Kuwait Financial Centre “Markaz” RESEARCH
GCC Corporate Earnings-Q2 11 Earnings decline 7% during Q2 2011 August 2011
Research Highlights: Provides a review of corporate earnings across the GCC up to Q2 2011.
Markaz Research is available on: Bloomberg - Type “MRKZ” <Go> Thomson Research, Reuters Knowledge Nooz Zawya Investor ISI Emerging markets
M.R. Raghu CFA, FRM Head of Research +965 2224 8280 rmandagolathur@markaz.com Layla Al-Ammar Assistant Manager +965 2224 8000 ext. 1205 lammar@markaz.com
As of first week of August 2011, we have 84% visibility in terms of market cap and 59% visibility in terms of number of companies to measure the performance of GCC corporate earnings. Saudi Arabia enjoys nearly 100% market capitalization visibility, followed by Oman with 77% visibility. Bahrain’s visibility at 49% is the lowest in GCC region. During 2Q11, GCC corporate earnings declined by 7% when compared to 2Q10. Total earnings, which came in at USD 12.8bn was less than the profits posted during the previous quarter (1Q11) by 7%. In 1H11, the GCC corporate earnings show an upswing of 5% compared to 1H10. Total earnings came at USD 26.5bn compared to USD 25.3bn in 1H10, mainly due to the improved performance in 1Q11. Corporate earnings declined due to weak performance by the Telecom sector in the region. Nevertheless, Banks and Commodity companies continued to perform strongly. The region’s continued dominance as a petrochemical hub, global recovery, and spikes in commodity prices supported the performance of companies across the region. Aggregate Net Profits from the Commodity sector were USD 3.4bn (+54% YoY, +4% QoQ). Amongst sectors, Banking continued to deliver the highest profits, at USD 5.0bn. Robust demand and access to low cost funds improved spreads in this quarter. Telecom sector registered 66% YoY decline in net income due to Zain’s one time profit from discontinued income reported in 2Q10. Excluding this one-time adjustment, the sector’s earnings fell by only 11% YoY. Real Estate sector recovered from the slump experienced last year and reported a profit of USD 386mn in 2Q11, up 127% YoY.
Figure: 1 – Earnings trend – GCC
Sanjay Chowdhary Analyst Schowdhary@markaz.com +965 2224 8000 Ext: 4605
Kuwait Financial Centre S.A.K. “Markaz” P.O. Box 23444, Safat 13095, Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 markaz.com
Source: Reuters Eikon, Markaz Research
RESEARCH August 2011 1H11 Earnings During 1H11, Saudi Arabian companies posted a total profit of USD 12.7bn an increase of 25% YoY. The increase was due to higher earnings reported during the 2Q11 by all the sectors across the board. Earnings of Kuwaiti companies during the 1H11 were down 33% YoY to 2.9bn. The decline in earnings was mainly due the decreased profits reported by the Telecommunication sector in Kuwait, however if we exclude extraordinary earnings in the sector, corporate earnings growth would be at 9%. UAE companies reported a profit of USD 5.2bn during the half year, an increase of 5% YoY. The surge in the Banking sector performance during the year supported the increased profits. Countries
1H10
2H10
YoY
Adj. YoY
Saudi Arabia
10,112
10,869
12,690
25%
25%
Kuwait
4,418
609
2,942
-33%
9%
UAE
4,966
144
5,198
5%
-2%
Qatar
4,322
4,570
4,333
0%
0%
Oman
982
869
822
-16%
-9%
Bahrain
472
341
510
5%
8%
25,393
17,083
26,586
5%
16%
Total
1H11
Note: Adjusted YoY refers to Net Income Adjusted for Extraordinary Items Source: Reuters Eikon, Markaz Research
Qatar earnings during the first half of the year was USD 4.3bn, almost flat compared to the previous year. The banking and the commodities sectors came up with good results during the year. However, the performance of the telecommunication sector was disappointing. Oman’s corporate earnings declined 16% YoY during the first half of the year to USD 0.8bn. The decrease in profit was mainly due the low profits reported by the Banking and the Telecommunication sectors. On a like-to-like basis, Bahrain’s corporate reported a profit of USD 510mn in 1H11, an increase of 5% YoY. The increase in profit was due to the improved results posted by the Banking sector in Bahrain. 2Q11 Earnings of Saudi Arabian companies totaled USD 6.9bn, an increase of 28% YoY and 20% QoQ. SABIC, which reported USD 2.2bn in 2Q profits, led the growth which was driven by higher volumes and prices. Al Rajhi Bank reported net income of USD 491mn, up 4% YoY. Saudi Telecom’s net profit increased 9% YoY to USD 602mn. The increase in net profit is mainly on account of higher sales and lower operating expenses in this quarter. Kuwait Corporate earnings fell by 73% YoY, due to decrease in profit reported by the Telecom sector. Telecom sector growth in 2Q10 was driven by one time gain of USD 2.75bn reported by Zain from discontinued operations. However, after adjusting for this one-time gain, corporate earnings increased by 57% YoY in 2Q11, as other sectors performed well in the Kuwait region. Banking sector was up 15% YoY, while Real Estate and Construction related companies posted positive earnings compared to last year. During 2Q11, UAE posted earnings of USD 2.4bn as against a profit of USD 2.1bn in 2Q10. Real Estate recovery and profits from Banks led earnings growth in UAE. Bank earnings at USD 1.5bn, were higher by 33% on YoY basis. Abu Dhabi Commercial Bank led the growth in 2Q11 with positive
Kuwait Financial Centre “Markaz”
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RESEARCH August 2011 earnings reported during the quarter compared to last year. Emirates NBD reported earnings growth of 87% YoY, due to higher other operating income. Table 1: Earnings Growth – Sectoral Trend (USD mn) Sector
2Q10
1Q11
2Q11
YoY
Banks
4,334
5,252
5,019
16%
-4%
Telecommunications
4,445
2,627
1,511
-66%
-42%
Commodities
2,238
3,315
3,442
54%
4%
Financial Services
(123)
273
522
N.M.
