Award Winner 2010 Excellence in Brokerage Business Awarded for Research Promotion and Website Content

Transcription

1 Award Winner 2010 Excellence in Brokerage Business Awarded for Research Promotion and Website Content By Muscat Securities Market 27 th June 2013

2 Content Oman s Oil Sector - Backbone of the economy 3 Oil Marketing Sector - An overview 6 Demand drivers 7 Industry Structure Porters Five Forces Model 11 Financial Performance 13 Valuations 18 Steady growth to continue 19 Page 2 of 21

3 In RO Millions Al Maha Research Oman s Oil Sector - Backbone of the economy The Oil and Gas sector plays a dominant role in Oman s economy, by being the backbone of Sultanate s steady economic advancement. The exploration and production of crude oil as well as its exports form a major share of Oman s gross domestic product (GDP) and its total revenues. As the Sultanate s GDP grew almost four-fold in the last 10 years, from RO 7,708 million in 2002 to RO 30,034 million as of 2012, the oil and gas GDP rose almost five-fold from RO 3,300 million to RO 15,678 million over the same period. Hence the sector s contribution also increased from 43% to 52% of the total GDP over the years. The high contribution of the sector to the Country s GDP and revenues is attributable to the increasing oil production coupled with favourable crude oil prices. 35,000 Contribution of Oil & Gas Sector to Oman's GDP 30,000 25,000 20,000 15,000 10,000 5, Oil & Gas Sector GDP Total GDP Source: Ministry of National Economy, Al Maha Financial Research Along with maintaining the steady pace of economic growth, Oman s fiscal position has also remained strong over the years, primarily due to the revenues generated from crude oil sales. Hydrocarbon revenues accounted for 75.8% of the total Government revenues in 2007, increasing to 85.4% of the total revenues as of The income from oil and gas sector is of immense significance to Oman, by being the major source for its increasing Government expenditure. The revenues from this sector will further support the diversification plans and development of other sectors that the nation aims for under its Vision 2020 plan. Page 3 of 21

4 Thousand bpd Al Maha Research Oil & non-oil revenues as a percentage of total government revenues 100% 80% 24.2% 21.4% 22.6% 19.2% 13.2% 14.6% 60% 40% 75.8% 78.6% 77.4% 80.8% 86.8% 85.4% 20% 0% Oil revenues Non oil revenues Source: Central Bank of Oman (CBO) report, Al Maha Financial Research Oil production, consumption and exports Oil production in Oman has been increasing at a healthy rate over the past two decades owing to the continuous exploration and excavation programmes undertaken by the Ministry of Oil and Gas to cater to the rising demand for petroleum products. Moreover, adoption of enhanced oil recovery techniques such as injection of steam and polymer and water dumping has also led to a rise in oil production in the recent years. The average daily production of crude oil grew from 750,960 barrels per day (bpd) in 2004 to 918,500 bpd at the end of Robust Government spending on infrastructure projects, rising vehicle sales, higher disposable income and increased thrust on tourism has resulted in higher intake of petroleum products. Consumption of petroleum products in the Sultanate has increased from 63,910 bpd in 2004 to 98,000 bpd in Exports too witnessed a rise from 720,220 bpd to 738,000 during the same period Oman's Oil Production, Consumption and Exports Production Consumption Exports Source: Index Mundi, Al Maha Financial Research Page 4 of 21

