1 April IPO. Page 2

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1 SAUDI EQUITY REPORT June 2014

2 1 April 2013 EXECUTIVE SUMMARY Performance of Tadawul All Share Index (TASI) Performances of Key Sectors in TASI Real Estate Development Sector Petrochemicals Industries Sector Telecommunications and Information Technology Sector Banks and Financial Services Retail Valuation Summary and Results for Basic Industries (SABIC) Summary and Results for Etihad Etisalat Co ( EEC) Summary and Results for Yanbu National Petrochemical Company (YANSAB) Summary and Results for Emaar The Economic City (EMAAR) Summary and Results for The National Shipping (BAHRI) IPO Activities in During 1Q IPO Activities in During IPO Activities in During Mergers and Acquisitions Activities in Page 2

3 EXECUTIVE SUMMARY Several factors supported the financial market s strong performance in 1Q14 and forecasts show that it will continue in the upcoming years. A high political stability message has been sent to the world, when s second deputy premier, Prince Muqrin bin Abdul Aziz, was been named deputy crown prince, thus becoming next in line for the post, the Royal Court in a decree issued by Custodian of the Two Holy Mosques King Abdullah, which makes the country a rare island of stability in an a flamed region with conflicts and political discord. Although, announced its 2014 budget of USD228bln, the Kingdom continues the expansionary policy that has been taken since the financial crises that hit the world, with substantial additional outlays for education, health and infrastructure, despite the decline in oil revenue. The stock market has witness a higher performance in 1Q14 when TASI closed at 9, points, increasing by 33.0% y-o-y in comparison to 7, points at the end of 1Q13. While increased by 10.99% y-t-d compared to 8, points at the end of Trading activity increased during the first three months of Total market value reached SAR468.38bln, showing a SAR99.88bln increase, or 27.1% y-o-yy from SAR368.49bln recorded in 1Q13, and total market volume for 1Q14 reached bln shares exchanged, increasing by 29.3% y-o-yy or 3.92bln shares in comparison to 13.36bln shares tradedd in 1Q13. Meanwhile total number of transactions went lower to 7.78mln deals in 1Q14 in comparison to 9.17mln in 1Q13, showing a decrease of 15.1% (y-o-y) or about 1.38mln deals. Real Estate Sector: The Real Estate sector index rose by 62.2% y-o-is 0.959, offering the possibility of a lower than market rate of return, and also to 6, points in 1Q14 from 3, points at the end of 1Q13. The Real Estate sector beta a lower risk in comparison to market risk. The main drivers of the market continue to be; high oil prices, the need to diversify the economy, job creation and demographic growth. The real estate and construction sectors have received a major boost in the recent years. The construction sector has historically been the largest sector followed by oil and gas, power and chemicals. In the last two decades, has received approximately USD150bln in Foreign Direct Investment. Its biggest investors are the U.S, Kuwait, France and Japan, knowing that the sectors receiving the largest Foreign Direct Investment are; contracting, real estate, petrochemicals and transport. In order to receive a greater number of pilgrims and business visitors, forecasts say there will be about 424,000 hotel rooms in by 2016, up from a forecasted 317,000in Real estate investments in hotels in Mecca alone are forecast to exceed USD3.2bln. Elsewhere, Jeddah is expected to need up to 7,000 new hotel beds in the next few years. UK-based Intercontinental Hotels has said it intends to increasee its hotel accommodation in by 50% to 7,300 beds by Petrochemical Sector: The Petrochemical sector index rose by 26.92% y-o-y to 7, points in 1Q14 from 6, points at the end of 1Q13. The Petrochemical sector beta is 1.247, offering the possibility of a higher rate of return and a higher risk than the market. Petrochemical sector continued to grow steadily until it contributed about 15% of GDP. The Petrochemical companies represent one-third of the market capitalization of the Stock Exchange, although the petrochemical sector has a big role in the gross domestic product (GDP), due to 9% of global petrochemicals production that comes from. Petrochemical prices are estimated to rise by 11% in 2014, supported by improved economic conditions in emerging and developed markets. Page 3

4 Telecommunication Sector: The Telecommunication sector index rose by 27.80% y-o-y in 1Q14 to 3, points from 2, points at the end of 1Q13. The Telecommunication sector beta is 0.841, offering the possibility of a lower rate of return and a lower risk than the market. is the largest telecom market in the GCC, accounting for 66% of total mobile subscribers, but the number of permanent subscriptionss totalled about 8.0mln lines is poised to grow with the increasing level of income and population growth, compared with pre-paid subscriptions, which currently make up to 70% of the subscriptions in. Recently, 's mobile subscriber base has fallen by a tenth in two years following a crackdown on illegal workers, reduced quotas for religious pilgrims and stricter phone registration requirements. KFHR expected the telecom sector to grow opportunities in large scale operational data services, after finishing from the enlargement construction process in the Grand Mosque in Mecca, and increase the capability of pilgrims, which will be reflected positively on the performance of the sector within the financial market. Banks and Financial Services Sector: Net operating income of the 11 banks under our observation aggregated at SAR14.76bln in 1Q14, an increase of 9.5% y-o-y from SAR13.48bln in 1Q13. Consequently, aggregate net profits totaled SAR8.06bln in 1Q14, an increase of 5.4% y-o-yy from SAR7.64bln in 1Q13, led by Al Rajhi Bank at SAR1.71bln, Samba Financial Group at SAR1.24bln and British Bank at SAR1.08bln. Fitch Ratings said in a new report that banks should continue to see strong performance, with ample opportunities for lending provided by a favorable economic outlook. For all the above positive reasons, the index increased by 32.30% y-o-y in 1Q14 when it scored 19, points, from 14, points at the end of 1Q13. The Banking and Financial services sector beta is 0.946, offering the possibility of a lower rate of return and also a lower risk than the market. Retail sector: The retail sector closed at 14, points, with an increase of 80.52% y-o-y in 1Q14, from 8, points recorded at year end 1Q13. The Retail sector beta is 0.830, offers the possibility of a lower than market rate of return and a lower risk than the market. Net profits of the listed retail firms grew by 13% to SAR704mln in the 1Q14 of the current year compared to SAR624mln in 1Q13. However, saless of the retail sector dropped by 1.3% to SAR6. 52bln in 1Q14 compared to SAR6.61bln in 1Q13. Jarir Marketing achieved profits worth SAR201.3mln in 1Q14 compared to SAR180.8mln in 1Q13, or an increase of 11.34% y-o-y. Its sales rose by 5.2% y-o-y to SAR1.4bln in 1Q14 compared to SAR1.33bln in 1Q13. The net profits of Al-Othaim Markets grew by 14% y-o-y in 1Q14 compared to SAR1.16bln in 1Q13. Mouwasat Medical Services has to SAR46..47mln in 1Q14 against SAR40.81 in 1Q13. The company s sales rose to SAR1.22bln its profits raised by 10. 3% y-o-y to SAR57.9mln in 1Q14 compared to SAR52.5mln in 1Q13. Page 4

