lecicomec.biz/term/uploads/lcsw-09-06-2010.pdfsep 06, 2010 · ceramic tile manufacturer. lecico is...

June 09, 2010

nbkcapi ta l .com

lecicoResilient in Tough conditions

key daTa

Fair Value per share (EGP) 25.4Closing Price (EGP) * 20.052-week High / Low (EGP) 23 / 13.51YTD / 12-month return 21.8% / 31.4%P/E 6.9Market Cap (EGP Millions) 801 Shares Outstanding (Millions) 40 Free Float 51%Reuters / Bloomberg LCSW.EG / LCSW EY

*As of June 08, 2010. Sources: Reuters, Zawya and NBK Capital

key meTRics

F igures in EGP 2009A 2010F 2011F 2012F

EPS 2.75 2.84 3.23 3.51

EPS Growth 1.2% 3.1% 13.6% 8.9%

P/E 7.3 7.1 6.2 5.7

Dividend Yield 7.5% 7.5% 7.5% 8.1%

EV/EBITDA 4.6 4.4 4.0 3.7

Revenue (M illions) 1,055 1,090 1,196 1,281

Revenue Growth -2.4% 3.3% 9.7% 7.1%

EBITDA (M illions) 257 270 298 319

EBITDA Growth 8.0% 5.2% 10.4% 6.9%

EBITDA Margin 24.4% 24.8% 25.0% 24.9%

Sources: Company financial statements and NBK Capital

QUaRTeRly foRecasTs

EGP M i l l io ns 2Q2009A 1Q2010A 2Q2010F 3Q2010F

Revenue 272.5 269.5 265 261EBITDA 67.8 67.3 65.7 63.5

Source: NBK Capital

Rebased PeRfoRmance

12.0

15.0

18.0

21.0

24.0

Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10

Lecico MSCI Egypt

Sources: MSCI, Reuters, and NBK Capital

*** Please refer to page 21 for recommendations and risk ratings.

HigHligHTs

12-month fair Value: egP 25.4

Recommendation: buy – Risk level**: 3

Reason for Report: initiation of coverage

• Lecico, an Egyptian exporter, is one of the leading global sanitary ware players and enjoys dominant status as a ceramic tile manufacturer as well. The company, primarily a cost arbitrage player, manufactures European-quality sanitary ware at competitive costs, possible mainly due to the lower labor and energy costs in Egypt. We feel that the company has built a durable moat that draws as much strength from its low-cost model as from its market positioning in Europe, the Middle East, and Egypt. The company’s strategies for entering new markets across Europe and the Middle East will further expand and strengthen Lecico’s positioning.

• Though the current slowdown and the muted outlook for the Euro zone and the United Kingdom (UK) specificallymake us wary of the company’s prospects in those markets, we believe such a situation fosters the growth of a low-cost model like Lecico. The company enjoys a 10%+ market share in the sanitary ware market in the UK, France, and Ireland and has evolved as a brand over the years, in addition to the company’s long history of being an important OEM (original equipment manufacturer) exporter to these markets.

• For 2010, we expect year-on-year (YoY) growth of 3.3% in total revenue after adjusting for potential revenue losses from the recentfireincident.WeexpectanEBITDAmarginof24.8%in2010(24.4%in2009)andforecastnetprofittogrowby3% YoY to EGP 113.5 million during the current year. We feel thefinancialimplicationsofthedamagesfromthefireshouldnot be material. In general, we forecast total revenue to grow at a six-year CAGR of 6.9% from EGP 1.05 billion in 2009 to EGP 1.58 billion in 2015. We expect tile revenue to grow at a higher CAGR of 7.9%; hence, this will be the main driver for total revenue growth going forward. We expect the EBITDA margin to average 24.7% over our forecast period, marginally higher compared to the six-year historical average.

