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Kuwait Financial Centre “Markaz” RESEARCH

MENA Market Intelligence

July 2012

Week ending 12th of July

Research Highlights: Provide readers with weekly updates on analyst recommendations from different investment houses collate views on the state of MENA economy, sector developments and fixed income news.

Markaz Research is available on: Bloomberg - Type “MRKZ” Thomson Research, Reuters Knowledge Nooz Zawya Investor ISI Emerging markets Capital IQ FactSet Research Connect TheMarkets.com

Market Performance: MENA Markets ended the week in the Red. Saudi Arabia (-2.9%), Morocco (-2.9%) and Egypt (-2.6%) lost the most during the week. MENA weekly performance was in-line with emerging market performance (MSCI EM and BRIC shed 2% during the week). On a positive note, Kuwait (+0.5%) and Qatar (+0.2%) were the only gainers during the week Equity Research: During the week we covered 7 research notes, the majority of the notes were “Neutral” and concentrated on Saudi Arabia. Out of the 7 research notes; 1 was “Buy”, 1 was “sell” and the rest were “Neutral” Fixed Income Development: Sukuk yield has dropped to a 7 year low, average yields fell five basis points this month to 3.39%, approaching the lowest level since January 2005, when they reached a record 3.33%, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Table 1: Market Performance Last Indicators

M. Cap (USD Bn)

WTD

Close

MTD

YTD

2011

%

%

%

MENA Markets

M.R. Raghu CFA, FRM Head of Research +965 2224 8280 rmandagolathur@markaz.com

Humoud Salah N AL Sabah Financial Analyst +965 2224 8530 halsabah@markaz.com

Kuwait Financial Centre S.A.K. “Markaz”

P.O. Box 23444, Safat 13095, Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 markaz.com

Saudi (TASI)

350

6,660

-2.9%

-0.13

4.42

-3

Turkey ISE National 100

198

62,662

-0.2%

0.19

22.23

-22

Kuwait SE WT.INDEX

102

406

0.5%

0.96

0.13

-16

Qatar(QE Index)

96

8,285

0.2%

1.99

-5.63

1

Abu Dhabi (ADI)

75

2,467

-0.2%

0.77

2.67

-12

Morocco (CAI)

50

9,669

-2.9%

-3.83

-12.32

-13

Dubai (DFMGI)

47

1,491

-0.9%

2.7

10.17

-17

Egypt (Hermes)

55

484

-2.6%

0.96

26.7

-42

Jordan (Amman)

23

4,389

-0.9%

-0.01

-5.57

-13

Bahrain (BAX)

16

1,114

-0.7%

-1.14

-2.61

-20

Oman(Muscat SM)

14

5,445

-2.4%

-4.3

-4.39

-16

Lebanon (BSE)

12

1,143

-0.6%

0.31

-2.9

-20

Note: 1 Weekend Details – Saudi Arabia – Thursday & Friday; Turkey, Morocco & Lebanon – Saturday & Sunday; MENA Ex-Saudi Arabia, Turkey, Morocco & Lebanon – Friday & Saturday; US, European & Emerging Markets – Saturday & Sunday


RESEARCH July 2012 What Analysts are Recommending Company

Curren cy

Recommend ation

Date of recommendation

Market price on recom day

Targ et

House

Bank Sohar

OMR

Accumulate

11-Jul

0.145

0.171

Gulf Badder Capital

Jarir Marketing company

SAR

Neutral

07-Jul

149.5

148

NCB Capital

Qassim Cement

SAR

Neutral

09-Jul

81

79.9

NCB Capital

Zain KSA

SAR

Neutral

09-Jul

14.5

15.9

Al Rajhi Capital

SAR

Neutral

10-Jul

23

27

NCB Capital

SAR

Neutral

11-Jul

23

27

NCB Capital

SAR

Underweight

10-Jul

28.2

21.6

NCB Capital

Advanced Petrochemical Advanced Petrochemical Bank Al Billad

Equity Recommendation - Key points Company

Jarir Marketing Company (Saudi Arabia)

Qassim Cement (Saudi Arabia)

Zain KSA (Saudi Arabia)

Bank Al Bilad (Saudi Arabia)

Banque Saudi Fransi (Saudi Arabia)

House

NCB Capital

NCB Capital

Al Rajhi Capital

NCB Capital

NCB Capital

Recommendation

Rationale

Neutral

2Q12 results: Sales increased 10% YoY to SAR 1,065mn, gross profits increased by 7.3% YoY to SAR 137mn while net profits grew by 8.4% YoY to SAR 107mn. Based on the above NCB Capital remains “Neutral” on Jarir Marketing Company with a target price of SAR 148

Neutral

On a YoY basis, 2Q12 was positive for Qassim Cement however QoQ results showed negative results. NCB Capital remains “Neutral” on Qassim Cement with a target price of SAR79.9, due to limited growth opportunities.