5 Selected Companies Valuation: Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for each related sectors for the period 2010 March 2014 and put more weights on the recent years, without calculating any additional risks or benefits. We used also the weighted average price for each stock, which is calculated according to the last 6 months traded value and volume. Listed stocks Valuation 1Q14 Price Status Basic Industries Corp (SABIC) Undervalued Etihad Etisalat Co (EEC) Overvalued Yanbu National Petrochemical Co (YANSAB) Overvalued Emaar The Economic City (EMAAR) Undervalued The National Shipping Co. of (BAHRI) Undervalued Source: Company s Financials March 2014, KFHR Page 5

6 1.0 Performance of Tadawul All Share Index (TASI) TASI closed at the end of 1Q14 at 9, point, up by points, or about 10.99% (y-t-d), compared with 8, point at year end Performance of Tadawul all share index (TASI) Stage One Stage Two Stage Three Stage Four Source: Bloomberg, KFHR When analysing the historical performance of the all share Index (TASI), we noted four time periods. Stage One- Significant Decrease This stage covers the period from 31 December 2007 to 09 March Due to the financial market crisis TASI decreased significantly by 62.6% or 6,908.7 points, when the index scored 4, point on 09 March 2009, (which is the lowest point during the period from December end 2007 to December end 2013), compared to 11, points at the year-end Stage Two- Gradual Increase This stage covers the period from 10 March 2009 to 26 April TASI recorded an increase by 67.2% or about 2, points when closed at 6, point at the end of this stage, compared to the end of the previous stage level of 4, point. Stage Three- Volatility and increase This stage covers the period from 27 April 2010 to 3 April TASI showed a sustain movement within a range between 7, and 5, points and increased by 14.4%, when scored 7, points at the end of the stage, compared to the end of the previous stage level of 6, points. Stage Four- Higher Performance This stage covers the period from 4 April 2012 to 31 March TASI closed at 9, point at the end of the 1Q14, and rose by 26. 0% compared to the end of the previous stage. Page 6

7 Performance of Tadawul all share index (TASI) and its peers in 1Q14 GCC Stock Markets Indices % 1Q Rank DUBAI FINANCIAL MARKET (DFM) ABU DHABI SECURITIES EXCHANGE (ADX) Qatar Exchange Index (QE) TADAWUL INDEX (TASI) BAHRAIN ALL SHARE INDEX MSM30 INDEX (OMAN) KUWAIT PRICE INDEX Source: Bloomberg, KFHR 32.1% 14.1% 12.1% 11.0% 8.7% 0.3% 0.3% 4, , , , , , , , , , , , , , At the end of 1Q14, the GCC countries continued the good performance of All the seven GCC markets ended 1Q14 with gains compare to the end of 2013 (y-t-d). Dubai financial market (DFM) led the markets in the positive zone with a 32.1% increase, Abu Dhabi Securities Exchange Index (ADX) came next when headed up by 14.1%, followed by Qatar Exchange (QE) with 12.1%. The Tadawul All Share Index (TASI) came on the 4 th place with 11.0% gains, Bahrain Bourse (BB) ranked in the 5 th place by 8.7% increase. Muscat Securities Market benchmark index (MSM30) and Kuwait Price Index (IXP) closed last in the positive zone with 0.3% increase for each market. Measuring the market liquidity in 1Q14, we note that total market value reached SAR468.38bln (USD124.86bln) showing a SAR99.88bln increase, or about 27..1% (y-o-y) from SAR bln recorded in 1Q13. Total daily average market value for 1Q14 (64 trading days) scored about SAR7.32bln, increasing by SAR1.56bln, or about 27.1% (y-o-y) from the average traded value of SAR5.76bln seen in 1Q13 (64 trading days). Tradedd Value for the period (1Q13-1Q14) Source: Bloomberg, KFHR Total market volume for 1Q14 scored about 17.28bln shares, increasing 29.3% (y-o-y) or about 3.92bln shares compared to 13.36bln shares traded in 1Q13. Daily average volume reached mln sharess in 1Q14, increasing by 61.21mln shares or about 29.3% (y-o-y), from the daily traded average shares of mln in 1Q13. Page 7

8 Tradedd Volume for the period (1Q13-1Q14) Source: Bloomberg, KFHR Total market trades for 1Q14 scored about 7.78mln deals compared to 9.17mln in 1Q12, trades etreated by 15.1% (y-o-y) or about 1.38mln deals in 1Q14. Daily average transactions reached 121, 602 deals, retreating by 21,652 deals or about 15.1% (y-o-y) from the daily traded average of 143,254 deals last year. Transactions for the period (1Q13-1Q14) Source: Bloomberg, KFHR The market capitalization for 163 common listed companies in 1Q14 after removing one company listed during the first three months in the year 2014 ( Marketing Company) reached SAR1,924.5bln, increasing by SAR bln, or about 9.8% (y-t-d), from SAR1, 752.9bln in December end Page 8

