Inside This Issue. 52-Week Low. % below 52-Week High

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1 January 08, 2013 Rebased Performance of Regional Indices Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 S&P Pan Arab Large/Mid Composite S&P GCC Large/Mid Composite MSCI Jordan+Egypt+Morocco MENA Market Caps Saudi Arabia 40% UAE 14% Qatar 14% Kuwait 11% Egypt 6% Morocco 6% Jordan 3% Bahrain 2% Oman 2% Lebanon 1% Tunisia 1% Palestine 0% (%) Share of MENA Market Cap Market Cap. (USD billion) Summary of Performance of MENA Indices Inside This Issue In Focus 1: Egyptian Consumer Goods: Short-term risks ahead? We like the prospects of the Egyptian consumer goods sector in the long term. Attractive demographics (a young and growing population), low per-capita consumption, and other specific sub-sector factors (such as the automobile replacement rate, the switch to branded products for dairy, etc.) remain intact as long-term drivers for the growth of the consumer market in Egypt. However, in the backdrop of current political uncertainty and the challenging economic environment, we believe that near-term growth could be constrained. We feel that the current anemic economic situation may keep growth of household disposable income, the most vital ingredient for the development of the overall consumer market, at bay. By: Ashish Jain & Samir Murad In Focus 2: Performance of GCC Markets in 2012 The start of 2012 witnessed a rally in stock markets across the globe, reflecting a potentially improved investor confidence. However, in the second quarter of 2012, global issues began to resurface, generally pushing stock markets down, with the GCC countries being no exception. The trend slightly improved in the second half of the year, with markets ending FY2012 with positive growth, albeit not reaching the levels seen in the first quarter of the year. Although the S&P GCC Large- and Mid-Cap index underperformed the S&P BRIC and S&P World 100 indices, a closer look reveals that it may be relatively undervalued, reflecting the continued potential of the region. By: Sara Kanaan & Aarthi Chandrasekaran REGIONAL Index Level as of 31-Dec-12 % below 52-Week High % over 52-Week Low 1-Month Period S&P Pan Arab Large/Mid Composite % 8.6% 1.9% 7.1% 944 S&P GCC Large/Mid Composite % 4.1% 1.8% 2.4% 766 MSCI Jordan+Egypt+Morocco 1,118 1, % 25.6% 5.2% 25.6% 138 GCC MSCI Bahrain % 3.2% -2.7% -3.8% 16 MSCI Kuwait % 9.5% -3.0% 0.9% 100 MSCI Oman % 11.4% 3.1% -4.3% 20 MSCI Qatar 1,017 1, % 3.1% -0.8% -2.0% 126 S&P Saudi Arabia Large/Mid Composite % 9.1% 3.5% 8.0% 372 MSCI UAE % 33.5% 0.1% 27.4% 131 OTHER MENA INDEX 52-Week High 52-Week Low % Change MSCI Egypt 1,373 1, % 47.1% 8.2% 47.1% 58 MSCI Jordan % 8.9% 1.0% -0.6% 27 MSCI Morocco % 7.5% -3.6% -11.5% 52 MSCI Lebanon % 7.3% 7.2% 1.3% 10 MSCI Tunisia 1,220 1,341 1, % 2.9% 1.5% -3.8% 9 Palestine SE % 14.7% 0.0% 0.1% 3 YTD Market Cap (USD billions) nbkcapital.com