• A cash-rich balance sheet, relatively low levels of leverage, healthydividend-paying record,and robust freecash-flow-generating ability are some of the other reasons that support our investment case. On 2010 forecasts, the stock currently trades on a forward PE of 7.1x, EV/EBITDA multiple of 4.4x, adividendyieldof7.5%andafreecashflowyieldof8.2%.

• We arrived at a 12-month fair value for Lecico of EGP 25.4 per share which represents an upside potential of 27%. Hence, we are initiating coverage on the company with an “Buy” recommendation.

analysts

Rajat Bagchi

T. +965 2259 5115E. [email protected]

Mariam Al-Bahar

T. +965 2259 5138E. [email protected]

http://www.nbkcapital.com

mailto:rajat.bagchi%40nbkcapital.com?subject=

mailto:mariam.albahar%40nbkcapital.com?subject=

conTenTs

execUTiVe sUmmaRy ............................................................................ 3

ValUaTion .............................................................................................. 4

Discounted Cash Flow Valuation ............................................................. 4

Sensitivity Analysis ................................................................................. 5

Peer Group Comparison .......................................................................... 6

bUlls Vs. beaRs ................................................................................... 7

Bull Story ............................................................................................... 7

Bear Story .............................................................................................. 8

saniTaRy waRe maRkeT in eURoPe & THe Uk ................................. 9

Sanitary Ware Market in Europe .............................................................. 9

Sanitary Ware Market in UK .................................................................. 10

comPany backgRoUnd ..................................................................... 12

Sanitary Ware Segment ........................................................................ 12

Tile Segment ........................................................................................ 13

Recent Events ...................................................................................... 14

financial oVeRView and foRecasTs ............................................ 15

Total Revenue ...................................................................................... 15

EBITDA and EBITDA Margin ................................................................ 17

Capital Expenditure and Depreciation.................................................... 17

Balance Sheet ...................................................................................... 18

High Free Cash Flow Is Likely to Lead to Attractive Dividend Payouts .. 18

1Q2010 - solid ResUlTs ..................................................................... 19

financial sTaTemenTs ..................................................................... 20

MENA Building Materials - LecicoJune 09, 2010

nbkcapi ta l .com | 3

execUTiVe sUmmaRy

The company, primarily a cost arbitrage player, manufactures European-quality sanitary ware at Egyptian costs. We feel this low cost business model is sustainable considering the company’s productionexpertiseandefficiencyovertheyears.Thecompanyalsoenjoysdominantstatusasaceramic tile manufacturer. Lecico is the world’s sixth-largest sanitary ware player and a leader in the sanitary ware market in Egypt and Lebanon. Though not a market leader, Lecico is still within the top three players in the tile market in Egypt. The company is a market leader in the tile market in Lebanon with an estimated market share of 50%. The company currently operates two factories in Egypt, one in Lebanon, and one in France, with a total capacity to produce 6.75 million pieces of sanitary ware and 22.5 million square meters (sq. m.) of tile per annum.

We feel that the company has built a durable moat that draws as much strength from its low-cost model as from its market positioning in Europe, the Middle East, and Egypt. The company enjoys a 10%+ market share in the sanitary ware market in the UK, France, and Ireland and has evolved as a brand over the years, in addition to Lecico’s long history of being an important OEM exporter to these markets. We feel this dual positioning as an independent brand and an OEM exporter gives the company an edge to successfully thrive in the current tough conditions prevailing in the European markets. It is worth mentioning that the percentage of exports to the UK increased from 34% of total sanitary ware exports in 2008 to 40% in 2009 in spite of a shrinking market. This a true testimony to the fact that the company successfully counters tough conditions. Planned strategies by the company to enter new markets such as Germany, Algeria, Saudi Arabia and Iraq will further expand and strengthen Lecico’s positioning globally as well as regionally.