5 The Ministry of Oil and Gas aims to increase the oil production to 940,000 bpd this year backed by enhanced extraction of oil and development of several oil fields. The Government of Oman has already awarded several onshore and offshore oil and gas blocks for development so far this year to cater to the rising demand for fuel. Industry Supply Chain The supply chain of Oman s oil sector begins from the process of oil exploration to the final distribution of the refined fuel products in the domestic and export markets. Crude oil production and exploration forms the upstream sector of the industry s supply chain. Petroleum Development Oman (PDO) is involved in locating oil fields and developing them into productive assets by drilling wells and constructing and operating various hydrocarbon treatment and transport facilities. The crude oil that is hence produced from the oil fields operated by PDO is delivered to a storage facility at Mina al Fahal. The Oman Oil Refineries and Petroleum Industries Company (Orpic), which owns and operates the two oil refineries at Muscat and Sohar uses this Omani Crude as raw material for refining it into fuel products such as gas oil, fuel oil, LPG, aviation fuel, blended products, etc. The three oil marketing companies (OMC) procure the refined fuel products from Orpic to market and distribute the same to the end users. The processing of crude oil into refined fuel products and their marketing and distribution forms the downstream sector of the oil and gas industry. Orpic PDO Oman Crude Storage facility at Mina Al Fahal Muscat Refinery Sohar Refinery Refined Fuel Products OMCs Refined Fuel Products End Users Source: Orpic, Al Maha Financial Research Page 5 of 21

6 Petroleum Development Oman is the leading hydrocarbon exploration and production company in the Sultanate, accounting for more than 90% of the Country s crude production. Government of Oman and Royal Dutch Shell are the major shareholders owning 60% and 34% of the Company s share respectively. Oman Oil Refineries and Petroleum Industries Company, a government owned Company, is the single supply source of refined petroleum products in the Sultanate of Oman. The Company was established in 2011 as a result of the integration of three companies - Oman Refineries and Petrochemicals Company LLC, Aromatics Oman LLC and Oman Polypropylene. At present, Orpic s total crude refining capacity stands at 222,000 barrels per day. The Oil Marketing Companies (OMCs) are involved in marketing and distribution of refined petroleum products to the end users. Oil Marketing Sector - An Overview Oman s steady economic development supported by the growth in oil sector has had a favourable impact on the country s oil marketing sector. The sector has witnessed a healthy expansion in its retail, commercial and aviation segments backed by strong demand for fuel. The sector s business size in terms of revenues grew at a CAGR of 14% from RO 368 million to about RO 1 billion over 2005 to The Sultanate s oil marketing sector has an oligopoly market, comprising of three listed players namely, Shell Oman Marketing, Oman Oil Marketing Company and Al Maha Petroleum Products Marketing Company. Business Segments The Oil Marketing Companies operate in four major business segments retail, commercial, aviation and lubricants. Retail Commercial Business Segments Aviation Lubricants Source: Al Maha Financial Research Page 6 of 21

7 Retail OMCs supply automobile fuel to retail customers through their network of filling stations across Oman. These companies procure refined fuel from Orpic at a fixed price and sell it to end users after adding a margin. The retail division is the growth engine of the OMCs, contributing to more than 50% of the total revenues of the sector for FY2012. Commercial The commercial segment of the oil marketing companies caters to the fuel requirements arising from the infrastructure development projects. Contracts for fuel supply are awarded based on the bids received by the companies. Intense competition in this segment poses a challenge for OMCs to retain their existing contracts as well as to win new contracts. Aviation This division provides aviation fuel to the aircrafts at the Muscat International Airport, Salalah Airport and also to the Royal Air Force of Oman. OMCs procure jet fuel from Orpic based on the international fuel prices and supply the same to the airlines at a markup. Lubricants Lubricant market in Oman is an unorganized market comprising of around 30 players selling products under different brand names. The oil marketing companies of Oman are engaged in distribution of lubricants under various brand names. Shell Oman is the only OMC in the Sultanate having its own lubricant blending plant and distributes its products under names like Rimula, Helix and Advance. Oman Oil Marketing Company sells lubricants under the brand name BP Castrol in the Sultanate and also exports its lubricant products, Maximo and Optimo. Al Maha, in partnership with Total Oils, offers a range of oils under the brand name Total. Demand Drivers Oman s rapid industrialization, infrastructure development including roadways, airports and seaports and increasing vehicle fleet supported by favourable demographics have led to the growth of the oil marketing sector in the Country. The sector s steady growth is expected to continue with rising workforce, increased focus on tourism, huge spending on infrastructure and construction projects and rising air traffic. Rising automobile sales as a result of increasing workforce and higher purchasing power to drive volumes of the retail segment Increasing working population has been one of the major growth drivers of the retail segment. The total work force of Oman increased at a CAGR of 12% to reach RO 1.47 million over Rise in employees in government as well as private sector indicates higher purchasing power leading to increase in demand for automobiles. Also, the number of driving licenses issued and renewed each year increased from 75,000 in 2005 to 125,000 in 2011, resulting in corresponding demand for vehicles and thus increasing demand for fuel products. Page 7 of 21