9 When we compare the market capitalization in 1Q14 with the market capitalization in 1Q13, the common listed companies reached 160 after removing four companies ( Marketing Company, Bawan Company, Aljazira Takaful Taawuni Company, MetLife AIG ANB Cooperativee Insurance Company) reached SAR1,918.8bln, increasing by SAR466.31bln, or about 32.1% (y-o-y), from SAR1,452.5bln in 1Q13. Market Breadth Increasing stocks outnumbers the decreasing ones in 1Q14 compared to the year end companies gained some values (76.07% of total common 163 listed companies), while 34 companies decrease (20.86% of total common 163 listed companies) ), and 5 companies stand flat (3.07% of total common 163 listed companies). Increasing stocks outnumber the decreasing ones in 1Q14 compared to same period in the previous year 1Q companies gained some values (68.75% of total common 160 listed companies), while 46 companies decreasee (28.75% of total common 160 listed companies), and 4 companies closed with no change (2.50% of total common 160 listed companies) ). Meanwhile, 21 companies had capital increase during the period Q14 from various sectors, the table below shows more details; Companies showing change in the Paid-up capital 1Q14 Companies Name 1 Samba Financial Group 2 Aldrees Petroleum & Transport Services Co. 3 Al-Tayyar Travel Group Holding Co. 4 Hollandi Bank 5 Al-Jouf Agriculture Development Co. 6 Arab National Bank 7 National Agriculture Development Co. Source: Tadawul, KFHR 1Q14 mln shares 1, , mln shares change % 33.3% 33.3% 25.0% 20.0% 20.0% 17.6% 16.7% 05 March, 2014; Aldrees Petroleum & Transport Services Co. increased its paid up capital by issuing one bonus share for every 3 shares, raising its total number of issued shares to 40mln in 1Q14, compared to 30mln at the end of the last year 2013, an increase about 33.3% (y-t-d) in the number of outstanding shares. 17 March, 2014; Arab National Bank rose its paid up capital by issuing three bonus shares for every 17 shares, raising its total number of issued shares by 17.6% (y-t-d) to 1bln shares, vs. 850mln sharess at the end of March, 2014; Hollandi Bank increased its paid up capital by 20% (y-t-d), after issuing one bonus share for every 5 shares, raising its total number of issued shares to 476mln, compared to 397mln shares at the end of March, 2014; National Agriculture Development Co. increased its paid up capital by issuing one bonus share for every 6 shares, raising its total number of issued shares to 70mln, from 60mln shares in 2013, an increase about 16.7% (y-t-d). 20 March, 2014; Samba Financial Group increased its paid up capital by 33.3% (y-t-d), after issuing one bonus share for every 3 shares, raising its total number of issued shares to 1.2bln shares in 1Q March, 2014; Al-Tayyar Travel Group Holding Co. increased its paid up capital by 25.0% (y-t-d) to150mln shares, when issued one bonus share for every 4 shares, raising its total number of issued shares to 150mln. Page 9

10 24 March, 2014; Al-Jouf Agriculture Development Co. increased its paid up capital by 20.0% (y-t-d), after issuing one bonus share for every 5 shares, raising its total number of issued sharess to 30mln, vs. 25mln sharess at the end of The Highest Increase in the share price in 1Q14 (y-t-d) Source: Bloomberg, KFHR The Highest decrease in the share price in 1Q14 (y-t-d) Source: Bloomberg, KFHR National Agriculture Marketing Co. (Thim'ar) scored the highest increase in the market price by 124.5% (y-t-d) in 1Q14, while Amana Cooperative Insurance (AMANA Insurance) scored the highest decrease by 24.4% (y-t-d) in 1Q14. Page 10

11 The Highest Increase in the share price in 1Q14 (y-o-y) Source: Bloomberg, KFHR The Highest decrease in the share price in 1Q14 (y-o-y) Source: Bloomberg, KFHR National Agriculture Marketing Co. (Thim'ar) scored the highest increase in the market price by 182.1% (y-o-y) in 1Q14, while Salama Cooperative Insurance Co (SALAMA) scored the highest decrease by 43.7% (y-o-y) in 1Q14. Page 11

12 2.0 Performances of Key Sectors in TASI 2.1 Real Estate Development Sector The Real Estate sector included 8 listed companies with a total market capitalization of SAR102.90bln in 1Q14 (5.3% of the total market) increased by 30.9% (y-t-d) from SAR78.60bln (4.5% of the total market), the real estate index closed at 6, point in 1Q14, increased by 62.2% (y-o-y) from 3, point in 1Q13. Real estate market capitalization by companies (2013-1Q14) Real estate Market Capitalization (mln SAR) 1Q14 1 Jabal Omar Development Company 38,663 2 Makkah Construction & Development Co. 14,257 3 Emaar The Economic City 14,705 4 Dar Alarkan Real Estate Development Company 13,554 5 Arriyadh Development Co. 3,500 6 Knowledge Economic City 7,227 7 Tiba Holding Co 6,675 8 Real Estate Co. Total 4, , ,138 10,631 11,305 10,638 2,820 6,006 5,910 4,152 78, % 34.1% 30.1% 27.4% 24.1% 20.3% 12.9% 4.0% 30.9% The reason behind the sector s market capitalization noticeable increase, is the increase of the market capitalization for all 8 companies that constitutes the sector. The market capitalization of Jabal Omar Development Company increased by 42.5% (y-t-d), followed by Makkah Construction & Development Co. and Emaar The Economic City with 34.1% and 30.1% increase (y-t-d) as mentioned in the above table. Value, Volume, Trade, and Index According to sectors (1Q13-1Q14) 1Q14 Volume Value Trade Volume Indices (mln Index (mln (mlnsar) (Thousand Deal) Shares) Shares) TASI Real Estate Development 17, , , , , , , , , Q13 Value (mlnsar) 368, ,014.1 Trade (Thousand Deal) 9, Index 7, , The real estate sector accumulated around 21.6% of the total trading market volume in 1Q14, when scored 3.73bln shares, with a daily averagee of 58.23mln shares (64 trading days), and accumulated 13.8% of total trading market value in 1Q14, when scored SAR64.45bln, with a daily average of SAR1.01bln Page 12