91%
Real Estate
170
549
386
127%
-30%
Construction Related
799
568
580
-27%
2%
7%
-17%
Conglomerates Others Total
QoQ
271
351
289
1,645
857
1,044
-37%
22%
13,778
13,792
12,794
-7%
-7%
Source: Reuters Eikon, Markaz Research
Qatar earnings declined in 2Q11, with corporate earnings coming at USD 1.9bn, down 12% over 2Q10. Though, on a like-to-like basis the profit for the quarter was up 18% YoY. Industries Qatar delivered a strong set of numbers with net income of USD 570mn. Higher volumes and improved demand proved beneficial for the company. Bank earnings grew 13% YoY to USD 944mn. Qatar National Bank grew its earnings by 26% YoY and 6% over the quarter. QNB’s net income of USD 497mn was driven by lower cost of funds and higher NIMs. Oman’s corporate earnings declined 10% YoY basis, though it was up by 35% on QoQ basis to USD 472mn as the Sultanate started to recover from the political turmoil that had its effect during the last quarter. Banking sector’s earnings were down at USD 94mn (-28% YoY, -38% QoQ), due to negative earnings posted by Bank Dhofar. Bank Muscat’s net income of USD 76mn was 30% higher on YoY basis and 6% on QoQ basis. On a like-to-like basis, Bahrain’s corporate reported a profit of USD 270mn in 2Q11, an increase of 28% YoY and 13% QoQ. On like-to-like basis, Banks reported an earnings growth of 63% on YoY basis. Ahli United Bank grew its earnings over the year by 20% to USD 84mn. Net income of Bahrain Telecom suffered, declining 5% YoY, though increasing by 22% on a QoQ basis.
Kuwait Financial Centre “Markaz”
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GCC Statistics â&#x20AC;&#x201C; 2Q11
GCC Market Cap Coverage at 84% Total market cap (USD Bn)
% Coverage in terms of market cap
Total Number of Companies
Coverage based on no. of companies
Saudi Arabia
341
99%
143
98%
Kuwait
103
72%
194
23%
U.A.E.
113
75%
110
54%
Qatar
121
66%
45
53%
Oman
17
77%
127
76%
Bahrain
21
49%
44
55%
716
84%
663
59%
Country
GCC Total
• • • •
Market Capitalization-based coverage stood at 84% for all GCC countries. Saudi Arabia topped with 99% coverage, followed by Oman at 77%, and UAE at 75%. Earnings visibility (by number of companies) for the GCC region stood at 59% for 2Q11. Saudi Arabia’s coverage stood at 98% and Oman at 76%. Kuwait’s coverage, was the lowest at 23%.
2 Source: Reuters Eikon, Markaz Research
GCC Corporate Earnings fell 7% YoY in 2Q11 GCC Corporate Earnings (USD Mn) YoY
QoQ
(%)
(%)
Bahrain
12
-18
Oman
-10
35
Qatar
-12
-21
UAE
11
-17
Kuwait
-73
-57
Saudi Arabia
28
20
GCC
-7
-7
16,000 13,778
14,000
13,792 12,794
12,000
11,429
11,615
10,000
5,654
8,000 6,000 4,000 2,000 0 Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
-2,000
Q2 2011
-4,000
• • •
GCC corporate earnings were down 7% on a YoY and QoQ basis in 2Q11. Kuwait, Qatar and Oman contributed to the earnings decline in GCC, due to slowing growth rates in all the sectors. Saudi Arabia, Bahrain and UAE saw their 2Q11 earnings escalate by 28%, 12% and 11% YoY, respectively. 3 Source: Reuters Eikon, Markaz Research
Telecom Affects GCC Earnings Sectoral earnings trend (USD Mn) 14,500
13,778 11,615
10,500 8,500
1,810
2,500
1,663
500
1,549
4,639
3,442 2,627
2,150
4,334
4,481
1,511
7
-17
Construction Related
-27
2
Real Estate
127
-30
Financial Services
NM
91
Commodities
54
4
Telecommunications
-66
-42
Banks
16
-4
2,087 5,252 3,887
5,019
(3,500) Q1 2010
22
2,586
(1,500)
Q4 2009
-37
Others
3,315
4,445 1,777
4,500
(%)
Conglomerates
5,654
2,176
2,199
6,500
(%)
11,429 2,238
4,673
QoQ
13,792 12,794
12,500
YoY
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
In 2Q11, the earnings decline was driven by Telecom companies. The Telecom sector registered a 66% YoY decline in net profit mainly due to decrease in profit reported by Zain. Zain had included USD 2.75bn in its reported net profit numbers in 2Q10 from discontinued operations. Excluding the one time gain from discontinued operations, the overall 2Q11 earnings increase by 16% YoY. Commodities, however, posted a steady set of numbers with earnings growing 54% YoY and 4% QoQ.
