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SAUDI EQUITY REPORT

September 2013

Copyright © KFH Research Ltd. 2013. All rights reserved

Saudi Equity Market

EXECUTIVE SUMMARY ..................................................................................................................... 3

1.0 Performance of Tadawul All Share Index (TASI) ....................................................................... 5

2.0 Performances of Key Sectors in TASI ....................................................................................... 11

2.1 Real Estate Development Sector ............................................................................................ 11

2.2 Petrochemicals Industries Sector ........................................................................................... 13

2.3 Telecommunications and Information Technology Sector ................................................. 15

2.4 Banks and Financial Services................................................................................................. 17

2.5 Retail ........................................................................................................................................... 19

3.0 Valuation ........................................................................................................................................ 21

3.1 Summary and Results for Saudi Basic Industries (SABIC) ................................................ 21

3.2 Summary and Results for Etihad Etisalat Co (EEC) ........................................................... 27

3.3 Summary and Results for Yanbu National Petrochemical Company ............................... 33

3.4 Summary and Results for Emaar The Economic City (EMAAR)....................................... 39

3.5 Summary and Results for The National Shipping (BAHRI) ................................................ 45

4.0 IPO activities in Saudi Arabia and its regional peers .............................................................. 50

4.1 IPO activities in the GCC region ............................................................................................. 52

5.0 Merger and Acquisitions activities in Saudi Arabia ................................................................. 53

1 April 2013


Saudi Equity Market

EXECUTIVE SUMMARY

The Saudi stock market witnessed an uptrend during 1H2013 when TASI closed at 7,496.57 points, increasing by

10.22% y-t-d compare to 6,801.22 points at the end of 2012. Trading activity declined in 1H2013 compared to

1H2012 with the increased tension in the region. However, we remain cautiously optimistic on TASI over the next

3 to 6 months, due to the Saudi government expansion policies on social spending and infrastructure investments.

which is benefiting the real estate and building material sectors, and already reflected in the consolidated earnings

for the sector in 1H2013 when rose by 565.9% y-o-y, moreover the regional political situation, is leading to higher

oil prices which is a major source of revenue for the Kingdome. In 2012, Saudi Arabia's average oil production

was 9.9mln bpd, while in 2013, the oil production is between 9.5mln bpd and 9.6mln bpd. However, If Syria is

attacked, oil prices might reach USD125 per barrel, Oil prices recently reached between USD115 and USD117

per barrel due to expectations of an attack on Syria.

KSA also offers superior diversification and is not dominated by banks and real estate companies, allowing more

accuracy investments. Importantly, the kingdom has dozens of listed consumer and industrial companies which

are the key beneficiaries of enhanced government spending, also the very strong external balance sheet has

been bolstered so far in 2013.

Real Estate Sector:

The real estate sector was a notable performance, rising by 37% y-t-d and closing at 4,580.6 in June 2013. The

sector was affected positively by the huge infrastructure investments in the kingdom. We expect the positive

performance to continue in the near future, while the political tension in Syria may slow down the progress in the

meantime. The real estate sector beta is 0.950, offering the possibility of a lower rate of return, but also posing

lower market risk.

Petrochemical sector:

Demand for petrochemicals declines in 1H2013 and was reflected in the price decline of the products. We expect

petrochemical prices be marginally higher in the remaining of 2013. The Petrochemicals sector beta of 1.253

offers the possibility of a higher rate of return, and higher risk factor more than the market .

Telecommunication Sector:

Saudi Arabia is the largest telecom market in the GCC, accounting for 66% of total mobile subscribers, 59% of

total fixed-line connections and 58% of total Internet users, despite this only 38% of the country’s population are

connected to the Internet. Saudi Arabia announced that it will invest up to SAR37bln in its telecom sector this year

alone, with future forecasts predicting investments of up to SAR50bln by 2015, putting growth rates at more than

the rest of the GCC telecom markets combined. The telecommunication sector index rose by 10.9% y-t-d to

2,400.52 points from 2,164.8 points at the end of the previous year. The Telecommunication sector beta is 0.838,

offering the possibility of a lower rate of return, and also lower market risk.

Banks and Financial services Sector:

The banking sector accumulated net profit in the 2Q2013 was higher by 3.5% y-o-y, when all the banks achieved

positive results, the loan book of the banking sector increased by 13% y-o-y to SAR776bln in 2Q2013 from

SAR687bln 2Q2012. SAMA’s expansionary policy is likely to keep interest rates low during 2013 and 2014, all the

above led the index to increase by 11.7% in 1H2013 when scored 16,361.7 points in June 2013 from 14,645.4

points at the end of 2012. The Banking and Financial services sector beta is 0.946, offering the possibility of a

lower rate of return, and also lower risk than the market.


Saudi Equity Market

Retail sector:

The retail index closed at 9,545.2 points, with an increase of 27.2% during 1H2013, from 7,506.1 points recorded

at year end 2012. The sector is growing backed by increasing population and growing education demand, plus

the lifestyle improvement. The Retail sector beta is 0.824, offering the possibility of a lower rate of return, and also

lower market risk.

Selected Companies Valuation:

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for each

related sectors for the period 2009 - June 2013 and put more weights on the recent years, without calculating any

additional risks or benefits, We use also the weighted average price for each stock, which is calculated according

to the last 6 month traded value and volume. KFH Research adopted 80% for the weighted average price, P/E

multiple 10%, and for P/B multiple 10%.

Listed stock Valuation June 2013 Price Status

Saudi Basic Industries Corp (SABIC) 103.23 91.5 Undervalued

Etihad Etisalat Co (EEC) 75.39 81 Overvalued

Yanbu National Petrochemical Co (YANSAB) 55.5 55.5 Neutral

Emaar The Economic City (EMAAR) 8.95 9.95 Overvalued

The National Shipping Co. of Saudi Arabia (BAHRI) 20.27 19.5 Undervalued

Source: Audited Financials, KFHR


Saudi Equity Market

1.0 Performance of Tadawul All Share Index (TASI) TASI closed the first half of the year 2013 (1H2013) at 7,496.6 points, up by 695.3 points, or about 10.2% (y-t-d), compared with 6,801.22 points of year end 2012. The y-o-y gain reached 786.7 points, or about 11.7%, compared with 6,709.9 closing of June 2012. Performance of Tadawul all share index (TASI)

Source: Bloomberg, KFHR

When analysing the historical performance of the Saudi all share Index (TASI), we noted four time periods.

Stage One – Significant Decrease

This stage covers the period from 31 December 2007 to 12 January 2009. Due to the financial market crisis TASI decreased significantly by 62.6% or 6,908.7 points, when the index scored 4,130 points in 12 January 2009, (which is the lowest point during the period from December end 2007 to June end 2013), compared to 11,038.66 points at the year-end 2007.

Stage Two- Gradual Increase

This stage covers the period from 13 January 2009 to 24 March 2010. TASI recorded an increase by 67.8% or about 2,799.4 points when closed at 6,929.4 points at the end of this stage, compared to the end of the previous stage level of 4,130 points.

Stage Three- Volatility and increase

This stage covers the period from 25 March 2010 to 3 April 2012. TASI showed a sustain movement within a range between 7,930.6 and 5,323.3 points and increased by 14.4%, when scored 7,930.6 points at the end of the stage, compared to the end of the previous stage level of 6,929.4 points.

Stage Four- Lower Performance

This stage covers the period from 4 April 2012 to 30 June 2013. TASI closed at 7,496.6 points at the end of the second quarter of 2013, and retreated by 5.5% compared to the end of the previous stage.

Stage

One

Stage

Two

Stage

Three

Stage

Four


Saudi Equity Market

Performance of Tadawul all share index (TASI) and its peers in 1H2013

GCC Stock Markets Indices

1H2013%

Jun. 2013

Dec. 2012

Rank

DUBAI FINANCIAL MARKET (DFM) 37.0% 2,222.6 1,622.5 1 ABU DHABI SECURITIES EXCHANGE (ADX) 35.0% 3,551.2 2,630.9 2 KUWAIT PRICE INDEX 31.0% 7,772.9 5,934.3 3 BAHRAIN ALL SHARE INDEX 11.5% 1,187.8 1,065.6 4 Qatar Exchange Index (QE) 11.0% 9,275.6 8,358.9 5 Saudi Arabia TADAWUL INDEX (TASI) 10.2% 7,496.6 6,801.2 6MSM30 INDEX (OMAN) 10.0% 6,338.4 5,760.8 7


During 2013, the GCC countries continued the good performance of 2012. All the seven GCC markets ended June 2013 with gains compare to the end of 2012 (y-t-d). Dubai financial market (DFM) led the markets in the positive zone with a 37% rise; Abu Dhabi Securities Exchange Index (ADX) came next with 35% increase, then the Kuwait price index with 31%. The Saudi Tadawul index came on the 6th place with 10.2% rise, after Qatar Exchange index which achieved 11% increase, and before the Omani MSM30 index which rose by 10%

Performance of Tadawul all share index (TASI) and its peers during the period June 2013-June 2012

y-o-y % June 2013

Jun. 2013

Jun. 2012

Rank

DUBAI FINANCIAL MARKET (DFM) 53.1% 2,222.6 1,451.9 1

ABU DHABI SECURITIES EXCHANGE (ADX) 45.1% 3,551.2 2,447.6 2

KUWAIT PRICE INDEX 34.3% 7,772.9 5,789.2 3

Qatar Exchange Index (QE) 14.2% 9,275.6 8,123.0 4 Saudi Arabia TADAWUL INDEX (TASI) 11.7% 7,496.6 6,709.9 5MSM30 INDEX (OMAN) 11.4% 6,338.4 5,689.8 6

BAHRAIN ALL SHARE INDEX 5.4% 1,187.8 1,126.7 7 Source: Bloomberg, KFHR

When comparing the closing of June 2013 with the same period in the previous year (y-o-y), Dubai financial

market (DFM) continued leading other GCC markets with a 53.1% rise; ADX came in the second place with 45.1%

increase, then the Kuwait Price Index with 34.3%. The Saudi Tadawul index came on the 5th place with 11.7%

rise, after Qatar Exchange index, and before the Omani MSM30 index who added 14.2% and 11.4% y-o-y figure,

respectively.

Measuring the market liquidity in 1H2013, we note that total market value reached SAR760.8bln (USD20.3bln)

showing a SAR485.9bln decline, or about 39% (y-o-y) from SAR1,246.7bln recorded in 1H2012. Total daily

average market value for 1H2013 (128 trading days) scored about SAR5.9bln, retreating by SAR3.6bln, or about

38% (y-o-y) from SAR9.6bln seen in 1H2012 (130 trading days).

Daily Average Traded Value for the period (1H 2013-1H 2012)



Saudi Equity Market

Total market volume for 1H2013 scored about 28.9bln shares compared to 56.0bln shares traded in 1H2012.

Daily average volume reached 226.0mln shares in 1H2013, retreating by 204.79mln shares or about 47.5% (y-o-

y), from 430.8mln average shares traded in 1H2012.

Daily Average Traded Volume for the period (1H2013-1H2012)


Total market trades for 1H2013 scored about 17.656mln deals in 1H2013 compared with 25.889mln in 1H2012.

Daily average transactions reached 137,942 deals, retreating by 61,204 deals or about 30.7% (y-o-y) from

199,146 deals in the same period last year.

Daily Average Deals for the period (1H2013-1H2012)


The total traded value in the Saudi market, until the end of June 2013, is about 27.9% (or 55.8% on an annual

basis) of GDP in 2013, according to the latest estimations of the GDP, and about 51.0% (or about 102.1% on an

annual basis) of the total market capitalization of listed companies, amounting SAR1,490.8bln as in June end

2013.


Saudi Equity Market

Traded Value and Market Capitalization (MC) as a percentage of GDP

Traded Value (GDP)

Market

Capitalization

(MC)

The Ratio of Traded

value to

Ratio

of MC

to GDP

(SAR Mln)(SAR Mln) (SAR Mln)GDP MC

759,184.5 1,975,542 1,325,390 38.4% 57.3% 67.1% 2010

1,098,836.0 2,510,650 1,270,840 43.8% 86.5% 50.6% 2011

1,929,318.3 2,727,399* 1,400,340 70.7% 137.8% 51.3% 2012

1,521,628.0** 2,727,399* 1,490,778 55.8% 102.1% 54.7% 2013

*year 2012 estimation **annualized traded value

Source: KSA Central bank, KFHR

The market capitalization for 158 common listed companies in June 2013 after removing two companies listed in

the first quarter of 2013 (National medical care company and Northen region cement), scored SAR1,490.8bln,

increasing by SAR90.4bln, or about 6.5% (y-t-d), from SAR1,400.3bln in December end 2012.

Market Breadth

Increasing stocks outnumbers the decreasing ones in 1H2013. 94 companies increased in prices (59.5% of total

companies listed), while 59 companies decrease (37.3% of total companies listed), and 5 companies stand flat

(3.2% of total companies listed).