We forecast total revenue to grow at a six-year CAGR of 6.9% from EGP 1.05 billion in 2009 to EGP 1.58 billion in 2015. We expect tile revenue to grow at a higher CAGR of 7.9%; hence, this will be the main driver for total revenue growth going forward. Accordingly, we expect the revenue mix to tilt toward the tile segment as its share in total revenue is expected to increase to 43.3% in 2015, compared to 41% in 2009. Accordingly, the share of sanitary ware segment operations will decrease to a six-year average of 57.8% (2010-2015), compared to the historical eight-year average of 63.3% until 2009. We expect the EBITDA margin to average 24.7% over our forecast period, marginally higher compared to the six-year historical average.

For 2010, we expect YoY growth of 3.3% in total revenue and an EBITDA margin of 24.8% compared to 24.4% in 2009. We expect the company to loose around 275,000 – 300,000 pieces in sanitary ware sales volume for the year (entirely export sales volume) due to the recent firebreakoutatitsBorgEl-Arabwarehouse.We expect this would translate in revenue losses of EGP 32 – EGP 35 million and additional capex of EGP 15 – EGP 20 million for constructing the new warehouse. For comparison purposes, our revenue would have been 3.2% higher and capex 11%lowerduringthecurrentyearhadthefirenothappened.Thecompanyisadequatelyinsuredandhencethefinancialconsequencesofthedamagefromthefireshouldnotbematerial.

On the 2010 payout, the stock currently trades at a dividend yield of 7.5%. It is also worth mentioningthenotablefreecashflowyieldof15.1%and18.3%onforecastedFCFOsin2011and 2012.

The company plans to boost its tile production capacity by an additional 17 million sq. m. (worth EGP 235 million); the plant is already under construction and is expected to be completed in two phases (50% to be completed by 2011 end) by the end of 2015. In addition to Lecico’s new capacity for the tile segment, other Egyptian players also either recently completed expansions or are in the near completion phase. We perceive this as a potential risk. The new tile plant is expected to increase the supply in the local market, which might lead to pricing pressures going forward.

We arrived at a 12-month fair value for Lecico of EGP 25.4 per share by using two valuation methods:discountedcashflow(DCF)andpeercomparison(usingforwardEV/EBITDAmultiples).The fair value represents an upside potential of 27%; hence, we are initiating coverage on the company with an “Buy” recommendation.




ValUaTion

The purpose of this valuation exercise is to arrive at a fair-value estimate of the share price using fundamental analysis that should prevail for Lecico over the next 12 months. This does not represent a guarantee that this value is achievable within this timeframe, as a wide range of variables and market dynamics affect the market price of an asset. Each investor must use his or her favorite mix of fundamental research, technical analysis, and market intelligence to arrive at an investment decision that matches his or her objectives and risk tolerance.

We arrived at a 12-month fair value for Lecico of EGP 25.4 per share by using two valuation methods:discountedcashflow(DCF)andpeercomparisonbasedonforwardEV/EBITDAmultiples.Wespecifiedaweightforeachmethod,asshowninFigure1.Agreaterweight isassignedtoDCF, as this method examines the fundamentals of the company to determine its future cash-generating ability. The 12-month fair value target of EGP 25.4 is 27% higher than the last closing price on June 08, 2010; hence, our recommendation is “Buy.”

Figure 1 Weighted Average Fair Value per Share

Valuation Method Value (EGP) Weight

Discounted cash flow 24.4 90%

Peer comparison 34.1 10%

Weighted average fair value 25.4 100%

Source: NBK Capital

discounted cash flow Valuation

OurDCFvaluation (Figure2) isbasedon forecastedfinancial results through2015.TheDCFvaluation is a function of the following major variables, which have been estimated using our models:

• Future net operating profit less adjusted taxes (NOPLAT), which is driven primarily byexpectations of revenues and operating expenses

• Future changes in working capital

• Futurenetexpendituresonfixedassets

• The weighted average cost of capital (WACC), which is a weighted average of our estimated cost of equity and the after-tax cost of debt

• Thelong-termexpectedgrowthrateinNOPLATandtheexpectedrateofreturnonnetnewinvestedcapital(RONIC)

From the forecastedfinancial results,we extracted the free cashflows thatwere used in ourvaluation.Wediscountedthosecashflowstoapointintime12monthsintothefuture,toobtainan estimate of the value of the company’s operations. After subtracting net debt and minority interest, and adding the value of non-operating assets, we arrived at a total equity value of EGP 977.5 million.