13 Real Estate Index and Volume performance during the period (2012-1Q14) The Real Estate traded volume reached 332.5mln shares, which is the maximum trading volume in a day during the period Q14 on the closing of 22 April 2012, while registered 9.03mln trading shares (the minimum trading volume) in the closing of 12 November As indicated in the graph above the real estate index maximum point during the period Q14 is 6, points in the closing of 09 March 2014, while reached the minimum point in the first trading day in year 2012, when closed at 2, points. The real estate sector Beta and volatility for the period (2007-1Q14) Real Estate Sector Volatility 1.740% Beta The real estate sector beta 0.959, offering the possibility of a lower than market rate of return, but also posing lower than market risk. Page 13

14 2.2 Petrochemicals Industries Sector The Petrochemicals sector includedd 14 companies with a total market capitalization of SAR588.17bln in 1Q14 (30.5% of the total market) increased by 6.6% (y-t-d) from SAR551.73bln in 2013 (31.5% of the total market), the petrochemicals index closed 7, points at the end of 1Q14, index rose by 26.92% (y-o-y), from 6, point in 1Q13. Petrochemicals market capitalization by companies (2013-1Q14) Petrochemicals Market Capitalization (mln SAR) 1Q Industrial Investment Group 22, , International Petrochemical Co 13, , Nama Chemicals Co. 1, , Rabigh Refining and Petrochemical Co 23, , Sahara Petrochemical Co. 9, , Methanol Chemicals Company 1, , Basic Industries Corp 354, , Kayan Petrochemical Company 24, , Advanced Petrochemical Company 7, , Fertilizers Co. 53, , National Industrialization Co 22, , National Petrochemical Company 12, , Yanbu National Petrochemical Company 40, , Alujain Corporation Total 1, , , , % 16.5% 8.9% 8.9% 8.6% 6.6% 5.8% 5.7% 4.7% 2.2% 0.6% -1.8% -3.4% -6.0% 6.6% The reason behind the sector s market capitalization increase, is the increase of the market capitalization for eleven out of 14 companies that constitutes the sector, as indicated in the table above, the market capitalization of Industrial Investment Group increased by 93.3% (y-t-d). Followed by International Petrochemical Co and Nama Chemicals Co. when rose by 16.5% and 8.9% (y-t-d), respectively as shown in the table above. Value, Volume, Trade, and Index According to sectors (1Q13-1Q14) 1Q14 Volume Value Trade Volume Indices (Mln Index (Mln (MlnSAR) (Thousand Deal) Shares) Shares) TASI Petrochem. 17, , , , , ,404 9, , , , Q13 Value (MlnSAR) 368, ,443.5 Trade (Thousand Deal) 9, ,781 Index 7, , The Petrochemicals sector traded volume around 16.6% of the total trading of the market in 1Q14, when scored 2..86bln shares, with an average of 44.69mln shares daily (64 trading days), and 18.5% of the total market trading value in 1Q14, when scored SAR86.55bln, with a daily average of SAR1.35bln. Page 14

15 Petrochemicals Index and Volume performance during the period (2012-1Q14) The Petrochemicals traded volume reach mln shares, which is the maximum trading volume in a day during the period Q4 on the closing of 21 st, march 2012, while reached 9.16mln trading shares (the minimumm trading volume) in 7 th of May As indicated in the graph above the Petrochemicals index maximum point during the period Q14 is 7, points in the closing of 30 March 2014, while reached the minimum point in 27 November 2012, when closed at 5,521.5 points. The Petrochemicals sector Beta and volatility for the period (2007-1Q14) Petrochemicals Sector Volatility 1.957% Beta The Petrochemicals sector beta offering the possibility of a higher than market rate of return, but higher than market risk. Page 15

16 2.3 Telecommunications and Information Technology Sector Four active companies constitutes the Telecoms sector with a total market capitalization of SAR218.43bln in 1Q14 (11.3% of the total market) increase by % (y-t-d) from SAR185.15bln (10.6% of the total market), the Telecommunication index closed at 3, point, increased by 27.80% (y-o-y) from 2, point in 1Q13. Telecommunications market capitalization by companies ( Q14) Telecoms Market Capitalization (mln SAR) 1Q Etihad Etisalat Co 133, , Telecom 2, , Mobile Telecommunications Company 11, , Etihad Atheeb Telecommunication Company Total 71, , , , % 19.8% 11.3% 7.9% 17.98% The reason behind the sector s market capitalization increase, is the increase of the market capitalization for all the traded stocks in the sector, as indicated in the table above, the market capitalization Etihad Etisalat rose by 24.8% in 1Q14, and telecom the heaviest in the sector increased by 19.8% in the same period. Value, Volume, Trade, and Index According to sectors (1Q13-1Q14) Volume Value Indices (Mln (MlnSAR) Shares) TASI Telecom. 17, , , , Q14 Trade (Thousand Deal) Volume Index (Mln Shares) 7, ,275 9, , , , Q13 Value (MlnSAR) 368, ,365.9 Trade (Thousand Deal) 9, ,70 Index 7, , The percentage of the Telecommunication sector traded volume around 12.2% of the total trading of the market in 1Q14, when scored 2.11bln shares, with a daily average of mln sharess (64 trading days), and scored 7.8% of the total trading value of the market in same period, when scored SAR36.31bln, with a daily average of SAR567.33mln. Page 16

