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Kuwait Financial Centre “Markaz” RESEARCH January 2011

GCC Equity Research Statistics Equity Coverage from Oct–Dec 2010

Equity markets received slightly lower attention from analysts in 4Q10 compared to the earlier quarter. Twenty five brokers published 243 research notes on 127 companies during 4Q10, while 288 research notes on 133 companies were Research Highlights: Review of broker coverage published in 3Q10. During this quarter, 18% of all GCC companies, representing 70% of the total market cap, were covered. Saudi Arabia continued to attract the statistics in 4Q10 most attention, accounting for 46% of research notes and 39% of companies covered within the GCC. Of the 243 research notes, ―Buy‖ calls (48% of research notes) continued to dominate over ―Hold‖ (41%) and ―Sell‖ (11%), indicating a positive sentiment in GCC markets.

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Number of Research Notes by country and type of recommendation Country

Buy

Sell

Hold

Total

Saudi Arabia

59

11

42

112

UAE

20

3

13

36

Oman

14

2

20

36

Qatar

13

1

11

25

Kuwait

8

6

11

25

Bahrain

3

3

3

9

TOTAL

117

26

100

243

Source: Reuters 3000Xtra, Zawya Investor

The market capitalization of researched stocks in Saudi Arabia accounted for 83% of the total domestic market capitalization. Oman (79%), Qatar (66%), Kuwait (57%), the UAE (55%) and Bahrain (36%) followed in that order.

M.R. Raghu CFA, FRM Head of Research The UAE was the most preferred equity market in 4Q10 as reflected by the fact that +965 2224 8280 56% of the reports were assigned a ―Buy‖ rating. Saudi Arabia accounted for rmandagolathur@markaz.com maximum ―Buy‖ as well as ―Sell‖ ratings. Moreover, the proportion of ―Buy‖ ratings in KSA increased to 53% in 4Q10 from 50% in 3Q10. However, the share of ―Buy‖ Layla Al-Ammar ratings in Qatar fell to 52% in 4Q10 from 100% in 3Q10. A third of the research Senior Analyst notes covering Bahrain fetched ―Sell‖ ratings, higher than other GCC markets. lammar@markaz.com +965 2224 8000 Ext: 1205 Etihad Etisalat Co. continued to remain the most tracked stock during the quarter, with eight research notes; Saudi Arabian Mining Co. was also covered by an equal number. Saudi Telecom Co. followed with six notes, and Almarai Co. and Qatar National Bank with five notes each. All research notes on Etihad Etisalat Co. and five on Saudi Arabian Mining Co were assigned a ―Buy‖ rating. Saudi International Kuwait Financial Centre Petrochemical Co. too received five ―Buy‖ ratings, while Saudi Basic Industries S.A.K. “Markaz” Corporation and Saudi Telecom Co. received four each.

P.O. Box 23444, Safat 13095, The banking sector continued to dominate the research coverage space, accounting Kuwait for 23% of total research notes in 4Q10. It fetched 50% of total ―Sell‖ ratings in Tel: +965 2224 8000 4Q10; this was the highest among other sectors, indicating uncertainty among Fax: +965 2242 5828 investors. The telecommunications sector received maximum ―Buy‖ calls, www.markaz.com representing 21% of the total 117 in the region.


RESEARCH January 2011 Equity Research Coverage The number of companies covered declined in 4Q10 as the year came to a close. Seventy eight companies were covered in October, 54 in November and 55 in December. The drop was mainly due to a fall in the number of companies covered in Kuwait and Saudi Arabia. On the other hand, Oman witnessed a contrary trend. Firms covered in the country accounted for 16% of the total companies covered in the GCC in 4Q10, up 9% over that in 3Q10. Table 1: Summary of research coverage across GCC Decline in companies covered in GCC countries to 55 in December from 78 in October

Saudi Arabia continued to remain the most researched country, both in terms of number of companies and market cap. The market capitalization of companies covered in KSA accounted for 54% of the total market cap of companies covered in the GCC. About 34% of all listed companies in Saudi Arabia, accounting for 83% of the local market cap (calculated as of the end of quarter), received coverage in 4Q10. Kuwait, despite being the third-largest market in the region, remains underserved. Only 8% of listed companies in the country received coverage in 4Q10, though they accounted for over half of total market cap. Table 2: Research coverage as a % of total listed companies and aggregate market cap Saudi Arabia, the most researched country in terms of number of companies Country and market cap

Number of Companies Covered (%)

Market Cap Contribution (%) Oct-Dec-10

Saudi Arabia

34

83

Qatar

28

66

Bahrain

18

36

Oman

16

79

UAE

14

55

Kuwait

8

57

Total

18

70

Source: Reuters 3000Xtra, Zawya Investor

Quarter-by-quarter Coverage The number of research notes on Saudi firms (as a percentage of total GCC coverage) was steady at 46% in 4Q10 (45% in 3Q10). The number of research notes on Omani firms nearly doubled to 15% from 8% during this period. However, for the UAE, it declined to 15% from 24%.