Meanwhile, 16 companies had capital increase during the period (1H2013) from various sectors, the table below

shows more details;

Companies showing change in outstanding shares in 1H2013

Companies Name Jun. 2013 Dec. 2012 change

Issued shares Issued shares %

1 BANK ALBILAD (ALBILAD) 400,000,000 300,000,000 33.3%

2 Yanbu Cement Co.(YCC) 157,500,000 105,000,000 50.0%

3 United Electronics Co.(Extra) 30,000,000 24,000,000 25.0%

4 Herfy Food Services Co(Herfy Foods) 33,000,000 30,000,000 10.0%

5 Alkhaleej Training and Education Co.(Alkhaleej Trng) 30,000,000 25,000,000 20.0%

6 Etihad Etisalat Co(Etihad Etisalat) 770,000,000 700,000,000 10.0%

7 The Company for Cooperative Insurance(Tawuniya) 100,000,000 75,000,000 33.3%

8

The Mediterranean & Gulf Insurance & Reinsurance

Co(MEDGULF) 100,000,000 80,000,000

25.0%

9 Trade Union Cooperative Insurance Co.(Trade Union) 27,500,000 25,000,000 10.0%

10 Al Sagr Co-operative Insurance Co(Sagr Insurance) 25,000,000 20,000,000 25.0%

11 United Cooperative Assurance Co(U C A) 28,000,000 20,000,000 40.0%

12 Takween Advanced Industries(Takween) 35,000,000 30,000,000 16.7%

13

Al Sorayai Trading And Industrial Group Co.(AlSorayai

Group) 37,500,000 30,000,000

25.0%

14 United Wire Factories Co.(ASLAK) 39,000,000 32,500,000 20.0%

15 United International Transportation Co. Ltd.(Budget Saudi) 30,500,000 24,400,000 25.0%

16 Al-Tayyar Travel Group Holding Co.(ALTAYYAR) 120,000,000 80,000,000 50.0%

Source: Tadawul, KFHR

06 April 2013; BANK ALBILAD (ALBILAD)Approved to increase the bank's capital from SAR3bln to SAR4bln, which

represents 33% of the bank's capital.


Saudi Equity Market

25 March 2013; Yanbu Cement Co.(YCC)approved to increase the company's capital by 50% from SAR1.050bln to

SAR1.575bln. The number of outstanding shares rose to 157.5mln from 105.0mln shares 02March 2013; United

Electronics Co.(Extra) approved the increase in capital by 25% from SAR240mln to SAR300mln, the number of

outstanding shares increased to 30mln from 24mln shares.

21 April 2013; Herfy Food Services Co(Herfy Foods)approved the increase of company's capital by 10% from

SAR300mln to SAR330mln, bringing the number of outstanding shares to 33mln from 30mln shares.

10 April 2013; Alkhaleej Training and Education Co.(Alkhaleej Trng)approved the capital increase of SAR50mln,from

SAR250mln to SAR300mln, which represents a 20% increase. Number of shares increased from 25mln shares to

30mln shares, through the issuance of bonus shares at a rate of one share for every five shares outstanding.

12 January 2013; Etihad Etisalat Co(Etihad Etisalat)approved a 10% capital increase from SAR7.0bln to SAR7.7bln or about 70mln shares. 23 April 2013; The Company for Cooperative Insurance(Tawuniya) approved 33% capital increase (SAR250mln) from SAR750mln, to SAR1bln; thus increasing the number of shares from 75mln to 100mln shares. 08 May 2013; The Mediterranean & Gulf Insurance & Reinsurance Co(MEDGULF) approved a capital increase from

SAR800mln to SAR1bln, an increase of 25%, thus increasing the number of shares from 80mln shares to 100mln

shares through the issuance of 20mln shares worth SAR200mln by granting one bonus share for each four

shares.

05 June 2013; Trade Union Cooperative Insurance Co.(Trade Union)approved a capital increase from SAR250mln to

SAR275mln, an increase of 10% through distributing one bonus share for every 10 shares outstanding.

07 May 2013; Al Sagr Co-operative Insurance Co(Sagr Insurance)approved 25% capital increase from SAR200mln to SAR250mln, through distributing one bonus share for every 4 shares outstanding owned by shareholders. 30 June 2013; United Cooperative Assurance Co(U C A)approved a capital increase by 40% or about SAR80mln, from SAR200mln to SAR280mln, thus increasing the number of shares from 20mln shares to 28mln shares by granting 2 bonus shares for every 5 shares. 19 March 2013; Takween Advanced Industries(Takween) approved the capital increase by 17% or SAR50mln from SAR300 to SAR350 by issuing 5mln shares from 30mln shares to 35mln shares by granting one bonus share for every six existing shares. 30 March 2013; Al Sorayai Trading And Industrial Group Co.(AlSorayai Group)approved the capital by 25% or about

SAR75mln from SAR300mln to SAR375mln, bringing the number of shares from 30mln shares to 37.5mln shares.

One bonus share was given against every four shares.

11 April 2013; United Wire Factories Co.(ASLAK) approved the capital increase from SAR325mln to SAR390mln, through distributing 20% bonus shares. The number of shares increased from 32.5mln shares to 39mln shares by giving one bonus share for every five shares list. 17 April 2013; United International Transportation Co. Ltd.(Budget Saudi)approved a capital increase from SAR244mln

to SAR305mln, an increase of 25% through distributing bonus shares. The number of shares increased to

30.5mln shares from 24.4mln shares.

03 April 2013; Al-Tayyar Travel Group Holding Co.(ALTAYYAR) approved a capital increase of 50% from SAR800mln

to SAR1.200bln, by granting one bonus share for every two shares.


Saudi Equity Market

The Highest Increase in market price in 1H2013


The Highest decrease in market price in 1H2013

Source:

Bloomberg,

KFHR

Tourism

Enterprise Company (shams) scored the highest increase in the market Price by 182.1% in 1H2013, while Amana

Cooperative Insurance (AMANA Insurance) scored the highest decrease of 73.8% in 1H2013.


Saudi Equity Market

2.0 Performances of Key Sectors in TASI

2.1RealEstateDevelopmentSectorThe real estate sector included 8 companies with a total market capitalization of SAR73.8bln in June 2013 (4.9%

of the total market) increase by 35.3% (y-t-d) from SAR54.5bln (3.9% of the total market), the real estate index

closed 4,580.6 points in June 2013 increased by 37% (y-t-d) from 3,344.2 points.

Real estate market capitalization by companies (June 2013- 2012)

Real Estate Market Capitalization (Mln SAR) June 2013 2012 Growth

1 Makkah Construction & Development Co. 11,620 6,692 73.6%

2 Jabal Omar Development Company 26,488 17,659 50.0%

3 Tiba Holding Co 5,100 3,728 36.8%

4 Dar Alarkan Real Estate Development Company 11,232 8,910 26.1%

5 Emaar The Economic City 8,458 7,055 19.9%

6 Knowledge Economic City 4,801 4,275 12.3%

7 Arriyadh Development Co. 2,305 2,285 0.9%

8 Saudi Real Estate Co. 3,780 3,912 -3.4%

Total 73,783 54,515 35.3%

Source: Tadawul official web site, KFHR

The reason behind this noticeable increase, is the increase of the market capitalization for 7 out of 8 companies,

the market capitalization of Makkah Construction and development increased by 73.6% (y-t-d), then Jabal Omar

development company came in the second place with 50% increase (y-t-d), as shown in the table above.

Average (Value, Volume, Trade), index According to sectors (June 2013-2012)

June 2013 2012

Average

Volume Value Trade

Index

Volume Value Trade

Index (Mln Shares)

(Mln

SAR) (Thou. Deal) (Mln Shares)

(Mln

SAR) (Thou. Deal)

TASI 226 5,943.9 137.9 7,496.6 317.2 7,363.8 160.7 6,801.2

Real Estate 49.4 601.1 9.9 4,580.6 67 807.5 13.5 3,344.2


The percentage of the real estate sector traded volume around 21.9% of the total trading of the Saudi market in

1H2013, when scored 6.3bln shares, with a daily average of 49.4mln shares (128 trading days), and scored

10.1% of the total trading value of the market in 1H2013, when scored SAR76.9bln, with a daily average of

SAR601.1mln.


Saudi Equity Market

Real Estate Index and Volume performance during the period (June 2013-2012)


The real estate traded volume reach 332.5mln shares, which is the maximum trading volume in a day during the

period June 2013-2012 in the closing of 22 April 2012, while reached 9mln trading shares (the minimum trading

volume) in the closing of 12 November 2013.

As indicated in the graph above the real estate index maximum point during the period June 2013-2012 is 4,688.6

points in the closing of 22 June 2013, while reached the minimum point in the first trading day in year 2012, when

closed at 2,675.6 points.

The real estate sector Beta and volatility for the period (June 2013- 2007)

Real Estate Sector

1.78% Volatility

0.950 Beta


The real estate sector beta 0.950, offering the possibility of a lower rate of return, but also posing lower than

market risk.


Saudi Equity Market

2.2 Petrochemicals Industries Sector The Petrochemicals sector included 14 companies with a total market capitalization of SAR448.6bln in June 2013

(30.1% of the total market) increase by 2% (y-t-d) from SAR439.9bln (31.4% of the total market), the

petrochemicals index closed 6,008.5 points in June 2013, index increased by 2.6% (y-t-d), from5,5856.4 points.

Petrochemicals market capitalization by companies (June 2013- 2012)

Petrochemicals Market Capitalization (Mln SAR) June 2013 2012 Growth

1 Advanced Petrochemical Company 5,215.0 4,296.7 21.4%

2 Saudi International Petrochemical Co 8,323.3 7,003.3 18.8%

3 Yanbu National Petrochemical Company 31,218.8 26,606.3 17.3%

4 National Petrochemical Company 10,920.0 9,600.0 13.8%

5 Saudi Industrial Investment Group 11,565.0 10,192.5 13.5%

6 Alujain Corporation 1,020.7 955.0 6.9%

7 Sahara Petrochemical Co. 6,296.7 5,945.7 5.9%

8 Saudi Basic Industries Corp 274,500.0 269,250.0 1.9%

9 National Industrialization Co 17,525.6 18,528.9 -5.4%

10 Saudi Arabia Fertilizers Co. 48,000.0 50,750.0 -5.4%

11 Saudi Kayan Petrochemical Company 17,100.0 18,150.0 -5.8%

12 Nama Chemicals Co. 1,555.1 1,651.5 -5.8%

13 Methanol Chemicals Company 1,495.4 1,610.0 -7.1%

14 Rabigh Refining and Petrochemical Co 13,884.6 15,373.8 -9.7%

Total 448,620.2 439,913.6 2.0%


The reason behind the slightly increase, is the increase of the market capitalization for 8 out of 14 companies, as

indicated in the table above, the market capitalization of advanced petrochemical company increase by 21.4% (y-

t-d), while Rabigh refining and petrochemical decreased by 9.7% (y-t-d), as shown in the table above.


June 2013 2012

Average

Volume Value Trade

Index

Volume Value Trade

Index (Mln Shares)

(Mln

SAR) (Thou. Deal) (Mln Shares)

(Mln

SAR) (Thou. Deal)

TASI 226 5,943.9 137.9 7,496.6 317.2 7,363.8 160.7 6,801.2

Petrochemical 20.1 716.2 9.9 6,008.5 42 1,187.7 17.1 5,856.4


The Petrochemicals sector traded volume around 8.9% of the total trading of the Saudi market in 1H 2013, when

scored 2.6bln shares, with an average of 20.1mln shares daily (128 trading days), and 12% of the total trading

value of the market in same period, when scored SAR91.7bln, with a daily average of SAR716.2mln.


Saudi Equity Market

Petrochemicals Index and Volume performance during the period (June 2013-2012)

Source: Tadawul official web site, KFHR The Petrochemicals traded volume reach 258.4mln shares, which is the maximum trading volume in a day during

the period June 2013-2012 in the closing of 21 march 2012, while reached 9.2mln trading shares (the minimum

trading volume) in 7 May 2013.

As indicated in the graph above the Petrochemicals index maximum point during the period June 2013-2012 is

7,487.5 points in the closing of 3 April 2012, while reached the minimum point in 27 November 2012, when closed

at 5,521.5 points.

The Petrochemicals sector Beta and volatility for the period (June 2013- 2007)

Petrochemicals Sector

2.0% Volatility

1.253 Beta


The Petrochemicals sector beta 1.253 offering the possibility of a higher rate of return, but also higher than market

risk.


Saudi Equity Market

2.3 Telecommunications and Information Technology Sector The Telecoms sector included 5 companies with a total market capitalization of SAR157.8bln in June 2013 (10.6%

of the total market) increase by 3.2% (y-t-d) from SAR152.8bln (10.9% of the total market), the telecommunication

index closed at 2,400.5 point, increased by 10.9% (y-t-d) from 2,164.8.

Telecommunications market capitalization by companies (June 2013- 2012)

Telecoms Market Capitalization (Mln SAR) June 2013 2012 Growth

1 Mobile Telecommunications Company Saudi Arabia 10,693.0 8,532.8 25.3%

2 Etihad Atheeb Telecommunication Company 2,472.8 2,016.0 22.7%

3 Etihad Etisalat Co 62,370.0 53,200.0 17.2%

4 Saudi Integrated Telecom Company 2,430.0 2,470.0 -1.6%

5 Saudi Telecom 79,800.0 86,600.0 -7.9%

Total 157,765.7 152,818.8 3.2%


The reason behind the increase, is the increase of the market capitalization for 3 out of 5 companies, as indicated

in the table above, the market capitalization of Mobile telecommunications company increase by 25.3% in June

2013, and Eitihad atheeb telecommunication increased by 22.7% in the same period, while Saudi Telecom the

heaviest weight company in the sector decreased by 7.9%.


June 2013 2012

Average Volume Value Trade

Index Volume Value Trade

Index (Mln Shares) (MlnSAR) (Thou. Deal) (Mln Shares) (MlnSAR) (Thou. Deal)

TASI 226 5,943.9 137.9 7,496.6 317.2 7,363.8 160.7 6,801.2

Telecom. 28.4 393.6 7.2 2,400.5 37.4 743.1 14.6 2,164.8


The percentage of the telecommunication sector traded volume around 12.6% of the total trading of the Saudi

market in the first six months of 2013, when scored 3.6bln shares, with a daily average of 28.4mln shares (128

trading days), and scored 6.6% of the total trading value of the market in same period, when scored SAR50.4bln,

with a daily average of SAR393.6mln.