8 Thousands Thousands Al Maha Research Working Population in Oman Private Sector Employees Government Employees Source: Ministry of National Economy, Al Maha Financial Research Note: Driving licenses issued includes new and renewed Driving licenses issued Thousands The 2013 budget reflects the Government's focus on job creation as it plans to add 56,000 jobs this year. Hence, employment generation together with increase in minimum wages announced by the Government will further increase demand for automobiles, in turn raising the demand for fuel. According to Frost and Sullivan International, a global growth consulting company, number of vehicles in Oman are expected record an average growth of 10.5 percent over the next five years to reach 1.4 million in 2017 from 0.85 million at the end of Thrust on tourism sector to support demand for fuel In line with the Vision 2020 plan that aims to make Oman a top tourism destination, the ministry of Tourism continues to develop niche markets like ecotourism, adventure tourism and the culture and heritage segment in order to boost foreign tourist arrivals. The increasing influx of tourists to Oman has also supported the volume growth in the retail segment through their demand for local transport. Tourist arrivals in 2011 stood at 1.4 million and are expected to climb to 12 million by 2020, further lifting the demand for rental cars and taxis and thus leading to increase in retail fuel consumption. New road projects to add new filling stations As the Government continues to focus on the infrastructure development and building of an efficient public transportation system, it has been heavily investing in expanding road network. The road length in the Sultanate has expanded from 15,943Kms in 2005 to 29,685Kms in The Government has spent approximately RO 2 billion on new road construction projects and improvements in the last 10 years, including the Muscat Expressway construction at the cost RO 150 million. Page 8 of 21

9 kilometers Al Maha Research Road Length in the Sultanate (End of the year) 35,000 30,000 25,000 20,000 15,000 10,000 5, Source: Ministry of National Economy, Al Maha Financial Research Further, the Ministry of Transport and Communications has signed road projects worth RO million approximately to be implemented in the region and wilayats of Dhofar Government. The Ministry of Regional Municipalities and Water Resources has floated 11 tenders for design and construction of internal roads in North and South Sharqiya. Moreover, the Tender Board of Oman has awarded contracts worth RO20 million for road projects in different parts of the Sultanate. Government continues to spend aggressively on infrastructural development projects through establishment of industrial zones and seaports leading to road network expansion, providing opportunities to OMCs to open new retail sites across the Sultanate. Commercial segment to benefit from robust government spending on infrastructural development The demand for fuel from the commercial business segment has been witnessing an increase over the past years. The rise in demand for fuel is attributable to continuous government spending on various projects related to infrastructural development including building of new roads, 1,061 kilometer railway line, dam sites, industrial zones and new power and water plants. This segment is expected to benefit further from new infrastructure contracts unveiled by the Government of Oman. The Tender Board of Oman has awarded contracts worth RO 882 million so far this year, leading to increased demand for diesel. Jet fuel consumption to rise owing to increasing traffic with expansion of the existing and construction of new airports Increased operations of commercial airlines in Oman has fuelled the demand for aviation oil. Airline companies like Oman Air have acquired new aircrafts and unveiled new routes and destinations which have led to increased number of visitors each year. As a result, the landing and takeoffs flights at the Muscat International Airport and Salalah Airport have been increasing, Page 9 of 21