â&#x20AC;˘
â&#x20AC;˘
4 Source: Reuters Eikon, Markaz Research
Saudi Arabia â&#x20AC;&#x201C; 2Q11
Saudi Earnings Get a Commodities Boost Yet Again.. Quarterly Earnings Trend (USD Mn)
Earnings Growth â&#x20AC;&#x201C;YoY (%)
8,000 6,911
7,000
Q2 2011
6,000 5,000
5,410
5,609
28%
5,779 5,261
4,702 Q1 2011
23%
4,000 3,000
Q4 2010
33%
2,000 1,000 Q3 2010
19%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011 Q2 2010
24%
Corporate profits rose 28% YoY in 2Q11 to USD 6.9bn. Commodity companies saw their earnings grow by 56% YoY and 7% QoQ led by SABIC which registered a 62% earnings growth over 2Q10. Bank earnings grew 11% and Telecom earnings saw 24% growth over 2Q10.
6 Source: Reuters Eikon, Markaz Research
Q1 2010
69%
0%
20%
40%
60%
80%
Higher Petchem Prices Drive SABIC’s Earnings Quarterly Sectoral Earnings Trend (USD Mn) 8,000 6,911
7,000 6,000 5,000
5,410
5,609
5,261
Others
5,779
Conglomerates
4,702
4,695 3,941
Construction Related
4,000 3,000 2,000 1,000
2,857 1,217
1,497
637
1,836
1,831
1,778
2,152
Real Estate
2,660
Financial Services
477
609
1,025
759
501
753
1,543
1,580
1,339
1,488
1,668
1,749
Commodities
901 1,639
894
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011
Telecommunications Banks
-1,000
Commodities sector recorded earnings of USD 2.9bn in 2Q11, as against USD 1.8bn in 2Q10, led by SABIC’s strong performance. The company reported a net income of USD 2.2bn (2Q10: USD 1.3bn), as higher petrochemical prices boosted company’s performance. Bank earnings increased by 11% YoY to USD 1.7bn. Al Rajhi Bank reported a 4% YoY growth in its net income of USD 491mn. Telecom sector’s earnings grew 50% QoQ to USD 753mn, and was up 24% on a YoY basis. Saudi Telecom’s earnings were up 43% QoQ and 9% YoY to USD 602mn. 7 Source: Reuters Eikon, Markaz Research
Top companies – Sector – Growth Rate – 2Q11 Top Companies – Saudi Arabia – Banking Company Name
Top Companies – Saudi Arabia – Commodities
Market Cap (USD mn) 2Q10 2Q11 Growth
Al Rajhi Bank
29,000
474
491
Samba Financial Group
11,761
325
294 -10%
Riyad Bank
9,980
204
223
9%
Banque Saudi Fransi
8,351
202
206
2%
The Saudi British Bank
8,640
119
227
91%
Arab National Bank
6,801
168
186
11%
Alinma Bank
3,920
1
27
NM
The Saudi Investment Bank
2,677
6
55
Saudi Hollandi Bank
2,540
NA
NA
Bank Albilad
1,444
9
Bank Aljazira
1,380
6
Industry Total
4%
2Q11 Growth
Saudi Basic Industries Corporation
83,409
1,337
2,160
62%
Saudi Arabia Fertilizers Co.
11,618
242
211
-13%
Saudi Kayan Petrochemical Company
6,921
-0
-4
Yanbu National Petrochemicals Company
7,501
134
257
Saudi Arabian Mining Company (Ma'aden)
6,488
8
17 100%
Saudi Industrial Investment Group
2,622
8
39 422%
NM
Saudi International Petrochemichal Co.
2,073
23
44
NM
Sahara Petrochemical Company
1,833
27
56 107%
22 149%
Advanced Polypropylene Company
1,210
17
41 138%
17 205%
Saudi Chemical Company
744
23
20
-12%
1,24,419 1,819 2,841
56%
86,495 1,514 1,749 16%
Top Companies – Saudi Arabia – Conglomerates Company Name Kingdom Holding Company National Industrialization Company Industry Total
Market Cap (USD mn) 2Q10
Company Name
Market Cap (USD mn) 2Q10 2Q11 Growth 7,660 36 44 21% 6,348 103 158 54% 14,008 139 202 45%
Industry Total
NM 92%
89%
Top Companies – Saudi Arabia – Telecom
Company Name Saudi Telecom Company Etihad Etisalat Company Saudi Mobile Telecommunications Company Industry Total
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 8 Source: Reuters Eikon, Markaz Research
Market Cap (USD mn) 2Q10 2Q11 Growth 19,149 550 602 9% 10,221 240 310 29% 2,446 31,815
-168 622
-120 793
NM 28%
Kuwait – 2Q11
Kuwaiti Companies Register Negative Profits Quarterly Earnings Trend (USD Mn)
Earnings Growth â&#x20AC;&#x201C;YoY (%)
3,309
3,500 3,000
Q2 2011
2,500
-73%
2,062
2,000 1,500
1,109
Q1 2011
1,002
86%
880
1,000 500
Q4 2010
-500
Q1 2010
Q2 2010
Q3 2010
Q4 2010 -394
Q1 2011
N.M.