Saudi Equity Market

Telecommunication Index and Volume performance during the period (June 2013-2012)


The Telecommunication sector traded volume reach the maximum trading volume in a day 207.8mln shares,

during the period June 2013-2012 in the closing of 11 April 2012, while reached 5.5mln trading shares (the

minimum trading volume) in 18 February 2013.

The Telecommunication index maximum point during the period June 2013-2012 is 2,435.2 points in the closing of

the 5 June 2013, while reached the minimum point in the first trading day in 2012, when closed at 1,659.8 points.

The Telecommunications sector Beta and volatility for the period (June 2013- 2007)

Telecommunications Sector 1.57% Volatility 0.838 Beta


The Telecommunication sector beta 0.838, offering the possibility of a lower rate of return, and also lower than

market risk.


Saudi Equity Market

2.4 Banks and Financial Services The banks and financial services sector included 11 companies with a total market capitalization of SAR346.2bln

in June 2013 (23.2% of the total market) increase by 12.6% (y-t-d) fromSAR307.5bln (22% of the total market),

the Banks and financial services index increased by 11.7% (y-t-d), when scored 16,361.7 points in June 2013,

from 14,645.4 points.

Banks and financial services market capitalization by companies (June 2013- 2012)

Banks & Fin. Ins. Market Capitalization (Mln SAR) June 2013 2012 Growth 1 The Saudi British Bank 37,100 29,900 24.1% 2 The Saudi Investment Bank 12,045 9,955 21.0% 3 Saudi Hollandi Bank 12,939 10,756 20.3% 4 BANK ALBILAD 10,160 8,490 19.7% 5 Arab National Bank 26,010 22,440 15.9% 6 Samba Financial Group 45,000 40,230 11.9% 7 Al Rajhi Bank 108,000 97,500 10.8% 8 Banque Saudi Fransi 29,290 26,578 10.2% 9 Riyad Bank 37,350 34,500 8.3% 10 Alinma Bank 20,475 19,275 6.2% 11 Bank AlJazira 7,830 7,830 0.0% Total 346,199 307,454 12.6% Source: Tadawul official web site, KFHR

The market capitalization for all the companies listed in the banks and financial services sector increased except

one stand still (Bank AL Jazira), AL Rajihi bank has the biggest market capitalization with SAR108.0bln (31.2% of

total market capitalization of the sector and 7.2% of the total market capitalization of the market), the Saudi British

bank increased by 24.1%, and the Saudi investment bank increased by 21% as indicated in the table above.


June 2013 2012




TASI 226 5,943.9 137.9 7,496.6 317.2 7,363.8 160.7 6,801.2 Banks 24.2 485.1 5.6 16,361.7 36.6 622.3 7.5 14,645.4 Source: Tadawul official web site, KFHR

The percentage of the Banks and financial services sector traded volume around 10.7% of the total trading

volume of the Saudi market in 1H 2013, when scored 3.1bln shares, with a daily average of 24.2mln shares (128

trading days), and scored 8.2% of the total trading value of the market in same period, when scored SAR62.1bln,

with a daily average of SAR485.1mln.


Saudi Equity Market

Banks Index and Volume performance during the period (June 2013-2012)


The Banks and Financial institutions sector traded volume reach the maximum trading volume in a day 238.4mln

shares during the period June 2013-2012 in the closing of 20 march 2012, while reached 7.4mln trading shares

(the minimum trading volume) in 4 November 2012.

As indicated in the graph above The banking and financial services sector maximum point during the period (June

2013-2012) is 18.064.4 points in the closing of 31 march 2012, while reached the minimum point in 27 November

2012, when closed at 1,659.8 points.

The Banking and financial services sector Beta and volatility for the period (June 2013- 2007)

Banking and Financial Services Sector 1.56% Volatility 0.946 Beta


The Banking and Financial services sector beta 0.946, offering the possibility of a lower rate of return, and also

lower than market risk.


Saudi Equity Market

2.5 Retail The Retail sector included 11 companies (after excluding national medical care company) with a total market

capitalization of SAR38.7bln in June 2013 (2.6% of the total market) increase by 26.5% (y-t-d) from SAR30.6bln

(2.2% of the total market), the Retail index closed 9,545.2 points in June 2013, increased by 27.2% (y-t-d) , from

7,506.1 points .

Retail Market Capitalization (Million SAR) June 2013 2012 Growth1 Fawaz Abdulaziz AlHokair Company 10,990 7,280 51.0% 2 Abdullah Al Othaim Markets Company 2,520 1,851 36.2% 3 Mouwasat Medical Services Company 3,438 2,688 27.9% 4 Jarir Marketing Co 11,580 9,315 24.3% 5 Saudi Automotive Services Co. 968 788 22.9% 6 United Electronics Company 2,933 2,490 17.8% 7 Alkhaleej Training and Education Company 1,050 903 16.3% 8 National Agriculture Marketing Co. 330 290 13.8% 9 Aldrees Petroleum & Transport Services Co. 1,113 1,038 7.2%

10 Fitaihi Holding Group 833 822 1.3% 11 Dallah Healthcare Holding Company 2,926 3,103 -5.7%

Total 38,680 30,567 26.5% Source: Tadawul official web site, KFHR

All the companies listed in the Retail sector increased except one (Dallah health care holding company decreased

by 5.7%), Jarir marketing has the heaviest market capitalization with SAR11.6bln (29.9% of total market

capitalization of the sector and 0.8% of the total market capitalization of the market). Fawaz Abdulaziz AlHokair

Company led the sector when it market capitalization increased by 51% y-t-d, followed by Abdullah Al Othaim

Markets Company when increased by 36.2% y-t-d.


June 2013 2012




TASI 226 5,943.9 137.9 7,496.6 317.2 7,363.8 160.7 6,801.2 Retail 10.9 549.7 15.2 9,545.2 6.7 185.9 5.3 7,506.1 Source: Tadawul official web site, KFHR

The percentage of the Retail sector traded volume around 4.8% of the total trading volume of the Saudi market in

the first six months of 2013, when scored 1.4bln shares, with a daily average of 10.9mln shares (128 trading

days), and scored 9.2% of the total trading value of the market in same period, when scored SAR70.4bln, with a

daily average of SAR549.7mln.


Saudi Equity Market

Retail Index and Volume performance during the period (June 2013-2012)

source: Tadawul official web site, KFHR

The Retail sector traded volume reach the maximum trading volume in a day about 77.2mln shares during the

period June 2013-2012 in the closing of 13 march 2013, while reached 1.5mln trading shares (the minimum

trading volume) in 9 December 2012.

The Retail index maximum point during the period (June 2013-2012) is 9,696.6 points in the closing of 8 June

2013, while reached the minimum point in 17 January 2012, when closed at 6,416 points.

The Retail sector Beta and volatility for the period (June 2013- 2007)

Retail Sector 1.61% Volatility 0.824 Beta


The Retail sector beta 0.824, offering the possibility of a lower rate of return, and also lower than market risk.


Saudi Equity Market

3.0 Valuation

3.1 Summary and Results for Saudi Basic Industries (SABIC)

Saudi Basic Industries (SABIC) and its subsidiaries engaged in the setting up of petrochemical, fertilizer, iron and steel, aluminum and other hydrocarbon based industries. The company’s assets increased in a compounded annual rate CAGR around 2.6% during 2009 – June 2013, and the share price has shown fluctuating during 2007 to June 2013, ranging between SAR34.1 to SAR181.75 per share. the Weighted Average share price in the last 6 months of the period has been SAR93.37.

Based on its historical performance and its latest financials and some basic assumptions, KFH Research has estimated SABIC’s fair price based on Relative Valuation approach by employing Petrochemicals sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weight average price in the market, The estimated fair value per share of SABIC is SAR103.23, which is expected to be reached during the next 3-6 months. As this value is more than share price in 30th of June 2013, amounting to SAR91.5.

Introduction and Background

Saudi Basic Industries (SABIC) is Saudi shareholding company; was incorporated in 4th of January 1977. SABIC has a paid up capital of SAR 30bln with the following shareholding structure at 25 July 2013, based on the disclosures to Tadawul of 5% or more ownership:

Shareholder Stake (%)Public Investment Fund 70.0% General Organization for Social Insurance 5.6% 5% or Above Owners 75.6%Public 24.4% Source: Tadawul official web site, KFHR

Based on the analysis of audited financial statements for the period 2009 through June 2013, we identified the key sources of income and profitability, and nature of its assets and liabilities.

Financial Position Assets SABIC’s total assets stood at SAR324.9bln as at June 2013. These increase at a compounded average rate (CAGR) of 2.6% over the period 2009 to June 2013. Assets are divided between current (38.3% of total assets) and non-current (61.7% of total assets).

Figure (1): Asset Distribution as on June 2013

Source: financial reports June 2013

Financial Analysis


Saudi Equity Market

Fixed Assets at SAR162bln or around 49.9% of total assets in June 2013, retreated by 1.9% y-o-y from SAR165.1bln, mainly Include the construction work to expand existing manufactures, as well as new projects implemented by subsidiaries, and Properties & buildings, fixed assets have grown at a CAGR of 0.8% from 2009 to June 2013.

Cash and cash equivalent valued at SAR52.7bln make 16.2% of total assets, mainly include term deposits and balances with banks; the cash decline by 9.9% y-o-y from SAR58.5bln, and decline at CAGR of 2.3% for the period 2009 June 2013.

SAR MLN 2009 2010 2011 2012 Jun-2013 1 CAGR %Net Income (Mother Company & Minority Interest)

9,074 21,529 29,242 24,780 25,211 33.9%

Number of Outstanding shares 3,000 3,000 3,000 3,000 3,000 Total Assets 296,861 317,580 332,784 338,434 324,973 2.6% Return on Average Assets (ROA)%* 3.1% 7.0% 9.0% 7.4% 7.6%

*June 2013 Annualized Ratios Source: SABIC’s financial reports

On comparing SABIC’s assets vis-à-vis its net income attributed to the mother company and the minority interest, the net profit of SAR21.5bln in 2010, SAR29.2bln in 2011, SAR24.8bln in 2012, and SAR25.2bln (on an annual basis) in June 2013, yielded Return on Average Asset (ROA) of 7.0%, 9.0%, 7.4%, and 7.6% respectively.

Graph (1): Evolution of Asset Structure from 2009 to June 2013:

Source: SABIC’s financial reports

Liabilities

SABIC’s total liabilities stood at SAR124.9bln in June 2013 of which about SAR85bln (68.1% of total liabilities) are non-current in nature. These included of long term debt of SAR71.5bln ( 57.3% of total liabilities).

SABIC’s current portion of liabilities stood at SAR39.9bln (31.9% of liabilities). These included the current portion of long term debt amounted about SAR9.7bln (7.8% of total liabilities) in June 2013, and short term debt of SAR220.6mln (0.2% of total liabilities).

1 Annualized


Saudi Equity Market

As we can see in the following table, the “Total Liabilities” are divided into eight main sources; their percentage of total liabilities has been changed over the period of 2009-June 2013.

SAR MLN 2009 % 2010 % 2011 % 2012 % Jun 2013

%

Short Term Debt 940 0.7% 1,121 0.7% 1,333 0.9% 874 0.6% 221 0.2% Cur. Por. of Long Term Debt

5,537 3.8% 15,634 10.3% 13,264 9.2% 15,029 10.7% 9,689 7.8%

Accounts Payable 16,678 11.6% 18,985 12.5% 16,388 11.4% 19,604 14.0% 17,854 14.3% Accrued Expenses

7,297 5.1% 6,770 4.5% 9,057 6.3% 9,627 6.9% 10,108 8.1%

Zakat Payable 1,721 1.2% 1,795 1.2% 3,140 2.2% 3,208 2.3% 1,994 1.6% Long Term Debt 100,538 69.7% 93,848 62.0% 87,907 61.2% 79,625 56.8% 71,547 57.3% End of Service Indemnity

7,044 4.9% 7,529 5.0% 8,555 6.0% 8,878 6.3% 10,142 8.1%

Other Long Term Liabilities

4,476 3.1% 5,752 3.8% 3,933 2.7% 3,351 2.4% 3,359 2.7%

Total Liabilities 144,231 100.0% 151,433 100.0% 143,578 100.0% 140,196 100.0% 124,915 100.0%


The company’s debt to equity decreased over the year 2010 to 66.6%, from 70.1%, the ratio continue the decline in 2011 and 2012 when reach 54.2%, 48.2% respectively, the debt to equity ratio decline again to 40.7% in June 2013 which is the lowest during the period 2009-June 2013:

2009 2010 2011 2012 Jun 2013Total Debt/Total Assets (%) 36.0% 34.8% 30.8% 28.2% 25.1% Total Debt/Equity (%) 70.1% 66.6% 54.2% 48.2% 40.7%


The total equity (related to the parent company) amounted to SAR149.4bln as of June 2013 indicating a book value per share of SAR49.81, rose up by 1.1% y-t-d, from SAR49.27 and 6.96% y-o-y from SAR46.57

SAR MLN 2009 2010 2011 2012 Jun 2013Equity (mother company) 108,255 120,782 138,022 147,801 149,445 shares 3,000 3,000 3,000 3,000 3,000 Book Value (SAR) 36.08 40.26 46.01 49.27 49.81


Financial Performance

SABIC’s total revenues amounted to SAR92.8bln (SAR184.8bln2), leading to a net profit attributed to parent company of SAR19.6bln for end 1H2013 (SAR39.2bln3), and net profit margin of 21.38%, compared to 20.31% y-o-y and 20.29% y-t-d.

