SACC Stronger growth expected

9-Jul 9-Aug 9-Sep 9-Oct 9-Nov 9-Dec 9-Jan 9-Feb 9-Mar ` Saudi Airlines Catering Company SACC Stronger growth expected We re-iterate our BUY rating and raise our target price to SAR 101.4 per share on Saudi Airlines Catering Company (SACC, 6004, CATERING AB), implying an upside potential of 11%. We revised our growth forecasts mainly on further fleet expansion by Saudi Airlines, the impact of which was partially off-set by our reduced margin expectations. SACC reached the target price assigned in our initiation coverage last year (previous recommendation: BUY, TP: SAR 84.8, SFC report July 2012). The stock generated total returns of 35% since our initiation in July 2012. BUY with TP of SAR 101.4 per share: Our TP implies a P/E 13 of 14.9x a discount of 22% to global peers but broadly at par to the local peers (based on exchange categorization). EV/EBITDA 13 implies a multiple of 12.7x for SACC a premium of 28% to global comparatives and 13% to the local ones. Tax adjusting the global EV/EBITDA multiple (25-35% tax rate vs 8% for SACC), the like-for-like premium would be much lower. With a superior expected ROE of 46% and dividend yield of 5.5% this year, totally unleveraged balance sheet, current net cash per share of SAR12.5 and an average free cash flow yield of 9% - we continue to view SACC as a solid investment. Saudi Airlines fleet expansion increased by 71 planes: We see higher growth outlook on the back of the growing Saudi Airlines order book of planes, now implying a fleet size of 199 by 2017 compared to 128 in our old forecasts (2016). Saudi fleet forecast is now 55% higher in year five which inevitably is a strong positive for SACC, the exclusive supplier of Saudi Airlines. Apple to apple, 2016 fleet size is now 37% higher, up to 175 planes from 128. The largest fleet additions are due in 2015-17. Fleet expansion impact on forecasts partially off-set by margin cut: Compared to our old forecasts we raise revenue CAGR to 13.5% (Old: 8.1%), EBITDA to 13.2% (Old: 10.7%), EPS to 14.1% (Old: 11.1%). Based on 2012 results, where EBITDA margins were higher YoY but nevertheless 105bps lower than we anticipated, we cut our EBITDA margin expectations going forward thus partially off-setting the fleet expansion impact. While SACC is keen to stress their cost plus pricing agreements, the growing proportion of revenues from the lower margin (~7%) airline equipment business is a key factor behind the overall retreat. We note that this business is focused on Saudia and comes as a relationship based add-on rather than a strategic focus by SACC, consequently it is viewed in absolute terms and as an EPS bonus. The relationship is the strategy here, not the airline equipment business. EPS (as reported) seen at SAR 6.82/share in 2013, 15% YoY growth: We expect SACC to achieve an EPS (as reported) of SAR 6.82/share this year, slightly lower than we had anticipated in our old forecasts. However, with the bulk of new fleet expansion due in 2015-2017, our long-term EPS expectations are higher. Expecting dividend yield of 5.5%: SACC s 2012 dividend yield was 4.8%. Which compares favorably on the Tadawul (Average 3.5%) and to the few close listed peers available globally (Average 3%). Recommendation BUY Ticker Tadawul 6004 Closing price (20 March 13) SAR 91.3 Average volumes (6 months) 000 86.5 Market capitalization SAR mn 7,483 High SAR 93.5 Low SAR 59.3 Price chg. (3 months) % 14.8 EPS (as reported) (2012) SAR 5.9 Beta NA Shareholding (%) Saudia 35.7 SCCL 34.3 Public 30.0 Key Ratios (2013E) P/E 14.5 EV/EBITDA 11.3 RoE 46.0 Source: Company, analysis Stock price movement vs. TASI 1.6 1.5 TASI SACC 1.4 1.3 1.2 1.1 1.0 0.9 0.8 SAR mn 2011 2012 2013E 2014E 2015E 2016E 2017E Revenues 1,465 1,687 1,884 2,125 2,433 2,861 3,180 EBITDA 435 523 573 652 743 876 972 Margin (%) 29.7 31.0 30.4 30.7 30.5 30.6 30.6 Net income (as reported) 421 487 559 632 721 851 943 Margin (%) 28.7 28.9 29.7 29.8 29.7 29.7 29.6 Net income (after tax) 382 448 515 582 664 784 868 Margin (%) 26.1 26.6 27.3 27.4 27.3 27.4 27.3 FCF yield 1.1 9.8 6.5 8.0 9.1 10.4 11.6 Assets 1,424 1,557 1,708 1,879 2,080 2,327 2,558 Equity 981 1,062 1,164 1,279 1,411 1,566 1,737 RoE (%)* 42.4 43.9 46.0 49.2 54.0 59.6 62.0 RoA (%)* 29.0 30.1 31.7 33.7 36.7 40.4 42.1 EPS (as reported) (SAR) 5.1 5.9 6.8 7.7 8.8 10.4 11.5 EPS (after tax) (SAR) 4.7 5.5 6.3 7.1 8.1 9.6 10.6 BVPS (SAR) 12.0 13.0 14.2 15.6 17.2 19.1 21.2 Source: Company, analysis; *Returns are calculated on net income after Zakat. Source: Tadawul Equity Coverage Roy Cherry rcherry@fransicapital.com.sa +966-1-2826844 Refer to important terms of use, disclaimers and disclosures on back page