Q2 2011
-1,000
Q3 2010
Corporate profits fell by 73% YoY in 2Q11, due to the one time profit of USD 2.75 bn from discontinued operations reported by Zain in 2Q2010. Excluding this one time gain, the profit was up 57% YoY, supported by recovery in the banking and financial services. On a QoQ basis aggregate net profit was down 57%
10 Source: Reuters Eikon, Markaz Research
96%
Q2 2010
113%
Q1 2010
-200%
551%
0%
200%
400%
600%
Financial Services and Real Estate - Back to Profits Quarterly Sectoral Earnings Trend (USD Mn) 4,000
3,309
3,000 2,062
2,000 1,109 1,000
1,002
-394
Q3 2010
Q4 2010
512
880
-3,152
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q1 2011
Q2 2011
-1,000 -2,000
Others
Conglomerates
-3,000
Construction Related
Real Estate
Financial Services
Commodities
Telecommunications
Banks
-4,000
In 2Q11, Financial Services sector registered profits of USD 74mn, versus a loss of USD 334mn in 2Q10. Real Estate also recovered from a USD 50mn loss in 2Q10 to post a profit of USD 30mn in 2Q11. Banking sector earnings were at USD 496mn, a growth of 15% YoY but a decline of 13% QoQ. National Bank of Kuwaitâ&#x20AC;&#x2122;s earnings came in at USD 240mn, up 2% YoY.
11 Source: Reuters Eikon, Markaz Research
Top companies – Sector – Growth Rate – 2Q11 Top Companies – Kuwait – Financial Services
Top Companies – Kuwait – Banking Company Name National Bank of Kuwait
Market Cap (USD mn) 2Q10
2Q11 Growth
15,960
237
240
2%
Kuwait Finance House KSC
8,774
137
83
Gulf Bank KSC
4,599
5
Commercial Bank of Kuwait SAK
3,870
8
1
-91%
Boubyan Bank KSC
3,781
5
8
73%
Al Ahli Bank of Kuwait
3,537
38
44
18%
-39%
31 522%
Burgan Bank
2,670
-28
49
NM
Bank of Kuwait & the Middle East KSC
3,718
22
39
73%
Kuwait International Bank
1,122
NA
NA
NM
48,031
423
496
Industry Total
17%
Company Name Kuwait Projects Company Holding KSCC National Investments Company KSCC Boubyan Petrochemical Company KSC Aviation Lease & Finance Company KSCC Commercial Facilities Co SAK International Finance Company Securities House KSCC Kipco Asset Management Co KSCC Kuwait Financial Centre SAKC Global Investment House KSCC Industry Total
Top Companies – Kuwait – Telecom Market Cap (USD mn) 2Q10
Company Name Mobile Telecommunications Company KSC National Mobile Telecom Co KSS Industry Total
2Q11 Growth
15,641
2,894
256
3,732
NA
NA
19,374 2,894
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 12 Source: Reuters Eikon, Markaz Research
-91% NM
256 -91%
Market Cap (USD mn) 2Q10 2Q11 Growth 1,633 33 31 -5% 694 NA NA NM 1,031 12 5 -57% 986 10 13 35% 670 16 9 -44% 283 NA NA NM 322 NA NA NM 240 NA NA NM 214 NA NA NM 159 NA NA NM 6,233 71 58 -18%
United Arab Emirates â&#x20AC;&#x201C; 2Q11
Earnings continue with their positive trend in 2Q11… Like-to-Like Earnings Analysis Earnings Growth – YoY (%)
Quarterly Earnings Trend (USD Mn) 3,000 2,500 2,000
2,421
2,415 1,923
2,041
2,354
Q2 2011
22%
1,911 Q1 2011
1,500
0%
1,000 Q4 2010
72%
500 -
-9% Q3 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011
UAE corporate profits (like-to-like basis) were up 22% YoY to USD 2.4bn, against a profit of USD 1.9bn in 2Q10. Banking sector recorded a growth of 65% YoY, due to Abu Dhabi Commercial Bank which reported a profit of USD 363mn compared to a loss of USD 84mn in 2Q10. Financial Services were up 40% YoY basis.
14
-48% Q2 2010
-6% Q1 2010
-100%
-50%
0%
50%
100%
Banking and Real Estate Lead the Growth Like-to-Like Earnings Analysis 3,000 2,500
2,415
2,235
1,923
2,000 1,500
2,421 2,041
551 518
1,108
Others
1,911
569
635
547
2,354
490
Construction Related
800
Real Estate
1,000 500 -
1,250
1,506
1,332 481
935
Conglomerates
1,132
1,547
924
233 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011
Financial Services Commodities Telecommunications Banks
-500
In 2Q11, Banking profits grew 65% YoY to USD 1.5bn. Though, on QoQ basis, Bank profits were up by only 3%. Abu Dhabi Commercial Bank led the growth in 2Q11 with positive earnings of USD 363mn. Telecoms were a drag on earnings, declining 10% on YoY basis and 11% QoQ. Emirates Telecomâ&#x20AC;&#x2122;s (Etisalat) net profit this quarter was USD 434mn (2Q10:USD 510mn, 1Q11:USD 495mn). Construction sector also showed a slow down with earnings of USD 37mn, a 28% YoY decline.
