we highlight Shaker, GB Auto, Halwani, and Budget as prime examples. Secular consumer stocks in MENA have outperformed government spendingreliant stocks in terms of cash flow generation and equity returns, but valuation remains at a discount. We think this provides an extremely attractive entry point for several quality stocks under coverage in this report. We initiate coverage of 20 consumer and retail names in MENA. We select: Al Tayyar Travel Group (ALTAYYAR AB, SAR 120, 62%), Shaker (SHAKER AB, SAR 90, 34%), Budget (BUDGET AB, SAR 70, 30%), Halwani Brothers (HB AB, SAR 56, 28%), Al Meera Consumer Goods (MERS QD, QAR 205, 27%), Saudi Airlines Catering (CATERING AB, SAR 100, 26%), and Ghabbour Auto (AUTO EY, EGP 35, 25%), given upside potential from current prices. We like, but see fundamentals priced in at: Agthia Group (AGTHIA UH, AED 2.45, 16%), Al Hokair (ALHOKAIR AB, SAR 125, 18%), Al Othaim (AOTHAIM AB, SAR 95, 16%), United Electronics Company (EXTRA AB, SAR 105, -3%), Herfy (HERFY AB, SAR 120, 17%), Jarir Marketing (JARIR AB, SAR 180, 13%), Juhayna (JUFO EY, EGP 8.5, 10%), Mabanee (MABANEE KK, KWd 1,250, 4%), Saudi Dairy and Foodstuff Co. (SADAFCO AB, SAR 70, 6%), Saudi Paper Manufacturing (SPM AB, SAR 30, -1%), Savola (SAVOLA AB, SAR 45, 12%). We advise against Al Marai (ALMARAI AB, SAR 52, -) and GASCO (NGIC AB, SAR 16, -16%), given weak top-down fundamentals. Risk: consumer lending, grain and commodity prices, FX risk, geopolitics given an unclear succession line in KSA and instability in Egypt and Syria. Top picks Bloomberg code ALTAYYAR AB Company name Al Tayyar Price target SAR 120 Rating 62% upside, Buy Bloomberg code SHAKER AB Company name Shaker Price target SAR 90 Rating 34% upside, Buy Bloomberg code BUDGET AB Company name BUDGET Price target SAR 70 Rating 30% upside, Buy Bloomberg code HB AB Company name Halwani Brothers Price target SAR 56 Rating 28% upside, Buy Bloomberg code MERS QD Company name Al Meera Consumer Goods Price target QAR 205 Rating 27% upside, Buy Bloomberg code CATERING AB Company name Saudi Airlines Catering Price target SAR 100 Rating 26% upside, Buy Bloomberg code AUTO EY Company name Ghabbour Auto Price target EGP 35 Rating 25% upside, Buy Bloomberg code ALMARAI AB Company name Almarai Price target SAR 52 Rating - downside, Sell Bloomberg code NGIC AB Company name GASCO Price target SAR 16 Rating -16% downside, Sell Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice.

3 MENA Consumer and Retail Contents MENA Consumer and Retail... 3 The evolving MENA consumer... 5 Key Industry drivers... 8 Decomposing RoE: MENA consumer markets are competitive Valuation: Secular themes currently trade at a discount to government spending stories MENA Consumer and Retail stocks in charts Appendix 1: Comparative ratios and multiples Appendix 2: Our MENA diversified coverage universe Al Tayyar Travel Group Shaker Budget Saudi Halwani Brothers Al Meera Consumer Goods Saudi Airlines Catering Ghabbour Auto Almarai Company GASCO Agthia Group Fawaz Abdulaziz Alhokair & Co Abdullah Al Othaim Markets United Electronics Company (Extra) Herfy Food Services Co Jarir Marketing Co Juhayna Food Industries Mabanee Co Saudi Dairy and Foodstuff Co Saudi Paper Manufacturing Savola MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 2

4 MENA Consumer and Retail MENA Consumer and Retail Key stocks to own in the MENA consumer space Exhibit 1: Our MENA consumers and retail coverage universe Company Price target Rating Up (down) side ADTV, USDmn Index Free float Al Tayyar Travel Group SAR 120 Buy 62% 5.5 SASEIDX 58.2% Al-Hassan Shaker SAR 90 Buy 34% 1.4 SASEIDX 30.0% United International Transportation SAR 70 Buy 30% 0.7 SASEIDX 41.1% Halwani brothers SAR 56 Buy 28% 2.1 SASEIDX 31.8% Al Meera QAR 205 Buy 27% 0.3 DSM 74.0% Saudi Airlines Catering SAR 100 Buy 26% 6.5 SASEIDX 30.0% Ghabbour Auto EGP 35 Buy 25% 0.1 EGX % Fawaz Al Hokair SAR 125 Hold 18% 1.5 SASEIDX 30.0% Herfy Food Services Co. SAR 120 Hold 17% 0.8 SASEIDX 32.1% Abdullah Al Othaim SAR 95 Hold 16% 1.4 SASEIDX 48.6% Agthia Group AED 2.45 Hold 16% 0.1 ADX 44.0% Jarir Marketing SAR 150 Hold 13% 1.2 SASEIDX 54.2% Savola SAR 45 Hold 12% 3.2 SASEIDX 59.9% Juhayna Food Industries EGP 8.5 Hold 10% 0.6 EGX % Saudi Dairy & Foodstuff Co. SAR 70 Hold 6% 0.9 SASEIDX 58.3% Mabanee Co. KWd 1,250 Hold 4% 2.1 KWSEIDX 39.7% Saudi Paper Manufacturing SAR 30 Hold -1% 1.3 SASEIDX 42.3% United Electronics Company SAR 105 Hold -3% 1.2 SASEIDX 30.0% National Gas & Industrialization SAR 16 Sell -16% 0.6 SASEIDX 71.1% Almarai Co. SAR 52 Sell SASEIDX 36.5% Company EV*, USDmn EV/EBITDA FY 13e P/E FY 13e P/B FY 13e RoE Div yield Al Tayyar Travel Group 1, x 6.6x 3.5x 53.4% 10.1% Al-Hassan Shaker x 10.0x 3.1x 31.1% 5.0% United Internatinal Transportation x 9.8x 2.0x 19.8% 4.2% Halwani brothers x 12.2x 2.1x 17.0% 5.8% Al Meera x 13.4x 1.3x 9.4% 5.4% Saudi Airlines Catering 1, x 11.4x 4.5x 39.2% 4.8% Ghabbour Auto 1, x 12.1x 1.4x 11.6% 4.1% Fawaz Al Hokair 2, x 12.1x 4.3x 35.5% 4.6% Herfy Food Services Co x 15.9x 4.9x 30.6% 2.9% Abdullah Al Othaim x 10.8x 2.6x 24.1% 4.2% Agthia Group x 8.8x 1.0x 11.8% 4.0% Jarir Marketing 2, x 15.0x 8.3x 55.5% 5.3% Savola 7, x 10.8x 1.8x 16.4% 3.7% Juhayna Food Industries x 13.8x 2.4x 17.4% 2.5% Saudi Dairy & Foodstuff Co x 11.9x 2.3x 19.6% 5.0% Mabanee Co. 3, x 15.3x 3.3x 21.8% 0.0% Saudi Paper Manufacturing x 10.5x 1.5x 14.4% 5.1% United Electronics Company x 14.3x 4.4x 31.0% 2.6% National Gas & Industrialization x 12.6x 1.4x 11.0% 7.1% Almarai Co. 9, x 15.4x 3.0x 19.5% 2.6% * At recent market prices MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 3

5 MENA Consumer and Retail Exhibit 2: Summary of recommendations Our MENA consumer and retail summary of recommendations Company Rating Outline Halwani Brothers Buy Doubling of capacity at core business segments drive medium-term growth. Attractive entry level at 7.0x FY 13e EV/EBITDA Al Meera Consumer Goods Buy High growth domestic retailer at similar fundamental qualities to KSA peers, but discounted valuation at 10.5x FY 13e EV/EBITDA Al-Hassan Shaker Buy Most profitable supplier of cooling solutions in KSA: Average FY 08-11A operating margins + 600bps vs. domestic peers Ghabbour Auto Buy New brand gamble (Geely) better suited for local demand than outgoing Hyundai models- CAPEX complete, EPS accretion to follow United Int l Transportation (budget) Buy Best fleet in town- 27M blended life cycle vs. 36M peers, Cheap current valuation in peer context: 8.9x FY 13e EPS 30% discount to peers Saudi Airlines Catering Buy Buy unique exposure to Saudi Arabian airline industry via 40% RoE, 38%+ RoIC business at 12.6x FY 13e P/E Al Tayyar Travel Group Buy Industry leader in corporate and government travel services; Cheapest valuation profile under coverage (6.6x FY 13e EPS, 6.1x EV/EBITDA). Agthia Group Hold Deliberate shift in product mix focused on improving group margins, but exercise remains hit and miss Saudi Dairy and Foodstuff Co. Hold Re-commissioning of idle plant diversifies product mix, but range remains narrow relative to peers Juhayna Food Industries Hold Well-positioned vis-à-vis changing dietary preferences, resulting from rising urbanization in Egypt SAVOLA Group Hold Leading KSA conglomerate offers broad exposure to food and retail sectors: growth a function of store roll-out and new product success Abdullah Al Othaim Markets Hold Absence of catalysts and weakening margins produce uninspiring story at 10.8x FY 13e P/E Fawaz Al Hokair Hold Largest KSA fashion retailer and high street brand franchisee. Superior margins and RoE priced in Jarir Marketing Company Hold Solid business fully priced in at 15.0x FY 13e P/E, 14.6x EV/EBITDA Mabanee Hold A pure play on the Kuwaiti retail rental market Saudi Paper Manufacturing Hold Unexciting story in the absence of genuine growth catalysts United Electronics Company Hold Industry deregulation a cause for concern, margins subpar vs. global peers, on FY 13e EV/EBITDA discount warranted Herfy Food Services Hold Market fully acknowledges fundamentals at 15.9x FY 13e P/E, 4.9x P/BV: wait for EPS to catch up with valuation Almarai Co. Sell Main product line (dairy) facing market share loss due to rising competition and limited pricing power National Gas & Industrialization Sell Unexciting story in the absence of genuine growth catalysts MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 4