To estimate the value of Lecico’s operations, we incorporated a varying WACC into our model. Our selection of a cost of equity of 15% is based mainly on interest rate levels and the operating environment.

Our 12-month fair value for

Lecico is EGP 25.4, 27%

higher than the current price




Figure 2 DCF Valuation

Figures in EGP Thousands*Fiscal Year Ends December 2010 2011 2012 2013 2014 2015

Net Operating Profit After Tax 145,443 162,810 172,768 193,311 202,073 213,329

Add: Depreciation and Amortization 78,929 85,979 93,093 97,468 101,530 105,280

Gross Cash Flow 224,372 248,789 265,860 290,779 303,604 318,609

(Increase)/ Decrease in Working Capital (25,965) (33,702) (38,967) (43,257) (46,347) (48,619)

(Incr.)/ Decrease in Operating Fixed Assets (133,000) (94,000) (80,000) (70,000) (65,000) (60,000)

Free Cash Flow from Operations 65,407 121,087 146,894 177,523 192,256 209,990

Terminal Value 1,446,886

Value of Operations in 12 Months 1,392,441

Add: Excess Cash 8,101

Add: Value of Long-Term Investments 4,207

Less:Total Debt (427,248)

Value of Equity in 12 Months 977,501

Per Share Value in EGP 24.44

Forecast

* Except per-share value, Source: NBK Capital

sensitivity analysis

We performed a sensitivity analysis (Figure 3) on two important inputs for our DCF valuation model: the cost of equity and the perpetual growth rate used in computing the terminal value.

Figure 3 DCF Sensitivity

3.00% 3.25% 3.50% 3.75% 4.00%

14.00% 26.92 26.85 26.78 26.70 26.61

14.50% 25.74 25.66 25.57 25.47 25.36

15.00% 24.63 24.54 24.44 24.33 24.21

15.50% 23.60 23.49 23.38 23.26 23.13

16.00% 22.62 22.51 22.39 22.26 22.13

Perpetual Growth Rate

Cos

t of

Equ

ity*

* Variations in the cost of equity result in variations in WACC, Source: NBK Capital

Using the DCF valuation

method, we arrived at a fair

value per share of EGP 24.44




Peer group comparison

We compared Lecico with publicly traded regional and global players that share similar characteristics. We obtained the consensus forward EBITDA for each of the companies for 2011. We would have preferred to include more regional players in our peer basket, but lack of information on consensus forward estimates for these players restricted us from doing so. This limitedourpeerbaskettoonlyfivecompanies.Forvaluationpurposes,weobtainedthecurrentEV(in this case, from the 1Q2010 balance sheet) and consensus 2011 EBITDA for each company to arrive at the forward EV/EBITDA multiple. We calculated the enterprise value for Lecico based on only a simple average (excluding outliers) of the forward EV/EBITDA multiple for the peer basket.

Using the simple average (excluding outliers) of the forward EV/EBITDA multiples of the peer basket, we estimated the value of a Lecico share to be EGP 34.1.

Figure 4 Forward EV/2011 EBITDA Multiples Comparison

Market Cap.* EV

(USD '000) (USD '000) 2011 (%)

RAK Ceramics UAE 250,825 670,096 18.5% 5.3

Topps Tiles Plc. England 139,016 257,665 15.4% 6.2

Al Anwar Ceramic Tiles co. Oman 117,988 117,088 40.9% 6.5

Panariagroup Industrie Ceramiche SpA Italy 97,449 223,608 12.3% 4.8

El Ezz Ceramics and Porcelain co. Egypt 39,492 86,593 17.0% 7.1

Simple Average 20.8% 6.0

Simple Average (excluding outliers) 17.0% 6.0

Lecico 147,523 200,955 25.0% 3.7

EV / 2011 EBITDA

EBITDA MarginCompany Name Country

*Prices as of last close. Sources: Respective company financial statements, Reuters Knowledge, and NBK Capital