17 Telecommunication Index and Volume performance during the period (2012-1Q14) The Telecommunication sector traded volume reach the maximum trading volume in a day 207.8mln shares, during the period Q14 in the closing of 11 April 2012, while reached 3.941mln trading shares (the minimum trading volume) in 15 July The Telecommunication index maximum point during the period Q14 is 3, points in the closing of the 26 March 2014, while reached the minimum point in the first trading day in 2012, when closed at 1, points. The Telecommunications sector Beta and volatility for the period (2007-1Q14) Telecommunications Sector Volatility 1.513% Beta The Telecommunication sector beta 0.841, offering the possibility of a lower than market rate of return, and lower than market risk. Page 17

18 2.4 Banks and Financial Services Eleven stocks constitutes the banks and financial services sector, with a total market capitalization of SAR bln in 1Q14 (21.9% of the total market) increase by 11.3% (y-t-d) from SAR380.04bln (21.7% of the total market), the Banks and financial services index increased by 32.30% (y-o-y), when retched 19, point in 1Q14, from 14, point in 1Q13. Banks and financial services market capitalization by companies (2013-1Q14) Banks & Fin. Ins. Market Capitalization (mln SAR) 1Q Alinma Bank 27, , Bank Al Bilad 17, , Riyad Bank 52, , Banque Fransi 36, , Arab National Bank 30, , Hollandi Bank 19, , Samba Financial Group 51, , Bank AlJazira 12, , The British Bank 46, , The Investment Bank 16, , Al Rajhi Bank Total 112, , , , % 22.9% 20.9% 15.2% 15.0% 14.5% 14.4% 9.3% 6.4% 4.9% 2.4% 11.3% The market capitalization for all the companies listed in the banks and financial services sector increased. Alinma Bank increased by 25..2%. Bank AL Bilad increased by 22.9%, and Riyad Bank increased by 20.9% as indicated in the table above. Value, Volume, Trade, and Index According to sectors (1Q13-1Q14) Volume Value Indices (Mln (MlnSAR) Shares) TASI Banks 17, , , , Q14 Trade (Thousand Deal) Volume Index (Mln Shares) 7, ,365 9, , , , Q13 Value (MlnSAR) 368, ,164.6 Trade (Thousand Deal) 9, ,502 Index 7, ,987.9 The percentage of the Banks and financial services sector traded volume around 14..9% of the total trading volume of the market in 1Q14, when scored 2.57bln shares, with a daily average of 40.17mln shares (64 trading days), and scored 13.6% of the total trading value of the market in same period, when accumulated SAR63.66bln traded value, with a daily average of SAR994.70mln. Page 18

19 Banks Index and Volume performancee during the period (2012-1Q14) The Banks and Financial institutions sector traded volume reach the maximum trading volume in a day mln shares during the period Q14 in the closing of 20 march 2012, while reached 7.37mln trading shares (the minimum trading volume) in 4 November As indicated in the graph above The banks and financial services sector Index maximumm point during the period (2012-1Q14) is 19, point in the closing of 31 March 2014, while reached the minimum point in 27 November 2012, when closed at 14,, point. Banking and financial services sector Beta and volatility for the period (2007-1Q14) Banks & Financial Services Volatility 1.499% Beta The Banking and Financial services sector beta 0.946, offering the possibility of a lower than market rate of return, and lower than market risk. Page 19

20 2.5 Retail The Retail sector included 12 companies (after excluding Marketing Company which listed during 2014) with a total market capitalization of SAR61.29bln in 1Q14 (3.2% of the total market) increased by 22.3% (y-t-d) from SAR50.09bln (2. 9% of the total market), the Retail index closed 14, points in 1Q14, increased by 80.52% (y-o-y), from 8, point in 1Q13. Retail Market Capitalization (mln SAR) 1 National Agriculture Marketing Co. 2 Abdullah Al Othaim Markets Company 3 Alkhaleej Training and Education Company 4 Fawaz Abdulaziz AlHokair Company 5 Jarir Marketing Co 6 Dallah Healthcare Holding Company 7 Aldrees Petroleum & Transport Services Co. 8 Automotive Services Co. 9 United Electronics Company 10 National Medical Care Company 11 Fitaihi Holding Group 12 Mouwasat Medical Services Company Total 1Q Growth 124.5% 3,999 1,823 18,585 17,460 4,000 1,604 1,247 3,458 2,713 1,015 4,438 61,286 2,807 1,338 14,595 14,310 3,292 1,350 1,060 2,963 2, ,600 50, % 36.2% 27.3% 22.0% 21.5% 18.8% 17.6% 16.7% 11.0% 10.5% -3.5% 22.3% All the companies listed in the Retail sector increased their market capitalization, except Mouwasat Medical Services Company retreated by 2.5%. National Agriculture Marketing Co scored the highest increase, when rose up by 124.5% y-t-d, followed by Abdullah Al Othaim Markets Company after increasing by 42.5% y-t-d. Value, Volume, Trade, and Index According to sectors (1Q13-1Q14) Volume Value Indices (Mln (MlnSAR) Shares) TASI Retail 17, , , Q14 Trade (Thousand Deal) Volume Index (Mln Shares) 7, ,472 9, , , Q13 Value (MlnSAR) 368, ,923.4 Trade (Thousand Deal) 9, ,242.1 Index 7, , The percentage of the Retail sector traded volume around 2.8% of the total trading volume of the market in 1Q14, when scored mln shares, with a daily average of 7.65mln shares (64 trading days), and scored 5.9% of the total trading market value in same period, when scored SAR27.40bln, with a daily average of SAR mln. Page 20