6 MENA Consumer and Retail The evolving MENA consumer Consumer preferences in MENA are changing, and retailers, food producers, and service providers are adapting to them. Rising disposable income and a persistent low interest rate environment in GCC states will cause an increase in consumer spending on (i) discretionary goods, including electronics and apparel, (ii) transportation and (iii) tourism. Changing dietary habits will play out in terms of a shift in preferences towards higher quality, healthier and fresher food options. Governments in MENA have and will increasingly adjudicate on matters of food and fuel subsidies with the consumer as priority beneficiary, rather than incumbent businesses and private sector commercial interests, in light of the civil unrest of the past 2 years across MENA. Adapting to the new MENA consumer is key: Consumer and retail businesses in MENA that are successfully transforming their product offerings and delivery formats will be winners in the sector over the next 12 months. Key areas are 1-Vendor formats: organized retail formats, via hypermarkets and branded convenience stores will override the fragmented/unorganized retail format dominant in MENA over the next 5 years. The region s improving logistics infrastructure and urbanization via new economic cities are highly supportive of organized retail in MENA. 2-Product mix: Businesses that are catering to changing consumer preferences are winners in the space- we highlight Shaker, GB Auto, Halwani, and Budget as prime examples. Exhibit 3: Our MENA consumer and retail scorecard Home market fundamentals Consumer evolution MENA exposure Code SSS* New POS** Margins Score Product mix Consumer preferences Disposable income Score New mkts M&A Score Overall HB AB MERS QD SHAKER AB AUTO EY BUDGET AB CATERING AB ALTAYYAR AB AGTHIA UH SADAFCO AB JUFO EY SAVOLA AB ALOTHAIM AB ALHOKAIR AB JARIR AB MABANEE KK SPM AB Extra AB HERFY AB ALMARAI AB NGIC AB *SSS: Same store sales growth **New POS: new points of sale MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 5

7 MENA Consumer and Retail We rate MENA consumer stocks on 3 key qualitative criteria: (i) their ability to capitalize on domestic market fundamentals, (ii) their positioning vis-à-vis changing consumer preferences and (iii) diversification and quality of exposure across broader MENA. Exhibit 4: We rank MENA consumer and retail stocks on their positioning vs. MENA growth drivers SPM AB Home market fundamentals NGIC AB SHAKER AB MERS QD HB AB SPM AB Consumer evolution NGIC AB SHAKER AB MERS QD HB AB ALOTHAIM AB SAVOLA AB ALOTHAIM AB SAVOLA AB HERFY AB CATERING AB HERFY AB CATERING AB JARIR AB ALTAYYAR AB JARIR AB ALTAYYAR AB SADAFCO AB JUFO EY SADAFCO AB JUFO EY AGTHIA UH MABANEE KK AGTHIA UH MABANEE KK AUTO EY ALMARAI AB AUTO EY ALMARAI AB Extra AB BUDGET AB ALHOKAIR AB Home market fundamentals Extra AB ALHOKAIR AB Consumer evolution BUDGET AB SPM AB NGIC AB MENA exposure SHAKER AB MERS QD HB AB SPM AB NGIC AB Overall score SHAKER AB MERS QD HB AB ALOTHAIM AB SAVOLA AB ALOTHAIM AB SAVOLA AB HERFY AB CATERING AB HERFY AB CATERING AB JARIR AB ALTAYYAR AB JARIR AB ALTAYYAR AB SADAFCO AB JUFO EY SADAFCO AB JUFO EY AGTHIA UH MABANEE KK AGTHIA UH MABANEE KK AUTO EY ALMARAI AB AUTO EY ALMARAI AB Extra AB ALHOKAIR AB BUDGET AB Extra AB ALHOKAIR AB BUDGET AB Inorganic growth Overall score MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 6

8 MENA Consumer and Retail Home market fundamentals are a function of 3 core domestic growth criteria: (i) compelling evidence of sales growth for existing stores/points of sale, (ii) opportunities for greater domestic market penetration, via new points of sale/outlets, and (iii) where available, expanding or stable margins. Consumer evolution is our qualitative measure of a business s positioning and adaptation avisà-vis changing consumer preferences (e.g. preference for organized retail formats, dietary habits, discretionary spending on travel and tourism) that emanate from rising disposable income, by way of changes to product mix. CAPEX deployment and operating leverage is underscored here. MENA exposure is a secondary criteria, that aims to capture the quality of a company s exposure to regional opportunities outside its home market. This has in some cases, resulted in downside risk to EPS, as competition and domestic partnerships failed to pan out successfully. With the above rationale in mind we select the following picks as our favoured plays in the MENA consumer and retail sector: Al Tayyar Travel Group (ALTAYYAR AB, SAR 120, 62%), Shaker (SHAKER AB, SAR 90, 34%), Budget (BUDGET AB, SAR 70, 30%), Halwani Brothers (HB AB, SAR 56, 28%), Al Meera Consumer Goods (MERS QD, QAR 205, 27%), Saudi Airlines Catering (CATERING AB, SAR 100, 26%), and Ghabbour Auto (AUTO EY, EGP 35, 25%), given upside potential from current prices. We like, but see fundamentals priced in at: Agthia Group (AGTHIA UH, AED 2.45, 16%), Al Hokair (ALHOKAIR AB, SAR 125, 18%), Al Othaim (AOTHAIM AB, SAR 95, 16%), United Electronics Company (EXTRA AB, SAR 105, -3%), Herfy (HERFY AB, SAR 120, 17%), Jarir Marketing (JARIR AB, SAR 180, 13%), Juhayna (JUFO EY, EGP 8.5, 10%), Mabanee (MABANEE KK, KWd 1,250, 4%), Saudi Dairy and Foodstuff Co. (SADAFCO AB, SAR 70, 6%), Saudi Paper Manufacturing (SPM AB, SAR 30, -1%), Savola (SAVOLA AB, SAR 45, 12%). We advise against Al Marai (ALMARAI AB, SAR 52, -) and GASCO (NGIC AB, SAR 16, -16%), given weak top-down fundamentals. MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 7

9 MENA Consumer and Retail Key Industry drivers 1-Preferences Vendor formats: and this is particularly important in KSA. The market is characterized by (i) low retail GLA/capita (2.4 sqm/capita) in comparison to Qatar (5.9 sqm/capita) and the UAE (14.6 sqm/capita), (ii) large city sprawl (Riyadh spreads across 1.55k km2, and houses 5.6mn residents, (iii) high motorization rates (415 cars per 1000 residents, (iv) improving logistics infrastructure and road network connectivity, and (v) the emergence of new, isolated urban centres going forward (namely the 4 economic cities under construction by 2020). This is further characterized by the fact that shop and mall visitation levels (i.e. footfall) are not only utilitarian, but also a result of a recreational activity in a highly conservative social setting. Exhibit 5: Organised retail penetration is particularly low in KSA, Egypt, and Kuwait.. Exhibit 6: Organised retail lends itself well to highly motorised population centres. Interestingly, KSA has some of the highest mobility levels across MENA, but the lowest degree of organized retail penetration MENA organised retail GLA(mn sqft) 35.0 Organised retail (%) 80% 70% Dubai % Abu Dhabi % Doha Dubai Abu Dhabi Riyadh Cairo Doha Jeddah Kuwait 40% 30% 10% 0% Cairo Jeddah Kuwait Riyadh Traditional retail Organised retail Motorisation rate (per '000) Source: Company data, MEED, MECSC, Arqaam Capital Research Source: Arqaam Capital Research The above factors lead to the following conclusions regarding the KSA retail sector: 1-Store penetration levels are low, and commute times are relatively long when compared with other GCC markets 2-Vendors are typically fragmented and disorganized, and generally do not offer extensive point of sale services such as maintenance, repair, or warranties 3-Access to retail outlets, whether by way of road networks or motorization rates, is high 4-Logistics infrastructure is supportive of large vendors 5-Footfall and per-visit customer spend is high in the context of a young, mobile population in which exists a culture of mall and retail visitation for recreational purposes The above factors lend themselves strongly in favour of large, organized retail formats, such as hypermarkets, and well as convenience stores, rather than the existing range of small, disorganized neighborhood vendors. We therefore highlight large scale retailers in KSA (Hokair, extra, Jarir) as key beneficiaries of evolving consumer preferences that are moving in favour of larger retailing formats. MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 8

10 MENA Consumer and Retail Exhibit 7: Private sector logistics spend is inversely correlated with infrastructure quality and development levels Logistics spend as % of GDP 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 13.6% 10.2% 7.4% 5.5% 3.6% Egypt Qatar Kuwait KSA UAE Source: UN, Arqaam Capital Research Dietary preferences: From the perspective of food retailers, consumer preferences have, as a function of rising income levels, education, and health awareness, resulted in increased demand for higher quality food items, namely in (i) packaged dairy products in Egypt (please refer to report on Juhayna), over traditional loose products that enjoy limited shelf life, (ii) fresh poultry and meat, over frozen produce (please refer to Almarai), and (iii) rising meat consumption/capita (Halwani). Exhibit 8: Food and dietary habits in KSA and Egypt: KSA consumes 4x Egypt s per-capita intake of poultry, 2x dairy, but 50% its consumption of grain. KSA per-capita consumption of all food items has nevertheless grown since 2009 Kg/capita/annum Egypt Saudi Arabia Grain Dairy Avg. Growth Avg. Growth Wheat (0.90%) % Corn (0.25%) % Rice (3.86%) Liquid Milk % % Butter (8.07%) % Cheese (0.87%) % Whole Milk % % Live stock Poultry % % Oil Palm Oil % (4.06%) Source: BMI, Arqaam Capital Research The above data suggests that per capita consumption of most food items has risen in KSA over the past 3 years. Conversely, grain consumption in Egypt has fallen, while non-milk dairy has fallen more sharply, and this suggests a degree of substitution or potential preference changes as urbanization rises. Note that grain consumption/capita in KSA is 50% of its corresponding level in Egypt, while dairy is 2x the Egyptian level, and poultry upwards of 4x. We believe that livestock consumption will continue to grow in Egypt as urbanization rises and dietary habits change, and that grain and non-milk dairy consumption will continue to fall. We see less growth potential in KSA livestock consumption, but upside to processed dairy demand. MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 9