10 boosting the demand for jet fuel. The combined landing flights surged from 26,397 in 2005 to 39,741 in 2012 and during the same period, the total takeoff of flights also grew from 26,384 to 39,740. Number of Flights (Muscat International Airport & Salalah Airport) 50,000 40,000 30,000 20,000 10, Landing Takeoffs Source: Ministry of National Economy, Al Maha Financial Research In 2011, Government announced expansion of Muscat International Airport and Salalah Airport and construction of four new airports at Duqm, Sohar, Ras Al Had and Adam. The expansion of Muscat International Airport is expected to be completed by the end of 2014, subsequent to which the capacity of the airport will increase to 12 million passengers per year from 5 million passengers currently. This will lead to further increase in landing and takeoff of flights, spurring the demand for jet fuel. Also, building of new airports together with continuous tourism development initiatives taken by the government will drive the demand for fuel in the aviation segment. Development of ports to drive the demand for marine fuel In addition to the airport expansion plans, Oman is also in the process of developing its ports at Salalah, Duqm, Sohar, Shinas and Khasab to enhance trade and also to support the increasing commercial and industrial activities. Development of Duqm Port has been completed and the commercial operations at the port have commenced this year. The Government expects the marine infrastructure work at other ports to be completed in Increased marine traffic as a result of opening up of ports will generate additional demand for marine fuel going forward. Page 10 of 21

11 Industry Structure Porters Five Forces Model Threat of New Entrants Entry Barriers Need of large retail distribution network Demanding infrastructure for fuel storage Lack of scope for product differentiation Bargaining Power of Suppliers Absent in case of retail and commercial segment Suppliers enjoy bargaining power in the aviation segment as the price of jet fuel is closely linked to international fuel prices. Industry Rivalry Competition amongst players Oligopoly market Bargaining Power of Buyers Present in case of commercial and aviation segment Zero switching costs in retail segment Threat of Substitutes No substitutes at present Renewable energy may pose a threat in the long term Page 11 of 21

12 Threat of New Entrants Threat of new entrants in the oil marketing sector is limited owing to presence of large entry barriers. The demanding infrastructure relating to the storage of fuel and setting up large network of retail stations acts as an entry barrier. A new entrant has to setup a large network of retail stations to achieve high sales as volumes are very critical in this kind of business. The existing three companies cater very well to the fuel requirements of the Oman s population, leaving less scope for the new player to tap the market demand. Hence, it will be difficult for a new company to setup a large distribution network and compete with the existing players who have a network of at least 140 filling stations each. Another entry barrier is absence of product differentiation. Orpic is the only supplier of fuel in Oman for OMCs and hence the product cannot be differentiated in terms of quality or price. Threat of Substitutes At present there are no perfect substitutes available for hydrocarbon related products. However, Oman has already identified sources of renewable energy available in the Country and also plans to invest heavily in the development of renewable energy over the coming years. Hence, use of renewable sources of energy may pose a threat in the long term. Bargaining Power of Suppliers Government regulations leave less scope for bargaining power for suppliers in the retail as well as commercial segment. However, bargaining power of suppliers is present in case of aviation segment as jet fuel prices are closely linked to international fuel prices. Bargaining Power of Buyers The contracts in the commercial and aviation segment are awarded based on competitive bidding and hence buyers enjoy bargaining power. In the retail segment, buyers do not have bargaining power in monetary terms however they can easily switch from one brand of fuel to another depending on the accessibility of the service station. Industry Rivalry Oil marketing sector of Oman is an oligopoly market limited with three players. These companies compete in retail, commercial and aviation business segments. However, price based competition is limited as OMCs have little scope to increase their selling prices. Page 12 of 21