15
Top companies – Sector – Growth Rate – 2Q11 Top Companies – United Arab Emirates – Banking Company Name National Bank of Abu Dhabi First Gulf Bank PJSC Emirates NBD PJSC Mashreqbank psc Abu Dhabi Commercial Bank PJSC Dubai Islamic Bank PJSC Union National Bank PJSC Commercial Bank of Dubai P.S.C. National Bank of Fujairah PSC United Arab Bank PJSC Industry Total
Top Companies – United Arab Emirates – Real Estate
Market Cap (USD mn) 2Q10 2Q11 Growth 8,830 272 279 2% 6,821 214 242 13% 6,492 108 203 87% 3,439 55 78 41% 4,616 -84 363 NM 2,068 NA NA NM 2,276 92 113 23% 1,586 70 71 2% 1,195 12 20 66% 1,221 21 20 -4% 38,544 760 1,389 83%
Top Companies – United Arab Emirates – Telecom Market Cap Company Name (USD mn) Emirates Telecommunications Corporation 22,065 Emirates Integrated Telecomm. Co. PJSC 3,933 Industry Total
25,998
2Q10 2Q11 Growth 510
434
-15%
37
56
51%
547 490
-10%
Company Name Emaar Properties PJSC Aldar Properties PJSC Sorouh Real Estate PJSC Deyaar Development PJSC Union Properties PJSC Ras Al Khaimah Properties PJSC Industry Total
Market Cap (USD mn) 4,677 981 872 441 356 191 7,517
2Q10 218 NA 8 NA NA NA 227
2Q11 Growth 68 -69% NA NM 30 258% NA NM NA NM NA NM 98 -57%
Top Companies – United Arab Emirates – Construction Related Market Cap Company Name (USD mn) 2Q10 2Q11 Growth Arkan Building Materials Company PJSC 586 NA NA NM Arabtec Holding PJSC 550 NA NA NM National Marine Dredging Company 649 50 29 -41% Drake & Scull International LLC 552 NA NA NM Gulf Cement Company P.S.C. 233 NA NA NM National Cement Company PSC 299 NA NA NM Union Cement Company P.S.C. 201 NA NA NM Fujairah Cement Industries PSC 107 NA NA NM Tamweel PJSC 231 1 8 413% Industry Total 3,407 51 37 -28%
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 16 Source: Reuters Eikon, Markaz Research
Qatar – 2Q11
Qatar â&#x20AC;&#x201C; Like-to-Like Earnings Quarterly Earnings Trend (USD Mn)
Earnings Growth â&#x20AC;&#x201C;YoY (%)
2,500
1,907
2,000
18%
Q1 2011
19%
1,767 1,615
1,500
Q2 2011
1,485
1,566
1,568
1,000 Q4 2010
51%
500 44%
Q3 2010
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
Q2 2011 Q2 2010
Total profits augmented 18% YoY to USD 1.9bn, due to positive performance across majority of the sectors. Net profit of Industries Qatar grew 46% over the year to USD 570mn. On a QoQ basis net profit increased by 8% due to consistent performance by all the sectors in the region. 18
33%
Q1 2010
10%
0%
20%
40%
60%
Commodities, Banks Drive Earnings in 2Q11 Like-to-Like Earnings Quarterly Sectoral Earnings Trend (USD Mn) 2,500 2,000 1,615 1,485
1,767 1,566
1,907
1,568
Others Conglomerates
1,500 1,088
1,036
1,000 329
334
391
570
889
944
418
311 521
706
753
833
730
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 -500
Construction Related Real Estate Financial Services
500 572
389
575
Commodities Telecommunicatio ns Banks
Banking sector profits grew 25% YoY to USD 944mn as all major Qatari banks saw earnings growth. Qatar National Bank was up 26% YoY and 6% QoQ to USD 497mn in 2Q11. Profit of Commodity companies grew 46% YoY but declined by 1% when compared on QoQ basis. Industries Qatar grew by 46% YoY.
19
Top companies – Sector – Growth Rate –2Q11 Top Companies – Qatar – Banking Company Name Qatar National Bank SAQ The Commercial Bank of Qatar Q.S.C.
Market Cap (USD mn) 2Q10
2Q11 Growth
24,793
395
497
26%
5,030
112
140
25%
Qatar Islamic Bank (S.A.Q.)
5,030
NA
NA
Masraf Al Rayan (Q.S.C.)
4,861
83
100
20%
Doha Bank (Q.S.C)
2,981
82
93
13%
Qatar International Islamic Bank QSC
1,996
36
45
24%
Al Khalij Commercial Bank QSC
1,701
15
36
141%
Ahli Bank Q.S.C.
1,353
30
33
13%
Industry Total
47,745
753
944
25%
Top Companies – Qatar – Commodities Market Cap Company Name (USD mn) 2Q10 2Q11 Growth Industries Qatar Q.S.C. 20,878 389 570 46% 389 570 46% Industry Total 20,878
NM
Top Companies – Qatar – Telecom Market Cap Company Name (USD mn) 2Q10 Qatar Telecom (QTel) Q.S.C. 7,575 NA Industry Total 7,575 NA
Top Companies – Qatar – Real Estate Operations Company Name
Market Cap (USD mn) 2Q10
2Q11
Growth
Ezdan Real Estate Company QSC
16,422
NA
NA
Barwa Real Estate Company QSC
3,196
NA
NA
NM
893
62
95
53%
95
53%
United Development Company P.S.C. Industry Total
20,511
62
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 20 Source: Reuters Eikon, Markaz Research
NM
2Q11 Growth NA NM NA NM
Oman – 2Q11
2Q11 Earnings Decline but at a slower rate Earnings Growth â&#x20AC;&#x201C;YoY (%)
Quarterly Earnings Trend (USD Mn) 600
Q2 2011
527 500
483
455 386
400
-10%
472 Q1 2011
350
-23%
300 Q4 2010
200
118%
100 Q3 2010
13%
Q2 2010
8%
Q1 2010
-49%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Omanâ&#x20AC;&#x2122;s corporate earnings declined 10% YoY to USD 472mn. However, earnings were up 35% on QoQ basis, as the markets started recovering during the quarter.