11 MENA Consumer and Retail Branded apparel, electronics, and auto: Disposable income growth across MENA suggests that demand for (i) branded apparel (see Al Hokair), (ii) consumer electronics and white goods (see Shaker, Extra, Jarir), and (iii) automotive solutions (GB Auto, Budget) is set to rise as consumers continue to part with incremental income. Afterthought: Where are the discount retailers in the GCC? Discount retail formats are an integral part of the retailing landscape globally. The format lends itself well to large population centres in urbanised areas that hold a substantial price sensitive demographic. However, the penetration level of discount retailers in Saudi Arabia is minimal, if not completely absent (Egypt conversely, has some degree of representation by discounters). There are several reasons in our view that have precluded the appearance of larger discounters in GCC markets, and these reasons are market specific: KSA: by virtue of its climate and manufacturing capability (relative to demand), the country is a net importer of food items. Discount retailers, which typically rely on unbranded/substitute products, cannot generate the necessary scale economies to operate profitably in an environment where inputs are imported (though production costs are arguably mitigated by cheap and subsidised fuel costs). The range of non-food items typically sold in discount retail formats is broad, and again in KSA, most non-food items are imported, rendering discount pricing unfeasible. Finally, government regulation on land classification renders approvals for large commercial land plots prohibitively expensive, which in part may explain the prevalence of small retailers. Egypt: In contrast, we believe that the Egyptian economic and demographic landscapes lend themselves very well to discount retail formats: (i) the country is populous, with dense urban centres, and disposable income levels are generally low (c. the KSA level, which in itself is low, but improving). (ii) The food manufacturing industry in Egypt is highly developed with substantial capability across product types. (iii) Production costs are low, and arguably among the lowest in MENA, given natural resource abundance, climate, and cheap labour. (iv) local labels and secondary brand penetration is high. All factors combined support a compelling opportunity for discount retailing in Egypt. There exist several prominent discounters in the Egyptian market as a result. MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 10

12 Egypt Iran Algeria Sudan Iraq Morocco KSA Syria Tunisia UAE Libya Jordan Lebanon Oman Kuwait Qatar Bahrain Algeria Bahrain Egypt Iraq Iran Jordan Kuwait Lebanon Libya Morocco Oman Qatar KSA Sudan Tunisia UAE FY 08A FY 09A FY 10A FY 11A FY 12e FY 08A FY 09A FY 10A FY 11A FY 12e MENA Consumer and Retail 2-Population MENA consumers are increasing in numbers, and increasingly able to part with disposable income to improve living standards. The population of the broader MENA region is growing at a rate of 3.1%/annum (CAGR FY 08-12e), introducing 5mn new consumers every year. The core growth centres are Egypt (2.5% CAGR 08-12e), and KSA (4.0% CAGR 08-12e), accounting for 23% and 14% of growth respectively. GDP/capita has also improved across MENA, namely in Qatar and KSA rising 33% and 14% respectively since This has translated into a 17% average growth in sales across our coverage universe of 20 MENA consumer names over the past 5 years. Exhibit 9: GDP/capita growth has generally outpaced population growth across MENA Exhibit 10: MENA consumer sector revenues have outpaced GDP growth 5-year population growth 14% 12% Qatar 10% Bahrain 8% 6% Oman KSA UAE 4% Iraq Kuwait Jordan 2% Egypt Lebanon Libya Iran Algeria Morocco --% Tunisia (6%) (4%) (2%) --% 2% 4% 6% 8% (2%) Sudan 5-year GDP/capita growth (4%) Source: IMF Indexed sector-revenues vs. indexed GDP/Capita (FY 08=100) 200% 180% 160% 140% 1 100% 80% 60% 40% 0% 100% 127% 140% Revenues 164% 187% Source: IMF, Company data, Arqaam Capital Research 100% 96% 100% GDP per capita 104% 110% The market for consumer staples in MENA has seen the addition of 5mn new consumers each year, which by our estimates will continue to necessitate imports of basic non-subsidised food items. Household formation has also been on the rise, given (i) falling average household sizes (in turn a function of urbanisation and rising expatriate residence, (ii) more affordable housing solutions, in turn a function of improved access to consumer finance (penetration) and its cost (affordability). Exhibit 11: GCC markets (ex-ksa) typically reflect smaller household sizes Exhibit 12: On average, 60% of MENA population is within prime consumer age range Total population (mn) Population breakdown by age (FY 12) 100% 14% 8% 17% 10% 16% 12% 8% 21% 14% 17% 9% 5% 3% 10% 11% 21% 80% 48% 60% 52% 59% 72% 52% 65% 55% 64% 60% 49% 62% 55% 81% 55% 56% 81% 40% 27% 31% 43% 23% 36% 27% 24% 31% 27% 27% 30% 40% 23% 14% 17% 0% Population Average household size (RHS) < 15 years years > 60 years Source: World Bank, Arqaam Capital Research Source: UNDP MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 11

13 Bahrain Kuwait KSA Lebanon Qatar UAE Oman Jordan Algeria Tunisia Egypt FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A FY 09A FY 10A FY 11A MENA Consumer and Retail 3-Penetration Retail: Per-capita penetration levels for retail outlets in MENA are highest the UAE (14.6 sqft/capita), which place the market ahead of Qatar (5.9 sqft/capita) and KSA (2.4 sqft/capita). The remainder of MENA, including GCC states, is substantially lower, averaging below 3.5 sqft/capita. Penetration levels for large, organised retail via convenience stores and hypermarkets is very low across MENA markets. Exhibit 13: Retail GLA/capita 2.6 sqft/capita in MENA (ex-uae) MENA GLA/capita (sqft) Abu Dhabi Dubai Doha Jeddah Riyadh Kuwait Cairo Exhibit 14: MENA internet penetration FY Internet penetration rates in GCC and Egypt % 100% 90% 80% 70% 60% 50% 40% 30% 10% 0% FY 09A FY 12e Qatar Kuwait Bahrain UAE Oman KSA Egypt Source: JLL, Arqaam Capital Research Source: International Telecommunication Union, Arqaam Capital Research Transportation and travel: MENA consumers are increasingly more mobile, which is reflected in the rising penetration of land and air transport services across the GCC and Egypt. This is a function of intra-regional travel growth, which is the result of the emergence of the GCC as a regional employment hub, and growth in intra-regional tourism. Exhibit 15: Egypt is extremely under-motorised vs. GCC states Exhibit 16: Airport traffic has grown at 8% CAGR across MENA Passenger cars (per '000) Passenger traffic (mn) UAE Saudi Arabia Egypt Qatar Kuwait Source: BMI Source: GACA, World bank DGCA, MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 12

14 Jordan Lebanon Morocco Iran Sudan Egypt Libya KSA Lebanon Algeria Kuwait Jordan Oman Tunisia Iraq UAE Qatar Morocco Bahrain Sudan Tunisia Egypt Algeria Iran Oman MENA Consumer and Retail 4-Prosperity Disposable income levels are highly divergent in MENA, given clear wage disparities (average GCC salary packages are c.5-6x corresponding levels elsewhere in MENA, after adjusting for taxes, by our estimates). Disposable income growth is highest in KSA over the past 3 years, according to EIU data. Discretionary spending, as a proportion of consumption, is highest in the UAE (50%+), Qatar (45%), and KSA (40%). Exhibit 17: KSA disposable income growth strongest in MENA Indexed annual disposable income (FY 09=100) Exhibit 18: GCC discretionary spend/income highest in MENA Discretionary spend / aggregate consumption, % 60% 50% 50% 45% 40% 40% 30% FY 09 FY 10 FY 11 FY 12 FY 13 KSA UAE Egypt Iran Morocco Turkey 10% 0% 16% 13% UAE Qatar KSA Turkey Egypt Source: EIU, Arqaam Capital Research Source: UN, EIU, Arqaam Capital Research Capital flows: Among the main drivers of MENA discretionary spending are (i) the nature of the GCC as an exporter of capital and an importer of labour, (ii) the spillover of wealth from the GCC into peripheral markets, via expatriate remittances and their subsequent domestic reinvestment. This has also resulted in rising demand for discretionary retail products, both within the GCC (where expatriate Arabs reside and spend), and the periphery (where remittances are routed). Exhibit 19: Remittances/GDP (by country) Exhibit 20: Inflation rates across MENA Remittances/GDP 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 5-year inflation CAGR 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 19.4% 16.9% 11.7% 6.9% 5.8% 5.6% 5.4% 5.3% 5.1% 4.9% 4.2% 3.3% 2.9% 2.3% 1.9% 1.7% FY 02A FY 12e Source: The World Bank. IMF Source: IMF MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 13

15 MENA Consumer and Retail Decomposing RoE: MENA consumer markets are competitive Equity returns largely a function of efficiency (asset turnover), rather than profitability (margins). Consumer discretionary sector wins, while food producers and retailers remain under pressure Exhibit 21: DuPont: financial leverage and asset turnover overwhelmingly responsible for RoE generation* FY 13e Net margin (%) Asset turnover Leverage RoE (%) Net margin (%) Asset turnover Leverage RoE (%) JARIR AB JARIR AB ALTAYYAR AB ALTAYYAR AB CATERING AB CATERING AB SHAKER AB SHAKER AB EXTRA AB ALHOKAIR AB HERFY AB HERFY AB ALHOKAIR AB EXTRA AB AOTHAIM AB AOTHAIM AB MABANEE KK ALMARAI AB BUDGET AB SADAFCO AB SADAFCO AB JUFO EY ALMARAI AB BUDGET AB JUFO EY SAVOLA AB SAVOLA AB HB AB HB AB MABANEE KK SPM AB AUTO EY NGIC AB SPM AB AUTO EY NGIC AB AGTHIA UH AGTHIA UH MERS QD MERS QD * RoE drivers highlighted by company MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 14 FY 14e Don t look for margins plays: MENA consumer markets are competitive: fragmentation and price competition are common denominators across most manufacturers of basic and processed food items in MENA. This has rendered margins across the space susceptible to pressure. We isolate food staples producers as the most likely to experience margin maintenance challenges over the next 3 years, and prefer retailers (selectively), and discretionary product and service providers (Al Tayyar, Budget, Catering), which are better positioned for rising disposable income and discretionary spending in MENA. Competition has resulted in high asset turnover profiles, particularly among lower-margin retailers and service providers: we highlight Jarir Marketing (Hold, SAR 157), Extra (Hold, SAR, 105) and Al Tayyar (Buy, SAR 120) as prime examples of MENA consumer businesses that are operationally efficient from an asset turnover perspective, generating RoEs in the 30-55% range.