2012 2013E 2014E 2015E 2016E 2017E 2012 2013E 2014E 2015E 2016E 2017E 2012 2013E 2014E 2015E 2016E 2017E SAR bn Growth (%) Passengers (mn) Growth (%) SAR Payout(%) 2012 2013E 2014E 2015E 2016E 2017E 2012 2013E 2014E 2015E 2016E 2017E 2012 2013E 2014E 2015E 2016E 2017E SAR bn EBITDA Margin (%) SAR Net Margin (%) SAR ` Saudi Airlines Catering Company SACC - Key Forecast Revenue and EBITDA margin (2012 2017E) EPS* vs. Net Income Margin (2012 2017E) Price per meal (2012 2017E) 3.5 32.0% 14 29% 50 3.0 2.5 2.0 1.5 1.0 0.5 31.5% 31.0% 30.5% 30.0% 29.5% 12 10 8 6 4 2 28% 27% 26% 48 46 44 42 40 38 36 34 32 0.0 29.0% 0 25% 30 Revenues EBITDA Margin EPS Net income margin % Saudia Others Total Sources: Company reports, analysis Note: EPS as reported (before Zakat) SACC - Key Forecast Total Assets and YoY Growth (2012 2017E) Passenger Traffic and Growth (2012 2017E) DPS and Payout ratio* (2012 2017E) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 14% 12% 10% 8% 6% 4% 2% 0% 90 80 70 60 50 40 30 20 10 0 12% 10% 8% 6% 4% 2% 0% 9 8 7 6 5 4 3 2 1 0 75% 74% 73% 72% Total assets Growth % Passenger traffic Growth YoY DPS Payout ratio Sources: Company reports, analysis Note: Payout ratio on as reported EPS (before Zakat) Page 2