2 IN FOCUS 1 EGYPTian Consumer Goods: Short-term risks ahead? We like the prospects of the Egyptian consumer goods sector in the long term. Attractive demographics (a young and growing population), low per-capita consumption, and other specific sub-sector factors (such as the automobile replacement rate, the switch to branded products for dairy, etc.) remain intact as long-term drivers for the growth of the consumer market in Egypt. However, in the backdrop of current political uncertainty and the challenging economic environment, we believe that near-term growth could be constrained. We feel that the current anemic economic situation may keep growth of household disposable income, the most vital ingredient for the development of the overall consumer market, at bay. In our view, the key risks for the growth of consumer disposable income in the prevailing environment in Egypt include the following: 1. Higher unemployment: On the back of a low economic growth environment, the IMF expects employment prospects to worsen. Though real GDP growth is expected to pick up once the political storm settles down, the effect on the job market may have some lag. Until then, lower employment opportunities will limit the growth of disposable income for Egyptian consumers. Therefore, big-ticket purchases such as autos could experience a considerable slowdown in growth or even decline in volumes. Figure 1-1 Real GDP Growth and Unemployment Rate: Egypt 16% 12% The unemployment rate is expected to rise following the low economic growth environment 8% 4% 0% F 2013F 2014F Real GDP growth Unemployment rate Source: IMF Ashish Jain T E. ashish.jain@nbkcapital.com Samir Murad T E. samir.murad@nbkcapital.com 2. Currency depreciation may continue: The Egyptian Pound (EGP) has been depreciating at a steady pace against the US Dollar (USD) since the start of the revolution in early Thus far, the Central Bank of Egypt (CBE) has been able to contain a major depreciation of the EGP using foreign currency reserves. However, given the CBE s limited maneuverability and depleting foreign currency reserves, along with the fresh volatile political developments, the rate of EGP depreciation has sped up recently. Since the beginning of 2011, the EGP has depreciated 11% against the USD. Recently, the CBE has announced that it will nbkcapital.com 2

3 conduct regular foreign currency auctions, which may be an indication of a managed shift toward a more free-floating currency regime. This could also result in higher volatility in the currency market in the near-term. A successful breakthrough of the impending USD 4.8 billion deal with the IMF could help contain a precipitous fall in the value of the EGP against the USD. Nonetheless, a weaker EGP could push the cost of imported material up, which would result in higher overall consumer prices and higher inflation. The IMF expects a steep pick-up in inflation over the next three years. Moreover, rising raw material costs could adversely hit margins for producers of consumer goods if the companies face difficulty in passing on the cost increases to consumers. Figure 1-2 Egyptian Pound versus US Dollar Figure 1-3 Inflation in Egypt % % 11.7% 11.7% 11.1% 10.7% 12.1% % Jan-11 Apr-11 Jul-11 Nov-11 Feb-12 Jun-12 Sep-12 Dec F 2013F 2014F Source: Bloomberg & IMF 3. Potential tax hikes and/or subsidy reforms likely prerequisite for the IMF deal: The current Egyptian government started the reform process by increasing tax rates and introducing new taxes in early December The proposed tax increases included new sales/vat taxes and changing the structure of personal income taxes, among others. However, the taxes were quickly rolled back following widespread public criticism. As tax increases and subsidy reforms (especially on fuel) are likely to be essential components of the economic agreement with the IMF, we feel these reforms will have to be implemented eventually. However, these measures could result in lower disposable income and potentially dampen consumer spending in the short-term. On the other hand, new taxes levied on consumer goods would make them costlier for end-users. Anecdotal evidence suggests that such changes in the tax structure may result in a decline in volumes of cyclical/discretionary consumer goods. The potential impact on the consumer goods companies Overall, we believe such headwinds could further dent an already challenging environment for the Egyptian consumer sector, from multiple dimensions as we describe below. 1. Slower progression of per-capita consumption: Egypt has lower per-capita consumption (penetration rate) for many consumer products compared with global peers, which we see as one of the key drivers of growth of the Egyptian consumer market. However, with weak economic prospects along with a timid job market, disposable income could contract. Therefore, growth of per-capita consumption of consumer products may be impacted. 2. Shift in consumer preference toward low-priced/no-frills products: In times of economic uncertainty (when disposable income is possibly shrinking), consumers tend to shift to basic or no-frills products (which may be branded but not premium and not expensive). Therefore, we see more risks for premium products in the current environment. Generally, premium products tend to generate better margins for companies. nbkcapital.com 3