Using the simple average

(excluding outliers) of the

forward EV/ EBITDA multiples

for the sample, we arrived at

a fair value of EGP 34.1 per

share




bUlls Vs. beaRs

bull story

• Low-cost player: The company, primarily a cost arbitrage player, manufactures European-quality sanitary ware at Egyptian costs, possibly mainly due to the lower labor and energy costs in Egypt. Lecico’s higher-than-average capacity utilization of 91% (the average of the last eight years) in the sanitary ware segment compared to the peer average of around 70% also showcasesthecompany’sproductionefficiency.Thecompanyalsoenjoysgreatereconomiesof scale within the sanitary ware segment due to Lecico’s single plant capacity of 4.4 million pieces (Borg El Arab) and 1.8 million pieces (Khorshid) per annum compared to the standard global plant size of 1 million pieces per annum.

• Strong market positioning: We feel that the company has built a durable moat that draws as much strength from its low-cost model as from its market positioning in Europe, the Middle East, and Egypt. The company is the world’s sixth-largest sanitary ware player and a leader in the sanitary ware market in Egypt and Lebanon. Though not a market leader, Lecico is still within the top three players in the tile market in Egypt and Lebanon. Planned strategies by the company to enter new markets such as Germany, Algeria, Saudi Arabia and Iraq will further expand and strengthen Lecico’s positioning globally as well as regionally.

• Dual Advantage: Though the current slowdown and the muted outlook for the Euro zone and theUKspecificallymakeuswaryofthecompany’sprospectsinthosemarkets,webelievesuch a situation fosters the growth of a low-cost model like Lecico. The company enjoys a 10%+ market share in the sanitary ware market in the UK, France, and Ireland and has evolved as a brand over the years, in addition to Lecico’s long history of being an important OEM (original equipment manufacturer) exporter to these markets. We feel this dual positioning as an independent brand and an OEM exporter gives the company an edge to successfully thrive in the current tough conditions prevailing in the European markets. We believe that the threat from low-cost Chinese and other Asian producers that compete in the same European markets as Lecico is inconsequential as the differential that the Egyptian players enjoy in terms of shipping cost compared to their Chinese peers (ca. USD 1.5 per piece vs. USD 6 per piece) far exceeds the cost advantage, if any, enjoyed by the Chinese manufacturers.

• Solid numbers: We expect the company to deliver solid results over our forecast period. We forecast total revenue to grow at a six-year CAGR of 6.9% from EGP 1.05 billion in 2009 to EGP 1.58 billion in 2015. We expect tile revenue to grow at a higher CAGR of 7.9%; hence, this will be the main driver for total revenue growth going forward. We expect the EBITDA margin to average 24.7% over our forecast period, marginally higher compared to the six-year historical average. For 2010, we expect year-on-year (YoY) growth of 3.3% in total revenue andanEBITDAmarginof24.8%(24.4%in2009).Weexpectnetprofittogrowby3%to EGP 113.5 million in 2010 compared to last year.

• Attractive valuation: A cash-rich balance sheet, relatively low levels of leverage, healthy dividend-paying record, and robust free cash-flow-generating ability are some of the otherreasons that support our investment case. On 2010 forecasts, the stock currently trades on a forward PE of 7.1x, EV/EBITDA multiple of 4.4x, a dividend yield of 7.5% and a free cash flowyieldof8.2%. Having made adjustments for cash and cash equivalents (EGP 110 million attheendof1Q2010),thecompanycurrentlytradesataPERof6.08xon2010netprofit.




bear story

• Stagnation in the UK market: We are concerned about the slowdown in the UK economy, which has been deeply hit by the recent global crisis. The weak outlook of the other economies in the European Union also does not augur well. These developments impede Lecico’s prospects in those markets. However, according to the CBI market survey of the UK sanitary ware and ceramic tile market, the number of new completed residential projects, after decreasing for two successive years in 2008 and 2009, is supposed to increase by 5% in 2010. However, if the recovery in the UK market takes longer than expected, then the company will be negatively affected.

