MENA-­1

 SUNDAY  MORNING  ROUND-­UP  

   
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UAE  
UAE’s  real  GDP  growth  at  1.4%in  2010  
Amlak  reports  a  1Q2011  net  loss  of  AED54  million  
Shuaa’s  Investment  Banking  Head  Kubaisy  to  leave  the  firm  
   
Kuwait  
89  companies  could  face  suspension  if  results  are  not  submitted  in  time  
Global  to  invest  USD350  million  in  Turkey  
   
Qatar  
QIB  to  sell  sukuk  this  year,  acting  CEO  says  
Barwa  Bank  to  list  on  QE  in  2011  
Al  Meera  plans  “massive  expansion”  
   
Bahrain  
Bahrain  will  hold  elections  for  vacant  parliament  seats  on  24  September  2011  
   
EFG  Hermes  Research  
Al  Anwar  Ceramics  (AACT)  -­  1Q2011  Earnings  Beat  Estimate;  Adjust  FV,  Forecasts  on  Gas  Allocation;  
Maintain  Buy  -­  Company  Note  -­  12  May  2011  
Union  Properties  (UP)  -­  1Q2011  Earnings  Beats  Estimates  on  Higher  DIFC  Deliveries;  Maintain  Neutral  -­  
Flash  Note  -­  12  May  2011  
   
Agenda  
   
Qatar  
Wed  25  May  >>  Vodafone  Qatar  FY2010-­‐2011  (March  year-­‐end)  results  
   
UAE  News  
   
UAE’s  real  GDP  growth  at  1.4%in  2010  
Preliminary  data  for  2010  points  to  real  GDP  growth  of  1.4%  after  shrinking  1.6%  in  2009,  according  to  the  
National  Bureau  of  Statistics.  In  nominal  terms,  GDP  grew  by  10.1%  to  USD297.6  billion  in  2010,  just  below  our  
estimate  of  USD299.5  billion.  With  the  recently  revised  data  for  2009,  we  had  estimated  real  GDP  growth  of  
1.9%  on  flat  oil  production  and  real  non-­‐oil  GDP  growth  of  2.9%.  We  estimate  that  the  preliminary  data  suggests  
real  non-­‐oil  GDP  growth  of  2.1%  in  2010.  We  forecast  that  real  growth  will  accelerate  to  3.6%  in  2011,  driven  by  
both  oil  and  non-­‐oil  growth.  We  see  the  external  recovery  continuing  to  build  momentum,  supported  by  Dubai’s  
role  as  a  service  hub  and  the  recent  turmoil  in  surrounding  countries.  We  also  see  stabilisation  in  the  domestic  
sectors,  such  as  banking  and  real  estate,  which  continued  to  face  severe  headwinds  in  2010.  (Reuters)  
   
Amlak  reports  a  1Q2011  net  loss  of  AED54  million  
Amlak  Finance  reported  a  1Q2011  net  loss  of  AED54  million  (versus  a  AED3  million  net  loss  in  1Q2010)  on  the  
back  of  higher  provisioning.  Provisioning  on  Amlak’s  mortgage  book  increased  58%  Y-­‐o-­‐Y  to  AED58  million  for  
the  quarter.  Revenue  from  Amlak’s  financing  and  investment  operations  declined  17%  Y-­‐o-­‐Y.  Total  assets  stood  
at  AED13  billion.  (Zawya  Dow  Jones)  
   
Shuaa’s  Investment  Banking  Head  Kubaisy  to  leave  the  firm  
Makram  Kubaisy,  Head  of  Investment  Banking  at  Shuaa  Capital  (SHUA.DU)  is  leaving  the  firm  as  part  of  the  
firm’s  latest  round  of  job  cuts,  a  Shuaa  spokeswoman  confirmed  on  12  May  2011.  (Zawya  Dow  Jones)  
   
Kuwait  News  
   
89  companies  could  face  suspension  if  results  are  not  submitted  in  time  
According  to  press  reports,  The  Kuwait  Stock  Exchange  will  suspend  trading  in  the  shares  of  89  companies  as  of  
16  May  2011  if  they  fail  to  submit  their  1Q2011  results  by  then.  The  companies,  which  have  not  yet  submitted  
their  results  include  Agility  (AGLTY.KW),  Investment  Dar  (TIDK.KW)  and  Aref  Investment  Group  (AIGK.KW).  
(Bloomberg)  
   
Global  to  invest  USD350  million  in  Turkey  
Global  Investment  House  (GIH)  [GLOB.KW]  has  allocated  USD350  million  for  additional  investments  in  Turkey  
after  its  private  equity  unit  bought  stakes  in  two  Turkish  companies.  GIH  bought  80%  of  a  medical  equipment  
manufacturer  and  a  stake  in  a  women’s  apparel  maker.  (Bloomberg)  
   