4 Below we discuss the impact of the weakness in macro factors on the consumer goods companies under our coverage in Egypt. GB Auto Risks for sales volumes We believe, in our Egyptian consumer goods coverage universe, that GB Auto will be the most impacted if disposable income is under pressure. With a very low car penetration rate compared to countries that have similar GDP per capita, cars are still considered a luxury item in Egypt. Therefore, persisting economic weakness combined with higher unemployment and probably higher taxation will bring down the level of disposable income, and adversely hamper the sales volume of passenger cars in Egypt. Though the passenger car market has shown a slight improvement in volumes in 2012 (the market was up 7% YoY during 11M2012), it still remains 28% lower than 2010 levels. We feel this is due to the factors we discussed above. In addition, tuk tuk volumes fell 32% YoY in 1H2012 due to an increase in the sales tax. Volumes recovered in 3Q2012 (+30% YoY) but at the expense of the gross profit margin (GPM), as the company lowered prices to offset the additional sales tax. We feel that the tuk tuk example highlights how quickly consumer demand can shift for large-ticket items. We feel that GB Auto s diversified operations, mainly its operations in Iraq, can offset some of the expected weakness in the Egyptian market. In addition, we believe the company s strong market positioning will allow GB Auto to outperform the market. Figure 1-4 Egyptian Passenger Car Volumes (in 000s) 200 Rolling 12 Months * 100 Dec-10 Mar-11 Jun-11 Sep-11 Jan-12 Apr-12 Jul-12 Oct-12 *For first 11 months of Sources: GB Auto and Egyptian Automotive Marketing Information Council Risks for margins A steep depreciation of the EGP against the USD would lead to a significant jump in procurement costs for GB Auto. In times of slackening consumer sentiment, the company may find it difficult to increase prices, which could result in a sharp deterioration of margins for GB Auto, in our opinion. Juhayna Risk for sales volumes Weakness in economic growth usually impacts consumer discretionary goods more than staples; however, by the same logic, we believe that within staples, the more-discretionary product categories such as premium or expensive branded products (premium juice, etc.), may take a stronger hit than the less-discretionary products in an economic downturn. Therefore, we feel if the economic challenges linger along with some erosion in disposable income, even manufacturers of consumer staples (such as Juhayna) may not come out unscathed. Nevertheless, we expect the overall impact on sales volumes for Juhayna to be less severe compared to cyclical consumer goods producers. nbkcapital.com 4

5 In 2011, following the revolution, Juhayna reported a considerable slowdown in juice sales and a slight decline in volumes for dairy sales. We note that yoghurt sales improved in 2011 due to increased capacity, as the company was operating with limited capacity in 2010, following a shutdown of one of the company s plants due to fire. In 2012, the company quickly reverted to its high growth trajectory across all major segments. Figure 1-5 Juhayna Sales Volumes Growth (YoY)* 33% 22% 26% 8% 3% M2012-1% Dairy Juice *Yoghurt excluded as the yoghurt sales volumes were affected by the availability of the production capacity in 2010 and 2011 following a fire in the yoghurt plant. Source: Juhayna Risks for margins Rising costs of imported material (raw milk, animal feed, powdered milk, etc.) could adversely hit margins for Juhayna if the company faces difficulty in passing on the cost increases to consumers. Oriental Weavers (OW) Risks for sales volumes In our opinion, OW s export sales will remain insulated from any worsening of the economic situation in Egypt. In fact, exports should benefit from a decline in the EGP. However, domestic sales (40% of total revenues) could be at risk, especially since the company sells most of its premium products (Grade A) in the domestic market. Typically, in Egyptian society, premium rugs and carpets are associated with social status. They are mostly either purchased during the construction of new household units or given as gifts to newly married couples. Both events could be deferred amid economic uncertainty and, hence, could result in lower sales volume. Following the aftermath of the 2011 revolution, OW s domestic sales volumes recorded a 4% decline in nbkcapital.com 5

6 Figure 1-6 Oriental Weavers Domestics Sales Volumes 45,070 45,852 43, sqm TTM (Sep 2012) Source: Oriental Weavers Risks for margins OW imports most of its raw material and sells the majority of its products in export markets. Therefore, the impact from a depreciating EGP could be somewhat balanced for OW. However, a major shift in the sales mix toward lower-grade products could be a negative for margins, in our view. Summary Below we summarize our key risks for the Egyptian consumer goods sector that could emerge from the current economic weakness. Figure 1-7 Potential Threats to the Growth of the Egyptian Consumer Market in the Current Economic Environment Current Challenging Economic Environment High Unemployment Currency Depreciation Tax Increases and Subsidy Reforms High inflation (Due to Expensive Imports) Resulting in Lower Consumer Disposable Income and Impacting the Market Through Source: NBK Capital Lower Penetration / Per-capita Consumption Growth Consumer Switch to Low Priced/Low Margin Products Slower Conversion to Branded/Packaged Products nbkcapital.com 6