The global financial downturn witnessed in 2008, and its continuing impacts in 2009, affects SABIC’s performance directly, with net income of SAR16.4bln attributed to parent company as a result of low revenues SAR103.1bln, in 2010 the revenues increased to SAR151.9bln which lead to net income of SAR33.3bln attributed to parent company, the increasing revenues continued when scored SAR189.9bln in 2011 increased by 25.0% or about SAR37bln y-o-y led to net income amounted about SAR45.3mln, the revenues in 2012 decline slightly by 0.46% or SAR 872mln, while the cost of goods sold increased by 5.43% or about SAR6.93bln led to decrease in the net income when reach SAR38.3bln attributed to parent company by 15% y-o-y or about SAR6.9bln, from SAR45.3bln. In June 2013 the total revenues scored SAR91.73bln a decline by 3.31% y-o-y from SAR94.87bln June 2012 (SAR183.46bln on an annual basis ,decreased 2.94% y-t-d from SAR189.02bln in 2012), while the net income of SAR19.6bln attributed to parent company increased by 1.7% y-o-y from SAR19.3bln in June 2012 attributed to parent company (SAR39.2bln on an annual basis ,increased by 2.3% y-t-d from SAR38.3bln in 2012) the increase attributed to the decrease of the cost of goods sold by 4.95% y-o-y when reach SAR64.66bln in June 2013, from SAR68.03bln in June 2012 (SAR129.33bln on an annual basis ,decreased by 3.98% y-t-d from

2 annualized 3 annualized


Saudi Equity Market

SAR134.7bln in 2012). SABIC registered a Return on Average Equity (ROE) of 17.4% in June 2013 vis-à-vis a ROE of 17.3% in 2012 and 22.6% in 2011.

The following table shows key financial indicators of the company: Indicators 2009 2010 2011 2012 Jun 2013

Share price (SAR) 82.5 104.75 96.25 89.75 91.5

Earnings per Share (SAR) 1.60 6.79 9.93 8.04 7.01 *

Book value per share (SAR) 36.08 40.26 46.01 49.27 49.81

Price to Earnings (P/E) 51.7 15.4 9.7 11.2 6.5 *

Price to Book Value (P/B) 2.39 2.73 2.18 1.9 1.8

Return on Average Assets (ROA)4 3.1% 7.0% 9.0% 7.4% 7.6% *

Return on Average Equity (ROE)5 8.4% 18.8% 22.6% 17.3% 17.4% *

*June 2013 Annualized Ratios Source: SABIC’s financial reports

The following table shows the comparison of key ratios and financial indicators of the company with the petrochemicals sector and the overall market. 2009 2010 2011 2012 June 2013

P/E

SABIC 51.6 15.4 9.7 11.2 6.5

Petro.Sector 42.1 16.3 10.6 11.8 12.0

Market 17.8 15.3 12.3 12.8 14.0

P/BV

SABIC 2.4 2.7 2.2 1.9 1.8

Petro.Sector 2.4 2.7 2.2 2.0 1.9

Market 2.0 2.1 1.8 1.8 1.9

ROA

SABIC 3.1% 7.0% 9.0% 7.4% 7.6%

Petro.Sector 2.0% 5.4% 7.0% 5.7% 5.6%

Market 2.8% 3.4% 3.8% 3.6% 3.5%

ROE

SABIC 8.4% 18.8% 22.6% 17.3% 17.4%

Petro.Sector 3.0% 14.3% 19.7% 15.0% 13.6%

Market 3.3% 11.4% 13.5% 13.0% 12.1%


SABIC’s price to earnings multiple (P/E) 6.5, is lower (Better) than the sector and the market in June 2013 when both reach 12.0 and 14.0 respectively, the price to book value multiple (P/B) 1.8, is lower (Better) than the sector and the market in June 2013 when both reach 1.90 and 1.90 respectively ,the return on assets (ROA) 7.6%, is higher than the sector and the market in June 2013 when both reach 5.6% and 3.5% respectively, the return on equity (ROE) 17.4%, is higher than the sector and the market in June 2013 when both reach 13.6% and 12.1% respectively.

SABIC Stock Performance

The graph below shows SABIC’s share performance vis-à-vis petrochemicals sector companies in Saudi stock market and the overall market performance during the period (2007- June 2013)

Graph (2): SABIC Share, Market and Petrochemicals Sector Performance (2007=100)

4 Attributed to Mother company and the minority interest 5 Attributed to Mother company


Saudi Equity Market

The maximum market price attained by SABIC’s share during the period 2007- June 2013 has been SAR181.75 on 12 of January 2008 with a 105.4% increase from its closing price on 6th of January 2003, while the lowest price was SAR34.1 on 9 March 2009, a decrease of 81.2% from its highest price.

The following table depicts the Beta, Volatility and Market Return:

MarketPetrochemicals SectorSABIC 1 1.25 1.150 Beta

The beta for the company over the period from 2007 to 30th June 2013 is 1.150, thus, the risk premium required to invest in the stock is HIGHER than that for the market; or in other words, the expected return on company shares supposed to be HIGHER than the expected return of the market.

Valuation

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 14 Petrochemicals companies in SABIC’s field, which are listed on the Saudi Stock Exchange. the weighted average P/E multiple for the sector was calculated at 16.9 times for the period 2009-June 2013, the weighted average P/B multiple was calculated at 2.15 times. Hence, using the resultant P/E multiple and SABIC’s annualized net income for June 2013 that equal to SAR25.21bln attributed to the mother company and minority interest, the estimated value of the company reached SAR142.103 per share, using the resultant P/B multiple and SABIC’s total equity attributed to the mother company and minority interest for June 2013 that equal to SAR200.1bln, the estimated value of the company reached SAR143.191 per share, without calculating any additional risks or benefits.

The following table depicts the valuation summary using P/E multiples:

P/E Multiples

Valuation using P/E multiple

Weighted Average Sector P/E multiple 16.909

SABIC ‘s Net Income as at June 2013 (Annualized) SAR25.211bln

Value of SABIC share using P/E multiple SAR142.103

The following table depicts the valuation summary using P/B multiples:

P/B Multiples

Valuation using P/B multiple

Weighted Average Sector P/B multiple 2.15

SABIC ‘s Book Value as at June 2013 SAR200.058bln

Value of SABIC share using P/B multiple SAR143.191

We use also the weighted average price of SABICs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR93.37 per share.

The following table depicts the Weighted average price summary:

6 MONTHS VOLUM 6 MONTHS VALUE Weighted average price582,051,696 54,346,079,174.25 93.37

Conclusion

For estimating the expected market value of SABIC’s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The Saudi stock exchange, 80% for the weighted average


Saudi Equity Market

price, the P/E multiple, 10%, and for P/B valuation 10%; and, we reached the value of SAR103.225 for SABIC’s share, which we believe will be the fair market value of SABIC’s shares in the short term. Compare to its trading price of SAR91.5 as on the end of June 2013.

Valuation Conclusion:

Weight



SABIC ‘s net income as at June 2013 (annualized) SAR25.211bln

Value of SABIC share using P/E multiple SAR142.103 10%

P/E Multiple share Value 14.210



SABIC ‘s Book Value as at June 2013 SAR200.058bln

Value of SABIC share using P/B multiple SAR143.191 10%

P/B Multiple share Value 14.319

SAR93.370 80%

Weighted average value 74.696

SABIC’s Fair Value SAR103.225


Saudi Equity Market

3.2 Summary and Results for Etihad Etisalat Co (EEC)

Etihad Etisalat Co (EEC) is a holding company with interest in operation and management of GSM mobile telecommunications network; provides internet, information technology consulting and maintenance services for telecommunication equipment; The company’s assets increased in a compounded annual rate CAGR around 8.8% during 2009 – June 2013, and the share price has shown fluctuating trends years during 2007 to June 2013, ranging between SAR20.45 to SAR83.00 per share. the Weighted Average share price in the last 6 months of the period has been SAR77.80.

Based on its historical performance and its latest financials and some basic assumptions, KFH Research has estimated EEC’s fair price based on Relative Valuation approach by employing Telecommunication sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weight average price in the market, The estimated fair value per share of EEC is SAR75.39, which is expected to be reached during the next 3-6 months. As this value is less than the market value of the share price as of 30th of June 2013, amounting to SAR81.0.


Etihad Etisalat (EEC) is Saudi shareholding company was incorporated as a joint stock company under the royal decree no. M/40 dated 18 August 2004. The company started its constituent activities on 14 December 2004. EEC started with a SAR4bln capital, distributed over 100mln shares at a par value of SAR50 per share, based on the disclosures to Tadawul of 5% or more ownership:

Shareholder Stake (%)

General Organization for Social Insurance 11.7%

Emirates Telecommunications Corporation (Etisalat) 27.4%

5% or Above Owners 39.1%

Public 60.9%



Financial Position Assets EEC’s total assets stood at SAR41.446bln as at June 2013. These increase at a compounded average rate (CAGR) of 8.8% over the period 2009 to June 2013. Assets are divided between current (28.2% of total assets) and non-current (71.8% of total assets).


Source: EEC financial reports June 2013

Financial Analysis


Saudi Equity Market

Property and Equipment stood at SAR19.085bln or around 46.0% of total assets in June 2013, rose by 13.2% y-o-y from SAR16.864bln, mainly Include a telecommunication network equipment (82.8% of total property and equipment item) which rose by SAR1.860bln in June 2013, fixed assets have grown at a CAGR of 19.0% from 2009 to June 2013.

Net receivables valued at SAR6.551bln make 15.8% of total assets, the receivables decline by 14.1% y-o-y from SAR7.624bln, while increased at CAGR of 5.2% for the period 2009 June 2013.

SAR MLN 2009 2010 2011 2012 June 2013 6 CAGR

%

Net Income 3,014 4,211 5,083 6,018 5,901 21.17%

Number of Outstanding shares 700 700 700 700 770

Total Assets 30,822 33,430 37,501 38,623 41,446 8.83%

Return on Average Assets (ROA)% * 10.37 13.09 14.33 15.81 14.56

*June 2013 Annualized Ratios Source: EEC’s financial reports

On comparing EEC’s assets vis-à-vis its net income, the net profit of SAR4.211bln in 2010, SAR5.083bln in 2011, SAR6.018bln in 2012, and SAR5.901bln (on an annual basis) in June 2013, yielded Return on Average Asset (ROA) of 13.09%, 14.33%, 15.81%, and 14.56% (on an annual basis) respectively.


Source: EEC’s financial reports

Liabilities

EEC’s total liabilities stood at SAR19.200bln in June 2013 of which about SAR8.574bln (44.7% of total liabilities) are non-current in nature, which is a sharia long term refinancing agreement signed with a local bank, in the first quarter of the year 2012, for total amount of SAR10bln, the loan period is seven years and is repayable for semi-annual schedule.

EEC’s current portion of liabilities stood at SAR10.625bln (55.3 % of total liabilities). These included the account payable about SAR6.012bln (31.3% of total liabilities), and the current portion of long term debt amounted about SAR974.031mln (5.1% of total liabilities) in June 2013,

6 Annualized


Saudi Equity Market

As we can see in the following table, the “Total Liabilities” are divided into six main sources; their percentage of total liabilities has been changed over the period of 2009-June 2013.

SAR MLN 2009 % 2010 % 2011 % 2012 % 13-Jun %

Short Term Debt 377 2.03% 599 3.37% 1,201 6.31% 0 0.00% 0 0.00%

Cur. Por. of L T Debt 1,777 9.59% 1,843 10.36% 4,895 25.73% 753 4.28% 974 5.07%

Accounts Payable 6,167 33.28% 6,198 34.85% 7,808 41.05% 5,580 31.74% 6,013 31.31%

Accrued Expenses 3,552 19.17% 3,335 18.75% 3,949 20.76% 3,609 20.53% 3,596 18.73%

Due To Sister Com. 211 1.14% 281 1.58% 194 1.02% 132 0.75% 43 0.22%

Long Term Debt 6,448 34.80% 5,529 31.09% 977 5.14% 7,506 42.69% 8,575 44.66%

Total Liabilities 18,532 100% 17,785 100% 19,024 100% 17,580 100% 19,200 100%


The company’s debt to equity decreased over the year 2010 to 66.6%, from 70.1%, the ratio continue the decline in 2011 and 2012 when reach 54.2%, 48.2% respectively, the debt to equity ratio decline again to 40.7% in June 2013 which is the lowest during the period 2009-June 2013:

2009 2010 2011 2012 13-Jun

Total Debt/Total Assets (%) 27.9% 23.8% 18.9% 21.4% 23.0%

Total Debt/Equity (%) 70.3% 51.2% 38.5% 39.5% 43.2%


The total equity amounted to SAR22.085bln as of June 2013 indicating a book value per share of SAR28.68, the book value rose up by 6.2% y-o-y, from SAR27.02 in June 2012, while decline by 4% y-t-d from SAR29.87 due to the increase of the outstanding shares by 10%.

SAR MLN 2009 2010 2011 2012 13-Jun

Equity 12,243 15,580 18,388 20,906 22,085

shares 700 700 700 700 770

Book Value (SAR) 17.49 22.26 26.27 29.87 28.68



EEC’s total revenues amounted to SAR11.600bln, leading to a net profit of SAR2.950bln for the end of 1H2013 (SAR5.901bln7), and net profit margin of 25.4%, compared to 24.6% y-o-y and 25.5% y-t-d. The net income witness a continuous growth since 2010, with net income of SAR4.211bln as a result of increasing revenues by 22.6% to SAR16.013bln in 2010, the increasing revenues continued when scored SAR20.052bln in 2011 increased by 25.2% or about SAR4.039bln y-o-y led to net income amounted about SAR5.083mln, the revenues in 2012 rose by 17.9% or SAR3.589mln, which led to increase in the net income by 15% y-o-y or about SAR4.46bln, when reach SAR6.017bln. In June 2013 the total revenues scored SAR11.600bln, an increase by 8.5% y-o-y from SAR10.687bln in June 2012 (SAR23.200bln on an annual basis ,decreased 1.9% y-t-d from SAR23.642bln), while the net income of SAR2.950bln increased by 12.2% y-o-y from SAR2.628bln in June 2012 (SAR5.901bln on an annual basis, declined by 1.9% y-t-d from SAR6.017bln).