21 Retail Index and Volume performance during the period (2012-1Q14) source: Tadawul official web site, KFHR The Retail sector traded volume reach the maximum trading volume in a day about 77.24mln shares during the period Q14 in the closing of 13 march 2013, while reached 1.52mln trading shares (the minimum trading volume) in 9 December The Retail index maximum point during the period (2012-1Q14) is 14, points in the closing of 31 March 2014, while reached the minimum point in 17 January 2012, when closed at 6, points. The Retail sector Beta and volatility for the period (2007-1Q14) Retail Sector Volatility 1.565% Beta The Retail sector beta 0.830, offering the possibility of a lower than market rate of return, and lower than market risk. Page 21

22 3.0 Valuation 3.1 Summary and Results for Basic Industries (SABIC) Basic Industries (SABIC) and its subsidiaries engaged in the setting up of petrochemical, fertilizer, iron and steel, aluminum and other hydrocarbon based industries. The company s assets increased in a compounded annual rate CAGR around 2.6% during 2010 March 2014, and the share price has shown fluctuating during 2007 to March 2014, rangingg between SAR34.1 to SAR per share. The Average share price in the last 6 months of the period has been SAR Based on its historical performancee and its latest financials and some basic assumptions, KFH Research has estimated SABIC s fair price based on Relative Valuation approach by employing Petrochemicals sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weighted average price in the market, The estimated fair value per share of SABIC is SAR118.42, which is expected to be reached during the next 3-6 months. As this value is more than share price in 1Q14, amounting to SAR Introduction and Background Basic Industriess (SABIC) is shareholding company; was incorporated in 4th of January SABIC has a paid up capital of SAR30bln with the following shareholding structure at 1Q14, based on the disclosures to Tadawul of 5% or more ownership: Shareholder Public Investment Fund General Organization for Social Insurance 5% or Above Owners Public Stake (%) 70.0% 5.6% 75.6% 24.4% Following the relativee valuation method, we calculated the weighted average P/E and P/B multiples for 14 Petrochemicals companies in SABIC s field, which are listed on the Stock Exchange. The weighted average P/E multiple for the sector was calculated at times for the period Q14, the weighted average P/B multiple was calculated at 2.34 times. Hence, using the resultant P/E multiple and SABIC s net income for 1Q14 that equal to SAR25.77bln 1, the estimated value of the company reached SAR per share, using the resultant P/B multiple and SABIC s total equity for 1Q14 that equal to SAR162.48bln, the estimated value of the company reached SAR per share, without calculating any additional risks or benefits. The following table depicts the valuation summary using P/E multiples: P/E Multiples Valuation using P/E multiple Average Sector P/E multiple SABIC s Net Income as at 1Q14 (Annualized) SAR25.77bln Value of SABIC per share using P/E multiple SAR The following table depicts the valuation summary using P/B multiples: P/B Multiples Valuation using P/B multiple Average Sector P/B multiple 2.34 SABIC s Book Value as at 1Q14 SAR162.48bln Value of SABIC per share using P/B multiple SAR Annualized Page 22

23 We use also the weighted average price of SABICs stock in the market, which is calculated according the weighted average price of the company's share in terms of value and volume, it recorded SAR per share. The following table depicts the average price summary: 6 MONTHS VOLUM 6 MONTHS VALUE average price 593,788, ,263,021, source: Tadawul official web site, KFHR Conclusion For estimating the expected market value of SABIC s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The stock exchange, 30% for the weighted average price, the P/E multiple, 50%, and for P/B valuation 20%, we reached the value of SAR for SABIC s share, which we believe will be the fair market value of SABIC s shares in the short term. Compare to its trading price of SAR as on the end of 1Q14. Valuation Conclusion: Valuation using P/E multiple Average Sector P/E multiple SABIC s net income as at 1Q14 (Annualized) Value of SABIC per share using P/E multiple P/E Multiple share Value Valuation using P/B multiple Average Sector P/B multiple SABIC s Book Value as at 1Q14 Value of SABIC per share using P/B multiple P/B Multiple share Value average value SABIC s Fair Value per share SAR25.77bln SAR SAR162.48bln SAR SAR SAR Weight 50% 20% 30% Page 23

24 3.2 Summary and Results for Etihad Etisalat Co (EEC) Etihad Etisalat Co (EEC) is a holding company with interest in operation and management of GSM mobile telecommunications network; provides internet, information technology consulting and maintenance services for telecommunication equipment; The company s assets increased in a compounded annual rate CAGR around 12.0% during 2010 March 2014, and the share price has shown fluctuating trends years during 2007 to March 2014, ranging between SAR20.45 to SAR93.50 per share. the Average share price in the last 6 months of the period has been SAR Based on its historical performancee and its latest financials and some basic assumptions, KFH Research has estimated EEC s fair price based on Relative Valuation approach by employing Telecommunication sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weighted average price in the market, The estimated fair value per share of EEC is SAR82.09, which is expected to be reached during the next 3-6 months. As this value is less than the market value of the share price as of 1Q14, amounting to SAR Introduction and Background Etihad Etisalat (EEC) is shareholding company was incorporated as a joint stock company under the royal decree no. M/40 datedd 18 August The company started its constituent activities on 14 December EEC has SAR7.7bln capital in 1Q14, distributed over 770mln shares at a par value of SAR10 per share, based on the disclosures to Tadawul of 5% or more ownership: Shareholder General Organization for Social Insurance Emirates Telecommunications Corporation (Etisalat) 5% or Above Owners Public Stake (%) 11.8% 27.4% 39.2% 60.8% Valuation Following the relativee valuation method, we calculated the weighted average P/E and P/B multiples for 5 Telecommunication and Informationn Technology companies in EEC s field, which are listed on the Stock Exchange. The weighted average P/E multiple for the sector was calculated at times for the period March 2014, the weighted averagee P/B multiple was calculated at 2.16 times. Hence, using the resultant P/E multiple and EEC s net income in 1Q14 that equal to SAR5.59bln 2, the estimated value of the company reached SAR84.53 per share, using the resultant P/B multiple and EEC s total equity for 1Q14 that equal to SAR24.40bln, the estimated value of the company reached SAR68.52 per share, without calculating any additional risks or benefits. The following table depicts the valuation summary using P/E multiples: P/E Multiples Valuation using P/E multiple Average Sector P/E multiple EEC s Net Income as at March 2014 (Annualized) SAR5.59bln Value of EEC per share using P/E multiple SAR Annualized Page 24