` Saudi Airlines Catering Company Financial Statements Income Statement Details (SAR mn) 2011 2012 2013E 2014E 2015E 2016E 2017E Revenues 1,465 1,687 1,884 2,125 2,433 2,861 3,180 Cost of sales (907) (1,059) (1,190) (1,342) (1,543) (1,816) (2,032) Gross profit 558 628 694 783 890 1,045 1,147 Gross margin (%) 38.1 37.2 36.8 36.9 36.6 36.5 36.1 General and administrative (140) (121) (137) (153) (171) (196) (207) EBITDA 435 523 573 652 743 876 972 EBITDA margin (%) 29.7 31.0 30.4 30.7 30.5 30.6 30.6 Operating profit 419 507 557 630 719 849 940 Operating margin (%) 28.6 30.0 29.6 29.7 29.5 29.7 29.6 Net income (as reported) 421 487 559 632 721 851 943 Net margin (%) 28.7 28.9 29.7 29.8 29.7 29.7 29.6 EPS (as reported) 5.1 5.9 6.8 7.7 8.8 10.4 11.5 Net income (after tax) 382 448 515 582 664 784 868 Net margin (%) 26.1 26.6 27.3 27.4 27.3 27.4 27.3 EPS (after tax) 4.7 5.5 6.3 7.1 8.1 9.6 10.6 Sources: Company reports, analysis Balance Sheet Details (SAR mn) 2011 2012 2013E 2014E 2015E 2016E 2017E ASSETS Cash & equivalents 655 1,022 1,101 1,237 1,389 1,551 1,725 Trade receivables 52 54 61 69 78 90 99 Due from related parties 512 256 251 251 257 284 304 Inventories 66 73 79 87 98 113 124 Total current assets 1,315 1,467 1,559 1,719 1,908 2,140 2,364 PPE 110 90 149 160 172 187 203 Total assets 1,424 1,557 1,708 1,879 2,080 2,327 2,568 LIABILITIES AND SHAREHOLDERS EQUITY Accounts payable - trade 116 152 167 185 208 240 263 Accrued expenses and other liabilities 233 237 260 286 320 367 400 Total current liabilities 349 389 427 471 528 607 663 Total liabilities 443 494 544 599 670 761 830 Total shareholders equity 981 1,062 1,164 1,279 1,411 1,566 1,737 Total liabilities and shareholders equity 1,424 1,557 1,708 1,879 2,080 2,327 2,568 Sources: Company reports, analysis Cash flow Statement Details (SAR mn) 2011 2012 2013E 2014E 2015E 2016E 2017E Cash flows from operating activities 214 786 611 685 779 901 993 Cash flows used in investing activities (59) (20) (75) (32) (36) (43) (48) Cash flows from financing activities (261) (399) (457) (517) (590) (696) (771) Net change in cash (106) 367 79 136 152 162 174 Cash at year end 655 1,022 1,101 1,237 1,389 1,551 1,725 Sources: Company reports, analysis Page 3

Valuation boosted by more Saudia expansion We see higher growth outlook on the back of the growing Saudi Airlines order book of planes, which is now 55% higher in year five compared to our old forecasts a strong positive for SACC, the exclusive supplier of Saudi Airlines. Although our revised forecasts are now higher, they have been significantly moderated by a cut in margin expectations on the back of 2012 s 105bps lower than expected EBITDA margin. Consequently, we see CAGRs during next five years for EBITDA at 13.2% (old: 10.7%) and EPS (as reported) at 14.1% (old: 11.1%). We do not expect a major spike in capex/sales, especially keeping in mind the existing spare capacity at SACC s existing facilities. As a result, we see the free cash flow yield averaging 9% over the next five years a very high yield by any standards. ROE is also expected to stay above the 45%-level, one of the highest rates on Tadawul and 2.2x peer market cap weighted average (2.8x based on median, see tables under P/E valuation). As a result, we reiterate our BUY recommendation on SACC with a higher TP of SAR 101.4, implying an upside to the last close of 11.1%. The stock is currently trading at a P/E 13 of 14.5x and EV/EBITDA 13 of 11.3x broadly in line with local peers. Valuation - Scenario Analysis Fair Value estimate for different scenarios 125 115 105 95 85 75 65 55 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 SAR 117.4 SAR 101.4 SAR 82.5 Fair Value Bull Case Base Case Bear Case We assume additional increase of: 1) 10% in Saudia meals; 2) SAR 1 price per meal; 3) 5% in non-airline revenues; and 4) GPM to expand by 2 percentage points. We assume: 1) 11.7% CAGR in total Saudia meals; 2) an average price per meal of SAR 39; 3) 20.4% CAGR in revenues from the non-airlines division; and 4) an average GPM of 36.6%. We assume decrease of: 1) 10% in Saudia meals; 2) SAR 1 in price per meal; 3) 20% in non-airline revenue; and 4) GPM to contract by 3 percentage points. Bull Case Base Case Bear Case Maintain BUY rating Overall, we find SACC shares attractive at current levels; upside potential of 11.1% Sources: Bloomberg; analysis We derived our target price by using the weighted Average approach and three valuation methods including; 1) Discounted Cash Flow (DCF); 2) P/E 13 based peer valuation; and 3) EV/EBITDA 13 based valuation. We assigned higher weight to the DCF approach, as we believe it is the method that best accounts for the primary leg of expansion (2015-2017). Valuation summary of SACC Fair Value Weights DCF Valuation SAR 104.3 50% EV/EBITDA SAR 84.0 25% P/E Multiple SAR 112.9 25% Weighted Average Fair Value SAR 101.4 Upside/(Downside) from current market price % 11.1% Sources: analysis Page 4