16 MENA Consumer and Retail Valuation: Secular themes currently trade at a discount to government spending stories MENA consumer stocks are less correlated with direct government spending packages than contractors, industrial manufacturers, property developers, logistics providers, or banks. They are however positively exposed to the spillover effect of government efforts to improve living standards, distribute welfare schemes, and raise wage levels. They generally do not have major government shareholding interests, either. Buying higher quality cash flow for less: Government spending-reliant sectors such as construction, property development, industrial manufacturing, and building materials, have proven sensitive to (i) politics and administrative bureaucracy, (ii) competing interests within systems of state subsidies, and (iii) slow regulatory evolution, particularly in the GCC. This has affected payment collections from government entities, thereby affecting balance sheets. The net result has been cash flow profiles that are relatively unattractive, rendering the theme better suited for selective bottom-up picks rather than top-down thematic calls. Secular sectors, such as the discretionary consumer and retail space, have consistently produced better cash flow margins overall during the last 3 years, despite being more competitive. This is largely due to the fact that cash collection cycles are much shorter, and that CAPEX burden is typically lower. Exhibit 22: MENA consumer stocks have consistently proven more cash generative than stocks reliant on government spending Average OCF margin(%) 25% 15% 10% 5% 0% 22% 17% 17% 15% FY 09A FY 10A FY 11A 12% Exhibit 23: While market valuation has been overly optimistic on government spending, rather than rewarding the MENA consumer sector for higher quality cash flows Jan 10 Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Consumer spending Government spending* Government spending Consumer spending Source: Company Data, AC Research, Bloomberg *ex-ksa cement, MENA financials Source: Company Data, AC Research, Bloomberg *ex-ksa cement, MENA financials The market has however not fully rewarded MENA consumer stocks for EPS and cash flow quality. The market has generally assigned far greater emphasis on government-spending-led EPS growth over the past 4 quarters, rather than rewarding more secular consumer stocks for earnings quality and cash generation as it had in FY 10-11A. This is evident when considering comparing forward earnings multiples between the 2 groups. The net result suggests that some MENA consumer and retail stocks currently trade at discounted valuation multiples, despite far stronger earnings momentum and cash low quality going forward. MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 15

17 MENA Consumer and Retail Exhibit 24: P/B vs. RoE: MENA consumer stocks produce substantially better returns than other sectors Current market cap / book value (x) 10 9 Jarir APCO 1 0 Mabanee SACCO Almarai Juhayna YNCCO YACCO Zamil OCIC EACCO SADAFCO Halwani Savola Budget Khodari JOUF AUTO REDSEA SPM SRECO Agthia Gasco Emaar Arabtec ARCCO Amaintit Depa Aldar Sorouh Arkan DSI Meera Hokair QACCO Othaim Herfy Extra SOCCO -10% 0% 10% 30% 40% 50% 60% Shaker Catering Tayyar FY 11A ROE (%) Exhibit 25: The market has not fully rewarded select MENA consumer stocks for superior cash flow margins Current market cap / FY 11A OCF (x) 40 SADAFCO 35 Emaar 30 Catering SRECO 25 Juhayna Hokair 20 Depa Zamil Extra OCIC Sorouh Jarir Herfy 15 Meera Agthia Almarai Savola SPM Halwani 10 AUTO Khodari Tayyar Arabtec REDSEA 5 Othaim Gasco Arkan Budget 0 Aldar -40% - 0% 40% 60% 80% -5 FY 11A OCF margin (%) APCO Amaintit DSI MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 16

18 MENA Consumer and Retail Exhibit 26: Snapshot of MENA consumer and retail coverage universe valuation and returns profiles BBG Code Rating FVE 5yr Rev CAGR GPM %EBITDA % NPM% OCF % FCF % Div yld % SG&A/rev % D/E RoE % RoA % RoIC % PE SADAFCO AB Hold SAR % JUFO EY Hold EGP % HB AB Buy SAR % SAVOLA AB Hold SAR % ALMARAI AB Sell SAR % AOTHAIM AB Hold SAR % ALHOKAIR AB Hold SAR % MERS QD Buy QAR % JARIR AB Hold SAR % MABANEE KK Hold KWd 1, % SHAKER AB Buy SAR % AUTO EY Buy EGP % BUDGET AB Buy SAR % SPM AB Hold SAR % CATERING AB Buy SAR % ALTAYYAR AB Buy SAR % EXTRA AB Hold SAR % HERFY AB Hold SAR % NGIC AB Sell SAR % AGTHIA UH Hold AED % Exhibit 27: Valuation: Deep value plays exist in MENA consumer space: We like Al Tayyar (40% P/E discount), Halwani (5%), Al Meera and (7%), on discount valuation, and warrant premium multiples at Shaker, Saudi Catering, and GB Auto HB AB SADAFCO AB HERFY AB CATERING AB SAVOLA AB SPM AB HERFY AB JUFO EY NGIC AB AGTHIA UH AUTO EY BUDGET AB AUTO EY ALTAYYAR AB CATERING AB ALMARAI AB SHAKER AB NGIC AB AOTHAIM AB SHAKER AB ALHOKAIR AB JARIR AB EXTRA AB ALHOKAIR AB MERS QD JUFO EY MABANEE KK JARIR AB P/E premium/discount % to sector (CMP/EPS 13e) ALTAYYAR AB 40% 30% 10% 0% -10% - -30% -40% MABANEE KK AOTHAIM AB BUDGET AB AGTHIA UH EXTRA AB SAVOLA AB SPM AB MERS QD HB AB SADAFCO AB SAVOLA AB ALHOKAIR AB EV/EBITDA premium/discount % to sector (EV current/ebitda 13e) JARIR AB NGIC AB MABANEE KK SHAKER AB ALMARAI AB CATERING AB HERFY AB AGTHIA UH 40% 30% 10% 0% -10% - -30% -40% -50% SPM AB AOTHAIM AB AUTO EY HB AB EXTRA AB BUDGET AB JUFO EY SADAFCO AB ALTAYYAR AB MERS QD MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 17

19 Qatar Bahrain Iraq Jordan Oman KSA Lebanon Egypt Kuwait UAE Iran MENA Consumer and Retail Risk: global grain prices, regional expansion challenges, and credit availability are key risks to MENA consumer and retail businesses Price controls in consumer staples, vs. rising global grain prices: Most basic food items in MENA are capped by government price control. This renders basic food producers exposed to input costs changes than cannot readily be passed on to end buyers. GCC governments however sometimes employ a mix of subsidies and rebates designed to compensate producers for exposure to commodity prices. Saudi Succession: The absence of a clear line of succession in Saudi leadership may impact investor sentiment of political and economic risk in the country. Operational challenges to regional expansion drives: Execution risks, margin threats (in the near term on higher SG&A and set up costs, but in the long term a function of market competitiveness and strength of entrenched local competitors), relationships with local partners, and regulation designed to protect local industries and producers may adversely impact regional expansion ventures. KSA based retailers and food producers (Savola, Al Marai, Al Hokair) have all either felt asset write-downs on, or opted to take full operational control of, ailing international and regional ventures. Credit availability: discretionary spending on auto and electronics in MENA is influenced by the availability of consumer bank credit and credit card penetration levels. Egyptian auto assemblers (GB Auto) may face significant challenges given the extremely low penetration rate of retail banking services (>15% population) and low consumer loans penetration relative to population base. Exhibit 28: Consumer loans, MENA Consumer loans (USDmn) Exhibit 29: Real interest rates, MENA Real interest rate (%) Saudi Arabia Kuwait Qatar UAE Egypt Oman Bahrain Lebanon FY 12 YTD FY 04A FY 12e Source: Central banks Source: BMI MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 18

20 MENA Consumer and Retail Grain prices: Global grain prices marked a new 3-yr high in Q3 12 (corn USDc 838/bu +60%, soybeans USDc 1,712/bu +30%) on a global supply shortfall, following a drought in the Northern area of US, which impacted crop production (corn 28% y/y, soybeans, -10% y/y). With (i) 40-60% of MENA consumer staple producers COGS concentrated in poultry/feed, (ii) limited use of effective commodity hedging policies, and (iii) minimal governmental subsidy support, we expect margin profiles of consumer food companies to remain highly exposed to grain price changes. Exhibit 30: Grain prices hike in July 2012: +60% corn Exhibit 31: +30% soybeans Corn active contract (USDc/bu) 900 Soybeans active contract (USDc/bu) 1, , , , , Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 0 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Source: Bloomberg Exhibit 32: Expected corn prices Corn USDc/bu Q3 12 Q4 12 Q1 13e Q2 13e Q3 13e 2013e 2014e 2015e Source: Bloomberg Exhibit 34: Expected soybeans prices Soybeans USDc/bu. 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 Q3 12 Q4 12 Q1 13e Q2 13e Q3 13e 2013e 2014e 2015e Source: Bloomberg Source: Bloomberg Exhibit 33: Expected wheat prices Wheat USDc/bu Q3 12 Q4 12 Q1 13e Q2 13e Q3 13e 2013e 2014e 2015e Source: Bloomberg Exhibit 35: Expected sugar prices Sugar#11 USDc/lb Q3 12 Q4 12 Q1 13e Q2 13e Q3 13e 2013e 2014e 2015e Source: Bloomberg MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 19