7 Valuation From a valuation perspective, we maintain our current recommendations for the consumer goods companies under our coverage in Egypt. We believe the perceived near-term weakness in the economic fundamentals could keep any sustainable upside potential in check for these companies. However, we note the risks for OW may be overblown, and the stock continues to trade at a 2013F PE of 5.3x. Therefore, based on the stock s cheap valuation and deep discount, we maintain our Buy recommendation. Figure 1-8 Valuation Summary Company Current Recommendation Fair Value (EGP) Up/down-side potential* 2013F PE* GB Auto Hold % 10.6 Juhayna Hold % 13.6 Oriental Weavers Buy % 5.3 *Prices as of December 31, Source: NBK Capital nbkcapital.com 7

8 IN FOCUS 2 Performance of GCC Markets in 2012 The start of 2012 witnessed a rally in stock markets across the globe, reflecting a potentially improved investor confidence. However, in the second quarter of 2012, global issues began to resurface, generally pushing stock markets down, with the Gulf Cooperation Council (GCC) countries being no exception. The trend slightly improved in the second half of the year, with markets ending FY2012 with positive growth, albeit not reaching the levels seen in the first quarter of the year. Although the S&P GCC Large- and Mid-Cap index underperformed the S&P BRIC and S&P World 100 indices, a closer look reveals that it may be relatively undervalued, reflecting the continued potential of the region. Overall, the GCC markets exhibited lower P/E and P/B multiples than the G7 and BRIC countries while displaying higher dividend yields. GCC Markets Underperform in 2012 We compared the performance of the GCC markets to the BRIC nations (Brazil, Russia, India, and China) and the S&P global index, as measured by the S&P World 100. The latter includes 100 large-cap companies from the S&P Global 1200 whose businesses are global in nature, and who derive a substantial portion of their operating income from multiple countries. The GCC markets (as measured by the S&P GCC Large- and Mid-Cap Index) witnessed a 2% increase in 2012, under-performing both the BRIC markets (+10%, as measured by the S&P BRIC) and the global markets (+10%). Figure 2-1 Key Indices Performance in 2012 (rebased to 100) S&P GCC Large and Mid Cap S&P BRIC S&P World 100 Sara Kanaan T E. sara.kanaan@nbkcapital.com Sources: Bloomberg and NBK Capital Aarthi Chandrasekaran T E. aarthi.chandrasekaran@nbkcapital.com nbkcapital.com 8

9 UAE Markets Outperform their Peers in 2012 The United Arab Emirates (UAE) markets outperformed in 2012, with the DFM General Index (Dubai) and the ADSM Index (Abu Dhabi) increasing by 20% and 9%, respectively. Figure 2-2 Performance of GCC markets in FY % 20% 20% 15% 10% 9% 5% 0% 1% 2% 6% -5% -10% -7% -5% Bahrain Qatar Oman Kuwait KSA Abu Dhabi Dubai Sources: Bloomberg and NBK Capital For Abu Dhabi, most of the growth occurred in the second half of the year, as the market was up 7%, compared to around 2% in the first half of the year. The Tadawul Stock Exchange (Tadawul) showed a minimum growth (1%) in 2H2012 after having outperformed its peers in 1H2012 (+5%). Figure 2-3, below, depicts Tadawul s YTD performance during 2012 and clearly illustrates the sharp volatility witnessed during the year. Following a sharp rally in the first quarter of the year (+24%), Tadawul dropped in the second quarter from the high levels reached earlier and continued to exhibit moderate volatility until the end of the year. Figure 2-3 YTD Performance of Tadawul during % 24% 19% 14% 12% 9% 4% 6% 3% -1% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Sources: Tadawul and NBK Capital nbkcapital.com 9