Discounted Cash Flow (DCF) Our DCF model is based on a five-year explicit forecast period until 2017E. We arrived at a WACC of 11.8% for SACC. In terms of terminal growth, we applied a 2.0% rate to estimate the terminal value. Our terminal growth rate assumption is on the conservative side, especially given Saudia s massive capacity expansion plans which extend into 2020 (230 planes vs 199 in 2017). Our DCF approach yields a fair value of SAR 104.3/share. SACC: Discounted cash flow valuation summary (SAR 000s) Details 2013E 2014E 2015E 2016E 2017E NOPAT 512,746 580,484 661,946 781,434 865,552 Depreciation & Amortization Exp. 16,256 21,066 24,142 27,716 31,794 Changes in Working Capital 20,180 12,803 11,708 (3,962) (1,686) Capex (75,000) (31,875) (36,495) (42,919) (47,698) Free Cash flow to Equity 474,183 582,478 661,302 762,268 847,962 Discount Factor 0.9 0.8 0.7 0.7 0.6 PV of Free Cash Flow 434,364 477,060 484,260 499,083 496,395 Total PV of FCF 2,391,162 Continuing value (CV) 8,785,920 PV of CV 5,143,254 Enterprise Value 7,534,416 Add: Cash 1,022,122 Less :- Debt 0 Equity Value 8,556,539 No. of shares 82,000 Fair value per share SAR 104.3 Upside/(Downside) % 14.4% Sources: analysis Price-Earnings (P/E) multiple approach We arrive at a P/E multiple of 18x for SACC. We used the market cap weighted P/E for Saudi Arabia and global peer universe. Our fair value estimate using P/E approach is SAR 112.9 per share, derived using 2013E post tax earnings forecast of SAR 515mn. Company MCap (USD mn) Price/Earnings (x) RoE (%) 2012 2013E 2014E 2012 2013E 2014E Herfy Food Services 916 19.2x 16.7x 14.7x 37.7% 36.5% 35.2% Savola 5,320 14.1x 12.8x 10.8x 16.9% 17.3% 18.1% Halwani Bros Co 373 17.5x 15.5x 13.0x 15.8% 16.0% 17.9% National Agricultural Development Company 396 14.1x 13.9x 11.8x 8.9% 9.7% 11.0% Almarai Co Ltd 6,932 18.4x 16.1x 13.4x 20.2% 19.9% 21.1% Al Jouf 279 10.2x 9.8x 9.5x 16.3% 15.8% 14.9% Gate Group 540 13.0x 10.4x 8.0x 12.2% 10.2% 14.6% SATS 2,644 19.8x 17.4x 16.0x 11.9% 13.1% 14.4% Auto Grill 3,063 21.5x 20.5x 17.1x 13.5% 13.3% 14.1% DO & CO AG 457 18.8x 15.3x 14.6x 14.1% 13.8% 13.4% Compass group 23,010 19.6x 18.0x 16.3x 24.8% 25.5% 25.6% SODEXO 14,762 22.3x 21.1x 18.4x 18.8% 16.3% 17.3% Catering International 281 20.5x 17.7x 15.3x 19.4% 21.3% 21.0% Median Multiple for KSA (Ex- SACC) 15.8x 14.7x 12.4x 16.6% 16.7% 18.0% Median Multiple for all peers (Ex- SACC) 18.8x 16.1x 14.6x 16.3% 16.0% 17.3% Mcap weighted average Multiple for KSA (Ex - SACC) 16.5x 14.7x 12.4x 19.6% 19.5% 20.4% Mcap weighted average Multiple for all peers (Ex - SACC) 19.6x 18.0x 15.8x 20.7% 20.3% 20.9% Sources: Bloomberg, analysis, as on 19 March 2013 Page 5