25 The following table depicts the valuation summary using P/B multiples: P/B Multiples Valuation using P/B multiple Average Sector P/B multiple EEC s Book Value as at March 2014 Value of EEC per share using P/B multiple 2.16 SAR24.40bln SAR68.52 We use also the weighted average price of EECs stock in the market, whichh is calculated according the weighted average price of the company's share in terms of value where it record SAR87.09 per share. The following table depicts the average price summary: 6 MONTHS VOLUM 6 MONTHS VALUE averagee price 145,296,471 12,653,905, source: Tadawul official web site, KFHR Conclusion For estimating the expected market value of EEC s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The stock exchange, 30% for the weighted average price, the P/E multiple, 50%, and for P/B valuation 20%; and, we reached the value of SAR82.09 for EEC s share, which we believe will be the fair market value of EEC s sharess in the short term. Compare to its trading price of SAR92.75 as on the end of 1Q14. Valuation Conclusion: Valuation using P/E multiple Average Sector P/E multiple EEC s net income as at March 2014 (Annualized) Value of EEC share using P/E multiple P/E Multiple share Value Valuation using P/B multiple Average Sector P/B multiple EEC s Book Value as at March 2014 Value of EEC share using P/B multiple P/B Multiple share Value average value EEC s Fair Value SAR5.59bln SAR SAR24.40bln SAR SAR SAR82.09 Weight 50% 20% 30% Page 25

26 3.3 Summary and Results for Yanbu National Petrochemical Company (YANSAB) Yanbu National Petrochemical Company (YANSAB) Manufacture of petrochemicals including ethylene, butane, propylene, polypropylene, high and low density polyethylene, ethylene glycol, methyl tert-butyl and benzene. The company s assets slightly retreated in a compounded annual rate CAGR of 0.6% during 2010 March 2014, and the share price has shown fluctuating trends during 2007 to March 2014, ranging between SAR12.85 to SAR77.25 per share. the Average share price in the last 6 months of the period has been SAR Based on its historical performancee and its latest financials and some basic assumptions, KFH Research has estimated YANSAB s fair price based on Relative Valuation approach by employing Petrochemicals sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weighted average price in the market, The estimated fair value per share of YANSAB is SAR64.81, which is expected to be reached during the next 3-6 months. As this value is lower than market value of the share price as of March 2014, amounting to SAR Introduction and Background Yanbu National Petrochemical Company (YANSAB) is shareholding company; was incorporated in 11 February YANSAB is the first joint stock company to be formed by SABIC. YANSAB has a paid up capital of SAR5.63bln with the following shareholding structure at 1Q14, based on the disclosures to Tadawul of 5% or more ownership: Shareholder Basic Industries Corporation General Organization for Social Insurance - 5% or Above Owners Public Stake (%) 51.0% 11.5% 62.5% 37.5% Valuation Following the relativee valuation method, we calculated the weighted average P/E and P/B multiples for 14 Petrochemicals companies in YANSAB s field, which are listed on the Stock Exchange. the weighted average P/E multiple for the sector was calculated at times for the period Q14, the weighted average P/B multiple was calculated at 2.34 times. Hence, using the resultant P/E multiple and YANSAB s net income for 1Q14 that equal to SAR2.22bln 3, the estimated value of the company reached SAR55.74 per share, using the resultant P/B multiple and YANSAB s total equity for 1Q14 that equal to SAR14.47bln, the estimated value of the company reached SAR60.26 per share, without calculating any additional risks or benefits. The following table depicts the valuation summary using P/E multiples: P/E Multiples Valuation using P/E multiple Average Sector P/E multiple YANSAB s Net Income as at 1Q14 (Annualized) SAR2.22bln Value of YANSAB per share using P/E multiple SAR Annualized Page 26

27 The following table depicts the valuation summary using P/B multiples: P/B Multiples Valuation using P/B multiple Average Sector P/B multiple YANSAB s Book Value as at 1Q14 Value of YANSAB per share using P/B multiple 2.34 SAR14.47bln SAR60.26 We use also the weighted averagee price of YANSABs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR69.3 per share. The following table depicts the average price summary: 6 MONTHS VOLUM 63,866,004 6 MONTHS VALUE 4,428,923,466 average price 69.3 source: Tadawul official web site, KFHR Conclusion For estimating the expected market value of YANSAB s share, KFH Research adoptedd the weighted average market price for the last 6 months of trading for the stock in The stock exchange, 60% for the weighted average price, the P/E multiple, 20%, and for P/B valuation 20%, and we reached the value of SAR64.81 for YANSAB s share, we believe will be the fair market value of YANSAB s shares in the short term, which is lower than the trading price of SAR70.75 as at the end 1Q14. Valuation Conclusion: Valuation using P/E multiple Average Sector P/E multiple YANSAB s net income as at 1Q14 (Annualized) Value of YANSAB share using P/E multiple P/E Multiple share Value Valuation using P/B multiple Average Sector P/B multiple YANSAB s Book Value as at 1Q14 Value of YANSAB share using P/B multiple P/B Multiple share Value average value YANSAB s Fair Value SAR2.22bln SAR SAR14.47bln SAR SAR SAR64.81 Weight 20% 20% 60% Page 27