21 Mabanee Hokair Catering Juhayna Almarai SADAFCO Herfy Halwani Shaker SPM Agthia Tayyar Extra Savola Al Meera BUDGET Jarir AUTO Othaim Gasco Mabanee Catering Herfy Almarai Tayyar Juhayna Shaker SPM Halwani Hokair Jarir SADAFCO Agthia BUDGET AUTO Savola Al Meera Gasco Extra Othaim Extra Juhayna Tayyar Othaim SADAFCO Herfy Shaker Agthia Hokair Al Meera Jarir Almarai Catering Halwani BUDGET SPM Savola Mabanee AUTO Juhayna Hokair Mabanee Shaker Almarai Al Meera Extra Jarir Halwani Tayyar Savola SADAFCO Catering Othaim Herfy Agthia SPM Gasco BUDGET Gasco AUTO Shaker Extra Savola Jarir Juhayna Tayyar Almarai Hokair Al Meera Catering Agthia Herfy SPM Othaim AUTO SADAFCO Halwani BUDGET Gasco Mabanee Hokair Juhayna Al Meera AUTO Jarir Mabanee Extra Tayyar Almarai Othaim Herfy Halwani Shaker Savola Catering SADAFCO BUDGET SPM Agthia Gasco MENA Consumer and Retail MENA Consumer and Retail stocks in charts Exhibit 36: 5-yr revenue CAGR (historic) Exhibit 37: 5-yr revenue CAGR (fwd) 5-yr* Revenue CAGR (Historic) 40% 5-yr Revenue CAGR (Fwd) 25% 35% 30% 25% 15% 15% 10% 10% 5% 0% 5% 0% -5% *when applicable Exhibit 38: 5-yr EPS CAGR (historic) Exhibit 39: 5-yr EPS CAGR (fwd) 5-yr* EPS CAGR (Historic) 1 100% 80% 60% 40% 0% 5-yr EPS CAGR (Fwd) 40% 35% 30% 25% 15% 10% 5% - 0% -40% *when applicable Exhibit 40: Gross margins (FY 13e) Exhibit 41: EBIT margins (FY 13e) GPM % FY 13e 90% 80% 70% 60% 50% 40% 30% 10% 0% EBIT margin % FY 13e 70% 60% 50% 40% 30% 10% 0% MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 20

22 Hokair Gasco Savola SPM Al Meera Jarir Extra Herfy Halwani Othaim Tayyar Almarai Mabanee Catering Juhayna Shaker Agthia BUDGET SADAFCO AUTO Herfy Jarir Halwani Tayyar Mabanee Hokair Agthia Shaker Othaim Almarai Al Meera SPM Savola BUDGET Juhayna AUTO SADAFCO Catering Gasco SADAFCO Catering Gasco Extra Herfy Agthia Jarir Al Meera Halwani Savola Shaker Mabanee Tayyar Juhayna Hokair Othaim AUTO BUDGET Almarai SPM Mabanee Catering BUDGET Herfy Almarai Tayyar SPM Hokair Shaker Jarir Juhayna SADAFCO Halwani Agthia Gasco Savola Al Meera Extra AUTO Othaim Mabanee BUDGET Catering Herfy Almarai SPM Juhayna Hokair Tayyar Agthia Shaker Jarir SADAFCO Gasco Al Meera Halwani Othaim Savola Extra AUTO MENA Consumer and Retail Exhibit 42: Net margins (FY 13e) Exhibit 43: CFO/Sales (FY 13e) NPM % FY 13e 70% CFO/Sales % FY 13e 70% 60% 60% 50% 50% 40% 40% 30% 30% 10% 10% 0% 0% Exhibit 44: D/E (FY 13e) Exhibit 45: Interest cover (FY 13e) D/E (USDmn) 4,000 Interest cover (FY 13e) 60x 3,000 50x 2,000 40x 1,000 30x - 20x -1,000 10x -2, ,000 Equity Debt Exhibit 46: Operating leverage % (FY 13e) Exhibit 47: Operating and financing leverage % (FY 13e) Operating leverage % (FY 13e) 300% Operating leverage % (FY 13e) 300% 250% 250% Hokair 200% 150% 100% 50% 200% 150% 100% 50% Gasco Jarir SPM Herfy Halwani Extra Othaim Almarai Savola Tayyar Catering SADAFCO Agthia Juhayna Shaker AUTO BUDGET Mabanee Al Meera 0% 0% 0% 40% 60% 80% 100% 1 140% Financing leverage % (FY 13e) MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 21

23 Agthia Al Meera Gasco AUTO SPM Savola BUDGET Halwani SADAFCO Juhayna Othaim Almarai Shaker Mabanee Tayyar Hokair Extra Catering Herfy Jarir Othaim AUTO Savola Extra Al Meera Gasco Agthia Tayyar Shaker Halwani SADAFCO SPM Juhayna Hokair Jarir BUDGET Almarai Herfy Catering Mabanee Jarir Tayyar Catering Shaker Extra Herfy Juhayna SADAFCO Hokair AUTO Othaim Halwani Mabanee SPM Savola Agthia Almarai Al Meera Gasco BUDGET Jarir Tayyar Catering Shaker Hokair Herfy Extra Othaim Juhayna Almarai SADAFCO Mabanee BUDGET Halwani Savola AUTO SPM Gasco Agthia Al Meera Tayyar Jarir Catering Herfy Shaker Hokair Extra SADAFCO Juhayna Halwani Mabanee Savola Almarai BUDGET Agthia Gasco Othaim AUTO Al Meera SPM MENA Consumer and Retail Exhibit 48: RoE % (average FY 13-15e) RoE (Avg FY 13-15e) 60% 50% 40% 30% 10% 0% Exhibit 49: RoA % (average FY 13e-15e) RoA (Avg FY 13-15e) 35% 30% 25% 15% 10% 5% 0% Exhibit 50: RoIC % (average FY 13-15e) RoIC (Avg FY 13-15e) 50% 45% 40% 35% 30% 25% 15% 10% 5% 0% Exhibit 51: P/B (CMP/BVPS FY 13e) P/B (CMP/ BVPS FY 13e) Exhibit 52: P/S (current market cap / sales FY 13e) P/S (Current market cap / Sales FY 13e) MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 22

24 Tayyar Halwani Extra Shaker Almarai SADAFCO Gasco Hokair BUDGET Jarir Catering Othaim SPM Al Meera Savola AUTO Mabanee Herfy Juhayna Agthia Juhayna AUTO Catering Hokair Extra BUDGET Tayyar Mabanee SADAFCO Herfy Savola Agthia Jarir Halwani Almarai Shaker SPM Othaim Al Meera Gasco Almarai Savola SPM SADAFCO Herfy Halwani Agthia AUTO BUDGET Tayyar Catering Shaker Gasco Othaim Hokair Al Meera Juhayna Extra Jarir Mabanee Tayyar Shaker BUDGET Halwani Catering AUTO Al Meera Hokair Herfy Othaim Agthia Jarir Savola Juhayna SADAFCO Mabanee SPM Extra Gasco Almarai BUDGET Agthia Tayyar AUTO Halwani Othaim Gasco Juhayna SADAFCO Shaker Catering Al Meera Extra Hokair Savola SPM Almarai Herfy Mabanee Jarir Tayyar Agthia Savola BUDGET Shaker Othaim SPM Catering SADAFCO Hokair AUTO Halwani Gasco Juhayna Al Meera Extra Jarir Mabanee Almarai Herfy MENA Consumer and Retail Exhibit 53: EV/EBITDA (current EV / EBITDA FY 13e) EV/EBITDA (Current EV / EBITDA FY 13e) Exhibit 54: P/E (CMP / EPS FY 13e) P/E (CMP / EPS FY 13e) Exhibit 55: PEG (CMP / EPS FY 13e) PEG (CMP/ EPS FY 13e) Exhibit 56: Upside/Downside % from CMP Upside/Downside % from CMP % 60% 50% 40% 30% 10% 0% -10% - -30% Exhibit 57: YTD relative to index YTD relative to index 15.0% Exhibit 58: Price performance Px performance (since May 2012) 80% 10.0% 60% 5.0% 40% 0.0% 0% -5.0% % Source: Bloomberg, Company Data, Arqaam Capital Research -40% Source: Bloomberg, Company Data, Arqaam Capital Research MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 23

25 MENA Consumer and Retail Exhibit 59: Buy portfolio alpha (YTD) Exhibit 60: Sell portfolio alpha (YTD) Buy portfolio alpha (YTD) Jan 2 Jan 3 Jan 4 Jan 5 Jan 6 Jan 7 Jan 8 Jan 9 Jan 10 Jan Buy portfolio Index 11 Jan 12 Jan 13 Jan 14 Jan Sell portfolio alpha (YTD) Jan 2 Jan 3 Jan 4 Jan 5 Jan 6 Jan 7 Jan 8 Jan 9 Jan 10 Jan Sell portfolio Index 11 Jan 12 Jan 13 Jan 14 Jan Exhibit 61: 5-yr revenue CAGR vs. CFO/sales 5-yr Revenue CAGR (FY 12-17e) 25.0% 22.5% 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% --% Hokair Juhayna Al Meera AUTO Extra Savola Othaim Tayyar Halwani Shaker Gasco Jarir SADAFCO Agthia Almarai Herfy SPM Catering Mabanee BUDGET 0% 10% 30% 40% 50% 60% 70% CFO / Sales FY 13e Exhibit 62: Operating and financing leverage % (FY 13e) Operating leverage % (FY 13e) 300% 250% 200% 150% 100% 50% Hokair Gasco Jarir SPM Herfy Halwani Extra Othaim Almarai Savola Tayyar Catering SADAFCO Agthia Juhayna Shaker AUTO BUDGET Mabanee Al Meera 0% 0% 40% 60% 80% 100% 1 140% Financing leverage % (FY 13e) Exhibit 63: RoE vs. P/B (FY 13e) RoE (FY 13e) 60% Jarir Tayyar 50% Catering 40% Shaker Hokair Herfy 30% SADAFCO Mabanee Extra BUDGET Juhayna SPM Almarai Agthia Othaim Halwani Savola 10% Gasco AUTO Al Meera 0% P/B (CMP / BVPS FY 13e) Exhibit 64: RoIC vs. P/E (FY 13e) RoIC (FY 13e) 50% 45% 40% 35% 30% 25% 15% 10% 5% 0% Tayyar Shaker Catering Jarir Herfy Extra SADAFCO Hokair Mabanee Juhayna SPM Othaim BUDGET Halwani Agthia AUTO Savola Almarai Gasco Al Meera P/E (CMP / EPS FY 13e) MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 24