Qatar  News  
   
QIB  to  sell  sukuk  this  year,  acting  CEO  says  
Qatar  Islamic  Bank  (QIB)  [QISB.QA]  announced  that  it  plans  to  sell  Islamic  bonds  (sukuks)  in  2011  “to  help  
reduce  debt  payments”,  the  bank’s  acting  Chief  Executive  Officer  (CEO),  Ahmad  Meshari,  was  quoted  as  saying.  
“A  major  issue  is  cost  control  of  our  funding,”  Meshari  explained  without  indicating  the  value  or  the  currency  of  
the  sukuks.  Details  of  the  sale  will  be  announced  in  3Q2011,  he  added.  The  sukuks  will  have  a  maturity  of  more  
than  five  years.  (Bloomberg)  
   
Qatar  Islamic  Bank:  QAR81.0,  Rating:  Buy,  FV:  QAR108.8,  MCap:  USD4,601  million,  QIBK  QD  /  QISB.QA  
   
Barwa  Bank  to  list  on  QE  in  2011  
Barwa  Bank  announced  that  it  plans  to  list  its  shares  on  the  Qatar  Exchange  (QE)  this  year,  The  Peninsula  Qatar  
reported.  “We  have  started  the  formalities  for  the  listing  and  expect  the  procedures  to  be  completed  in  2011,”  
the  bank  said  in  a  statement.  (The  Peninsula  Qatar)  
   
Al  Meera  plans  “massive  expansion”  
Al  Meera  Consumer  Goods  (MERS.QA)  announced  that  it  plans  to  launch  some  13  new  stores  in  Qatar  within  the  
next  two  years  with  40,000  square  metres  (sqm)  of  additional  retail  and  20,000  sqm  of  “shopping  mall”  space,  
The  Gulf  Times  reported.  The  company  will  issue  a  tender  for  six  new  outlets  this  week,  scheduled  to  be  opened  
within  the  next  24  months.  (The  Gulf  Times)  
   
Bahrain  News  
   
Bahrain  will  hold  elections  for  vacant  parliament  seats  on  24  September  2011  
Bahrain  will  hold  elections  on  24  September  2011  to  fill  at  least  18  vacant  seats  in  parliament  after  the  
opposition  resigned  to  protest  the  government’s  crackdown  on  protests.  A  second  round  of  voting  will  take  
place  on  1  October  2011,  Bahrain  News  Agency  reported  citing  Justice  Minister  Sheikh  Khalid  bin  Ali  Al  Khaifa.  
(Bloomberg)  
   
EFG  Hermes  Research  
   
Al  Anwar  Ceramics  (AACT)  -­  1Q2011  Earnings  Beat  Estimate;  Adjust  FV,  Forecasts  on  Gas  Allocation;  
Maintain  Buy  -­  Company  Note  -­  12  May  2011  
Raise  Fair  Value  to  OMR0.345/Share  from  OMR0.328/Share;  Reiterate  Buy:  AACT  announced  that  it  has  been  
allocated  natural  gas  by  Oman’s  Ministry  of  Oil  and  Gas  for  the  company’s  expansion  project.  The  gas  allocation  
is  currently  expected  to  be  sufficient  for  the  3  million  square  metres  (sqm)  expansion.  Our  fair  value  (FV)  
subsequently  increases  as  we  factor  in  the  lower  feedstock  cost.  Our  new  FV  implies  20%  upside  potential,  
hence  we  reiterate  our  Buy  rating.  AACT  now  trades  a  very  close  multiple  compared  to  peers’  average  estimated  
2011  P/E  of  11.6x.  
   
Increase  Earnings  Estimates  on  Reduced  Cost  of  New  Capacity  Expansion:  We  raise  our  earnings  estimates  to  
reflect  the  change  in  cost  of  the  originally-­‐planned  use  of  liquefied  petroleum  gas  (LPG)  to  natural  gas  for  the  
capacity  expansion.  Our  2011  estimate  remains  largely  unchanged,  although  it  increases  by  6.7%  to  OMR7  
million  in  2012.  We  expect  synergies  from  operating  leverage  to  reflect  in  higher  margins  in  2012.  We  expect  a  
gross  margin  of  51.3%  compared  to  49.9%  in  2011.  
   
Cost  Advantage  Provides  Prospect  For  Further  Expansion:  AACT  plans  to  expand  its  capacity  to  16  million  sqm  
by  2013.  The  recent  allocation  of  gas  coupled  with  a  cash  flush  balance  sheet  (net  cash  of  OMR0.051/Share  as  of  
31st  March  2011)  has  increased  AACT’s  prospects  of  organic  growth  over  the  next  three  years.  In  our  opinion,  
the  lack  of  gas  allocation  would  have  challenged  the  company’s  ability  to  expand  organically.  
   