-100% -50%
Financial Services sector was up 845% YoY as Al Sharqiya Investment Holding reported a profit of USD 271mn during the quarter compared to a loss of USD 0.25mn in 2Q10. 22 Source: Reuters Eikon, Markaz Research
0%
50%
100% 150%
Financial Services Profit Supports Omanâ&#x20AC;&#x2122;s Earnings in 2Q11 Quarterly Sectoral Earnings Trend (USD Mn)
600 500 400
342
Others Conglomerates Construction Related Real Estate Financial Services 455 Commodities Telecommunications Banks
55
221
100 111 -
-8 Q3 2009
386
84
472
350
28
37 19
278
41 43
62 159
200 85
483
66 29
45
300
527
112
61 60
73
68
39 5 50 41
134
130
129
138
150
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
94 Q2 2011
-100
Bank earnings declined to USD 94mn, a fall of 28% over the year and 38% over the quarter, due to loss reported by Bank Dhofar during the current quarter. Though Bank Muscatâ&#x20AC;&#x2122;s earnings grew by 30% YoY to USD 76mn and 6% on QoQ basis. Constructed-related sectors also posted negative growth of 57% on YoY basis, as profits of Raysut Cement and Oman Cement declined 43% and 72% respectively. 23 Source: Reuters Eikon, Markaz Research
Top companies – Sector – Growth Rate – 2Q11 Top Companies – Oman – Banking Market Cap (USD mn) 2Q10 Company Name BankMuscat (SAOG) 2,928 59 Bank Dhofar 1,426 23 National Bank of Oman 898 21 Oman International Bank SAOG 644 9 Ahli Bank 543 9 Bank Sohar SAOG 369 8 Muscat Finance Company Limited 82 2 Industry Total 6,891 132
Top Companies – Oman – Telecom Market Cap Company Name (USD mn) 2Q10 Oman Telecommunications Company 2,081 NA Industry Total 2,081 NA
Top Companies – Oman – Construction Related 2Q11 Growth 76 30% -39 NM 24 16% 10 10% 12 29% 10 21% 2 12% 96 -27%
Market Cap (USD mn)
2Q10
2Q11
Raysut Cement Company SAOG
535
18
10
-43%
Oman Cement Company SAOG
455
29
8
-72%
Galfar Engineering & Contracting Co.
241
NA
NA
Company Name
Oman Cables Industry Industry Total
Growth
NM
207
6
5
-13%
1,439
53
24
-55%
Top Companies – Oman – Real Estate Operations Market Cap 2Q11 Growth Company Name (USD mn) 2Q10 2Q11 Growth NA NM Sahara Hospitality Company SAOG 36 1 1 -7% NA NM Industry Total 36 1 1 -7%
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 24 Source: Reuters Eikon, Markaz Research
Bahrain – 2Q11
Bahrain’s Corporate Earnings Recover in 2Q11 Like-to-Like Earnings Analysis Earnings Growth –YoY (%)
Quarterly Earnings Trend (USD Mn) 300
270
260
Q2 2011
239
250 212
28%
202
200 Q1 2011
-8%
139
150 100
48%
Q4 2010
50 Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q3 2010
-6%
Q2 2010
-12%
Q1 2010
-20%
Q2 2011
Bahrain’s corporate earnings were up by 28% YoY in 2Q11 and 13% on QoQ basis. Banking sector registered profit of USD 190mn up 63% YoY, and 16% on a QoQ basis. -40%
26 Source: Reuters Eikon, Markaz Research
-20%
0%
20%
40%
60%
Telecom continues to be a Drag on Profit Like-to-Like Analysis Quarterly Sectoral Earnings Trend (USD Mn) 300 270
260
239
250 214
212
200 150
202
56
65
Conglomerates
46 59
67
51
139
Construction Related Real Estate
94 100 156 50 -
105
117
123
55
Others
164
190
Financial Services Commodities
68
43 5 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011
Telecommunication s Banks
-50
Telecom sector, represented mainly by Bahrain Telecommunications, continue to drag Bahrainâ&#x20AC;&#x2122;s earnings. The companyâ&#x20AC;&#x2122;s net income was USD 56mn in 2Q11, a drop of 5% YoY. On a like-to-like basis, Financial services sector earnings were down 32% YoY and 42% QoQ.
27 Source: Reuters Eikon, Markaz Research
Top companies – Sector – Growth Rate – 2Q11 Top Companies – Bahrain – Banking Company Name Ahli United Bank B.S.C Arab Banking Corporation (B.S.C.) National Bank of Bahrain BSC Al Baraka Banking Group BSC United Gulf Bank B.S.C. BBK B.S.C. Ithmaar Bank B.S.C. Al Salam Bank BSC Bahrain Islamic Bank B.S.C. Khaleeji Commercial Bank B.S.C. The Bahraini Saudi Bank BSC Industry Total
Market Cap (USD mn) 2Q10 2Q11 Growth 3,614 70 84 20% 1,431 34 68 100% 1,339 27 28 4% 1,009 NA NA NM 840 NA NA NM 944 NA NA NM 215 NA NA NM 199 3 4 5% 257 -18 4 NM 138 NA NA NM 86 1 2 156% 10,069 117 190 63%
Top Companies – Bahrain – Financial Services Company Name
Market Cap (USD mn) 2Q10
TAIB Bank B.S.C.