7 annualized


Saudi Equity Market

EEC in June 2013 registered a Return on Average Equity (ROE) 29.82% (on an annual basis) vis-à-vis a ROE of 30.63% in 2012 and 29.93% in 2011.The following table shows key financial indicators of the company:

Indicators 2009 2010 2011 2012 13-Jun

Share price (SAR) 39.5 50.2 47.7 69 81

Earnings per Share (SAR) * 4.31 6.02 7.26 8.6 7.66


Price to Earnings (P/E) * 9.2 8.3 6.6 8.0 10.6


Return on Average Assets (ROA) * 10.37% 13.09% 14.33% 15.81% 14.66%

Return on Average Equity(ROE) * 27.40% 30.27% 29.93% 30.63% 29.82%

*June 2013 Annualized Ratios Source: EEC’s financial reports

The following table shows the comparison of key ratios and financial indicators of the company with the telecommunication sector and the overall market. 2009 2010 2011 2012 June-138

P/E

EEC 9.2 8.3 6.6 8.0 10.6

Teleco.Sector 10.06 8.91 8.33 9.32 11.35

Market 17.79 15.28 12.29 12.75 13.95

P/BV

EEC 2.3 2.3 1.8 2.3 2.8

Teleco.Sector 2.16 2.07 1.68 1.86 1.92

Market 2.0 2.06 1.84 1.84 1.9

ROA

EEC 10.37% 13.09% 14.33% 15.81% 14.66%

Teleco.Sector 8.39% 9.64% 8.41% 9.58% 10.04%

Market 2.79% 3.43% 3.76% 3.59% 3.48%

ROE

EEC 27.40% 30.27% 29.93% 30.63% 29.82%

Teleco.Sector 22.75% 23.63% 20.07% 20.99% 17.15%

Market 3.28% 11.38% 13.54% 13.04% 12.09%


EEC’s price to earnings multiple (P/E) 10.6, is lower (Better) than the sector and the market in June 2013 when both reach 11.35 and 13.95 respectively, the price to book value multiple (P/B) 2.8, is higher (worse) than the sector and the market in June 2013 when both reach 1.92 and 1.90 respectively ,the return on assets (ROA) 14.66%, is higher than the sector and the market in June 2013 when both reach 10.04% and 3.48% respectively, the return on equity (ROE) 29.82%, is higher than the sector and the market in June 2013 when both reach 17.15% and 12.09% respectively.

EEC Stock Performance

The graph below shows EEC’s share performance vis-à-vis telecommunications sector companies in Saudi stock market and the overall market performance during the period (2007- June 2013)

Graph (2): EEC Share, Market and Telecommunication Sector Performance (2007=100)

8 annualized


Saudi Equity Market

The maximum market price attained by EEC’s share during the period 2007- June 2013 has been SAR117.25 on 13 February 2006, with a 172.0% increase from its closing price on 20 December 2004, while the lowest price was SAR20.5 on 23 November 2008, a decrease of 82.6% from its highest price.


MarketTelecommunication SectorEEC 1 0.838 0.903 Beta

The beta for the company over the period from 2007 to 30th June 2013 is 0.903, thus, the risk premium required to invest in the stock is LOWER than that for the market; or in other words, the expected return on company shares supposed to be LOWER than the expected return of the market.

Valuation

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 5 Telecommunication and information technology companies in EEC’s field, which are listed on the Saudi Stock Exchange. the weighted average P/E multiple for the sector was calculated at 9.93 times for the period 2009-June 2013, the weighted average P/B multiple was calculated at 1.93 times. Hence, using the resultant P/E multiple and EEC’s annualized net income for June 2013 that equal to SAR5.901bln, the estimated value of the company reached SAR76.117per share, using the resultant P/B multiple and EEC’s total equity for June 2013 that equal to SAR22.085bln, the estimated value of the company reached SAR55.425 per share, without calculating any additional risks or benefits.


P/E Multiples



EEC ‘s Net Income as at June 2013 (Annualized) SAR5.901bln

Value of EEC share using P/E multiple SAR76.117


P/B Multiples



EEC ‘s Book Value as at June 2013 SAR22.085bln

Value of EEC share using P/B multiple SAR55.425

We use also the weighted average price of EECs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR77.80per share. The following table depicts the Weighted average price summary:

6 MONTHS VOLUM 6 MONTHS VALUE Weighted average price

95,747,605 7,448,894,219 77.8

Conclusion

For estimating the expected market value of EEC’s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The Saudi stock exchange, 80% for the weighted average price ,the P/E multiple, 10%, and for P/B valuation 10%; and, we reached the value of SAR75.39 for EEC’s share, which we believe will be the fair market value of EEC’s shares in the short term. Compare to its trading price of SAR81as on the end of June 2013.


Saudi Equity Market


Weight



EEC ‘s net income as at June 2013 (annualized) SAR5.901bln

Value of EEC share using P/E multiple SAR76.117 10%




EEC ‘s Book Value as at June 2013 SAR22.085bln

Value of EEC share using P/B multiple SAR55.425 10%


SAR77.80 80%


EEC’s Fair Value SAR75.39


Saudi Equity Market

Yanbu National Petrochemical Company (YANSAB) Manufacture of petrochemicals including ethylene, butane, propylene, polypropylene, high and low density polyethylene, ethylene glycol, methyl tert-butyl and benzene. The company’s assets increased in a compounded annual rate CAGR around 2.7% during 2009 – June 2013, and the share price has shown fluctuating trends during 2007 to June 2013, ranging between SAR12.85 to SAR69.5 per share. the Weighted Average share price in the last 6 months of the period has been SAR52.765.

Based on its historical performance and its latest financials and some basic assumptions, KFH Research has estimated YANSAB’s fair price based on Relative Valuation approach by employing Petrochemicals sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weight average price in the market, The estimated fair value per share of YANSAB is SAR55.50, which is expected to be reached during the next 3-6 months. As this value is equal to market value of the share price as of 30 June 2013, amounting to SAR55.50.


Yanbu National Petrochemical Company (YANSAB) is Saudi shareholding company; was incorporated in 11 February 2006. YANSAB is the first joint stock company to be formed by SABIC. The company has completed awarding all of the engineering, procurement and construction contracts to build its complex in YANBU industrial. YANSAB has a paid up capital of SAR 5.625bln with the following shareholding structure at 22 January 2013, based on the disclosures to Tadawul of 5% or more ownership:


Saudi Basic Industries Corporation 51.00%

General Organization for Social Insurance - Saudi Arabia 11.00%

Saudi Pharmaceutical Industries and Medical Appliances Corporation 1.90%

Saudi Arabian Fertilizer Company 1.69%


Public 34.41%



Financial Position Assets YANSAB’s total assets stood at SAR23.183bln as at June 2013. These increase at a compounded average rate (CAGR) of 2.7% over the period 2009 to June 2013. Assets are divided between current (28.5% of total assets) and non-current (71.5% of total assets).



3.3 Summary and Results for Yanbu National Petrochemical Company

Financial Analysis


Saudi Equity Market

Fixed Assets at SAR16.031bln or around 69.2% of total assets in June 2013, retreated by 6.8% y-o-y from SAR17.203bln, The company has rented land for machinery, equipment and buildings from the governmental bodies for 35 years started in January 1, 2006 and is subject to renewal, Property and equipment include assets with a net book value of approximately SAR3.175mln rented under a lease contract from one of the local banks.

Cash and cash equivalent valued at SAR1.747bln about 7.5% of total assets, the cash and cash equivalent Include cash balances in banks, investments, and Murabaha can be liquidated within three months or less; the cash rose by 162.2% y-o-y from SAR666.606mln, and rose at CAGR of 35.4% for the period 2009 June 2013.

SAR MLN 2009 2010 2011 2012 13-Jun 9 CAGR %Net Income (After Taxes, Zakat) -29.2 1,672.8 3,174.3 2,446.4 2,675.2 N/A Number of Outstanding shares 562.50 562.50 562.50 562.50 562.50 Total Assets 21,124 23,163 22,975 22,388 23,183 2.69% Return on Average Assets (ROA)% * -0.15% 7.55% 13.76% 10.79% 11.66%

*June 2013 Annualized Ratios Source: YANSAB’s financial reports

On comparing YANSAB’s assets vis-à-vis its net income, the net profit of SAR1.672bln in 2010, SAR3.174bln in 2011, SAR2.446bln in 2012, and SAR2.675bln (on an annual basis) in June 2013, yielded Return on Average Asset (ROA) of 7.55%, 13.76%, 10.79%, and 11.66% respectively.


Source: YANSAB’s financial reports

Liabilities

YANSAB’s total liabilities stood at SAR9.446bln in June 2013 of which about SAR6.320bln (66.9% of liabilities) are non-current in nature. These included of long term debt of SAR6.171bln that form 65.3% of total liabilities.

YANSAB’s current portion of liabilities stood at SAR3.125bln (33.1% of liabilities). These included the current portion of long term debt amounted about SAR1.298bln (13.7% of total liabilities) in June 2013, and accrued expenses of SAR1.545bln that form 16.4% of total liabilities.

9 annualized


Saudi Equity Market

As we can see in the following table, the “Total Liabilities” are divided into nine main sources; their percentage of total liabilities has been changed over the period of 2009-June 2013.

SAR MLN 2009 % 2010 % 2011 % 2012 % June

2013 %

Short Term

Islamic

Financing

0.0 0.00% 222.3 1.40% 317.6 2.55% 357.2 3.79% 0.0 0.00%

Current Portion

of Long Term

Debt

915.7 5.92% 724.6 4.58% 2,077.1 16.67% 921.6 9.78% 1,298.4 13.74%

Accounts

Payable 275.8 1.78% 256.3 1.62% 423.4 3.40% 361.4 3.83% 282.2 2.99%

Accrued

Expenses 487.9 3.16% 1,058.1 6.69% 737.4 5.92% 831.1 8.82% 1,545.4 16.36%

Long Term

Debt 11,540.5 74.67% 8,040.5 50.82% 6,542.5 52.51% 4,942.7 52.43% 6,171.8 65.33%

Long Term

Islamic

Financing

0.0 0.00% 2,553.1 16.14% 2,235.6 17.94% 1,878.3 19.92% 0.0 0.00%

Long term

loans from

major

shareholder

2,155.2 13.94% 2,870.2 18.14% 0.0 0.00% 0.0 0.00% 0.0 0.00%

Other non-

current

liabilities

0.0 0.00% 0.0 0.00% 126.8 1.02% 134.9 1.43% 149.2 1.58%

end of service 81.1 0.52% 97.9 0.62% 0.0 0.00% 0.0 0.00% 0.0 0.00%

Total

Liabilities 15,456.3 100.0% 15,823.0 100.0% 12,460.3 100.0% 9,427.3 100.0% 9,447.0 100.0%


The company’s debt to equity decreased over the year 2010 to 185.56%, from 247.12%, the ratio continue to decline in 2011 and 2012 when reach 100.56%, 62.33% respectively, the debt to equity ratio decline again to 53.62% in June 2013 which is the lowest during the period 2009-June 2013:

2009 2010 2011 2012 June 2013




The total equity amounted about SAR13.736bln as of June 2013 indicating a book value per share of SAR24.4, rose up by 6.0% y-t-d, from SAR23.0 and 15.5% y-o-y from SAR21.15

SAR MLN 2009 2010 2011 2012 June 2013

Equity 5,667.7 7,340.5 10,514.8 12,961.2 13,736.3

shares 56.3 56.3 56.3 56.3 56.2

Book Value (SAR) 10.1 13.1 18.7 23.0 24.4



Saudi Equity Market


YANSAB’s total revenues amounted about SAR4.400bln, leading to a net profit of SAR1.337bln for end 1H2013 (SAR2.675bln10), and net profit margin of 30.53%, compared to 28.7% y-o-y and 26.31% y-t-d.

The company started to generate revenues in 2010 by SAR5.821bln, led to net income of SAR1.672bln in 2010 the revenues noticeably increased by 65.9% to SAR9.659bln, which is the main reason behind the high increase of net income when rose by 89.8% to SAR3.174bln in 2011, the revenues slightly decline in 2012 by 3.7% y-o-y, to SAR9.299bln, while the cost of goods sold increased by 6.2% or about SAR359.382bmln which led to decrease in net income by 22.9% y-o-y or about SAR727.965mln to SAR2.446bln, from SAR3.174bln. In June 2013 the total revenues scored SAR4.381bln, a decline by 8.3% y-o-y, from SAR4.778bln June 2012 (SAR8.762bln on an annual basis, decreased by 5.8% y-t-d from SAR9.299bln in 2012), while the net income of SAR1.337bln decreased by 2.4% y-o-y from SAR1.369bln in June 2012 (SAR2.675bln on an annual basis, increased by 9.4% y-t-d from SAR2.446bln in 2012)

YANSAB registered a Return on Average Equity (ROE) of 20.88% in June 2013 (on an annual basis) vis-à-vis a ROE of 20.84% in 2012 and 35.56% in 2011.