10 The markets in Kuwait (as measured by the value-weighted index) and Oman showed modest growth of 3% and 1%, respectively, in 2012, while Bahrain ( 7%) and Qatar ( 5%) underperformed. The strong growth in Dubai was mostly driven by the real estate sector, which accounts for approximately a quarter of the total market capitalization. The real estate sector index soared 42% in 2012, largely driven by the outstanding performance of Emaar Properties (Emaar), whose share price surged 46%. We note that Emaar accounts for around 20% of the total DFM market index. Similarly, Arabtec s share price was up 48% in Moreover, the 10% increase in the Abu Dhabi market came mostly from the real estate sector, with the stock prices of Aldar Properties and Sorouh Real Estate Company increasing 38% and 47%, respectively, in As for the Qatar Exchange, the 5% decrease in 2012 stemmed mostly from a 9% decline in the banking sector index. The latter accounts for close to 37% of the index s market capitalization, with Qatar National Bank (QNB) representing 20% of the exchange s weight. QNB s stock price decreased 5% in 2012, following a 61% increase in 2010 and a 14% increase in 2011, while Doha Bank witnessed the largest drop (21%) in Trading Generally Increased in 2012 Trading increased in most GCC markets in Tadawul remains, by far, the most liquid market in the GCC, with an average daily liquidity of USD 2.1 billion in Tadawul witnessed a major pick-up (+76%) in trading in 2012, mostly driven by high trading activity in 1H2012. The markets in Dubai, Abu Dhabi, and Kuwait showed a pick-up in average daily liquidity in 2012, which increased by 107%, 22%, and 18%, respectively. However, the Qatar Exchange lagged behind, as its liquidity declined 15% in On the other hand, the stock markets in Oman and Bahrain continue to suffer from extremely low trading activity. Figure 2-4 Average Daily Liquidity (USD millions) Saudi Arabia 2,088 1, ,182 2,075 Kuwait Dubai Abu Dhabi Qatar Oman Bahrain Sources: Respective stock markets, Bloomberg, and NBK Capital Valuations We examined several key metrics to determine where the GCC markets rank from a valuation standpoint relative to developed markets (the G7) and the BRIC markets (Brazil, Russia, India, and China). We narrowed our focus to the market cap-to-gdp ratio, the price-to-earnings (P/E) multiple, the price-to-book (P/B) multiple, and the dividend yield. We note that country P/E, P/B, and dividend yield estimates, as well as market cap data, have been extracted from the main representative stock indices of the respective countries. Figure 2-5 displays a summary of our findings. nbkcapital.com 10

11 Figure 2-5 Valuation Summary Market Cap GDP USD Billion* GDP Growth** Market Capto-GDP USD Billion 2012F 2012F 2013F 2012 P/E TTM P/B TTM Div Yield GCC K.S.A % 4.2% 49% 14.1x 1.8x 3.6% Kuwait % 1.9% 53% 23.2x 1.3x 3.2% Dubai x 0.7x 3.9% Abu Dhabi x 1.0x 5.0% UAE % 2.6% 27% Qatar % 4.9% 66% 9.5x 1.6x 4.3% Bahrain % 2.8% 85% 11.9x 0.8x 4.6% Oman % 3.9% 29% 10.9x 1.5x 4.4% Total 718 1, % 3.5% Average 46% 12.9x 1.2x 4.1% G7 U.S.A 16,861 15, % 2.1% 108% 13.2x 2.6x 2.6% Japan 3,529 5, % 1.2% 59% 22.8x 1.0x 2.5% UK 3,378 2, % 1.1% 139% 15.2x 1.7x 3.9% France 1,649 2, % 0.4% 64% 12.5x 1.2x 3.9% Germany 1,540 3, % 0.9% 46% 14.9x 1.4x 3.4% Canada 2,023 1, % 2.0% 114% 14.1x 1.8x 3.0% Italy 483 1, % -0.7% 24% 21.5x 0.7x 3.9% Total 29,463 33, % 1.4% Average 87% 16.3x 1.5x 3.3% BRIC China 2,685 8, % 8.2% 33% 11.5x 1.6x 2.3% India 1,251 1, % 6.0% 64% 16.2x 2.7x 1.5% Brazil 1,164 2, % 4.0% 48% 20.6x 1.2x 4.2% Russia 771 2, % 3.8% 37% 5.8x 0.8x 4.0% Total 5,871 14, % 6.2% Average 40% 13.5x 1.6x 3.0% Sources: IMF, respective stock markets, Bloomberg, and NBK Capital. Note: KSA GDP forecast based on official press release; *Nominal GDP; **Real GDP growth Market Cap-to-GDP Ratios For the market cap-to-gdp metric, we used the total market capitalization as of December 2012 (as represented by the main stock index of the respective countries) and the nominal GDP for FY2012 as estimated by the International Monetary Fund (IMF) unless official estimates by the countries authorities were available. At the end of December 2012, the weighted average ratio for the GCC countries stood at 46%, compared with 87% and 40% for the G7 countries and the BRIC countries, respectively. A closer look at individual countries within the GCC reveals that the UAE and Oman have low ratios of 27% and 29%, respectively, indicating a potential for the expansion of their stock markets, whether it is via higher valuations or via increased listings. Price-to-Book Multiples We also looked at the GCC markets trailing price-to-book (P/B) multiples at the end of the last five years as another measure for assessing the GCC markets valuations relative to their histories. It is worth noting that GCC countries have been trading at clearly lower-than-historical levels, as illustrated in Figure 2-6 below. nbkcapital.com 11