EV-to-EBITDA (EV/EBITDA) multiple approach We used EV/EBITDA multiples for SACC s market approach-based relative valuation. We selected a peer group of global companies in addition to the Saudi sector peers. Our comparative valuation is summarized in the following table. This valuation was based on market cap adjusted EV/EBITDA valuation. Company MCap (USD mn) EV/ EBITDA (x) RoE (%) 2012 2013E 2014E 2012 2013E 2014E Herfy Food Services 916 15.1x 13.1x 11.6x 37.7% 36.5% 35.2% Savola 5,320 11.2x 10.4x 9.3x 16.9% 17.3% 18.1% Halwani Bros Co 373 9.3x 8.2x 7.0x 15.8% 16.0% 17.9% National Agricultural Development Company 396 7.6x 7.4x 6.7x 8.9% 9.7% 11.0% Almarai Co Ltd 6,932 14.3x 12.3x 10.6x 20.2% 19.9% 21.1% Al Jouf 279 6.5x 6.0x 6.0x 16.3% 15.8% 14.9% Gate Group 540 4.4x 4.4x 3.9x 12.2% 10.2% 14.6% SATS 2,644 12.6x 11.5x 10.8x 11.9% 13.1% 14.4% Auto Grill 3,063 6.6x 6.5x 6.3x 13.5% 13.3% 14.1% DO & CO AG 457 4.4x 5.4x 4.9x 14.1% 13.8% 13.4% Compass group 23,010 11.2x 10.6x 9.9x 24.8% 25.5% 25.6% SODEXO 14,762 10.2x 9.7x 8.8x 18.8% 16.3% 17.3% Catering International 281 6.9x 6.2x 5.5x 19.4% 21.3% 21.0% Median Multiple for KSA (Ex- SACC) 10.3x 9.3x 8.1x 16.6% 16.7% 18.0% Median Multiple for all peers (Ex- SACC) 9.3x 8.2x 7.0x 16.3% 16.0% 17.3% Mcap weighted average Multiple for KSA (Ex - SACC) 12.7x 11.3x 9.9x 19.6% 19.5% 20.4% Mcap weighted average Multiple for all peers (Ex - SACC) 11.0x 10.2x 9.4x 20.7% 20.3% 20.9% Sources: Bloomberg, analysis, as on 19 March 2013 Key risks Upside Margin expansion: We have lowered our EBITDA going forward on account of lower than expected performance in 2012 and ongoing concerns over rising cost. However, if SACC manages to contain cost in coming years through improved operational efficiency, margins are set to expand. This could positively affect SACC s earnings estimates and therefore our valuation. Totally unleveraged: SACC is debt free. This provides significant potential for RoE expansion in the coming years. Moreover, unleveraged balance sheet and comfortable cash position also leave sufficient room for undertaking inorganic expansion. Both cases provide additional room for shareholders value creation. Downside Adverse changes in SACC s agreements with Saudia might hurt earnings: SACC generates majority of its revenues from Saudia under airline catering services and sky sales services agreements which are due for renewal on 29 January 2015. Any unfavorable changes in the terms and conditions (such as additional discounts to Saudia) would result in weaker than expected margins for SACC. However, we do not forsee any major changes in the forseeable future Weaker-than-expected growth in passengers: Any geopolitical event and weaker-than-expected growth in the global economy could have an adverse impact on the airlines industry, thus denting SACC s revenues and margins. Page 6