The following table shows key financial indicators of the company:

Indicators 2009 2010 2011 2012 June 2013

11

Share price (SAR) 33.4 47.6 44 47.3 55.5

Earnings per Share (SAR) * -0.05 2.97 5.64 4.35 4.76


Price to Earnings (P/E) * N/A 19.92 10.5 13.62 12.46


Return on Average Assets (ROA) * -0.15% 7.55% 13.76% 10.79% 11.66%

Return on Average Equity (ROE) * -0.51% 25.72% 35.56% 20.84% 20.88%

*June 2013 Annualized Ratios Source: YANSAB’s financial reports

The following table shows the comparison of key ratios and financial indicators of the company with the petrochemicals sector and the overall market. 2009 2010 2011 2012 June 2013

P/E

YANSAB N/A 19.92 10.5 13.62 12.46

Petro.Sector 42.11 16.27 10.61 11.78 12.02

Market 17.79 15.28 12.29 12.75 13.95

P/BV

YANSAB 5.88 4.54 3.17 2.57 2.43

Petro.Sector 2.39 2.68 2.22 1.95 1.9

Market 2.00 2.06 1.84 1.84 1.9

ROA

YANSAB -0.15% 7.55% 13.76% 10.79% 11.66%

Petro.Sector 2.04% 5.40% 6.99% 5.71% 5.57

Market 2.79% 3.43% 3.76% 3.59% 3.48%

ROE

YANSAB -0.51% 25.72% 35.56% 20.84% 20.88%

Petro.Sector 3.02% 14.34% 19.69% 15.03% 13.56%

Market 3.28% 11.38% 13.54% 13.04% 12.09%


YANSAB’s price to earnings multiple (P/E) 12.46, is higher (Worse) than the sector and the market in June 2013 when both reach 12.02 and 13.95 respectively, the price to book value multiple (P/B) 2.43, is higher (Worse) than the sector and the market in June 2013 when both reach 1.90 and 1.90 respectively ,the return on assets (ROA) 11.66%, is higher than the sector and the market in June 2013 when both reach 5.57% and 3.48% respectively,

10 annualized 11 Annualized


Saudi Equity Market

the return on equity (ROE) 20.88%, is higher than the sector and the market in June 2013 when both reach 13.56% and 12.09% respectively.

YANSAB Stock Performance

The graph below shows YANSAB’s share performance vis-à-vis petrochemicals sector companies in Saudi stock market and the overall market performance during the period (2007- June 2013)

Graph (2): YANSAB Share, Market and Petrochemicals Sector Performance (2007=100)

The maximum market price attained by YANSAB’s share during the period 2007- June 2013 has been SAR69.5 on 14 of January 2008 with a 175.2% increase from its closing price on 6th of January 2007, while the lowest price was SAR12.85 on 22 November 2008, a decrease of 440.9% from its highest price.


MarketPetrochemicals SectorYANSAB 1 1.25 1.270 Beta

The beta for the company over the period 2007 to 30th June 2013 is 1.27, thus, the risk premium required to invest in the stock is HIGHER than that for the market; or in other words, the expected return on company shares supposed to be HIGHER than the expected return of the market.

Valuation

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 14 Petrochemicals companies in YANSAB’s field, which are listed on the Saudi Stock Exchange. the weighted average P/E multiple for the sector was calculated at 16.9 times for the period 2009-June 2013, the weighted average P/B multiple was calculated at 2.15 times. Hence, using the resultant P/E multiple and YANSAB’s annualized net income for June 2013 that equal to SAR2.675bln, the estimated value of the company reached SAR80.419 per share, using the resultant P/B multiple and YANSAB’s total equity for June 2013 that equal to SAR13.736bln, the estimated value of the company reached SAR52.436 per share, without calculating any additional risks or benefits.


P/E Multiples



YANSAB ‘s Net Income as at June 2013 (Annualized) SAR2.675bln

Value of YANSAB share using P/E multiple SAR80.419


Saudi Equity Market


P/B Multiples

Valuation using P/B multiple Weighted Average Sector P/B multiple 2.15 YANSAB ‘s Book Value as at June 2013 SAR13.736bln Value of YANSAB share using P/B multiple SAR52.436

We use also the weighted average price of YANSABs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR52.765 per share.


6 MONTHS VOLUM 6 MONTHS VALUE Weighted average price62,467,444 3,296,094,010 52.765

Conclusion

For estimating the expected market value of YANSAB’s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The Saudi stock exchange, 80% for the weighted average price ,the P/E multiple, 10%, and for P/B valuation 10%; and, we reached the value of SAR55.5 for YANSAB’s share, which we believe will be the fair market value of YANSAB’s shares in the short term. Which is the trading price of SAR55.5 as on the end of June 2013.


Weight



YANSAB ‘s net income as at June 2013 (annualized) SAR2.675bln

Value of YANSAB share using P/E multiple SAR80.419 10%




YANSAB ‘s Book Value as at June 2013 SAR13.736bln

Value of YANSAB share using P/B multiple SAR52.436 10%


SAR52.765 80%


YANSAB’s Fair Value SAR55.50


Saudi Equity Market

3.4 Summary and Results for Emaar The Economic City (EMAAR) Emaar The Economic City (EMAAR) Develop property, reclaimed lands & other types of land in the special economic zone or elsewhere for multiple use or other development operations, including infrastructure facilities. The company’s assets increased in a compounded annual rate CAGR around 12.1% during 2009 – June 2013, and the share price has shown fluctuating trends during 2007 to June 2013, ranging between SAR12.85 to SAR69.5per share. the Weighted Average share price in the last 6 months of the period has been SAR52.765.

Based on its historical performance and its latest financials and some basic assumptions, KFH Research has estimated YANSAB’s fair price based on Relative Valuation approach by employing Petrochemicals sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weight average price in the market, The estimated fair value per share of YANSAB is SAR55.50, which is expected to be reached during the next 3-6 months. As this value is equal to market value of the share price as of 30th of June 2013, amounting to SAR55.50.


Emaar The Economic City (EMAAR) is Saudi shareholding company; was incorporated in 26 September 2006.

EMAAR leads the master-planning and development of King Abdullah Economic City (KAEC), a project being built

on a pristine location off the Red Sea in the north of Jeddah, EMAAR has a paid up capital of SAR 8.500bln with

the following shareholding structure at 22 January 2013, based on the disclosures to Tadawul of 5% or more

ownership:


Modern Diem for real estate management 18.80% Emaar Middle east 5.80% MI Holdings 5.80% MI Strategic Investment 5.80% MI Royal Capital 9.40% 5% or Above Owners 45.60%Public 54.40% Source: Tadawul official web site, KFHR


Financial Position Assets

EMAAR’s total assets stood at SAR13.890bln as at June 2013. These increase at a compounded average rate (CAGR) of 12.1% over the period 2009 to June 2013. Assets are divided between current (29.9% of total assets) and non-current (70.1% of total assets).

Figure (1): Assets Distribution as on June 2013


Financial Analysis


Saudi Equity Market

Investment property rose by 25.2% y-o-y to SAR4.497bln in June 2013, from SAR3.59bln, mainly it is a greenfield land measuring approximately 168mln square meters has been earmarked for the master development of the KAEC, therefore, the greenfield land and associated costs amounting to SAR3.517bln (2012:SAR3.591bln)

Fixed Assets at SAR3.856bln or around 27.8% of total assets in June 2013, increased by 6.0% y-o-y from SAR3.689bln, property and equipment includes capital work in progress amounted to SAR3.257bln which represent construction costs in respect of the infrastructure and other projects at KAEC.

Cash and cash equivalent valued at SAR3.137bln make 22.6% of total assets, Include cash balances in banks amounted SAR368.101mln, and short term Murabaha of SAR2.769bln; the cash rose by 1552% y-o-y from SAR189.915mln, and rose at CAGR of 44.6% for the period 2009 June 2013.

SAR MLN 2009 2010 2011 2012 June

2013 12

CAGR

%

Net Income (After Taxes, Zakat) (308.85) (309.92) 82.55 189.20 34.75 N/A

Number of Outstanding shares 8,500 8,500 8,500 8,500 8,500

Total Assets 9,305 8,885 13,746 13,884 13,891 12.1%

Return on Average Assets (ROA)% * -3.28% -6.42% 0.73% 1.37% 0.50%

*June 2013 Annualized Ratios Source: EMAAR’s financial reports

On comparing EMAAR’s assets vis-à-vis its net income, the net income turned to positive in 2011, when scored SAR82.554mln, SAR189.198mln in 2012, and SAR34.752mln in June 2013, yielded Return on Average Asset (ROA) of 0.73%, 1.37%, and 0.50% respectively.

Liabilities

EMAAR’s total liabilities stood at SAR6.286bln in June 2013 of which about SAR5.570bln (88.6% of liabilities) are non-current in nature. These included of long term debt of SAR5.221bln that form 83.1% of total liabilities.

EMAAR’s current portion of liabilities stood at SAR716.007mln (11.4% of liabilities), which is mainly account payables.

As we can see in the following table, the “Total Liabilities” are divided into nine main sources; their percentage of total liabilities has been changed over the period of 2009-June 2013.

SAR MLN 2009 % 2010 % 2011 % 2012 % Jun-13 %

Accounts Payable 1,298 91.16% 1,442 90.86% 1,121 17.60% 864 5.83% 716 11.39%

Long Term Debt 0 0.00% 0 0.00% 5,062 79.51% 5,168 34.88% 5,221 83.06%

Deferred contribution 58 4.07% 86 5.39% 149 2.34% 245 1.66% 334 5.31%

Long term provision 54 3.83% 54 3.43% 29 0.45% 29 0.19% 5 0.08%

Employees end of

service benefits 8 0.56% 5 0.32% 5 0.09% 8,511 57.44% 10 0.16%

liabilities related to

disposal assets 5 0.38% 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Total Liabilities 1,423 100% 1,587 100% 6,366 100% 14,817 100% 6,286 100%

Source: EMAAR’s financial reports

12 Annualized


Saudi Equity Market

The company was fully finance by equity in the period 2009-2010, EMAAR’s debt to equity is almost constant during the period 2011-June 2013 due to the parallel changes of the debt and equity, the ratio scored 68.58% in 2011, and 68.27%, 68.66% in 2012 and June 2013 respectively:

2009 2010 2011 2012 Jun-13



Source: EMAARs financial reports

The total equity amounted to SAR7.604bln as of June 2013 indicating a book value per share of SAR24.4, rose up by 6.0% y-t-d, from SAR23.0 and 15.5% y-o-y from SAR21.15

SAR MLN 2009 2010 2011 2012 Jun-13

Equity 7,881.68 7,297.86 7,380.40 7,569.59 7,604.35

shares 850 850 850 850 850

Book Value (SAR) 9.27 8.59 8.68 8.91 8.95



EMAAR’s total revenues amounted to SAR54.539mln, leading to a net profit of SAR34.752mln for end 1H2013 (SAR69.504mln13), and net profit margin of 63.72%, compared to 38.43% y-o-y and 34.70% y-t-d.

The company started to generate positive income in 2011 due to the high increase in the revenues and the noticeable decrease in the cost of revenues, the revenues increased in 2012 by 33.7% y-o-y, when scored SAR545.182mln, while the cost of goods sold decreased by 30.6%, which led to high increase in net income when reach SAR189.198mln by 129.2% y-o-y or about SAR106.644mln, from SAR82.554mln. In June 2013 the total revenues scored SAR54.539mln a decline by 84.8% y-o-y from SAR358.811mln June 2012 (SAR109.078mln on an annual basis ,decreased 80.0% y-t-d from SAR545.182mln in 2012), while the net income of SAR34.752mln decreased by 74.8% y-o-y from SAR137.904bln in June 2012 (SAR69.504mln on an annual basis ,decreased by 63.3% y-t-d from SAR189.198mln in 2012)

EMAAR registered a Return on Average Equity (ROE) of 0.91% in June 2013 (on an annual basis) vis-à-vis a ROE of 2.44% in 2012 and negative 1.74% in 2011.

The following table shows key financial indicators of the company: Indicators 2009 2010 2011 2012 June 2013 14

Share price (SAR) 9.6 7.1 7.35 8.3 9.95

Earnings per Share (SAR) * -0.36 -0.69 0.1 0.22 0.08


Price to Earnings (P/E) * N/A N/A N/A 38.16 125.35


Return on Average Assets (ROA) * -3.11% -5.03% -0.92% 1.33% 0.50%

Return on Average Equity (ROE) * -3.64% -5.96% -1.74% 2.44% 0.91%

*June 2013 Annualized Ratios Source: EMAAR’s financial reports

13 annualized 14 Annualized


Saudi Equity Market

The following table shows the comparison of key ratios and financial indicators of the company with the petrochemicals sector and the overall market.

2009 2010 2011 2012 Jun-13 15

P/E

EMAAR N/A N/A N/A 38.16 125.35

Real

Estate.Sector 21.21 25.83 24.29 22.67 77.00

Market 17.79 15.28 12.29 12.75 13.95

P/BV

EMAAR 1.11 1.19 1.18 1.15 1.15

Real

Estate.Sector 1.21 0.99 0.95 1.13 1.50

Market 2 2.06 1.84 1.84 1.9

ROA

EMAAR -3.11% -5.03% -0.92% 1.33% 0.50%

Real

Estate.Sector 4.26% 2.92% 2.76% 3.55% 5.40%

Market 2.79% 3.43% 3.76% 3.59% 3.48%

ROE

EMAAR -3.64% -5.96% -1.74% 2.44% 0.91%

Real

Estate.Sector 5.68% 3.84% 3.91% 4.99% 7.78%

Market 3.28% 11.38% 13.54% 13.04% 12.09%


EMAAR’s price to earnings multiple (P/E) 125.35, is higher (Worse) than the sector and the market in June 2013 when both reach 77.00 and 13.95 respectively, the price to book value multiple (P/B) 1.15, is lower (Better) than the sector and the market in June 2013 when both reach 1.50 and 1.90 respectively ,the return on assets (ROA) 0.50%, is lower than the sector and the market in June 2013 when both reach 5.40% and 3.48% respectively, the return on equity (ROE) 0.91%, is lower than the sector and the market in June 2013 when both reach 7.78% and 12.09% respectively.

EMAAR Stock Performance

The graph below shows EMAAR’s share performance vis-à-vis petrochemicals sector companies in Saudi stock market and the overall market performance during the period (2007- June 2013)

Graph (2): EMAAR Share, Market and Petrochemicals Sector Performance (2007=100)

The maximum market price attained by EMAAR’s share during the period 2007- June 2013 has been SAR28 on 15 of January 2008 with a 57.7% increase from its closing price on 6th of January 2007, while the lowest price was SAR5.65 on 2 March 2011, a decrease of 79.8% from its highest price.