307
NA
NA
NM
Gulf Finance House BSC
194
NA
NA
NM
Securities and Investment Co. BSC
229
NA
NA
NM
Esterad Investment Company BSC
55
-7
-8
NM
BMB Investment Bank BSC
44
NA
NA
NM
-8
NM
Industry Total
1,739
-7
2Q11 Growth
Top Companies – Bahrain – Telecom Company Name Bahrain Telecommunications Company Industry Total
Note: Companies that have not declared their 2Q11 results on the date of this report are marked as NA in the 2Q10 and 2Q11 columns. 28 Source: Reuters Eikon, Markaz Research
Market Cap (USD mn) 2Q10 2Q11 Growth 1,597 1,597
59 59
56 56
-5% -5%
Annual Results
Saudi Earnings (USD Mn) 25,000
GCC Earnings (USD Mn)
20,000 70,000
23,035 21,443
20,752
18,427 15,532
65,836
15,000
12,690
12,392
60,000 10,000
50,335 50,000
46,986 41,615
40,000
5,000
34,145 34,388 -
30,000
26,586
2005
2006
2007
2008
2009
2010
1H11
Kuwait Earnings (USD Mn)
20,000 20,000
16,430
10,000 15,000 11,477
2005
2006
2007
2008
2009
2010
1H11
9,473
10,000
5,341 5,000
2,942
2005 -5,000
29 Source: Reuters Eikon, Markaz Research
2006
2007
2008 2009 -1,900 -462
2010
1H11
Annual Results
Qatar Earnings (USD Mn)
UAE Earnings (USD Mn) 18,000
16,427
16,000
13,910
14,000 12,000
10,748
11,639 9,152
10,000 8,000 6,000
4,730
5,198
2010
1H11
4,000 2,000 2005
2006
2007
2008
2009
10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 -
1,645
1,000
4,725
4,333
3,773
2006
3,000
1,607
2007
2008
2009
2010
1H11
2,618
2,500
1,380 1,270
2,000
1,107
1,200
5,682
Bahrain Earnings (USD Mn)
1,600 1,400
8,113
7,487
2005
Oman Earnings (USD Mn) 1,800
9,434
1,947 1,617
1,500
945 822
800
987
1,000
695
600
2010
1H11
500
600
-
400
-500
200
2005
-1,000
2005
2006
2007
2008
2009
2010
1H11
30 Source: Reuters Eikon, Markaz Research
2006
2007
2008
2009 -647
RESEARCH August 2011
Markaz Research Offerings Sectors
Economics MENA Unrest (Apr-11) Kuwait Development Plan (Apr-11) MENA Unrest (Apr-11) Kuwait Investment Sector (Sept-10) The New Regulations on Kuwait Investment Sector (Jun-10) Kuwait Capital Market Law (Mar-10) The “Vicious Square” Monetary Policy options for Kuwait (Feb-08) A Gulf Emerging Portfolio: And Why Not? (Jun-07) To Leap or To Lag: Choices before GCC Regulators (Apr-07) GCC for Fundamentalists (Dec-06) GCC Leverage Risk (Nov-06)
Capital Markets
Infrastructure GCC Power (Jul-09) GCC Ports (Aug-09) GCC Water (Nov-09) GCC Airports (Nov-09) GCC Roads & Railways (Dec-09) GCC ICT (Feb-10) Abu Dhabi Jordan Qatar
Algeria KSA Syria
Real Estate Dubai Kuwait U.S.A.
Egypt Lebanon
Banking
Stress testing Kuwait Banks (May-11) GCC Banks - Done with Provisions? (Jan-10) Shelter in a Storm (Mar-09) Banking Sweet spots (Apr-08) Oil & Gas Diworsification: The GCC Oil Stranglehold (Jan-09) Periodic Research Monthly Regional Petroleum Projects Commentary Weekly Real Estate Market Commentary Daily Oil & Gas Bulletin
Strategic Research GCC Outlook 2H11 (Aug-11) What to expect in 2011 (Jan-11) The Golden Portfolio (Sept-10) Persistence in Performance (Jun-10) What to expect in 2010 (Jan-10) What is left for 2009? (Sept-09) Missing the Rally (Jun-09) This Too Shall Pass (Jan-09) Fishing in Troubled Waters (Dec-08) Down and Out: Saudi Stock Outlook (Oct-08) Mr. GCC Market-Manic Depressive (Sept-08) Global Investment Themes (June-08) To Yield or Not To Yield (May-08) China and India: Too Much Too Fast (Oct-07) A Potential USD 140b Industry: Review of Asset Management Industry in Kuwait (Sep-07) A Gulf Emerging Portfolio: And Why Not? (Jun-07) Derivatives Market in GCC (Mar-07) Managing GCC Volatility (Feb-07) Periodic Research Annual GCC Market Outlook Quarterly GCC Equity Funds GCC Corporate Earnings GCC Equity Research Statistics Monthly Market Review Weekly MENA Market Intelligence KSE Market Review International Market Update Daily Markaz Daily Morning Brief Markaz Kuwait Watch Daily Fixed Income Update Company Research (See the list attached)
RESEARCH August 2011