13 RO MIllions Al Maha Research Financial Performance Steadily increasing revenues owing to consistent growth in the retail segment Oman s oil marketing sector has shown a steady financial performance over the years owing to its stable business model supported by favourable market dynamics. Combined revenues for the three companies have shown a CAGR growth of 15.7% from that of RO 6.38 billion in 2009 to RO 9.87 billion as of Although the revenues have been consistent for the sector, year-onyear growth witnessed a marginal impact of the economic slowdown in In terms of overall revenues for the year 2012, Shell Oman is the market leader with 40.9% market share, followed by Al Maha with 30.9% and Oman Oil with its market share of 28.2%. Revenue Growth ( ) CAGR of 15.7% Source: Company Financials, Al Maha Financial Research The retail segment is the major contributor to the sector revenues with more than half of the total revenues derived from this segment. While commercial and other business segments including aviation and lubricants contribute closely to the remaining portion of revenues. As the price for obtaining retail fuel is fixed by the Government, the steadiness in revenue growth is attributed to the consistent increase in the number of filling stations and sales volumes. In terms of the number of filling stations across the Sultanate, Al Maha Petroleum is the market leader with 176 of the total 471 filling stations as of December Page 13 of 21

14 Commerci al 20.7% Revenue Segments of OMCs (as of Dec. 2012) Others 24.4% Retail 54.9% No. of Filling Stations - OMCs ( ) Al Maha Oman Oil Shell Oman Source: Company Financials, Al Maha Financial Research Profitability under marginal pressure due to rising costs The oil marketing is characterized as a thin margin and high volume business. The last four years average gross margin for the sector stood at 9.8%, while the operating and net margins stood at 3.9% and 3.4% respectively. Cost of fuel is the only factor affecting the sector s gross margin while increases in the general and administrative expenses, depreciation as well as finance costs impact the operating and overall profitability. The sector witnessed a marginal pressure on its profitability due to higher increases in the above costs over the previous years. 12% 10% Profitability ( ) 10.80% 10.01% 9.16% 9.21% 8% 6% 4% 4.30% 4.10% 3.69% 3.60% 2% 0% 3.77% 3.61% 3.24% 3.18% Gross Margin Operating Margin Net Margin Source: Company Financials, Al Maha Financial Research Hence, though revenues demonstrated a higher growth from 2009 to 2012, net profit of the sector grew only from RO 24 million to RO 31 million, registering a CAGR of 9.2% over the same period. Page 14 of 21

15 RO Millions Al Maha Research Net Profit Growth ( ) CAGR 9.2% Operational performance of Shell Oman has over the years been better than that of its peers and the overall sector averages. However, the year 2012 saw the operating and net margin of Shell Oman slipping to the bottom of the sector due to a rise in direct, operating and finance costs. On the other hand, Al Maha Petroleum demonstrated an improvement in profitability last year due to savings in operating and finance costs while Oman Oil showed savings in direct fuel costs and higher other income for Consistent returns Source: Company Financials, Al Maha Financial Research On account of the steadily growing revenues and profitability of the sector, return on average equity and average assets has been stable over the years. Return on average equity (RoAE) averaged 30.6% for the last four years while return on average assets (RoAA) averaged 15.2% for the period. In terms of returns, Shell Oman continues to lead its peers with a RoAA of 19.6% and RoAE of 44.3% averaged over the four year period from 2009 to % 30% 25% 20% 15% 10% 5% 0% Returns ( ) RoAA RoAE Avg. RoAA Avg. RoAE Source: Company Financials, Al Maha Financial Research Page 15 of 21

16 Healthy operating cash flows and cash position Owing to the sector s stable business model, oil marketing companies have a healthy cash flow from operations that has led to their strong cash position. Also, the capital expenditure or development and upgradation requirement of OMCs is fairly consistent and hence is mostly financed by internal accruals. The limited continuous investment and a healthy cash position also enable the companies to maintain constant dividend distribution to the investors. Low leverage and strong solvency position As capital expenditure as well as dividend payments are funded internally supported by healthy cash flows, the oil marketing sector is relatively low leveraged. The average total debt to equity ratio of the sector stood 0.09 over the last four years. Al Maha Petroleum has been a debt free company while Shell Oman Marketing has raised short term loans during the last two years. The current ratio of the sector too stays at a healthy average of 1.4 for the four year period. Hence the sector demonstrates financial strength with its nearly debt-free balance sheet and high solvency position Total Debt to Equity ( ) Sector Average Oman Oil Al Maha Shell Oman Source: Company Financials, Al Maha Financial Research Track record of consistent dividend payments The average dividend payout for the oil marketing sector during the last four years from 2009 to 2012 stayed high at 72.8%. This sector is hence one of the most defensive sectors for risk-averse investors in times of a market downturn due to its limited downside risk. Oil marketing companies are also attractive for long term dividend seeking investors. Shell Oman has the highest average dividend payout ratio of 90.8%, followed by Al Maha Petroleum at 67.7% and Page 16 of 21