12 Figure 2-6 GCC Historical Price-to-book Multiples Saudi Kuwait Dubai Abu Dhabi Qatar Bahrain Oman Sources: Bloomberg and NBK Capital Overall, the latest GCC s PB multiple of 1.2x seems to fall in line with BRIC countries average PB multiple of 1.6x and the 1.5x average PB multiple for the G7 countries. Looking at expected GDP growth rates according to the IMF, we note that GCC valuations seem appealing when taking into consideration the average 5.7% and 3.5% expected GDP growth for the GCC countries versus the 1.4% and 1.4%, respectively, for G7 countries for 2012 and Looking more closely at Saudi, the Central Department of Statistics and Information released in December new statistics revealing that Saudi Arabia s gross domestic product slowed to 6.8% in FY2012, compared to 7.1% in the previous year. In fact, rising oil prices have immensely benefitted GCC countries in funding vast capital spending. As a result, several regional countries have accumulated significant levels of wealth. Over the past five years alone, the budget surplus across the GCC was around USD billion, according to NBK Economic research estimates. Dividend Yields While the GCC displayed lower P/E and P/B multiples than G7 and BRIC countries, the GCC stands out in terms of dividend yields, with the average dividend yield reaching 4.1% at the end of December 2012, compared with 3.3% for G7 countries and 3.0% for BRIC countries. After a closer look at markets within the GCC, we note that Abu Dhabi, on average, offers the highest dividend yield (5.0%), while Qatar, Oman, and Bahrain also offer attractive dividend yields of 4.3%, 4.6%, and 4.4%, respectively. Looking more closely at Qatar, where banks make up around 37% of the Qatar Exchange s market capitalization, dividend yields have been consistently high in the past four years; in fact, it is the highest among GCC banking stocks. However, dividends per share for 2011 were cut for all banks, although we do not expect further cuts for 2012; we forecast that dividend payouts will come down beyond nbkcapital.com 12

13 Conclusion The GCC markets continue to display attractive valuations, supported by relatively high GDP growth prospects, continued government spending, and high oil prices. In general, the GCC markets remain undervalued compared to global markets and deliver higher dividend yields. Overall, GCC countries exhibit lower P/E and P/B multiples than G7 and BRIC countries, while displaying higher dividend yields. Going into 2013, high government spending especially in the KSA, Kuwait, Qatar, and Oman should support their stock markets. As for the UAE, ongoing deleveraging, more stability in banks asset quality indicators, and further improvement in Dubai s real estate sector should support the stock markets in Dubai and Abu Dhabi. nbkcapital.com 13