Revision in forecasts The rise in the number of religious visitors to Umrah and Hajj is being boosted by the government s continuous investment in visitor capacity at the religious sites and remains a key driver for air passenger growth in the Kingdom. Note that Saudi Arabia maintains annual visitor/visa number caps for each country, due to the overwhelming demand and comparatively limited capacity. The rapidly expanding economy, increasing domestic spending and rising per capita income are also important factors behind the positive outlook for passenger growth. As per IATA s recently published data, air traffic in Saudi Arabia is expected to increase at a CAGR of 7% until 2016E. Saudia estimates the total number of air passengers to double by the end of 2020. To meet this demand Saudia is planning to increase its fleet size from 103 in 2012 to 199 in 2017, and 230 in 2020. Apple to apple, 2016 (year five in old forecasts) fleet size is now 37% higher, up to 175 planes from 128. The largest fleet additions are due in 2015-17, where the new Saudia planning suggests an average of 42% increase annually compared to figures provided in July 2012. Comparison of Saudia s fleet expansion plan (old versus new) 164 175 199 113 112 117 118 123 128 128 2013 E 2014 E 2015 E 2016 E 2017 E Fleet expansion (new) Fleet expansion (old) Source: Company, analysis Supported by Saudia s fleet expansion, our new expectations are significantly higher than our old forecasts. We raised our CAGRs on: revenues to 13.5% (old: 8.1%), EBITDA to 13.2% (old: 10.7%) and EPS (as reported) to 14.1% (old: 11.1%). Page 7

SAR mn % Saudi Airlines Catering Company Old Vs New forecasts SAR mn, unless specified 2013E 2014E 2015E Details Old Forecast New Forecast Old Forecast New Forecast Old Forecast New Forecast Revenues 1,873 1,884 2,037 2,125 2,174 2,433 EBITDA 619 573 683 652 737 743 EBITDA margin (%) 33.1 30.4 33.6 30.7 33.9 30.5 Net income (as reported) 588 559 648 632 698 721 Net margin (%) 31.4 29.7 31.8 29.8 32.1 29.7 EPS (as reported) (SAR) 7.2 6.8 7.5 7.7 8.5 8.8 Net income (after tax) 535 515 589 582 635 664 Net margin (%) 28.6 27.3 28.9 27.4 29.2 27.3 EPS (after tax) (SAR) 6.5 6.3 7.2 7.1 7.7 8.1 RoE (%)* 49.9 46.0 51.7 49.2 49.9 54.0 RoA (%)* 33.7 31.7 35.0 33.7 34.3 36.7 BVPS (SAR) 13.1 14.2 14.5 15.6 16.0 17.2 Sources: Company reports, analysis, * Returns are calculated on net income after Zakat. Top-line take off on growing fleet size With the top-line meeting our expectations last year coupled with the planned expansion at the Saudi flag carrier, we have made a significant upward revision to our expectations. Comparison of old versus new estimates for SACC s revenues and gross margins 5,000 39.7% 39.8% 39.9% 40.0% 40% 4,000 36.8% 36.9% 36.6% 36.5% 35% 3,000 2,000 1,884 1,873 2,125 2,037 2,433 2,174 2,861 2,307 30% 1,000 25% 0 2013 E 2014 E 2015 E 2016 E 20% New Revenue Old Revenue New GPM Old GPM Source: Company, analysis EBITDA CAGR raised; margins cut While cost of material increased from 39.5% in 2011 to 40.8% in 2012, G&A expenses to sales fell from 9.5% to 7.2%. All in all EBITDA margins increased by some 130bps YoY but were 105bps lower than we had anticipated. Consequently, we have moderated our margin expectations going forward especially amidst growing impact of the low margin airline equipment business (GPM of ~7%). Page 8