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RESEARCH January 2011

Figure 1: Proportion of number of companies researched (by country) to total GCC coverage 50% 40%

Almost half (48%) of broker researches in 4Q10 recommend ―Buy‖ rating, while just 11% advocate ―Sell‖

30% 20% 10% 0% Saudi Arabia

Kuwait

UAE

Qatar

Q3 2010

Oman

Bahrain

Q4 2010

Source: Reuters 3000Xtra, Zawya Investor

Buy, Sell, or Hold? ―Buy‖ ratings continued to dominate, accounting for 48% of the total recommendations during 4Q10. The share of ―Sell‖ calls remained almost unchanged from that in the previous quarter, while ―Hold‖ recommendations increased to 41% from 36%. The UAE was the most attractive market in the region in terms of proportion of ―Buy‖ recommendations (56%) in 4Q10, the number of ―Buy‖ recommendations dropped to 20 in 4Q10 from 47 in the previous quarter. At 14, the number of ―Buy‖ recommendations remained the same for Oman; however, the proportion of research notes with a ―Buy‖ rating decreased to 39% in 4Q10 from 61% in 3Q10. Signs of optimism could be seen in the Kuwaiti market in 4Q10, with the proportion of ―Buy‖ ratings increasing to 32% during the quarter from 21% in 3Q10. In 4Q10, 56% of research notes in Oman received a ―Hold‖ recommendation, the highest among GCC countries. Qatar and Kuwait followed with 44% each. Drop in number of ―Buy‖ calls for UAE companies from 47 in 3Q10 to 20 in 4Q10

Table 3: Type of recommendation of research notes Q410 Vs Q310 Q3 2010 Buy Sell Hold Saudi Arabia 64 9 56 Kuwait 7 11 15 UAE 47 5 18 Qatar 19 0 0 Oman 14 0 9 Bahrain 6 3 5 Source: Reuters 3000Xtra, Zawya Investor

Buy 59 8 20 13 14 3

Q4 2010 Sell 11 6 3 1 2 3

Hold 42 11 13 11 20 3

The number of ―Buy‖ calls for UAE companies decreased from 47 in 3Q10 to 20 in 4Q10, while the number of ―Hold‖ calls fell from 18 to 13 during the same period (Figure 2). Kuwait was the only country with an increase in the number of ―Buy‖ ratings (eight in 4Q10 compared to seven in 3Q10). Also, the number of ―Sell‖ calls for Kuwaiti firms decreased from 11 to 6 during the same period.

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RESEARCH January 2011 Sector-wise Recommendations

Maximum number of research notes (57) in the banking sector—19 assigned a ―Buy‖ rating, 13 ―Sell‖, and 25 ―Hold‖

Banking was the most researched sector with 57 notes; of these, 19 fetched a ―Buy‖ rating, 13 were assigned a ―Sell‖ recommendation, while 25 were ―Hold‖ calls. In fact, most ―Hold‖ and ―Sell‖ recommendations were in the banking industry. The telecommunications sector received the highest ―Buy‖ ratings (24) and just one ―Sell‖ rating, reflecting the attractiveness of the commodity space. In 4Q10, 41 research notes were published from this sector. Energy also looks positive, with 9 ―Buy‖ and zero ―Sell‖ calls. Table 4: Sector-Wise number of research notes by Recommendation Buy

Sell

Hold

Total

Banks

19

13

25

57

Telecommunications Services

24

1

16

41

Mineral Resources

14

5

15

34

Chemicals

17

5

10

32

Energy

9

0

9

18

Food & Beverages

6

0

4

10

Real Estate

4

1

5

10

Industrial Services

4

0

4

8

Transportation

4

0

4

8

Utilities

6

0

1

7

Cyclical Consumer Services

3

0

0

3

Industrial Conglomerates

2

1

0

3

Industrial Goods

1

0

2

3

Retailers

1

0

2

3

Financial Services - Diversified

1

0

1

2

Food & Drug Retailing

2

0

0

2

Insurance

0

0

1

1

Investment Trusts

0

0

1

1

117

26

100

243

Industry

Total

Source: Reuters 3000Xtra, Zawya Investor

Top Picks Banking was the most tracked sector; however, the top five researched stocks belonged to other sectors. Mineral resources and telecom picks were the most attractive stocks for coverage in 4Q10. Saudi Arabian Mining Co. and Etihad Etisalat Co. topped the list with eight researches each. They were followed by Saudi Telecom Co. (six), Almarai Co. (five) and Qatar National Bank (five). Figure 2: Most researched companies (October–December 2010) Number of Researches

Most researched companies during this quarter active in telecom sector

8

8 6

Saudi Arabian Etihad Etisalat Saudi Telecom Mining Company Company Company

5

5

Almarai Company

Qatar National Bank

Source: Reuters 3000Xtra, Zawya Investor

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RESEARCH January 2011 In terms of ―Buy‖ calls; Etihad Etisalat Co. also topped the charts, with all 8 of its researches recommending increased exposure. It should be noted that Etihad Etisalat has featured among the top five picks in the past three quarters consecutively. This was followed by Saudi Arabian Mining Co. and Saudi International Petrochemical Co. (five each), and Saudi Basic Industries Corporation and Saudi Telecom Co. (four each). All researches on Etihad Etisalat assigned a ―Buy‖ call