14 Companies under coverage (Prices as of DECEMBER 31, 2012) Sector Country Currency 12-Month Fair Value Recommendation TTM Latest Banking Abu Dhabi Commercial Bank UAE AED Dec Accumulate Abu Dhabi Islamic Bank UAE AED Dec Accumulate Arab National Bank Saudi Arabia SAR Oct Buy BankMuscat Oman OMR Dec Accumulate Banque Saudi Fransi Saudi Arabia SAR Oct Accumulate Commercial International Bank Egypt EGP Nov Hold Credit Agricole Egypt Egypt EGP Nov Hold Doha Bank Qatar QAR Dec Hold First Gulf Bank UAE AED Dec Buy National Bank of Abu Dhabi UAE AED Dec Hold National Bank of Oman Oman OMR Dec Hold National Societe Generale Bank Egypt EGP Nov Sell Qatar Islamic Bank Qatar QAR Dec Hold Qatar National Bank Qatar QAR Dec Buy Riyad Bank Saudi Arabia SAR Oct Buy Samba Financial Group Saudi Arabia SAR Oct Buy Saudi Hollandi Bank Saudi Arabia SAR Oct Accumulate The Commercial Bank of Qatar Qatar QAR Dec Accumulate The Saudi British Bank Saudi Arabia SAR Oct Accumulate Union National Bank UAE AED Dec Buy Sector Country Currency Closing Price Closing Price Date of Last Report Date of Last Report 12-Month Fair Value Recommendation PE PB EV/EBITDA TTM TTM Building Materials Lecico Egypt EGP Dec Buy nmf Oman Cement Co. Oman OMR Oct Buy Qatar National Cement Co. Qatar QAR Oct Hold Raysut Cement Co. Oman OMR Nov Reduce Yamama Cement Saudi Arabia SAR Jan Hold Contractors Arabtec UAE AED Dec Hold DEPA UAE USD Jan Hold nmf nmf 13.0 nmf nmf 5.6 Drake and Scull UAE AED Nov Hold Orascom Construction Egypt EGP Nov Buy Consumer Goods and Retail Abdullah Al Othaim Markets Saudi Arabia SAR Oct Accumulate Agthia UAE AED Nov Accumulate Alhokair* Saudi Arabia SAR Dec Buy Almarai Saudi Arabia SAR Oct Hold GB Auto Egypt EGP Nov Hold Juhayna Egypt EGP Jan Hold Oriental Weavers Egypt EGP Nov Buy Savola Saudi Arabia SAR Dec Hold Petrochemicals and Oil Saudi Arabian Fertilizer Co. Saudi Arabia SAR Dec Hold Saudi Basic Industries Corp. Saudi Arabia SAR Nov Buy Saudi Kayan Petrochemicals Saudi Arabia SAR Nov Accumulate na na Yanbu National Petrochemicals Saudi Arabia SAR Jan Accumulate Real Estate Emaar UAE AED Nov Hold Mabanee Kuwait KWD Jan Hold Palm Hills Developments Egypt EGP Oct-12 na na na na na na na na Salhia Real Estate Co. Kuwait KWD Aug Accumulate Sodic Egypt EGP Nov Hold nmf nmf Sorouh UAE AED Nov Suspended Talaat Mustafa Group Egypt EGP Nov Buy Telecommunications Batelco Bahrain BHD Suspended Suspended Suspended 8.5 na na 4.5 na na du UAE AED Dec Hold Etisalat UAE AED Jan Buy Jordan Telecom Jordan JOD 5.30 Suspended Suspended Suspended 12.6 na na 7.5 na na Mobily Saudi Arabia SAR Oct Buy Nawras Oman OMR Suspended Suspended Suspended 7.8 na na 3.4 na na Omantel Oman OMR Suspended Suspended Suspended 9.3 na na 4.7 na na Qatar Telecom Qatar QAR Suspended Suspended Suspended 11.0 na na 3.7 na na Saudi Telecom Saudi Arabia SAR Dec Buy Telecom Egypt Egypt EGP Nov Buy Vodafone Qatar* Qatar QAR Nov Hold nmf nmf nmf Transportation & Logistics Air Arabia UAE AED Nov Reduce Aramex UAE AED Nov Buy DP World UAE USD Nov Accumulate Jazeera Airways Kuwait KWD Dec Accumulate Others El Sewedy Electric Egypt EGP Dec Hold Maridive Egypt USD Nov Accumulate 38.9 nmf Qatar Electricity and Water Co. Qatar QAR Nov Buy *Fiscal year ends March. PE nbkcapital.com 14

15 RISK AND RECOMMENDATION GUIDE RECOMMENDATION UPSIDE (DOWNSIDE) POTENTIAL BUY MORE THAN 20% ACCUMULATE BETWEEN 5% AND 20% HOLD BETWEEN -10% AND 5% REDUCE BETWEEN -25% AND -10% SELL LESS THAN -25% RISK LEVEL LOW RISK HIGH RISK Disclaimer The information, opinions, tools, and materials contained in this report (the Content ) are not addressed to, or intended for publication, distribution to, or use by, any individual or legal entity who is a citizen or resident of or domiciled in any jurisdiction where such distribution, publication, availability, or use would constitute a breach of the laws or regulations of such jurisdiction or that would require Watani Investment Company KSCC ( NBK Capital ) or its parent company, its subsidiaries or its affiliates (together NBK Group ) to obtain licenses, approvals, or permissions from the regulatory bodies or authorities of such jurisdiction. The Content, unless expressly mentioned otherwise, is under copyright to NBK Capital. 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