Neutral

Underweight

Overweight

Al Rajhi Capital issued a “Neutral” recommendation with a price target of SAR 15.9 indicating a 9.68% upside potential. The rationale behind the decision was that the restructuring plan will reduce Zain‟s interest cost thus improving its bottom line. Although Bank Al Bilad has showed strong 2Q12 performance, NCB Capital believes that the stock price is overvalued and unjustified. Hence NCB Capital issued an “underweight” recommendation with a price target of SAR 21.6 Although 2Q12 results were weak, healthy loan book growth (+18.5% YoY and +3.6% QoQ) lead NCB Capital to issue an “Overweight” recommendation with a price target of SAR 39.6


RESEARCH July 2012

Advanced Petrochemical (Saudi Arabia)

NCB Capital

Bank Sohar (Oman)

Gulf Baader

Neutral

Net income fell 65.4% YoY to SAR 53.9mn in 2Q12 mainly due to steep decline in propylene prices, lower sales volume and increase in operating expense. NCB Capital issued a “Neutral” recommendation with a price target of SAR27

Accumulate

Gulf Baader Capital issued an “Accumulate” rating with a target price of OMR 0.171 on the back of growth in the loan book and deposits.


RESEARCH July 2012 Fixed Income News Sources which include Bloomberg, Zawya, and daily newspapers were utilized in the creation of the fixed income section which is mainly from Markaz GCC daily report

Title

Sukuk yields at 7 year low

Emaar Properties PJSC executes its second international fixedincome Sukuk offering of $500m

Dar al-Arkan plans to repay $1 billion sukuk on Monday

U.A.E. banks required to hold 10% liabilities in Liquid Assets

Market

Sukuk

UAE

Dar Al Arkan

UAE

View Islamic bond yields dropped to a seven-year low this week and investors predict further declines as growth in Asia and the Gulf thatâ€&#x;s outpacing the rest of the world shores up demand for sukuk. Average yields fell five basis points, or 0.05 percentage point, this month to 3.39%, approaching the lowest level since January 2005, when they reached a record 3.33%, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Sukuk sales have climbed 73% in 2012 to $26.8bn from the same period last year as the decline in borrowing costs encouraged issuers such as Qatar and Dubai-based Emaar Properties to tap the market. Inflows into emerging-market bond funds climbed to an eight-week high of $850mn in the week ended July 4, approaching $24bn for the year, according to the latest research from EPFR Global. Emaar Properties PJSC ("Emaar"), rated Ba3/BB,has successfully priced its second international fixedincome Sukuk offering, raising $500m via the issuance of trust certificates with a maturity of 7 years at a yield of 6.400%. Emaar has executed its first public offering since January 2011 through the issuance of a $500m Sukuk. The transaction, which was structured as a Sukuk al-Ijarah and issued through a special purpose vehicle (Emaar Sukuk Limited), constitutes the second drawdown under the company's recently updated $2bn Trust Certificate Issuance Programme. This offering follows Emaar's $500m Sukuk issuance in 2011 and the $500m convertible bond executed in 2010. Saudi builder Dar al-Arkan Real Estate Co has transferred $1 billion to Deutsche Bank to repay its Sukuk, the firm said in a bourse statement on Saturday. Dar al-Arkan, the kingdom's largest property developer, has issued three international sukuks and one domestic in the past five years, raising a total of $2.25bn, the firm said in the statement. Dar al-Arkan had earlier said that it would use cash and proceeds from land sales to repay the bond. Banks in the United Arab Emirates will be required to hold 10 percent of their liabilities in high-quality liquid assets until Dec. 31, 2014, according to new liquidity regulations issued by the central bank. The assets are defined as cash at the central bank, physical cash at the bank, central bank certificates of deposits, U.A.E. federal government bonds, reserves requirements and other account balances at the central bank, the regulator said in a statement on its website today. They could also include debt of


RESEARCH July 2012

Qatar debt priced at world’s lowest sovereign; Demand for the debt continues to outstrip supply

GCC Developers’ Bond Sales Rise to Three-Year High

Qatar

GCC

government and public sector entities Qatar, the world‟s biggest exporter of liquefied natural gas, will pay less for $4 billion (Dh14.7 billion) than any other sovereign issuing Islamic bonds. The government priced five-year sukuk to yield 115 basis points more than the benchmark midswap rate, or about 2 per cent, two people familiar with the transaction said on Wednesday. The 10-year notes were sold at 155 basis points over midswaps, or about 3.2 per cent, they said. That‟s below the 3.56 per cent average yield of 12 constituents in the HSBC/Nasdaq Dubai Sovereign US Dollar Sukuk Index. Arabian Gulf property developers are raising the most since 2009 from bond sales as Dubai‟s debt repayment agreements and record-low regional yields help restore investor confidence. Majid Al Futtaim Holding LLC, a United Arab Emirate-based shopping-mall developer and operator, and Kuwait‟s Al Argan International Real Estate Co. were among companies that issued about $995 million in the first six months, according to data compiled by Bloomberg. The sales compare with $500 million in 2011 and $2.45 billion in the first half of 2009, the data show


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MMI15072012  

MMI15072012

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