Figure 3: Companies with most “Buy” calls (October–December 2010) Highest Number of Buy Reports

8

Etihad Etisalat Company

5

5

Saudi Arabian Mining Company

Saudi International Petrochemical Company

4

4

Saudi Basic Industries Corporation

Saudi Telecom Company

Source: Reuters 3000Xtra, Zawya Investor

Best “Buys” and Worst “Buys” The top five best performing ―Buy‖ stocks included two Qatari and three Saudi Arabian companies. Industries Qatar, with two ―Buy‖ ratings, gained 33% since the first recommendation and emerged the best ―Buy‖ pick. Saudi Arabia’s Steel Pipe Co. was the fourth-best ―Buy‖ stock; it has risen 25% since the first recommendation. The stock featured among the Worst Buy Recommendations in 3Q10. Table 5: Top Buy Recommendations (4Q10)

Union Properties shed 11.8% despite ―Buy‖ call during the quarter

The worst ―Buy‖ call was on Dubai-based Union Properties, which lost 11.8% since the recommendation. Emirates Telecommunications Corporation (Etisalat) and Savola Group Company received three ―Buy‖ ratings each; the two have lost 8.6% and 7%, respectively, since the first recommendation. Table 6: Worst Buy Recommendations (4Q10)

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RESEARCH January 2011 Abu Dhabi Commercial Bank, Saudi Telecom and Emirates Telecommunications Corporation featured among stocks with the highest upside potential—these companies have lost significant value after the ―Buy‖ recommendation. Table 7: Top 15 stocks with highest return potential Three of the worst ―Buy‖ recommendations have the potential to return over 47%

What Brokers Said The most notes continue to come from Taib Securities with 84 researches—of these 43 were ―Buy‖ calls, 14 ―Sell‖ recommendations and 27 ―Hold‖ ratings. Al Rajhi Capital, which did not feature among the top five brokers in the previous quarter, occupied the third slot this quarter with 21 research notes. Figure 4: Number of notes per broker (Oct-Dec 2010) The most notes continue to come from Taib Securities; however, Al Rajhi moved up the list to be among the top slots

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RESEARCH January 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 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 does not have regard to 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 securityâ&#x20AC;&#x2122;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 historical and 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.

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RESEARCH January 2011

Markaz Research Offerings Strategic Research What to expect in 2011 (Jan-11) Kuwait Investment Sector (Sept-10) The Golden Portfolio (Sept-10) The New Regulations on Kuwait Investment Sector (Jun-10) Persistence in Performance (Jun-10) Kuwait Capital Market Law (Mar-10) GCC Banks: Done with Provisions (Jan-10) What to expect in 2010 (Jan-10) What is left for 2009? (Sept-09) Kuwait Investment Sector (Jun-09) Missing The Rally (Jun-09) Shelter in a Storm (Mar-09) Diworsification: The GCC Oil Stranglehold (Jan-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) The Golden Portfolio (Apr-08) Banking Sweet spots (Apr-08) The ―Vicious Square‖ Monetary Policy options for Kuwait (Feb-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) To Leap or To Lag: Choices before GCC Regulators (Apr-07) Derivatives Market in GCC (Mar-07) Managing GCC Volatility (Feb-07) GCC for Fundamentalists (Dec-06) GCC Leverage Risk (Nov-06)

Periodic Research

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Daily Markaz Daily Morning Brief Markaz Kuwait Watch Daily Fixed Income Update Weekly KSE Market Weekly Review International Market Update Real Estate Market Commentary MENA Market Intelligence Monthly Market Review Quarterly GCC Equity Funds Thought Speaks Equity Research Statistics GCC Corporate Earnings

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Real Estate – Market Outlook                 

Qatar Residential – An Update (Aug-10) Dubai Real Estate - Trends and Outlook(Apr-10) Egypt Real Estate - Trends and Outlook(Feb-10) Kuwait Real Estate Outlook(Dec-09) Abu Dhabi Residential (Nov-09) Office Investment in KSA (Jul-09) Saudi Arabia – Residential Real Estate Outlook (Jun-09) Saudi Arabia (Sep-08) Abu Dhabi (July-08) Algeria (Mar-08) Jordan (Mar-08) Kuwait (Feb-08) Lebanon (Dec-07) Qatar (Sep-07) Saudi Arabia (Jul-07) U.S.A. (May-07) Syria (Apr-07)

Real Estate Strategic Research     

GCC Distressed Real Estate Opportunities (Sep-09) GCC Real Estate Financing (Sept-09) Real Estate Earnings -2009 (May-09) Supply Adjustments Are we done? (Apr-09) Dubai Real Estate Meltdown (Feb-09)


RESEARCH January 2011

GCC Equity Research Statistics Jan 2011  

GCC Equity Research Statistics Jan 2011