17 Oman Oil Marketing at 45.3% for the four year period. However, in terms of dividend yield, Al Maha leads the sector with an average yield of 6% compared to that of 5.1% for the sector. 100% 90% 80% 70% 60% 50% 40% 30% 20% Average Dividend Payout ( ) % 7% 6% 5% 4% 3% 2% 1% 0% Dividend Yield ( ) Sector Oman Oil Al Maha Shell Oman Sector Oman Oil Al Maha Shell Oman Source: Company Financials, Al Maha Financial Research Financial Highlights - Q Oil marketing companies continued to demonstrate steady revenue growth during the first quarter of the year. However, pressures on profitability margins affected the year-on-year net profit growth. The sector s combined revenues for Q reached RO million, increasing almost 3% year-on-year from that recorded for the corresponding quarter in However, continuing pressure on profitability resulted in a year-on-year decline of 4.7% in operating profit and a decline of 3.5% in net profit for Q The combined operating profit for the sector stood at RO million and net profit reached RO million for the last quarter. Company Revenue Key Financials Gross Profit (in RO '000s) Al Maha Petroleum 74,201 6,089 2,715 2,380 Oman Oil Marketing 70,362 6,217 2,178 2,072 Shell Oman Marketing 103,003 9,811 3,456 3,020 Sector 247,566 22,117 8,349 7,472 Source: Company Financials, Al Maha Financial Research Operating Profit Net profit Page 17 of 21

18 Profitability was impacted by the higher direct fuel costs and accelerated depreciation, employee and other operating costs as a result of the expanding retail network. Intense competition in the commercial segment also added to the pressure as the companies face challenges to retain the existing contracts and acquire new contracts. Thus, gross margin for Q1 2013, declined marginally from 9% for Q to 8.9% while operating margin slipped from 3.6% to 3.4% during the year. Net profit margin too declined from 3.2% for Q to 3% for the last quarter. Returns witnessed a marginal drop as well due to the same in overall profits, however, remained healthy at an annualized RoAA of 12.4% and RoAE of 28.9% for the quarter. Shell Oman Marketing continues to stay ahead of its peers in terms of returns. Although the companies increased their borrowing during the year 2013, their leverage remains low at a total debt to equity ratio of 0.46 as of the end of March Company Gross Margin Profitability Operating Margin Annualised Returns Net Margin RoAA RoAE Total Debt to Equity Solvency Current Ratio Al Maha Petroleum 8.2% 3.7% 3.2% 12.0% 24.6% Oman Oil Marketing 8.8% 3.1% 2.9% 10.2% 21.9% Shell Oman Marketing 9.5% 3.4% 2.9% 14.9% 45.1% Sector 8.9% 3.4% 3.0% 12.4% 28.9% Source: Company Financials, Al Maha Financial Research Valuations Currently, the oil marketing sector trades at a trailing twelve months (TTM) enterprise value to EBITDA of 10.6 and PE (TTM) of The sector valuations are at a premium to the service sector PE of 11.3 due to its outlook for continuation of steady growth in future. All the three companies recently scaled their all-time high prices reflecting the positive market sentiment towards them. Company Price PE PBV EV/EBITDA 27-Jun-13 (TTM) Q1'13 (TTM) Al Maha Petroleum Oman Oil Marketing Shell Oman Marketing Sector EBITDA = Operating Profit Minus Depreciation and Amortization Source: Company Financials, Al Maha Financial Research Page 18 of 21