SAR mn % SAR mn % Saudi Airlines Catering Company Comparison of old versus new estimates for SACC s EBITDA & EBITDA margin 2,000 1,800 1,600 1,400 1,200 33.1% 33.6% 33.9% 34.0% 30.4% 30.7% 30.5% 30.6% 40% 35% 30% 25% 1,000 800 600 400 200 573 619 652 683 743 737 876 784 20% 15% 10% 5% 0 2013 E 2014 E 2015 E 2016 E New EBITDA Old EBITDA New Margin Old Margin 0% Source: Company, analysis Net income CAGR of 14% Reported net income increased 15.8% YoY to SAR 487mn (EPS: SAR 5.94) (SACC s reported net income is before Zakat), but missed our estimate by 4.3%. However, if we adjust for one-time expenses, SACC s profits grew 21.2% YoY and were therefore in line with our estimate of SAR 510mn for 2012. Reported net profit was knocked down by a SAR 22.8mn write-off in 4Q 2012 on a building, the ownership of which was transferred to the General Authority of Civil Aviation. GACA recently changed the terms for SACC on its leased land plot, which was on a 20 year contract that expired in late 2012. The new contract includes a clause giving GACA the right to terminate the lease contract at any point in time without compensation 1. As a result, management believes that as the future benefit is doubtful, it has decided to write-off the carrying value of SAR 22.8mn. Our raised top-line and EBITDA expectation produce an EPS CAGR of 14.1% compared to our old forecasts. The major EPS impact is towards the end of the projection period, when most of the plane additions are expected to materialize. Comparison of old versus new estimates for SACC s net profit and net margin 2,000 1,800 1,600 1,400 1,200 29.7% 31.4% 31.8% 32.1% 32.2% 29.8% 29.7% 29.7% 40% 35% 30% 25% 1,000 800 600 400 200 559 588 632 648 721 698 851 743 20% 15% 10% 5% 0 2013 E 2014 E 2015 E 2016 E New Net Income Old Net Income New NPM Old NPM 0% Source: Company, analysis; Net income as reported (before Zakat) 1 From 2012 financials Page 9

Capex no spike in sight There are no major new capex plans ahead and, according to the management, most of the growth can be met with minimal tweaks and additions to existing capacity. This is more or less confirmed by our high-level analysis, system spare capacity is around 42%, meaning it can absorb up to 73% growth from current levels. In comparison, our total meal growth projection is 69% in 2017 compared to estimated 2012 meals. Note that SACC has also developed a freeze & store capacity, which means it can pre-cook and store meals during off-peak season. Capacity details of SACC s catering units at key airports Details Jeddah Riyadh Dammam Madinah Cairo Total Design capacity (meal per day) 45,000 40,000 18,000 12,000 9,000 124,000 Average flights handled per day 171 153 54 35 11 424 Average number of daily flight meals produced* 32,538 26,398 6,609 3,443 2,552 71,540 Spare capacity (%) 27.7 34.0 63.3 71.3 71.6 42.3 Implied capacity for growth (capacity/used) (%) 73.3 Projected growth in meals (2017/12) (%) 69.0 Source: Company prospectus; * The total no. of daily flight meals produced exceeds 70,000 meals; As on 31 December 2011 Attractive dividends ahead Implied yield of 5.5% in 2013 The management aims to maintain a payout ratio of 60-80%, implying potential payout of SAR 5-8.5 per share during 2013-2017 based on our EPS expectations which converts into a yield range of 5.5%-9.3%. We expect them to pay around 74%, in line with 2012. Page 10