28 3.4 Summary and Results for Emaar The Economic City (EMAAR) Emaar The Economicc City (EMAAR) Develop property, reclaimed lands & other types of land in the special economicc zone or elsewhere for multiple use or other development operations, including infrastructure facilities. The company s assetss increased in a compounded annual rate CAGR around 16.4% during 2010 March 2014, and the share price has shown fluctuating trends during 2007 to March 2014, ranging between SAR5.65 to SAR28 per share. the Average share price in the last 6 months of the period has been SAR Based on its historical performancee and its latest financials and some basic assumptions, KFH Research has estimated EMAAR s fair price based on Relative Valuation approach by employing Real Estate Development sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weighted average price in the market, The estimated fair value per share of EMAAR is SAR20.22, which is expected to be reached during the next 3-6 months. As this value is higher to market value of the share price as of 1Q14, amounting to SAR17.2. Introduction and Background Emaar The Economic City (EMAAR) is shareholding company; was incorporated in 26 September EMAAR leads the master-planning and development of King Abdullah Economic City (KAEC), a project being built on a pristine location off the Red Sea in the north of Jeddah, EMAAR has a paid up capital of SAR8.500bln with the following shareholding structure at 1Q14, based on the disclosures to Tadawul of 5% or more ownership: Shareholder Modern Diem for real estate management Emaar Middle east MI Holdings MI Strategic Investment MI Partners MI Royal Capital 5% or Above Owners Public Valuation Stake (%) 17.6% 5.8% 5.8% 5.8% 5.4% 9.4% 49.8% 50.2% Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 8 Real Estate companies in EMAAR s field, which are listed on the Stock Exchange. the weighted average P/E multiple for the sector was calculated at times for the period Q14, the weighted average P/B multiple was calculated at 1.59 times. Hence, using the resultant P/E multiple and EMAAR s net income for 1Q14 that equal to SAR1. 09bln 4, the estimated value of the company reached SAR26.37 per share, using the resultant P/B multiple and EMAAR s book value attributed to the shareholders equity for 1Q14 that equal to SAR7.89bln, the estimated value of the company reached SAR14.78 per share, without calculating any additional riskss or benefits. The following table depicts the valuation summary using P/E multiples: P/E Multiples Valuation using P/E multiple Average Sector P/E multiple EMAAR s Net Income as at March 2014 (Annualized) SAR1.09bln Value of EMAAR share using P/E multiple SAR Annualized Page 28

29 The following table depicts the valuation summary using P/B multiples: P/B Multiples Valuation using P/B multiple Average Sector P/B multiple 1.59 EMAAR s Book Value as at March 2014 SAR7.89bln Value of EMAAR share using P/B multiple SAR14.78 We use also the weighted average price of EMAARs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR per share. The following table depicts the average price summary: 6 MONTHS VOLUM 6 MONTHS VALUE average price 1,181,487,385 16,067,039, Conclusion For estimating the expected market value of EMAAR s share, KFH Research adoptedd the weighted average market price for the last 6 months of trading for the stock in The Stock Exchange, 30% for the weighted average price, the P/E multiple, 50%, and for P/B valuation 20%; and, we reached the value of SAR20.22 for EMAAR s share, whichh we believe will be the fair market value of EMAAR s shares in the short term. Which is higher than trading price of SAR17.2 as on the end of 1Q14. Valuation Conclusion: Valuation using P/E multiple Average Sector P/E multiple EMAAR s net income as at March 2014 (Annualized) Value of EMAAR per share using P/E multiple P/E Multiple share Value Valuation using P/B multiple Average Sector P/B multiple YANSAB s Book Value as at March 2014 Value of YANSAB share using P/B multiple P/B Multiple share Value average value EMAAR s Fair Value SAR1.09bln SAR SAR7.89bln SAR SAR SAR20.22 Weight 50% 20% 30% Page 29

30 3.5 Summary and Results for The National Shipping (BAHRI) The National Shipping Co. of (BAHRI) purchase sand sell vessels and other floating means of transportation and utilize them to transport imported trade into Kingdom on regular basis so as to maintain stability of freight rates and secure the requirement of national security under all circumstances, Transport the Kingdom s export to the outside world, Carry persons, goods, commodities and livestock into and out of the Kingdom by sea. The company s assetss increased in a compounded annual rate CAGR around 6.7% during 2010 March 2014, and the share price has shown fluctuating trends years during 2007 to March 2014, ranging between SAR10.8 to SAR35.75 per share. the Average share price in the last 6 months of the period has been SAR Based on its historical performancee and its latest financials and some basic assumptions, KFH Research has estimated BAHRI s fair price based on Relative Valuation approach by employing Transportation sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weighted average price in the market, The estimated fair value per share of BAHRI is SAR35.56, which is expected to be reached during the next 3-6 months. As this value is more than the market value of the share price as of 1Q14, amounting to SAR33.8. Introduction and Background The National Shipping Co. of (BAHRI) is shareholding company Incorporated according to Royal Decree No. M/5 dated 23/12/1977 with authorized capital amount of SAR500mln, which was increased three times to become SAR3.150bln. based on the disclosures to Tadawul of 5% or more ownership: Shareholder The Public Investment Fund (PIF) 5% or Above Owners Public Stake (%) 28.1% 28.1% 71.9% Valuation Following the relativee valuation method, we calculated the weighted average P/E and P/B multiples for 4 Transportation companies in BAHRI s field, which are listed on the Stock Exchange. the weighted average P/E multiple for the sector was calculated at times for the period March 2014, the weighted average P/B multiple was calculated at 1.69 times. Hence, using the resultant P/E multiple and BAHRI s net income for 1Q14 that equal to SAR780.58mln 5, the estimated value of the company reached SAR40.39 per share, using the resultant P/B multiple and BAHRI s book value attributed to the shareholders equity for 1Q14 that equal to SAR5.73bln, the estimated value of the company reached SAR30.81 per share, without calculating any additional risks or benefits. The following table depicts the valuation summary using P/E multiples: P/E Multiples Valuation using P/E multiple Average Sector P/E multiple BAHRI s Net Income as at March 2014 (Annualized) SAR780.58mln Value of BAHRI share using P/E multiple SAR Annualized Page 30