26 MENA Consumer and Retail Appendix 1: Comparative ratios and multiples Exhibit 65: P/E (CMP) Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 23.9x 29.3x 18.1x 13.8x 10.3x 7.6x Almarai Co. ALMARAI AB 11.6x 13.1x 18.0x 15.4x 12.4x 11.0x Savola SAVOLA AB 17.0x 11.4x 9.4x 9.0x 7.9x 7.0x Saudi Paper Manufacturing SPM AB 9.2x 11.3x 11.2x 10.9x 10.3x 9.6x Saudi Dairy & Foodstuff Co. SADAFCO AB 16.2x 14.1x 13.6x 11.9x 10.4x 9.6x Herfy Food Services Co. HERFY AB 24.8x 21.0x 17.2x 15.9x 14.2x 12.8x Halwani brothers HB AB 15.4x 15.4x 14.3x 12.2x 10.9x 9.5x Agthia Group AGTHIA UH 10.9x 14.7x 9.4x 8.8x 8.0x 7.6x Weighted harmonic mean 5.4x 14.9x 14.3x 12.9x 11.3x 10.0x Consumer discretionary Ghabbour Auto AUTO EY 12.7x 16.2x 18.4x 12.1x 8.5x 6.9x United International Transportation BUDGET AB 13.9x 13.1x 10.9x 9.8x 9.2x 9.0x Al Tayyar Travel Group ALTAYYAR AB 12.0x 9.7x 7.5x 6.6x 5.7x 5.2x Saudi Airlines Catering CATERING AB 17.0x 17.1x 13.4x 11.4x 9.9x 9.0x Al-Hassan Shaker SHAKER AB 16.1x 13.0x 11.9x 10.0x 8.3x 7.3x National Gas & Industrialization NGIC AB 15.8x 13.4x 12.8x 12.6x 11.8x 11.3x Weighted harmonic mean 6.7x 17.7x 14.5x 12.7x 11.1x 10.1x Retailers Abdullah Al Othaim AOTHAIM AB 11.4x 12.3x 12.1x 10.8x 9.7x 8.8x Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 32.0x 22.9x 16.5x 12.1x 9.9x 8.0x Al Meera Consumer Goods MERS QD 24.6x 20.9x 17.3x 13.4x 11.1x 10.2x United Electronics Company EXTRA AB 26.5x 19.6x 16.3x 14.3x 12.6x 11.0x Jarir Marketing JARIR AB 23.9x 18.7x 16.8x 15.0x 13.1x 11.7x Weighted harmonic mean 4.7x 18.8x 16.1x 13.4x 11.4x 10.1x Mabanee Co. MABANEE KK 39.3x 35.3x 24.0x 15.3x 16.0x 15.1x Exhibit 66: P/B (CMP) Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 3.3x 3.0x 2.7x 2.4x 2.1x 1.8x Almarai Co. ALMARAI AB 2.4x 2.2x 3.4x 3.0x 2.6x 2.3x Savola SAVOLA AB 2.4x 2.2x 2.0x 1.8x 1.6x 1.4x Saudi Paper Manufacturing SPM AB 1.9x 1.7x 1.6x 1.5x 1.4x 1.4x Saudi Dairy & Foodstuff Co. SADAFCO AB 2.9x 2.7x 2.5x 2.3x 2.1x 2.0x Herfy Food Services Co. HERFY AB 8.1x 7.0x 5.8x 4.9x 4.1x 3.6x Halwani brothers HB AB 2.4x 2.3x 2.2x 2.1x 2.0x 1.8x Agthia Group AGTHIA UH 1.3x 1.2x 1.1x 1.0x 1.0x 0.9x Average 3.1x 2.8x 2.7x 2.4x 2.1x 1.9x Consumer discretionary Ghabbour Auto AUTO EY 1.6x 1.6x 1.5x 1.4x 1.3x 1.2x United International Transportation BUDGET AB 2.9x 2.5x 2.2x 2.0x 1.7x 1.5x Al Tayyar Travel Group ALTAYYAR AB 5.1x 5.0x 4.2x 3.5x 3.0x 2.5x Saudi Airlines Catering CATERING AB 7.9x 6.6x 5.4x 4.5x 3.7x 3.1x Al-Hassan Shaker SHAKER AB 4.8x 4.1x 3.7x 3.1x 2.6x 2.1x National Gas & Industrialization NGIC AB 1.4x 1.4x 1.4x 1.4x 1.4x 1.4x Average 4.0x 3.6x 3.1x 2.6x 2.3x 2.0x Retailers Abdullah Al Othaim AOTHAIM AB 4.1x 3.5x 3.0x 2.6x 2.3x 2.0x Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 6.7x 6.6x 5.2x 4.3x 3.5x 2.9x Al Meera Consumer Goods MERS QD 6.7x 5.9x 5.5x 1.3x 1.3x 1.2x United Electronics Company EXTRA AB 10.7x 6.9x 5.5x 4.4x 3.6x 3.0x Jarir Marketing JARIR AB 12.0x 10.6x 9.4x 8.3x 7.4x 6.6x Average 8.0x 6.7x 5.7x 4.2x 3.6x 3.1x Mabanee Co. MABANEE KK 5.8x 5.0x 4.3x 3.3x 2.8x 2.4x MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 25

27 MENA Consumer and Retail Exhibit 67: EV/EBITDA (Current EV) Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 13.4x 13.8x 10.6x 8.2x 6.3x 5.2x Almarai Co. ALMARAI AB 16.8x 15.6x 14.0x 12.3x 10.5x 9.4x Savola SAVOLA AB 21.2x 16.9x 12.9x 12.0x 10.9x 9.9x Saudi Paper Manufacturing SPM AB 11.3x 13.6x 12.8x 12.2x 11.6x 11.0x Saudi Dairy & Foodstuff Co. SADAFCO AB 12.1x 10.3x 9.4x 8.2x 7.2x 6.7x Herfy Food Services Co. HERFY AB 19.6x 16.4x 13.7x 12.5x 11.2x 10.0x Halwani brothers HB AB 9.9x 9.3x 8.0x 7.0x 6.3x 5.5x Agthia Group AGTHIA UH 7.7x 8.8x 6.3x 5.8x 5.3x 5.0x Average 14.0x 13.1x 11.0x 9.8x 8.7x 7.8x Consumer discretionary Ghabbour Auto AUTO EY 8.3x 7.7x 7.5x 6.8x 5.7x 5.1x United International Transportation BUDGET AB 6.5x 5.7x 4.6x 4.5x 4.3x 4.1x Al Tayyar Travel Group ALTAYYAR AB 11.1x 9.0x 7.0x 6.1x 5.3x 4.8x Saudi Airlines Catering CATERING AB 13.8x 13.6x 11.6x 9.9x 8.6x 7.8x Al-Hassan Shaker SHAKER AB 14.4x 11.9x 10.0x 8.7x 7.4x 6.5x National Gas & Industrialization NGIC AB 10.1x 9.4x 7.6x 7.5x 7.8x 7.9x Average 10.7x 9.6x 8.0x 7.3x 6.6x 6.1x Retailers Abdullah Al Othaim AOTHAIM AB 10.6x 9.0x 8.3x 7.3x 6.5x 5.8x Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 27.1x 23.7x 16.0x 11.4x 9.5x 7.9x Al Meera Consumer Goods MERS QD 23.9x 18.1x 13.3x 10.5x 9.3x 8.8x United Electronics Company EXTRA AB 21.1x 15.8x 13.0x 10.9x 9.6x 8.6x Jarir Marketing JARIR AB 23.3x 18.4x 16.8x 14.6x 12.6x 11.2x Average 21.2x 17.1x 13.5x 11.0x 9.5x 8.5x Mabanee Co. MABANEE KK 34.5x 32.2x 21.9x 14.5x 14.9x 14.1x Exhibit 68: EV/Sales (Current EV) Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 3.2x 2.6x 2.1x 1.7x 1.3x 1.1x Almarai Co. ALMARAI AB 5.1x 4.4x 3.5x 3.0x 2.6x 2.3x Savola SAVOLA AB 1.3x 1.1x 1.0x 0.9x 0.8x 0.7x Saudi Paper Manufacturing SPM AB 2.6x 2.5x 2.6x 2.5x 2.3x 2.2x Saudi Dairy & Foodstuff Co. SADAFCO AB 1.8x 1.5x 1.3x 1.1x 1.0x 1.0x Herfy Food Services Co. HERFY AB 5.3x 4.4x 3.6x 3.2x 2.8x 2.6x Halwani brothers HB AB 1.6x 1.4x 1.3x 1.1x 1.0x 0.9x Agthia Group AGTHIA UH 1.2x 1.0x 0.9x 0.8x 0.8x 0.7x Average 2.7x 2.4x 2.0x 1.8x 1.6x 1.4x Consumer discretionary Ghabbour Auto AUTO EY 0.7x 0.7x 0.6x 0.6x 0.5x 0.4x United International Transportation BUDGET AB 3.8x 3.3x 2.9x 2.7x 2.4x 2.2x Al Tayyar Travel Group ALTAYYAR AB 1.6x 1.4x 1.1x 1.0x 0.8x 0.8x Saudi Airlines Catering CATERING AB 5.0x 4.0x 3.4x 2.9x 2.5x 2.3x Al-Hassan Shaker SHAKER AB 2.5x 1.8x 1.6x 1.4x 1.3x 1.1x National Gas & Industrialization NGIC AB 0.9x 0.8x 0.8x 0.8x 0.7x 0.7x Average 2.4x 2.0x 1.7x 1.6x 1.4x 1.3x Retailers Abdullah Al Othaim AOTHAIM AB 0.6x 0.5x 0.5x 0.4x 0.4x 0.3x Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 4.2x 3.3x 2.7x 2.0x 1.6x 1.4x Al Meera Consumer Goods MERS QD 2.0x 1.5x 1.1x 0.9x 0.7x 0.6x United Electronics Company EXTRA AB 1.4x 1.0x 0.8x 0.7x 0.6x 0.5x Jarir Marketing JARIR AB 3.2x 2.3x 2.1x 1.7x 1.5x 1.3x Average 2.3x 1.8x 1.4x 1.1x 1.0x 0.8x Mabanee Co. MABANEE KK 24.0x 22.7x 16.4x 10.8x 11.2x 10.6x MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 26

