Kuwait Financial Centre “Markaz”

R E S E A R C H

MENA Market Intelligence Week ending 16th of February

Market Performance: MENA markets were positive during the

week on optimism about Greek bailout; Egypt rallied the most,

booking a 4.92% gain. All GCC markets were positive during the

week except Qatar which lost 1.68%. Dubai was the biggest gainer,

increasing 1.96%.

Equity Research: Analysts remain bullish, out of 8 research notes 6

were “Buy/Overweight/Accumulate” while 1 each had “Hold” and

“Underperform” recommendations.

Fixed Income Development: S&P has said that rising tension

between Iran and the West is increasing political and economic risks

for sovereign & corporate issuers in the Middle East.

Moody’s is of the view that poor visibility on government support for

financially strained companies in Dubai has put a drain on their credit

ratings and damaged investor sentiment.

Table 1: Market Performance

Indicators M. Cap

(USD Bn) Last Close

WTD (%)

MTD (%)

YTD (%)

2011 (%)

MENA Markets

Saudi (TASI) 356 6,830 0.39 3.08 6.43 -3

Turkey ISE National 100 198 61,111 3.00 6.89 19.20 -22

Kuwait SE WT.INDEX 107 406 0.64 0.21 0.09 -16

Qatar(QE Index) 95 8,544 -1.68 -0.28 -2.68 1

Abu Dhabi (ADI) 73 2,474 0.31 0.83 3.00 -12

Morocco (CAI) 63 11,397 0.38 1.65 3.35 -13

Dubai (DFMGI) 49 1,516 1.96 5.60 12.02 -17

Egypt (Hermes) 59 498 4.92 6.65 30.37 -42

Jordan (Amman) 23 4,499 0.96 1.94 -3.20 -13

Bahrain (BAX) 17 1,144 0.61 0.35 0.01 -20

Oman(Muscat SM) 14 5,654 0.56 1.66 -0.73 -16

Lebanon (BSE) 13 1,183 0.23 1.43 0.57 -20

Source: The Daily Morning Brief “Markaz”

February 2012

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.

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M.R. Raghu CFA, FRM Head of Research

+965 2224 8280

rmandagolathur@markaz.com

Layla Al Ammar

Assistant Manager

Tel: (965) 2224 8281

lammar@markaz.com

Madhu Soothanan

Senior Research Analyst

+965 2224 8000 Ext: 4603

Msoothanan@markaz.com

Kuwait Financial Centre

S.A.K. “Markaz”

P.O. Box 23444, Safat 13095,

Kuwait

Tel: +965 2224 8000

Fax: +965 2242 5828

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R E S E A R C H February 2012

What Analysts are Recommending

Equity Recommendation - Key points

Company Currency Recommendation Date of

recommendation

Market price on

recom day Target House

Industries Qatar QAR Outperform 15-Feb-12 134 171.2 QNB

Financial

Emaar Properties AED Buy 15-Feb-12 2.98 3 Rasmala

Emirates NBD AED Buy 14-Feb-12 2.95 4.11 Rasmala

Drake and Scull AED Buy 13-Feb-12 0.959 1.05 NBK Capital

Renaissance Services OMR Accumulate 16-Feb-12 0.572 0.65

GBCM Research

Raysut Cement OMR Accumulate 13-Feb-12 0.73 0.869 NBK Capital

Sorouh Real Estate AED Hold 16-Feb-12 0.99 1 Rasmala

Zain KSA SAR Underweight 15-Feb-12 7.4 6 Al Rajhi Capital

Company House Recommendation Rationale

Industries Qatar

(Qatar)

QNB

Financial

Outperform 4Q11 results: Revenue of QAR 4bn,

down 8% QoQ, missed estimate by around 7%. Net Income of QAR 1.7bn is also 18%

below estimate.

QNB expects capacity expansion to offset a weaker pricing outlook and thus maintains

“Outperform” rating with a target to QAR 171.2.

Emaar Properties

(UAE)

Rasmala Buy Preliminary 4Q11: Revenue of AED

2.24bn (+20% QoQ and -42% YoY), was almost in line with Rasmala’s forecast of

AED 2.20bn. Net Income of AED 716mn

(+76% QoQ and +162% YoY), was 22% higher than forecast.

Rasmala expects Emaar to announce a

10% cash dividend for the year and maintains “Buy” rating with a target price

of AED 3.00.

Emirates NBD (UAE)

Rasmala Buy Although Rasmala expects ENBD’s results to be disappointing, they believe the

current valuation is far too cheap

considering ENBD's long-term cash generating capabilities.

Rasmala raised its recommendation from “Hold” to “Buy” but lowers the target

price from AED 4.55to AED 4.11.

Drake and Scull

(UAE)

NBK

Capital

Buy FY2011 revenues of AED 3.1bn was 1.7%

ahead of NBK’s estimate while net profit of AED 220mn was 1% below estimate.

NBK Capital expects order backlog of AED 7.1bn and AED 0.05/share dividend as

positives and maintains “Buy” rating with a price target of AED 1.05.

R E S E A R C H February 2012

Renaissance Services

(Oman)

GBCM

Research

Accumulate Preliminary FY11: Total revenue of RO

290mn, (+14.4% YoY) was 4.9% above GBCM estimates. FY11 PAT (before

minority) stood at RO 2.3mn, above

estimated loss of RO 3.5mn.

