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Kuwait Financial Centre “Markaz” RESEARCH

MENA Market Intelligence

October 2012

Week ending 14th of October

Research Highlights: Provide readers with weekly updates on analysts‟ 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 were mainly negative during the week, weak global growth estimates were the main culprit. Morocco and Saudi Arabia were the biggest losers shedding 1.9% and 1.3% respectively. Turkey and Egypt led the weekly gainers by gaining 3.3% and 0.5% respectively. Equity Research: During the week we covered 9 research notes. It is interesting to observe that with the exception of 1 note, all notes covered were concentrated on the Saudi Market. Out of the 9 research notes four were “Buy/Overweight” while five were “Hold/Neutral”. Fixed Income Development: Sukuk issuance is back on the rise, Bank Saudi Fransi got approval for a SAR 2.5 Sukuk; while in Qatar, QIIB priced its USD 700mn Sukuk at a profit rate of 2.668%. By the end of this month Dana Gas will mature its USD 1 Bn Sukuk; preliminary reports suggest that creditors and the company will reach an equitable solution in terms of repayments.

Table 1: Market Performance Indicators

M. Cap (USD Bn)

Last

WTD

MTD

YTD

2011

Close

(%)

%

%

%

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)

359

6,797

-1.3%

-2.56

3.85

-3

Turkey ISE National 100

224

69,603

3.3%

4.83

35.77

-22

Kuwait SE WT.INDEX

104

416

-0.7%

-0.62

2.4

-16

Qatar(QE Index)

97

8,480

0.0%

-0.35

-3.4

1

Abu Dhabi (ADI)

80

2,643

-0.3%

1.46

10.04

-12

Morocco (CAI)

51

9,281

-1.9%

-2.01

-15.84

-13

Dubai (DFMGI)

49

1,633

0.4%

3.41

20.63

-17

Egypt (Hermes)

64

580

0.5%

-1.72

51.99

-42

Jordan (Amman)

23

4,507

-0.9%

-0.99

-3.05

-13

Bahrain (BAX)

16

1,070

-0.7%

-1.6

-6.45

-20

Oman(Muscat SM)

15

5,638

-0.1%

1.88

-1

-16

Lebanon (BSE)

12

1,118

-0.1%

0.21

-5

-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 August 2012

What Analysts are Recommending Market price on recom day

Target

Currency

Recommendation

Date of recommendation

Extra

SAR

Overweight

07-Oct

96

106

Qatar National Bank

QAR

Accumulate

08-Oct

136

164.8

Riyad Bank

SAR

Accumulate

10-Oct

22.8

27.3

Arab National Bank

SAR

Buy

10-Oct

25.5

36.4

Almarai

SAR

Hold

09-Oct

67.75

66.71

Suez Cement

EGP

Hold

10-Oct

23.4

24.5

Yamama Cement

SAR

Neutral

07-Oct

44.9

52.2

Jarir Marketing Company

SAR

Neutral

07-Oct

157.5

151

Qassim Cement

SAR

Neutral

09-Oct

76

79.3

Company

House NCB Capital Audi Sardar Audi Sardar Audi Sardar Audi Sardar NAEEM NCB Capital NCB Capital NCB Capital

Equity Recommendation - Key points Company

Qatar National Bank (Qatar)

House

Audi Sardar

Yamama Cement (Saudi Arabia)

NCB Capital

Jarir Marketing Company (Saudi Arabia)

NCB Capital

Extra (Saud Arabia)

NCB Capital

Recommendation

Rationale

Accumulate

Despite 3Q12 disappointment, Audi Sardar issued an “Accumulate” recommendation with a price target of QAR164.8, citing strong loan book growth and close dealings with the government of Qatar as positive indicators.

Neutral

NCB Capital issued a “Neutral” recommendation with a price target of SAR 52.2. The main Rationale behind this decision was: limited capacity, lower than average growth and plant relocation.

Neutral

NCB Capital estimates that all positive events are priced in Jarir‟s stock price; thus, NCB reiterates its neutral recommendation with a price target of SAR151

Overweight

3Q12 results were positive; revenue increased by 14.5% YoY , Operating income increased 8.2% YoY, while, net income grew by 7.5% to SAR 28.4 mn.


RESEARCH August 2012

AlMarai ( Saudi Arabia)

Qassim Cement (Saudi Arabia)

Audi Sardar

NCB Capital

Hold

Despite positive 3Q12 results, Audi Sardar reiterates a Hold recommendation with a price target of SAR 66.71 citing higher input costs as the main reason for this recommendation.