15 Annualized


Saudi Equity Market


MarketReal Estate SectorEMAAR 1 0.950 1.110 Beta

The beta for the company over the period from 2007 to 30th June 2013 is 1.110, thus, the risk premium required to invest in the stock is HIGHER than that for the market; or in other words, the expected return on company shares supposed to be HIGHER than the expected return of the market.

Valuation

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 8 Real Estate companies in EMAAR’s field, which are listed on the Saudi Stock Exchange. the weighted average P/E multiple for the sector was calculated at 11.2 times for the period 2009-June 2013, the weighted average P/B multiple was calculated at 1.2 times. Hence, using the resultant P/E multiple and EMAAR’s annualized net income for June 2013 that equal to SAR69.504mln, the estimated value of the company reached SAR0.912per share ,using the resultant P/B multiple and EMAAR’s book value attributed to the shareholders equity for June 2013 that equal to SAR7.604bln, the estimated value of the company reached SAR10.936 per share, without calculating any additional risks or benefits.


P/E Multiples



EMAAR ‘s Net Income as at June 2013 (Annualized) SAR69.504mln

Value of EMAAR share using P/E multiple SAR0.912


P/B Multiples



EMAAR ‘s Book Value as at June 2013 SAR7.604bln

Value of EMAAR share using P/B multiple SAR10.936

We use also the weighted average price of EMAARs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SA9.703 per share.


6 MONTHS VOLUM 6 MONTHS VALUE Weighted average price1,673,843,968 16,241,134,496.75 9.703

Conclusion

For estimating the expected market value of EMAAR’s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The Saudi stock exchange, 90% for the weighted average price ,the P/E multiple, 10%, and for P/B valuation 10%; and, we reached the value of SAR8.95for EMAAR’s share, which we believe will be the fair market value of EMAAR’s shares in the short term. Which is lower than trading price of SAR9.95 as on the end of June 2013.


Saudi Equity Market


Weight



EMAAR ‘s net income as at June 2013 (annualized) SAR69.504mln

Value of EMAAR share using P/E multiple SAR0.912 10%




YANSAB ‘s Book Value as at June 2013 SAR7.604bln

Value of YANSAB share using P/B multiple SAR10.936 10%


SAR9.703 80%


EMAAR’s Fair Value SAR8.95


Saudi Equity Market

3.5 Summary and Results for The National Shipping (BAHRI)

The National Shipping Co. of Saudi Arabia (BAHRI) purchase sand sell vessels and other floating means of transportation and utilize them to transport imported trade into Kingdom on regular basis so as to maintain stability of freight rates and secure the requirement of national security under all circumstances, Transport the Kingdom’s export to the outside world, Carry persons, goods, commodities and livestock into and out of the Kingdom by sea. The company’s assets increased in a compounded annual rate CAGR around 2.6% during 2009 – June 2013, and the share price has shown fluctuating trends years during 2007 to June 2013, ranging between SAR10.8 to SAR35.75 per share. the Weighted Average share price in the last 6 months of the period has been SAR20.051.

Based on its historical performance and its latest financials and some basic assumptions, KFH Research has estimated BAHRI’s fair price based on Relative Valuation approach by employing Transportation sector multiples like Price/Earnings per share (P/E), Price/Book Value per share (P/B), and weight average price in the market, The estimated fair value per share of BAHRI is SAR20.27, which is expected to be reached during the next 3-6 months. As this value is less than the market value of the share price as of 30th of June 2013, amounting to SAR19.5.


The National Shipping Co. of Saudi Arabia (BAHRI) is Saudi shareholding company Incorporated according to Royal Decree No. M/5 dated 23/12/1977 with authorized capital amount of SAR500mln, which was increased three times to become SAR3150mln. based on the disclosures to Tadawul of 5% or more ownership:


The Public Investment Fund (PIF) 28.10%


Public 71.90%



Financial Position Assets BAHRI’s total assets stood at SAR11.297bln as at June 2013. These increase at a compounded average rate (CAGR) of 2.6% over the period 2009 to June 2013. Assets are divided between current (10.8% of total assets) and non-current (89.2% of total assets). Figure (1): Assets Distribution as on June 2013

Source: BAHRI financial reports June 2013

Financial Analysis


Saudi Equity Market

Fixed assets stood at SAR7.821bln or around 69.2% of total assets in June 2013, rose by 8.2% y-o-y from SAR7.227bln, mainly include Giant oil tankers and chemical tankers worth SAR7.467bln in December 2012,, are funded and pledged as a collateral for the banks provided the facilities, fixed assets have grown at a CAGR of 4.4% from 2009 to June 2013.

Net receivables valued at SAR515.686mln make 4.6% of total assets, the receivables rose by 38.8% y-o-y from SAR371.476mln, and increased at CAGR of 34.6% for the period 2009 June 2013.

SAR MLN 2009 2010 2011 2012 13-Jun16 CAGR %

Net Income 369.30 414.88 287.77 503.99 553.88 10%

Number of Outstanding shares 315.00 315.00 315.00 315.00 315.00

Total Assets 10,339 9,966 10,623 11,064 11,298 2.6%

Return on Average Assets (ROA)% * 3.66 4.09 2.80 4.65 4.90

*June 2013 Annualized Ratios Source: BAHRI’s financial reports

On comparing BAHRI’s assets vis-à-vis its net income, the net profit of SAR414.88mln in 2010, SAR287.77mln in 2011, SAR503.99mln in 2012, and SAR553.88mln (on an annual basis) in June 2013, yielded Return on Average Asset (ROA) of 4.09%, 2.80%, 4.65%, and 4.90% (on an annual basis) respectively.

Liabilities

BAHRI’s total liabilities stood at SAR5.596bln in June 2013 of which about SAR4.241bln (75.8% of liabilities) are non-current in nature, which is a many Murabaha financing agreements and long-term loans for the purpose of financing the construction of major petrochemical tankers and the company's offices in Dubai, BAHRI’s current portion of liabilities stood at SAR1.354bln (24.2% of liabilities). These included current portion of long term debt amounted about SAR512.440mln (9.2% of total liabilities) in June 2013, and the account payable about SAR275.507mln (4.9% of total liabilities),

As we can see in the following table, the “Total Liabilities” are divided into eight main sources; their percentage of total liabilities has been changed over the period of 2009-June 2013.

SAR MLN 2009 % 2010 % 2011 % 2012 % 13-

Jun %

Short Term Debt - 0.00% - 0.00% 64 1.22% 466 8.73% 512 9.16%

Short Term Islamic Fin. 247 4.78% 325 7.08% 456 8.66% 160 3.00% 400 7.15%

Accounts Payable 214 4.16% 254 5.54% 289 5.48% 231 4.33% 276 4.92%

Dividends Payable 29 0.57% 27 0.59% 31 0.58% 31 0.58% 34 0.61%

Other Current Liabilities 119 2.31% 130 2.84% 105 1.99% 119 2.23% 133 2.38%

Long Term Islamic Fin. 4,516 87.51% 3,819 83.23% 4,295 81.54% 4,254 79.69% 4,169 74.49%

indemnity 31 0.61% 32 0.69% 28 0.53% 40 0.75% 42 0.75%

Other Long Term Lia. 4 0.07% 2 0.04% - 0.00% 37 0.69% 31 0.55%

Total Liabilities 5,161 100% 4,588 100% 5,267 100% 5,338 100% 5,597 100.00%

Source: BAHRI’s financial reports

The company’s debt to equity fluctuated over the period 2009 to June 2013, in 2009 the ration amounted 95.50%, decreased to 81.40% in 2010, then increased to 95.11% in 2011 while decreased to 90.18% in 2012, the debt to equity ratio increased again to 94.53% in June 2013:

2009 2010 2011 2012 13-Jun




16 Annualized


Saudi Equity Market

The total equity amounted to SAR5.273bln as of June 2013 indicating a book value per share of SAR17.06, the book value rose up by 1.9% y-o-y, from SAR16.74 in June 2012, while decline by 0.7% y-t-d from SAR17.18

SAR MLN 2009 2010 2011 2012 13-Jun

Equity 4,988 5,090 5,063 5,411 5,375

shares 315.00 315.00 315.00 315.00 315.00

Book Value (SAR) 15.83 16.16 16.07 17.18 17.06



BAHRI’s total revenues amounted to SAR1.264bln, leading to a net profit of SAR276.938mln for end 1H2013 (SAR553.876bln17), and net profit margin of 21.9%, compared to 27.7% y-o-y and 20.4% y-t-d.

The net income witness a gradual growth in 2012, with net income of SAR503.993mln as a result of increasing revenues by 23.8% to SAR2.464bln, In June 2013 the total revenues scored SAR1.264bln, decrease by 4.7% y-o-y from SAR1.325bln in June 2012 (SAR2.528bln on an annual basis, increased by 2.6% y-t-d from SAR2.464bln), while the net income of SAR276.938mln decreased by 24.6% y-o-y from SAR367.181mln in June 2012 (SAR553.876mln on an annual basis, increased by 9.9% y-t-d from SAR503.993mln).

BAHRI registered a Return on Average Equity (ROE) of 5.2% in June 2013 (10.4% on an annual basis) vis-à-vis a ROE of 9.62% in 2012 and 5.67% in 2011.The following table shows key financial indicators of the company:

Indicators 2009 2010 2011 2012 13-Jun

Share price (SAR) 17.75 17.5 12.15 19.15 19.5

Earnings per Share (SAR) * 1.17 1.32 0.91 1.6 1.76


Price to Earnings (P/E) * 17.27 15.38 22.17 12.66 11.52


Return on Average Assets (ROA) * 3.66% 4.09% 2.80% 4.65% 4.90%

Return on Average Equity (ROE) * 7.33% 8.23% 5.67% 9.62% 10.40%

*June 2013 Annualized Ratios Source: BAHRI’s financial reports

The following table shows the comparison of key ratios and financial indicators of the company with the telecommunication sector and the overall market. 2009 2010 2011 2012 June-1318

P/E

BAHRI 17.27 15.38 22.17 12.66 11.52

Trans.Sector 15.02 14.14 25.07 14.56 7.75

Market 17.79 15.28 12.29 12.75 13.95

P/BV

BAHRI 1.28 1.25 1.26 1.18 1.19

Trans.Sector 1.19 1.09 0.95 1.46 1.46

Market 2.00 2.06 1.84 1.84 1.90

ROA

BAHRI 3.66% 4.09% 2.80% 4.65% 4.90%

Trans.Sector 4.11% 4.26% 1.92% 5.16% 9.49%

Market 2.79% 3.43% 3.76% 3.59% 3.48%

ROE

BAHRI 7.33% 8.23% 5.67% 9.62% 10.40%

Trans.Sector 7.90% 7.74% 3.77% 10.02% 18.86%

Market 3.28% 11.38% 13.54% 13.04% 12.09%


17 Annualized 18 Annualized


Saudi Equity Market

BAHRI’s price to earnings multiple (P/E) 11.52, is higher (worse) than the sector, while lower (better) than the market in June 2013 when both reach 7.75 and 13.95 respectively, the price to book value multiple (P/B) 1.19, is lower (better) than the sector and the market in June 2013 when both reach 1.46 and 1.90 respectively ,the return on assets (ROA) 10.40%, is lower than the sector while higher than the market in June 2013 when both reach 9.49% and 3.48% respectively, the return on equity (ROE) 10.40%, is lower than the sector and the market in June 2013 when both reach 18.86% and 12.09% respectively.

BAHRI Stock Performance

The graph below shows BAHRI’s share performance vis-à-vis Transportation sector companies in Saudi stock market and the overall market performance during the period (2007- June 2013)

Graph (2): BAHRI Share, Market and Transportation Sector Performance (2007=100)

The maximum market price attained by BAHRI’s share during the period 2007- June 2013 has been SAR35.75 on 23 June 2008, with a 55.4% increase from its closing price on 6 January 2007, while the lowest price was SAR10.80 on 22 October 2011, a decrease of 69.8% from its highest price.


Market Transportation Sector BAHRI 1 1.009 0.995 Beta

The beta for the company over the period from 2007 to 30th June 2013 is 0.995, thus, the risk premium required to invest in the stock is LOWER than that for the market; or in other words, the expected return on company shares supposed to be LOWER than the expected return of the market.

Valuation

Following the relative valuation method, we calculated the weighted average P/E and P/B multiples for 4 Transportation companies in BAHRI’s field, which are listed on the Saudi Stock Exchange. the weighted average P/E multiple for the sector was calculated at 11.5 times for the period 2009-June 2013, the weighted average P/B multiple was calculated at 1.3 times. Hence, using the resultant P/E multiple and BAHRI’s annualized net income for June 2013 that equal to SAR553.876mln, the estimated value of the company reached SAR20.304 per share ,using the resultant P/B multiple and BAHRI’s book value attributed to the shareholders equity for June 2013 that equal to SAR5.375bln, the estimated value of the company reached SAR21.963 per share, without calculating any additional risks or benefits.


P/E Multiples



BAHRI ‘s Net Income as at June 2013 (Annualized) SAR553.876mln

Value of BAHRI share using P/E multiple SAR20.304


Saudi Equity Market


P/B Multiples



BAHRI‘s Book Value as at June 2013 SAR5.375bln

Value of BAHRI share using P/B multiple SAR21.963

We use also the weighted average price of BAHRIs stock in the market, which is calculated according the weighted average price of the company's share in terms of value where it record SAR20.051 per share. The following table depicts the Weighted average price summary:

6 MONTHS VOLUM 6 MONTHS VALUE Weighted average price130,739,187 2,621,394,113 20.051

Conclusion

For estimating the expected market value of BAHRI’s share, KFH Research adopted the weighted average market price for the last 6 months of trading for the stock in The Saudi stock exchange, 80% for the weighted average price ,the P/E multiple, 10%, and for P/B valuation 10%; and, we reached the value of SAR20.27 for BAHRI’s share, which we believe will be the fair market value of BAHRI’s shares in the short term. Compare to its trading price of SAR19.5 as on the end of June 2013.