Markaz Research Offerings Company Research UAE
Saudi Arabia • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Al Rajhi Bank (Mar-11) Saudi Telecom Co. (Feb-11) Samba Financial Group (Aug-10) Jabal Omar Development (Jul-10) Arabian Cement Co (Jul-10) Yanbu Cement Co. (Jun-10) Emaar Economic City (Jun-10) Qassim Cement Company (Jun-10) Savola Group (May-10) Alinma Bank (May-10) Jarir Marketing (May-10) Bank Al Bilad (May-10) Bank Al Jazira (Apr-10) Makkah Construction (Apr-10) Saudi Cement Company(Apr-10) Southern Province Cement Co(Mar-10) Saudi Electricity Company(Feb-10) Saudi Arabian Mining Co(Feb-10) Yamama Saudi Cement (Feb-10) Etihad Etisalat (Feb-10) Al Marai Company (Dec-09) Arab National Bank (Oct-09) SAFCO (Oct-09) Riyad Bank (Jul-09) Sabic (Mar-09) Saudi Investment Bank (Jan-09) Kingdom Holding Co (Dec-08) Saudi Kayan Petro Co. (Aug-08) Banque Saudi Fransi (Jun-08
Kuwait (For Internal Use Only) • Qurain Petrochem. Ind. (Aug-10) • Wataniya (Jul-10) • Boubyan Bank (June-10) • Agility (June-10) • Gulf Bank of Kuwait (May -10) • National Bank of Kuwait (Mar-10) • Al Deera Holding (Aug-09) • Kuwait Finance House (Apr-09) • Kuwait Financial Centre (Dec-08) • Commercial Bank of Kuwait (Oct-08) • National Industries Group (Sept-08) • Zain (Sept-08) • Global Investment House (Sept-08) • Kipco (Sept-08) • The Investment Dar (Sept-08) • Burgan Bank (Sept-08) • Automated Systems Co (Aug-08) • Al Safat Investment Co (July-08)
• • • • • • • • • • • • • • • • • • •
NBAD (Mar-11) Union National Bank (Sept-10) FGB (Aug-10) Etisalat (Aug-10) Dubai Financial Market (Sept-09) ADCB (Jun-09) DP World (Jun-09) NBAD (Feb-09) Sorouh Real Estate (Feb-09) Aldar Properties (Feb-09) Gulf Cement Company (Jan-09) Abu Dhabi National Hotels (Dec-08) Dubai Investments (Dec-08) Arabtec Holding (Dec-08) Air Arabia ( Nov-08) Union Properties (Nov-08) Dubai Islamic bank (Oct-08) Emaar Properties (July-08) Dana Gas (July-08)
Markaz Research is available on: Bloomberg Type “MRKZ” <GO>, Thomson Financial, Reuters Knowledge, Zawya Investor & Noozz. To obtain a print copy, kindly contact: Kuwait Financial Centre “Markaz” Media and Communications Department Tel: +965 2224 8000 Ext. 1814 Fax: +965 2249 8740 Postal Address: P.O. Box 23444, Safat, 13095, State of Kuwait Email: info@markaz.com markaz.com/research
Saudi Arabia Kuwait Qatar UAE Bahrain Oman Egypt Jordan Morocco MENA
Qatar • Qatar National Bank (Oct-10) • Qatar Gas Transport Co. (Sept-10) • QISB (Sept-10) • Masraf Al-Rayan (Jun-10) • Commercial Bank of Qatar (Mar-10) • Qatar Telecom (Jun-09) • Industries Qatar (Apr-09) • United Development Co. (Feb-09) • Qatar Fuel Co. (Dec-08) • Qatar Shipping Co (Dec-08) • Barwa Real Estate Co. (Nov-08) • Qatar Int’l Islamic bank (Nov-08) • Qatar Insurance Co. (Nov-08) • Doha Bank (Aug-08) • QEWC (July-08) Bahrain • Batelco (Aug-10) • Al Salam Bank (Aug-10) • Gulf Finance House (Oct-08) • Esterad Inv. Company (Aug-08) • Bahrain Islamic Bank (Aug-08) • Ithmaar Bank (July-08) • Tameer (July-08)
Markaz Company Research Coverage MSCI Arabian Markets MSCI Arabian Markets Conventional Islamic 60% 64% 83% 92% 92% 90% 79% 25% 79% 100% 63% 100% 62% 100% 39% 0% 50% 70% 79% 93%
Oman • Bank Muscat (Mar-11) • Raysut Cement Company (Sept-10) • Shell Oman Marketing (Apr-10) • Galfar Engineering & Cont. (Nov-08) • Oman Telecommunications (Sept-08) • Bank Muscat(Sept-08) • Oman cement (Sept-08) • National Bank of Oman (Aug-08) • OIB (July-08) Jordan • Arab Bank (Sept-08) • Cairo Amman Bank (Oct-08) Morocco • Maroc Telecom (Mar-10) Egypt • Sidi Kerir Petrochemicals (Jul-10) • Egypt Kuwait Holding (Mar-10) • Commercial Int’l Bank (Oct-08) • Orascom Telecom (Sep-08) • Mobinil (Sep-08) • Telecom Egypt (Aug-08) • EFG-Hermes (Jun-08)
Local Index 78% 56% 95% 58% 21% 50% 45% 32% 24% 63%
RESEARCH August 2011
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