Neutral

Higher cost and lower sale volume send 3Q12 net profit down 3.9% YoY to SAR 111mn. NCB Capital remains “Neutral” with a price target of SAR 79.3 pending full financial results.

Riyad Bank (Saudi Arabia)

Audi Sardar

Accumulate

Arab National Bank (Saudi Arabia)

Audi Sardar

Buy

Suez Cement (Egypt)

NAEEM

3Q12 loan growth was flat on a QoQ basis and non-interest income were below Audi Sardar‟s estimates. Based on the above Audi Sardar lowered the target price of Riyad Bank to SAR 27.3 while reiterating the “Accumulate” recommendation indicating a 20% upside potential. 3Q12 results: net interest income increased 8% YoY to SAR 846mn, non-interest income decreased 6% to SAR 342mn while net profits increased 10% YoY to SAR 573 mn. Audi Sardar reiterates its “Buy” recommendation with a new target price of SAR 36.4. 2Q12 were a disappointment. Revenues declined by 12% YoY to EGP 1,175mn, while net profits slid by 11% YoY to EGP 125mn. NAEEM issued a “Hold” recommendation with a price target of EGP24.5.

Hold

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

Qatar QIIB Prices $700 Mln Sukuk After Orders Top $5 Bln

Market

View

Qatar

Qatar International Islamic Bank (QIIK.DO) has priced a $700 million, five-year Islamic bond, or Sukuk, carrying a profit rate of 2.688%, at par, after receiving strong demand, according to a lead arranging bank. Orders booked were in excess of $5 billion, a person familiar with the deal, who declined to be identified, told Zawya Dow Jones earlier in the day. HSBC, QNB Capital and Standard Chartered Bank were book runners on the issue. They helped arrange the investor meetings for QIIB in the Middle East, Asia and Europe. QIIB 's bond follows the $750 million Sukuk issued by Qatar Islamic Bank last week and indicates the healthy global appetite for Gulf debt.


RESEARCH August 2012

Banque Saudi Fransi Gets Approval for 2.5 Billion Riyal Sukuk

Sukuk Yields at Record Low on World Growth Cuts

Morocco delays $1 bln sovereign bond sale

Dana Rises as Investors See Sukuk Resolution

Abu Dhabi's NBAD places $32 mln renminbi bond

Saudi Arabia

Banque Saudi Fransi, partly owned by Credit Agricole SA, said it received approval from the Saudi central bank to issue as much 2.5 billion riyals ($667 million) in Sukuk. The Islamic bonds will enhance the bank‟s capital base and help expand its lending activities, the Riyadh-based lender said in a statement to the Saudi bourse website today. The maturity of the Sukuk is no more than five years, it said. Sales of Sukuk in the six-member Gulf Cooperation Council have almost quadrupled this year to $18.5 billion as Saudi Arabia‟s state-run General Authority of Civil Aviation and Qatar‟s government sold $4 billion each.

Sukuk

Investors say a rally in Islamic bonds that‟s driven borrowing costs to a record low will last through year-end as global growth-forecast cuts boost demand for safer securities. The International Monetary Fund predicted this week that the world economy will expand 3.3 percent in 2012, the slowest pace since the 2009 recession. Appetite for Shariah-compliant notes will be supported so long as Europe‟s fiscal crisis lingers, according to OCBC Al Amin Bank Bhd. in Kuala Lumpur.

Morocco

Morocco has delayed its maiden dollar bond sale to end-November pending market stability, the budget minister said in published remarks on Wednesday, but banks have already been mandated for an issue that may exceed the initial $1 billion mark. The delay's announcement, carried by L'Economiste newspaper, comes amid speculation King Mohammed would soon make a rare official tour of the Gulf Arab region from where Rabat hopes to raise a substantial share of the issue.

U.A.E

U.A.E

Dana Gas PJSC surged to the highest level since April on investor optimism the fuel producer may reach a resolution with investors on $1 billion in Islamic bonds maturing this month. The shares soared 4.4 percent to 47 fils, the highest level since April 25. Shareholder Crescent Petroleum Co.‟s President Badr Jafar said he was “very optimistic about the professionalism of Dana Gas management to reach a reasonable resolution with investors. Discussions are ongoing with Egypt regarding scheduling payments.”

National Bank of Abu Dhabi , Hong Kong branch, has completed its second offshore renminbi bond in a CNH200m (USD32m) 1-year issue at 3.1%. That pricing translated to around 135bp over Libor, assuming mid-swaps. BNP Paribas arranged the deal,


RESEARCH August 2012 which will settle on October 16. NBAD's debut offshore renminbi bond issue was a CNH100m 1-year note issue at 2.9% in early September this year. That piece was quoted at 3.418%/2.917% in the secondary market.


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