19 Steady growth to continue... Revenue growth to continue supported by the overall economic advancement As Oman s economic development gathers pace the oil marketing companies will benefit directly and continue the steady growth trend. The planned Government spending on infrastructure, tourism, transport systems, industrial zones and job creation will increase demand for fuel products across all business segments. The buoyant international oil prices coupled with high Government spending on infrastructure development is expected to have a knock on effect on the oil sector and hence the oil marketing business too is expected to grow in line with the country s overall economic growth. Volume growth to mitigate competitive and cost escalation pressure As the companies compete to tap the growing demand from the commercial segment, profitability margins on such contracts continue to witness a slight contraction. In the aviation segment too, competitive bidding as well as any volatility in the international prices for jet fuel will affect the companies margins. Also as companies roll out new retail filling stations to tap on the growing retail demand, higher depreciation, employee and other operating costs are expected to have a marginal impact on profitability. However, growth forecasted in the sales volumes across all segments will mitigate the impact on margins to an extent and thus enable companies to translate top line growth into steady bottom line growth. Profitability to be steady, dividends to remain high The oil marketing companies are expected to continue their track record of a high dividend payout as their balance sheet and cash position stay strong. The healthy and consistent financial performance will also help them to maintain profitability and hence consistent returns to equity holders as witnessed in the previous years. Limited downside risk and value creation in the long term Due to the stable business model and steady growth linked to a great extent to the overall economy, stocks of oil marketing companies face very limited downside risk. Hence these stocks are a safe bet during a market slowdown or downturn. Also, consistent returns in the form of dividends as well as capital appreciation have proved these companies to be wealth creators for investors over the years and we also expect the same to continue in the future. Page 19 of 21

20 PO Box 1065 PC 117, Al Wadi Al Kabir, Sultanate of Oman Tel: , Fax: Award Winner 2010 Excellence in Brokerage Business Awarded for Research Promotion and Website Content By Muscat Securities Market Contacts Telephone Customer service & Operations: Zakia Al Ghammari Muna Al Hashmi Halima Al Mahrooqi Pravin Sivan Research: Suresh Kumar Radhika Gadhia Khushboo Badlani Portfolio Management: S.V. Uppiliappan Brokerage: Abdullah Al Hinai Mahmoud Al Hamsaidi Nasser Al Banna Page 20 of 21

21 DISCLAIMER: The research report has been prepared by for private circulation amongst selected clientele for information purposes only and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe any investment. This Report is not directed to, or intended to be used by, any person or entity who (or which) is a citizen of (or domiciled) in any jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the company to any registration or licensing requirements within such jurisdiction. will not be liable for any direct or indirect losses arising from the use thereof, and the investors are expected to use the information contained herein at their own risk. and its affiliates including analyst who has issued this report, may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to companies mentioned herein or inconsistent with any recommendation and related information and opinions. and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. The information contained in this report has been obtained from the sources believed to be reliable and in good faith, but which may not be verified independently. While utmost care has been taken in preparing the above report, Al Maha Financial Services LLC makes no guarantee, representation or warranty, whether expressed or implied, and accepts no responsibility or liability to its accuracy and completeness of the data, being provided. Opinion expressed is our current opinion as of the date appearing on this material only. We do not undertake to advise you as to any change of our views expressed in this document. The investments discussed in this report may not be suitable for all the investors. Investors must take their own decision based on their specific investment objectives and financial position, and using such independent advisors, as they believe necessary. Income from investments may fluctuate. The price or value of the investments, to which this report relates, either directly or indirectly, may fall against the interest of investors. This document is strictly for the use of recipients only. None of the material provided herein may be reproduced, rewritten, rehashed, published, resold or distributed in any manner whatsoever without the prior and explicit written permission of. Page 21 of 21