Weight



BAHRI ‘s net income as at June 2013 (annualized) SAR553.876mln

Value of BAHRI share using P/E multiple SAR20.304 10%




BAHRI ‘s Book Value as at June 2013 SAR5.375bln

Value of BAHRI share using P/B multiple SAR21.963 10%


SAR20.051 80%


BAHRI’s Fair Value SAR20.27


Saudi Equity Market

4.0 IPO activities in Saudi Arabia and its regional peers The value of initial public offerings in the Mena region fell sharply during the second quarter of 2013, the IPOs

raised to USD482.6mln during the second quarter of this year, down by 169.4% q-o-q from USD1.3bln.

A number of factors could explain the high retreat of the IPOs value in the Mena reign, the reign political

instability, due to the some countries witness revolutions against their regimes, the strict regulations of the capital

markets, and the lack of liquidity in some markets due to the slow of the economy.

Initial Public Offering (IPO) activity in the GCC is not in a better condition than Mena region, in the second quarter

of 2013 three new listings raised, in total of USD48mln, compared to two IPOs in first quarter 2013 in total of

USD337mln, decreased by 86% q-o-q. The average offering value witnessed more decline, when dropped by

94% y-o-y, which witnessed four IPOs raising a total of USD1.1bln.

7 companies in Saudi Arabia listed during 2012, combined offered shares reach 257.4mln in 2012, rising 120.2%

y-o-y from 116.9mln shares (5 companies listed during 2011). The offered value of these companies amounted to

SAR5.3bln in 2012, with growth of 206.4%y-o-y from SAR1.7bln in 2011.

Initial Public offering in the Kingdom of Saudi Arabia during 2012

Company Sector Offer date Listing Share capital Issued Offered Offered value

date (Mln SAR) (Mln shares) (Mln shares) (Mln SAR)

Najran Cement Cement 16-Apr 12-May 1,700.0 170.0 85.0 850.0

City Cement Cement 10-Sep 13-Oct 1,892.0 189.2 94.6 946.0

Dallah Health Retail 19-Nov 17-Dec 472.0 47.2 14.2 539.6

Catering Agri. & Food 18-Jun 9-Jul 820.0 82.0 24.6 1,328.4

Alinma Tokyo M Insurance 19-Mar 24-Jun 200.0 20.0 6.0 60.0

Takween Indus. Inv. 16-Jan 7-Feb 300.0 30.0 9.0 234.0

ALTAYYAR Hotel & Touri 14-May 4-Jun 800.0 80.0 24.0 1,368.0

Total 6,184.0 618.4 257.4 5,326.0

Source: Tadawul, Zawya, KFHR

Najran Cement Company: listed in 12 May 2012, the principal activity for the company is manufacturing and

marketing of diversified qualities of cement, the company offered 85mln shares in 16 April 2012, with a total value

of SAR850mln, the lead manager of the IPO was Saudi Fransi Capital.

City Cement: listed in 13 October 2013, the company engaging in the production and sale of ordinary Portland

cement, in 10 September 2012, the company offered 94.6mln to the public, the total value of the offered share

reach SAR946mln, this IPO leaded by Riyad Capital.

Dallah Health: listed in 17 December 2012, Dallah focused in medical services and distributes pharmaceuticals

and health products, in 19 November 2012, the company offered 14.2mln shared, valued SAR539.6mln, samba

capital and investment was the lead manager of the public offering.

Saudi Air Lines Catering Company: provide catering and other services to local and international air lines, the

company offered 24.6mln shares in 18 June 2012, valued SAR1.3bln, the Saudi fransi bank was the lead

manager of the IPO.

Alinma Tokyo Marine: is operating insurance and reinsurance business, the IPO took place in 19 march 2012,

the number of shares offered worth SAR60mln, and the lead manager of the offer was Al Inma Investment

company.


Saudi Equity Market

Takween Advanced Industries: manufacture and sale of plastic packing products and nonwoven fabrics for a

diversified consumer base, the company offered in 14 may 2012, 9mln shares, valued SAR234mln, the lead

manager of the IPO was NCB Capital.

Al Tayyar Travel Group Holding: is a travel and tourism agency, issuing and selling tickets, offered in 17 May

2012, 24mln shares worth SAR1.4bln, Samba Capital and Investment was the lead manager of the IPO.

during 2013, 4 companies listed in the Saudi stock market, combined offered shares reach 119.3mln for 1H2013,

retreated by 3.8% y-o-y from 124mln shares (4 companies listed during the same period 2012). The offered value

of these companies amounted to SAR1.4bln in 1H2013, decline by 43.4% y-o-y from SAR2.5bln in 1H2012.

Initial Public offering in the Kingdom of Saudi Arabia during 2013

Company Sector Offer date Share capital Issued Offered Offered value

(Mln SAR) (Mln shares) (Mln shares) (Mln SAR)

Northen Region Cement Cement 8-Jan 1,800 180 90 900

National medical care Retail 4-Feb 448.5 44.9 13.5 364.5

Aljazira Takaful Taawuni Insurance 13-May 350 35 10.5 105

AIG-ANB Cooperative Insurance 27-May 175 17.5 5.3 52.5

Total 2,773.5 277.4 119.3 1,422.0

Source: Tadawul, Zawya, KFHR

Northen Region Cement: was established in 2006, involved in the business of production, distribution, and

packaging of clinker, in 8th of January 2013, offered 90mln shared for the public, worth SAR900mln, the lead

manager of the IPO was Arab National Investment.

National medical care: established in August 2003, the principal activities for the company is distribution of

medical equipment and pharmaceutical products, offered in fourth of February 2013, about 13.5mln shares, the

offered value worth SAR364.mln, the lead manager was Riyad Capital

Aljazira Takaful Taawuni: is an insurance company, offered 10.5mln shares in 13 may 2013, the offered value worth SAR105mln. AIG-ANB Cooperative: is in the insurance sector, provide Islamic non-life and life insurance services, in 27 may 2013, offered 5.3mln shares, worth SAR52.5mln, the lead manager of the IPO was Saudi Fransi Capital


Saudi Equity Market

4.1 IPO activities in the GCC region United Arab emirates and Oman took the first place in the number of the IPOs during 2013, amounted about 11

IPOs for each country, the second place goes to Qatar with 7 IPOs, and Kuwait in the third place with 5 IPOs, and

Bahrain came last with 2 IPOs only. The table below shows the available information for each transaction.

Initial Public offering in the GCC Reign during 2013

Issuer Country Sector Equity

Offered

Size Of

Offering

(USD Mln)

Lead Manager

1 First Energy Bank Bahrain Financial Ser. 30% - Gulf Finance House

2 Takaful International Company Bahrain Financial Ser. 60% 9.944 -

1 IFA Hotels and Resorts Company Kuwait Real Estate 40% 114.264 -

2 KGL Logistics Kuwait Transport 65% 106.95 -

3 KGL Logistics Kuwait Transport 65% 72.45 -

4 Kuwait Cement Company Kuwait Industrial Man. 7% 50.723 -

5 Kuwait Stock Exchange Kuwait Financial Ser. 50% - HSBC Bank Middle East Limited

1 Al Badi Group Oman Conglomerates - - -

2 Al Batinah Hotels Company Oman Leisure & Tou. - - -

3 Al Khalili United Enterprises Oman Industrial Man 40% - Oman Arab Bank

4 Galfar Engineering & Contracting Oman Construction 15% 36 Oman Arab Bank

5 Northern Minerals Company Oman Mining & Met - - -

6 Oman Arab Bank Oman Financial Ser. 25% - National Securities Company

7 Oman Medical Projects Company Oman Health Care 20.12% 4.351 -

8 Tilal Development Company Oman Real Estate 25% - -

9 Al Madina Insurance Company Oman Financial Ser. 40% - -

10 Sembcorp Salalah Power Oman Power & Uti. 35% - HSBC Holdings

11 MB Petroleum Services Oman Oil and Gas - - -

1 Al Jazeera Finance Qatar Financial Ser. - - -

2 Al Jazeera Satellite Network Qatar Media - - -

3 Barwa Bank Qatar Financial Ser. - 288.366 -

4 Barwa Bank Qatar Financial Ser. - 274.635 QInvest

5 Doha Global Investment Company Qatar Financial Ser. - 3,089.64 -

6 Qatar First Investment Bank Qatar Financial Ser. 100% - -

7 The Transport Company of Qatar Qatar Transport - - -

1 Al Benaa Real Estate Investment UAE Real Estate - - -

2 Aswaaq UAE Retail 55% - -

3 DAMAC Properties UAE Real Estate - - -

4 FTV Proclad (Dubai) UAE Industrial Man. 30% - -

5 Just falafel UAE Food & Bev. - - -

6 Mawarid Finance UAE Financial Ser. 25% - -

7 Orbit Showtime Network UAE Media - - -

8 R-Serviced Offices UAE Services - - -

9 Tasheed Holding Company UAE Services - - -

10 Alif Investments Group UAE Financial Ser. - - -

11 Abraaj Capital UAE Financial Ser. - - -

Source: Zawya, KFHR


Saudi Equity Market

5.0 Merger and Acquisitions activities in Saudi Arabia The Etihad Etisalat and Atheeb announced on 2 June 2013, for studying the possibility of entering into a

preliminary non-binding negotiations to acquire a stake in the shares of Etihad Atheeb Telecom by a subsidiary of

Etihad Etisalat.

AL Batain Power and Telecommunication announced on 30 June 2013 a non-binding offer to Hisham Hilal

Swedish Steel Industries, to buy a net equity of the company, Energia is working in the field of construction steel

and buildings, in addition to the production of lighting poles and transmission towers.

Sahara Petrochemical and Saudi international petrochemicals announced in 4 June 2013, about initial

understanding between them on feasibility study for the merger of the two companies, the two companies during

the period of 5 months, will do the necessary technical and financial, studies then display to the board of directs in

the both companies.

Savola Group Company announced in 1 may 2013, signing an agreement with Muhaideb to acquire all the

number of the shares in Savola Food Company amounting to 10% and al Azizia Panda United amounting to

18.6% compare to issue a new shares of SAR626.3Mln for Muhaideb company through capital increase Savola

and SAR712.5Mln for Azizia Panda United.

Al Tayyat Travel Group announced in the board of directors meetings on 4 April 2013 the intent to acquire

additional share in AL Mothmera Real Estate investment, the percentage bought represents 39% of the target

assets, worth SAR341Mln.

Najran Cement Company announced in 18 March 2013, signing a memorandum understanding with Projects

Supply Company, for the purpose of buy 30% of the company which specialized in transportations and logistics.

Al-Babtain for Operation and Maintenance announced on to increase the company’s capital from SAR405Mil

toSAR426.3Mln, an increase of 5.3%, through issuance 2.13mln shares to HSBC Saudi Arabia, which in turn will

grant full economic benefit of these shares to the Palnck international investment through a swap agreement

versus the acquisition of 49% of Al Batain LeBlanc.

Saudi Arabia merger and acquisitions during 2013 Date Company Position Country Sector Status

Percentage

Bought Value

Jun Etihad Etisalat Acquirer Saudi Teleco.

In-Process - - Etihad Atheeb Teleco. Target Saudi Teleco.

Jun Al-Babtain Power and Teleco. Acquirer Saudi Indus.Manuf.

Confirmed 100.0% - Energya Steel Solutions Target Saudi Indus.Manuf.

Jun Sahara Petrochemical NA Saudi Oil&Gas

In-Process - - Saudi International Petro. NA Saudi Oil&Gas

May Savola Group Company Acquirer Saudi Food&Beve.

In-Process 10.0% SAR626.3Mln Savola Foods Company Target Saudi Food&Beve.

May Savola Group Company Acquirer Saudi Food&Beve.

In-Process 18.6% SAR712.5Mln Al Azizia Panda United Target Saudi Retail

Apr Dabbagh Group Holding Acquirer Saudi Agriculture

Rumored 49.0% SAR1,286.3Mln Petromin Corporation Target Saudi Oil&Gas

Apr Al Tayyar Travel Group Acquirer Saudi Leisure&Tourism

In-Process 39.0% SAR341.0Mln Al Mothmera Real Estate Inv. Target Saudi Leisure&Tourism

Mar Najran Cement Company Acquirer Saudi Indus.Manuf.

In-Process 30.0% - Projects Supply Company Target Saudi Transport

Feb

Al-Babtain for Operation & Main. Acquirer Saudi Indus.Manuf.

In-Process - - Al-Babtain LeBlanc Teleco. Acquirer Saudi Teleco.

Emirates Link Trading Company Target UAE Indus.Manuf.

Feb Arab Satellite Communications Acquirer Saudi Media

In-Process 99.0% EUR208.0Mln Hellas-Sat Consortium Ltd. Target Cyprus Media

Feb Amiantit Fiberglass Industries Acquirer Saudi Indus.Manuf.

In-Process 49.0% SAR6,4Mln Fiberglass Pipe Company Target Saudi Indus.Manuf.

Jan Dallah Healthcare Holding Acquirer Saudi Health Care

In-Process 100.0% SAR 38.0Mln Dawara Medical Factory Target Saudi Health Care

Source: Zawya, KFHR

© 2013 KFH Research Ltd. All rights reserved.

22 January 2013KFH Research LtdKDNPP15024/03/2013 (031903)

Turkey 2013 OuTlOOk: ecOnOmic rebalancing nears

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