Financial Statements Income Statement Details (SAR 000s) 2011 2012 2013E 2014E 2015E 2016E 2017E Total revenue 1,465,271 1,687,393 1,883,660 2,124,977 2,432,968 2,861,291 3,179,847 Growth (%) 22.8% 15.2% 11.6% 12.8% 14.5% 17.6% 11.1% Cost of revenue (906,809) (1,059,393) (1,189,804) (1,341,645) (1,542,889) (1,816,254) (2,032,409) Gross profit 558,462 627,999 693,856 783,332 890,079 1,045,037 1,147,438 GPM (%) 38.1% 37.2% 36.8% 36.9% 36.6% 36.5% 36.1% S,G&A (139,824) (121,217) (136,968) (152,875) (171,148) (196,331) (207,372) As a % of revenues 9.5% 7.2% 7.3% 7.2% 7.0% 6.9% 6.5% Operating profit 418,638 506,782 556,888 630,456 718,931 848,706 940,066 OPM (%) 28.6% 30.0% 29.6% 29.7% 29.5% 29.7% 29.6% EBITDA 434,739 522,641 573,144 651,522 743,074 876,422 971,859 EBITDA margin (%) 29.7% 31.0% 30.4% 30.7% 30.5% 30.6% 30.6% Other (expenses)/income 1,924 (19,731) 2,000 2,000 2,500 2,500 2,500 Net Income (as reported) 420,562 487,051 558,888 632,456 721,431 851,206 942,566 Source: Company reports, analysis Page 11

Balance Sheet Details (SAR 000s) 2011 2012 2013E 2014E 2015E 2016E 2017E ASSETS Cash & equivalents 655,053 1,022,122 1,101,011 1,237,017 1,389,060 1,550,648 1,724,711 Trade receivables 52,119 53,792 61,268 68,550 77,704 90,307 98,990 Due from related parties 511,816 256,147 251,346 250,975 257,175 284,311 304,419 Inventories 65,540 73,280 79,041 87,290 98,270 113,193 123,881 Total current assets 1,314,693 1,466,726 1,559,306 1,719,011 1,908,283 2,139,687 2,364,499 PPE 109,770 90,046 148,790 159,599 171,951 187,155 203,058 Total assets 1,424,463 1,556,772 1,708,096 1,878,610 2,080,234 2,326,841 2,567,557 LIABILITIES AND SHAREHOLDERS EQUITY Accounts payable - trade 115,582 151,631 167,037 184,679 208,153 240,057 263,058 Accrued expenses and other liabilities 233,253 237,320 260,015 285,846 320,268 367,060 399,608 Total current liabilities 348,835 388,952 427,052 470,525 528,421 607,117 662,666 Total liabilities 443,461 494,385 543,950 599,310 669,581 761,206 830,305 Total shareholders equity 981,002 1,062,388 1,164,146 1,279,300 1,410,653 1,565,636 1,737,252 Total liabilities and shareholders equity 1,424,463 1,556,772 1,708,096 1,878,610 2,080,234 2,326,841 2,567,557 Source: Company reports, analysis Cash Flow Statement Details (SAR 000s) 2011 2012 2013E 2014E 2015E 2016E 2017E Cash flows from operating activities 214,255 786,183 611,017 685,183 778,615 900,731 992,710 Cash flows used in investing activities (58,728) (20,197) (75,000) (31,875) (36,495) (42,919) (47,698) Cash flows from financing activities (261,298) (398,917) (457,129) (517,303) (590,078) (696,224) (770,949) Net change in cash (105,771) 367,070 78,888 136,006 152,043 161,588 174,063 Cash at year end 655,053 1,022,123 1,101,011 1,237,017 1,389,060 1,550,648 1,724,711 Source: Company reports, analysis Page 12

Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price. Page 13

Contacts RESEARCH & ADVISORY DEPARTMENT Roy Cherry Head of Research & Advisory rcherry@fransicapital.com.sa +966-1-2826844 SAUDI FRANSI CAPITAL Call centre 800-125-9999 Website www.sfc.sa SAUDI FRANSI CAPITAL LLC C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37) Page 14

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