1Q2011  Results  Indicate  Robust  Demand:  AACT’s  1Q2011  results  saw  earnings  increase  5.5%  Y-­‐o-­‐Y  and  30.7%  
Q-­‐o-­‐Q  to  OMR1.52  million  (EPS:  OMR0.008),  ahead  of  our  OMR1.45  million  estimate  on  better-­‐than-­‐expected  
selling  price  and  volume  sales.  The  selling  price  in  1Q2011  is  estimated  to  have  improved  2.5%  Y-­‐o-­‐Y.  We  
believe  that  AACT’s  target  market  demand  (small  and  medium  housing)  remains  strong.  We  expect  AACT  to  
continue  to  operate  at  full  capacity  in  2011.  Regional  risk  has  increased,  in  our  view,  hence  we  raise  our  risk  
premium  by  50  bps.  (Gigi  Tharian  Varghese,  Ahmed  Gad)  
   
Union  Properties  (UP)  -­  1Q2011  Earnings  Beats  Estimates  on  Higher  DIFC  Deliveries;  Maintain  Neutral  -­  
Flash  Note  -­  12  May  2011  
Index  Tower,  Limestone  House  Deliveries  Drive  1Q2011  Earnings:  UP  reported  1Q2011  revenues  and  earnings  
of  AED1,479  million  and  AED82.2  million,  respectively,  significantly  ahead  of  our  AED827  million  and  AED37  
million  estimates,  respectively.  The  better-­‐than-­‐expected  results  were  primarily  boosted  by  greater-­‐than-­‐
expected  deliveries  of  units  within  UP’s  DIFC  projects.  The  higher  unit  deliveries  during  1Q2011  could  provide  
some  upside  potential  to  our  cAED2.2  billion  sales  estimate,  based  on  potentially  lower  default  rates  and  higher  
pricing.  We  maintain  our  Neutral  rating  on  the  stock  as  our  fair  value  (FV)  of  AED0.40/share  implies  no  upside  
potential.  
   
A  Cause  for  Some  Concern:  DIFC  Ritz  Carlton  Remains  on  UP’s  Books:  While  the  delay  in  the  transfer  of  the  
property  may  be  due  to  legal  and  formal  procedures,  we  are  mindful  of  a  potential  deal  cancellation,  which  
would  significantly  dent  UP’s  ability  to  meet  upcoming  short-­‐term  debt  payments,  in  our  view.  The  implications  
include  lengthening  of  UP’s  deleveraging  process  (see  “UP  Offers  REIT  Prospects  Yet  Value  Not  Seen  Before  
2014;  Maintain  Neutral”,  published  on  4  May  2011),  and  providing  an  overhang  on  UP’s  shares,  in  our  view.  
   
Provisions  Booked  Against  Properties,  AED2.1Billion  Expected  in  FY2011:  UP  recorded  AED65.4  million  in  
provisions  on  the  valuation  of  development  properties.  We  expect  up  to  cAED2.1  billion  in  further  revaluation  
losses  to  be  booked  in  FY2011,  bridging  the  gap  between  current  market  capitalisation  and  reported  book  value.  
We  expect  this  to  be  recognized  in  2Q-­‐4Q2011,  coinciding  with  UP’s  semi-­‐annual  property  revaluation  tests.  
Since  2009,  UP  has  recorded  AED2.3  billion  in  revaluation  losses.    
   
Some  More  Investment  Properties  Sold,  More  Expected:  UP  sold  AED22.6  million  of  investment  properties  
during  the  quarter,  recognising  a  gain  of  AED3.2  million  on  the  sale.  The  sale,  while  small  in  size,  follows  various  
individual  IP  sales  since  2009.  We  expect  cAED500  million  in  asset  sales  over  the  next  12-­‐24  months,  including  
the  sale  of  none-­‐core  investments  (i.e.,  EmiCool).  (Jad  Abbas)  
   
[Note  –  EFG  Hermes  is  not  responsible  for  the  accuracy  of  news  items  taken  from  other  media.]  
_________________________________________________________________________________________________________________  
Our  investment  recommendations  take  into  account  both  risk  and  expected  return.  We  base  our  fair  value  estimate  on  a  
fundamental  analysis  of  the  company’s  future  prospects,  after  having  taken  perceived  risk  into  consideration.  We  have  
conducted  extensive  research  to  arrive  at  our  investment  recommendations  and  fair  value  estimates  for  the  company  or  
companies  mentioned  in  this  report.  Although  the  information  in  this  report  has  been  obtained  from  sources  that  EFG  
Hermes  believes  to  be  reliable,  we  do  not  guarantee  its  accuracy,  and  such  information  may  be  condensed  or  incomplete.  
Readers  should  understand  that  financial  projections,  fair  value  estimates  and  statements  regarding  future  prospects  may  
not  be  realized.  All  opinions  and  estimates  included  in  this  report  constitute  our  judgment  as  of  this  date  and  are  subject  to  
change  without  notice.  This  research  report  is  prepared  for  general  circulation  and  is  intended  for  general  information  
purposes  only.  It  is  not  intended  as  an  offer  or  solicitation  with  respect  to  the  purchase  or  sale  of  any  security.  It  is  not  
tailored  to  the  specific  investment  objectives,  financial  situation  or  needs  of  any  specific  person  that  may  receive  this  report.  
We  strongly  advise  potential  investors  to  seek  financial  guidance  when  determining  whether  an  investment  is  appropriate  to  
their  needs.  No  part  of  this  document  may  be  reproduced  without  the  written  permission  of  EFG  Hermes.  
   
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