28 MENA Consumer and Retail Exhibit 69: RoA Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 8% 6% 9% 10% 12% 16% Almarai Co. ALMARAI AB 10% 7% 8% 8% 9% 9% Savola SAVOLA AB 6% 7% 8% 7% 8% 9% Saudi Paper Manufacturing SPM AB 8% 6% 6% 6% 6% 6% Saudi Dairy & Foodstuff Co. SADAFCO AB 12% 14% 13% 14% 14% 15% Herfy Food Services Co. HERFY AB 25% 25% 26% 24% 24% 23% Halwani brothers HB AB 12% 12% 10% 11% 12% 13% Agthia Group AGTHIA UH 9% 6% 9% 9% 9% 9% Average 11% 10% 11% 11% 12% 13% Consumer discretionary Ghabbour Auto AUTO EY 5% 4% 3% 5% 8% 9% United International Transportation BUDGET AB 11% 10% 10% 9% 9% 8% Al Tayyar Travel Group ALTAYYAR AB 23% 27% 29% 28% 28% 28% Saudi Airlines Catering CATERING AB 32% 27% 28% 27% 26% 25% Al-Hassan Shaker SHAKER AB 17% 15% 15% 16% 18% 19% National Gas & Industrialization NGIC AB 6% 7% 7% 8% 8% 8% Average 16% 15% 15% 16% 16% 16% Retailers Abdullah Al Othaim AOTHAIM AB 11% 9% 8% 8% 8% 8% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 12% 15% 17% 15% 16% 18% Al Meera Consumer Goods MERS QD 15% 10% 11% 6% 7% 7% United Electronics Company EXTRA AB 17% 17% 16% 15% 15% 14% Jarir Marketing JARIR AB 28% 30% 29% 28% 28% 27% Average 17% 16% 16% 14% 15% 15% Mabanee Co. MABANEE KK 7% 7% 8% 12% 11% 11% Exhibit 70: RoE Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 14% 10% 15% 17% 21% 24% Almarai Co. ALMARAI AB 21% 17% 19% 19% 21% 21% Savola SAVOLA AB 12% 16% 17% 16% 17% 17% Saudi Paper Manufacturing SPM AB 21% 15% 14% 14% 14% 14% Saudi Dairy & Foodstuff Co. SADAFCO AB 18% 19% 19% 21% 21% Herfy Food Services Co. HERFY AB 33% 33% 34% 31% 29% 28% Halwani brothers HB AB 16% 15% 15% 17% 18% 19% Agthia Group AGTHIA UH 12% 8% 12% 12% 12% 12% Average 18% 17% 18% 18% 19% 19% Consumer discretionary Ghabbour Auto AUTO EY 12% 10% 8% 12% 15% 17% United International Transportation BUDGET AB 21% 19% 19% 17% Al Tayyar Travel Group ALTAYYAR AB 43% 52% 56% 53% 52% 49% Saudi Airlines Catering CATERING AB 46% 39% 41% 39% 38% 35% Al-Hassan Shaker SHAKER AB 30% 32% 31% 31% 31% 29% National Gas & Industrialization NGIC AB 9% 10% 11% 11% 12% 12% Average 27% 27% 28% 27% 27% 26% Retailers Abdullah Al Othaim AOTHAIM AB 36% 28% 25% 24% 23% 23% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 21% 28% 31% 35% 36% 36% Al Meera Consumer Goods MERS QD 26% 28% 32% 9% 11% 12% United Electronics Company EXTRA AB 40% 35% 34% 31% 29% 27% Jarir Marketing JARIR AB 50% 57% 56% 55% 57% 56% Average 35% 35% 35% 31% 31% 31% Mabanee Co. MABANEE KK 15% 14% 18% 22% 18% 16% MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 27

29 MENA Consumer and Retail Exhibit 71: RoIC Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 14% 13% 15% 18% 21% 25% Almarai Co. ALMARAI AB 12% 9% 10% 10% 11% 12% Savola SAVOLA AB 8% 10% 11% 12% 12% 13% Saudi Paper Manufacturing SPM AB 14% 11% 10% 12% 12% 12% Saudi Dairy & Foodstuff Co. SADAFCO AB 18% 19% 19% 21% 21% Herfy Food Services Co. HERFY AB 31% 31% 32% 29% 28% 27% Halwani brothers HB AB 16% 15% 12% 13% 15% 16% Agthia Group AGTHIA UH 12% 8% 12% 12% 12% 12% Average 16% 14% 15% 16% 17% 17% Consumer discretionary Ghabbour Auto AUTO EY 14% 15% 16% 16% 21% United International Transportation BUDGET AB 17% 16% 15% 14% 14% 13% Al Tayyar Travel Group ALTAYYAR AB 39% 50% 41% 39% 38% 37% Saudi Airlines Catering CATERING AB 46% 39% 41% 39% 38% 35% Al-Hassan Shaker SHAKER AB 32% 33% 34% 34% 33% 31% National Gas & Industrialization NGIC AB 8% 8% 9% 9% 10% 10% Average 26% 27% 26% 25% 25% 24% Retailers Abdullah Al Othaim AOTHAIM AB 23% 22% 19% 19% 18% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 16% 18% 22% 22% 24% Al Meera Consumer Goods MERS QD 26% 16% 19% 9% 10% 11% United Electronics Company EXTRA AB 38% 35% 34% 31% 29% 27% Jarir Marketing JARIR AB 43% 48% 46% 46% 47% 47% Average 29% 28% 28% 25% 25% 26% Mabanee Co. MABANEE KK 10% 9% 12% 16% 14% 14% Exhibit 72: Dividend yield Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 0% 0% 2% 2% 4% 5% Almarai Co. ALMARAI AB 2% 2% 2% 3% 3% 4% Savola SAVOLA AB 3% 2% 4% 4% 4% 5% Saudi Paper Manufacturing SPM AB 3% 4% 4% 5% 6% 6% Saudi Dairy & Foodstuff Co. SADAFCO AB 2% 5% 4% 5% 6% 6% Herfy Food Services Co. HERFY AB 2% 3% 3% 3% 3% 4% Halwani brothers HB AB 2% 3% 5% 6% 6% 7% Agthia Group AGTHIA UH 2% 2% 4% 4% 4% 5% Average 2% 3% 3% 4% 5% 5% Consumer discretionary Ghabbour Auto AUTO EY 5% 5% 3% 4% 6% 7% United International Transportation BUDGET AB 3% 3% 4% 4% 5% 5% Al Tayyar Travel Group ALTAYYAR AB 5% 8% 9% 11% 12% 14% Saudi Airlines Catering CATERING AB 0% 3% 4% 5% 6% 6% Al-Hassan Shaker SHAKER AB 4% 5% 5% 5% 5% 5% National Gas & Industrialization NGIC AB 2% 3% 7% 7% 7% 7% Average 3% 5% 5% 6% 7% 7% Retailers Abdullah Al Othaim AOTHAIM AB 3% 4% 4% 4% 5% 5% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 0% 4% 2% 5% 6% 7% Al Meera Consumer Goods MERS QD 3% 3% 4% 6% 7% 7% United Electronics Company EXTRA AB 0% 0% 2% 3% 3% 3% Jarir Marketing JARIR AB 3% 4% 5% 5% 6% 7% Average 2% 3% 3% 4% 5% 6% Mabanee Co. MABANEE KK 1% 0% 1% 0% 1% 0% MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 28

30 MENA Consumer and Retail Exhibit 73: CFO/Sales Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 16% 10% 17% 17% 18% 18% Almarai Co. ALMARAI AB 28% 24% 22% 22% 23% 23% Savola SAVOLA AB 7% 6% 5% 6% 7% 7% Saudi Paper Manufacturing SPM AB 12% 11% 19% 19% Saudi Dairy & Foodstuff Co. SADAFCO AB 7% 4% 9% 10% 11% 11% Herfy Food Services Co. HERFY AB 27% 27% 25% 24% 24% 24% Halwani brothers HB AB 10% 14% 9% 9% 10% 10% Agthia Group AGTHIA UH 15% 8% 8% 12% 12% 13% Average 15% 13% 14% 15% 15% 16% Consumer discretionary Ghabbour Auto AUTO EY 0% 5% 3% 5% 5% 4% United International Transportation BUDGET AB 44% 71% 64% 61% 59% 57% Al Tayyar Travel Group ALTAYYAR AB 22% 10% 11% 12% 13% 13% Saudi Airlines Catering CATERING AB 57% 15% 29% 28% 27% 28% Al-Hassan Shaker SHAKER AB 14% -3% 12% 11% 12% 12% National Gas & Industrialization NGIC AB 10% 13% 11% 11% 10% 10% Average 25% 19% 22% 22% 21% 21% Retailers Abdullah Al Othaim AOTHAIM AB 7% 7% 4% 6% 6% 6% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 14% 12% 12% 14% 14% 14% Al Meera Consumer Goods MERS QD 9% 9% 8% 9% 8% 8% United Electronics Company EXTRA AB -1% 5% 7% 6% 7% 6% Jarir Marketing JARIR AB 12% 14% 11% 10% 10% 10% Average 8% 10% 9% 9% 9% 9% Mabanee Co. MABANEE KK 66% 66% 66% 66% 66% 66% Exhibit 74: FCF/Sales Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 1% -8% -8% -1% 7% 11% Almarai Co. ALMARAI AB -4% -14% -10% 1% 4% 6% Savola SAVOLA AB 5% 4% 1% 3% 3% 4% Saudi Paper Manufacturing SPM AB -1% -3% 11% 12% 12% 14% Saudi Dairy & Foodstuff Co. SADAFCO AB 1% -3% 3% 5% 7% 8% Herfy Food Services Co. HERFY AB 13% 12% 10% 13% 14% 15% Halwani brothers HB AB 0% 5% 3% -1% 3% 6% Agthia Group AGTHIA UH 5% -4% 0% 4% 4% 6% Average 2% -1% 1% 4% 7% 9% Consumer discretionary Ghabbour Auto AUTO EY -6% 2% -2% 3% 5% 4% United International Transportation BUDGET AB 18% 5% -12% -4% 1% 4% Al Tayyar Travel Group ALTAYYAR AB 8% 9% 9% 9% 9% Saudi Airlines Catering CATERING AB 29% 25% 25% 23% 23% 24% Al-Hassan Shaker SHAKER AB 5% -7% 9% 8% 9% 9% National Gas & Industrialization NGIC AB 5% 5% 9% 9% 8% 7% Average 12% 7% 6% 8% 9% 9% Retailers Abdullah Al Othaim AOTHAIM AB 0% 2% 1% 1% 1% 1% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 7% 9% 4% 2% 10% 11% Al Meera Consumer Goods MERS QD 6% 3% 1% 0% 1% 3% United Electronics Company EXTRA AB -7% 2% 4% 2% 3% 3% Jarir Marketing JARIR AB 11% 9% 9% 8% 8% 8% Average 3% 5% 4% 3% 5% 5% Mabanee Co. MABANEE KK -50% -50% -50% -50% -50% -50% MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 29