GBCM expects investor confidence to strengthen with improving earnings &

revived management focus and thus maintains “Accumulate” rating with a target price of OMR 0.650.

Raysut Cement (Oman)

NBK Capital

Accumulate FY2011 revenues of OMR 83.8mn was 1.9% above NBK’s estimate and net profit

of OMR 14.95mn was also ahead of

forecast.

NBK Capital believes that the recent share price drop is overdone and upgrades

Raysut from “Hold” to “Accumulate” with a price target of OMR 0.869.

Sorouh Real Estate

(UAE)

Rasmala Hold 4Q11 revenue of AED 1,227mn (+38%

QoQ), significantly above Rasmala’s estimate of AED 665mn. Net profit at AED 93mn (+37% QoQ) was also above

estimate by 34%.

Rasmala thinks that the main challenge for Sorouh is to create demand for its

upcoming developments and maintains “Hold” rating with a target price of AED

1.00.

Zain KSA (Saudi Arabia)

Al Rajhi Capital

Underweight 4Q11 revenues declined 1% YoY to SAR 1.7bn, against an expected a 12%

increase. Financial costs (SAR 249mn)

weighed heavily on the bottom-line leading to a net loss of SAR 461mn in Q4.

Al Rajhi is of the opinion that Zain KSA is

looking weaker with high debt and

interest costs eroding the capital. They have an “Underweight” rating with a price

target of SAR 6.00.

R E S E A R C H February 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 Market View

Dubai Companies Can

Fend For Themselves In

Debt Restructurings UAE

Dubai's government-linked companies can sort out

their debt issues without state assistance, a senior Dubai official said, following the rejection of a request

from bank creditors of Dubai Group for government support in its $10bn debt restructuring. "The

government of Dubai provides the necessary support

but isn't legally obligated to guarantee the debts of government-related companies," the government official said, declining to be named. "GREs are independent in managing their own financials and

have the capacity to deal with their creditors."

Moody’s: Lack Of Clarity On Government Support

Hurts Dubai Company

Ratings

UAE

Poor visibility on government support for financially strained companies in Dubai has put a drain on their

credit ratings and damaged investor sentiment in the emirate, according to the managing director of

regional corporate finance at Moody's. A lack of clarity

about what would happen if Dubai's state-linked companies could not refinance debt on commercial

terms remains a critical source of uncertainty for investors and credit ratings agencies, David Staples,

the MD of EMEA corporate finance at Moody's, said.

"If there was visibility over exactly what would happen if commercial refinancing couldn't be

achieved and that there was a backstop in place of some nature, then we would be able to rate to the

probability of that backstop coming," he said.

Global Sukuk Issuances Reached $20 Bn Last

January

MENA

The momentum of global sukuk issuances has continued during last January to reach $20.2bn, an

annual increase by 23.1%, KFH Research reported. According to the report, this huge figure of issuances

is due to the $9.7bn issuance announced by Plus

Expressways Berhad, the biggest company in construction and operation of highways in Malaysia.

Other notable issuances for the month included three sukuk from the UAE, all of which representing the

financial services sector.

DP World Said to Seek

Loan to Repay Half of $3 Billion Facility

UAE

DP World Ltd. started talks with banks for a loan to help pay half of a $3 billion credit facility maturing in

October, a banker familiar with the discussions said. The Dubai World-controlled company is talking to

HSBC Holdings Plc, Standard Chartered Plc and

Citigroup Inc. for a $1.5 billion loan, the banker said, asking not to be identified because the information is private. DP World, rated the lowest investment grade at Moody’s Investors Service and Fitch Ratings, will

pay the remaining $1.5 billion with its own cash, he

said.

R E S E A R C H February 2012

Qatari Conventional Banks ‘Cannot Invest In

Islamic Bonds’

Qatar

Conventional banks in Qatar will not be allowed to

invest in sukuk following the closure of their Shariah-based windows, IMF has said in its country report.

The IMF said the QCB had informed them that

“conventional banks would not be allowed to have Islamic subsidiaries, and they would not be allowed to

invest in sukuk… Also, conventional banks with Islamic windows in other GCC countries will not be

allowed to have an Islamic branch in Qatar.” IMF said several issues merit future consideration by the QCB when implementing the directive, to ensure that the

desired objectives are met

S&P: Rising Tensions Pose Credit Risks To Gulf

MENA

Rising tension between Iran and the West is

increasing political and economic risks for sovereign

and corporate issuers in the Middle East and focusing attention on the key role of the Strait of Hormuz in

trade for the Gulf, says S&P in a series of three new reports. “At this time, we think the current

developments in relation to Iran are captured in our ratings on countries and corporate issuers in the

region and so we do not expect any immediate

actions,” S&P said.

Dubai Sees DIFC, Jafza

Debt Refinancing Without

State Support

UAE

Dubai expects two of its main companies to refinance $3.25bn of debt without government support. DIFC

Investments LLC, has $1.25bn in Islamic bonds maturing in June, while Jebel Ali Free Zone has

AED7.5bn ($2bn) in Shariah-compliant notes due in November. “I’m very confident they will manage to

sort out these issues on their own,” Mohammed Al Shaibani, director general of Dubai ruler‟s court, said.

“We are available for any advice, any help. But mainly

they will manage it themselves.”

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