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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

Disclaimer This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is regulated by the Central Bank of Kuwait. The report is owned by Markaz and is privileged and proprietary and is subject to copyrights. Sale of any copies of this report is strictly prohibited. This report cannot be quoted without the prior written consent of Markaz. Any user after obtaining Markaz permission to use this report must clearly mention the source as “Markaz “. The report is intended to be circulated for general information only and should not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable but no representation or warranty, expressed or implied, is made that such information and data is accurate or complete, and therefore should not be relied upon as such. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinion of Markaz and are subject to change without notice. Markaz has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. This report may not consider the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors are urged to seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and to understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Investors should be able and willing to accept a total or partial loss of their investment. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily indicative of future performance. Kuwait Financial Centre S.A.K (Markaz) does and seeks to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of Markaz, Markaz has not reviewed the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to Markaz’s own website material) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or Markaz’s website shall be at your own risk. For further information, please contact ‘Markaz’ at P.O. Box 23444, Safat 13095, Kuwait; Email: research@markaz.com ; Tel: 00965 1804800; Fax: 00965 22450647.

GCC Corporate Earnings - Q211  

GCC Corporate Earnings - Q211

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