31 MENA Consumer and Retail Exhibit 75: D/E Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 46% 50% 57% 59% 51% 35% Almarai Co. ALMARAI AB 78% 102% 114% 110% 101% 92% Savola SAVOLA AB 63% 69% 75% 69% 52% 38% Saudi Paper Manufacturing SPM AB 139% 152% 147% 125% 119% 105% Saudi Dairy & Foodstuff Co. SADAFCO AB 0% 0% 0% 0% 0% 0% Herfy Food Services Co. HERFY AB 9% 9% 8% 7% 6% 5% Halwani brothers HB AB 0% 2% 33% 28% 25% 21% Agthia Group AGTHIA UH 15% 22% 18% 17% 16% Average 44% 51% 57% 52% 46% 39% Consumer discretionary Ghabbour Auto AUTO EY 81% 88% 91% 66% 50% 43% United International Transportation BUDGET AB 59% 61% 75% 80% 80% 77% Al Tayyar Travel Group ALTAYYAR AB 10% 9% 42% 46% 40% 37% Saudi Airlines Catering CATERING AB 0% 0% 0% 0% 0% 0% Al-Hassan Shaker SHAKER AB 37% 74% 63% 51% 37% 24% National Gas & Industrialization NGIC AB 0% 0% 0% 0% 0% 0% Average 31% 39% 44% 39% 33% 29% Retailers Abdullah Al Othaim AOTHAIM AB 78% 62% 65% 64% 63% 61% Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 33% 34% 38% 83% 69% 49% Al Meera Consumer Goods MERS QD 0% 91% 99% 27% 24% United Electronics Company EXTRA AB 8% 0% 0% 0% 0% 0% Jarir Marketing JARIR AB 19% 19% 23% 24% 26% 26% Average 28% 41% 45% 40% 36% 31% Mabanee Co. MABANEE KK 79% 78% 79% 55% 39% 25% Exhibit 76: Interest cover Company BBG code FY 10A FY 11A FY 12e FY 13e FY 14e FY 15e Consumer staples Juhayna Food Industries JUFO EY 3.5x 3.3x 3.8x 4.2x 5.1x 7.2x Almarai Co. ALMARAI AB 12.1x 11.2x 9.4x 9.3x 10.6x 11.4x Savola SAVOLA AB 3.9x 4.0x 4.2x 4.0x 4.8x 6.5x Saudi Paper Manufacturing SPM AB 11.3x 7.4x 6.5x 6.5x 7.4x 7.9x Saudi Dairy & Foodstuff Co. SADAFCO AB 152.0x 31.4x 92.5x Herfy Food Services Co. HERFY AB 267.5x 278.6x 341.3x 379.3x 424.5x 471.5x Halwani brothers HB AB 60.7x 78.4x 36.0x 43.4x 51.9x 64.0x Agthia Group AGTHIA UH 24.8x 12.5x 15.5x 16.7x 18.3x 19.2x Average 67.0x 53.4x 63.7x 57.9x 65.3x 73.4x Consumer discretionary Ghabbour Auto AUTO EY 2.4x 2.1x 2.5x 3.3x 4.1x 5.4x United International Transportation BUDGET AB 4.4x 3.8x 4.1x 4.5x 4.7x 4.7x Al Tayyar Travel Group ALTAYYAR AB 17.2x 29.0x 27.4x 23.3x 22.5x 24.3x Saudi Airlines Catering CATERING AB Al-Hassan Shaker SHAKER AB 56.1x 18.7x 9.6x 12.6x 17.3x 25.1x National Gas & Industrialization NGIC AB Average 13.3x 8.9x 6.7x 7.3x 8.1x 9.9x Retailers Abdullah Al Othaim AOTHAIM AB 36.9x 12.6x 12.2x 12.0x 11.9x 11.7x Fawaz Abdulaziz Alhokair & Co. ALHOKAIR AB 18.8x 16.0x 24.0x 20.9x 20.2x 26.8x Al Meera Consumer Goods MERS QD x 7.6x 8.1x 9.3x 11.3x United Electronics Company EXTRA AB 22.8x 205.5x 979.7x Jarir Marketing JARIR AB 34.7x 75.8x 80.8x 57.4x 55.6x 53.7x Average 22.6x 64.5x 220.9x 19.7x 19.4x 20.7x Mabanee Co. MABANEE KK 11.6x 12.0x 15.3x 22.9x 25.3x 33.0x MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 30

32 MENA Consumer and Retail Exhibit 77: Our MENA coverage universe Appendix 2: Our MENA diversified coverage universe Company BBG code EV*, USDmn EV/EBITDA FY 13e P/E FY 13e P/B FY 13e RoE Div yield Real estate Aldar Properties ALDAR UH 5, x 5.7x 0.7x 12.2% 3.8% Dar Al Arkan Real Estate Development ALARKAN AB 3, x 8.1x 0.5x 6.5% 0.0% Emaar Properties EMAAR UH 8, x 10.3x 0.7x 6.9% 3.3% Saudi Real Estate (Al Akaria) SRECO AB x 22.0x 1.1x 5.2% 3.7% Sorouh Real Estate SOROUH UH 1, x 7.9x 0.5x 6.8% 0.0% Construction Abdullah A.M. Al-Khodari Sons Co ALKHODAR AB x 11.3x 1.8x 15.9% 3.0% Arabtec Holding ARTC UH 1, x 9.9x 1.1x 10.9% 1.8% Depa Limited DEPA DU x 8.2x 0.1x 1.5% 0.0% Drake & Scull International DSI UH x 12.5x 0.6x 4.8% 0.0% Orascom Construction Industries OCIC EY 11, x 8.9x 2.4x 26.7% 5.8% Red Sea Housing Services REDSEA AB x 10.7x 1.4x 13.5% 2.2% Cement Al Jouf Cement JOUF AB x 14.5x 1.4x 9.4% 2.3% Arabian Cement ARCCO AB 1, x 8.8x 1.3x 14.7% 6.1% Eastern Cement EACCO AB 1, x 11.8x 2.1x 17.7% 6.2% Qassim Cement QACCO AB 1, x 13.0x 3.6x 27.8% 7.4% Saudi Cement SACCO AB 4, x 15.3x 4.4x 28.5% 6.1% Southern Cement SOCCO AB 3, x 14.5x 5.2x 35.6% 6.3% Yamama Cement YACCO AB 2, x 13.0x 2.6x 19.7% 5.4% Yanbu Cement YNCCO AB 2, x 10.1x 2.8x 27.2% 8.9% Industrial Arabian Pipes APCO AB x 174.2x 1.7x 1.0% 0.0% Saudi Arabian Amiantit SAAC AB x 11.1x 1.1x 9.5% 8.9% Zamil Industrial Investment ZIIC AB 1, x 20.4x 2.6x 12.6% 4.1% Logistics and transport Air Arabia AIRARABI UH 1, x 11.8x 0.7x 6.3% 7.1% Gulf Warehousing Company GWCS QD x 17.8x 2.3x 12.7% 4.3% Consumers and retail Abdullah Al Othaim AOTHAIM AB x 10.8x 2.6x 24.1% 4.2% Agthia Group Agthia UH x 8.8x 1.0x 11.8% 4.0% Al Meera Consumer Goods MERS QD x 13.4x 1.3x 9.4% 5.6% Al Tayyar Travel Group ALTAYYAR AB 1, x 6.6x 3.5x 53.4% 10.8% Al-Hassan Shaker SHAKER AB x 10.0x 3.1x 31.1% 5.0% Almarai Co. ALMARAI AB 9, x 15.4x 3.0x 19.5% 2.6% Fawaz Al Hokair ALHOKAIR AB 2, x 12.1x 4.3x 35.5% 4.6% Ghabbour Auto AUTO EY x 12.1x 1.4x 11.6% 4.1% Halwani brothers HB AB x 12.2x 2.1x 17.0% 5.8% Herfy Food Services Co. HERFY AB x 15.9x 4.9x 30.6% 2.9% Jarir Marketing JARIR AB 2, x 15.0x 8.3x 55.5% 5.5% Juhayna Food Industries JUFO EY x 14.0x 2.4x 17.4% 2.5% Mabanee Co. MABANEE KK 2, x 15.1x 3.3x 21.8% 0.0% National Gas & Industrialization NGIC AB x 12.6x 1.4x 11.0% 7.1% Saudi Airlines Catering CATERING AB 1, x 11.4x 4.5x 39.2% 4.8% Saudi Dairy & Foodstuff Co. SADAFCO AB x 11.9x 2.3x 19.6% 5.0% Saudi Paper Manufacturing SPM AB x 10.9x 1.5x 13.9% 5.1% Savola SAVOLA AB 7, x 10.8x 1.8x 16.4% 3.7% United Electronics Company Extra AB x 14.3x 4.4x 31.0% 2.6% United Internatinal Transportation BUDGET AB x 9.8x 2.0x 19.8% 4.2% MENA Consumer and Retail Copyright 2013, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 31