• Foreign exchange exposure: Lecico is exposed to exchange rate risk, as two-thirds of the company’s export revenues is denominated in Euros and Sterling. Hence, Lecico’s operating resultswillcontinuetobeaffectedbythefluctuationinforeigncurrencyexchangerates,andany potential weakening of the EGP against the Euro or Sterling will hurt the company.

• Supply glut in the domestic tile market: In addition to Lecico’s new capacity for the tile segment, other Egyptian players also either recently completed expansions or are in the near completion phase. This expansion is expected to increase the supply in the local market, which might lead to pricing pressures. Any potential drop in prices is likely to negatively impact Lecico, which caters to the low/medium segment of the ceramic tile market. However, the company plans to increase its tile exports to the regional markets thus mitigating to an extent the expected over supply in the local market.

• Low liquidity of the share: The stock suffers from low liquidity in the local and global depositary receipts(GDR)marketsduetothelowfreefloatinthelocalmarketwithalargepercentageoftheremainingstakeofthefreefloatinthehandsofinstitutions.Thoughtheliquidityhasvastly improved in the recent past, the stock trades for around 75% to 80% of the market days only. According to Zawya, the company’s 12-month average volume and value traded are 67,178 shares and USD 227 million, respectively. As per company data, the GDR is completely illiquid but however, the local shares have traded almost on all trading days in the recent past.




saniTaRy waRe maRkeT in eURoPe and THe Uk

sanitary ware market in europe

Sanitary ware consumption

The EU is the leading market for sanitary ware and ceramic tile mainly due to the region’s population and the size of the economy. The consumption of sanitary ware in the EU increased annuallyby0.6%toEUR7.05billionin2008.ThetopfivemarketsforsanitarywareintheEUare Italy, France, Spain, the UK, and Germany, accounting for almost 70% of total consumption of sanitary ware in the EU.

According to the CBI Market survey, the expected decline in private spending activity and construction output are likely to lead to a slowdown in the consumption of sanitary ware. Regardless, consumption in Central and Eastern European (CEE) countries will continue to perform better than in the rest of the EU. The following table gives an overall picture of the consumption of sanitary ware by country from 2004 to 2008.

The main factors on which consumption depends are private spending activity and output of the construction industry, which can, to a certain degree, also be related to the general economic performance of the region. Due to the recent international credit crisis, both of the above-mentioned factors have been affected. Therefore, the consumption of sanitary ware is expected to decline in 2010.

Figure 5 Trend in Sanitary Ware Consumption in the EU

Country (all figures in EUR mn) 2004 2005 2006 2007 2008 CAGR %

Italy 925 950 956 1,415 1,560 14.0%

United Kingdom 1,405 1,159 1,341 1,285 972 -8.8%

Germany 1,262 1,022 952 948 841 -9.6%France 753 788 818 818 813 2.0%

Spain 621 681 763 766 537 -3.6%

Poland 192 172 196 237 257 7.6%

Netherlands 224 195 240 264 226 0.2%

Belgium 180 173 175 165 208 3.8%

Sweden 218 226 245 269 206 -1.3%

Austria 126 135 143 147 195 11.6%

Czech Republic 126 135 155 220 184 10.0%

Portugal 161 164 169 175 155 -0.8%

Greece 121 92 107 135 132 2.3%

Romania 46 82 101 125 129 29.4%

Denmark 133 130 140 136 121 -2.3%

Ireland 93 93 110 108 91 -0.6%

Slovenia 56 56 61 67 69 5.3%

Finland 46 54 54 57 63 8.5%

Slovakia 28 43 40 51 63 22.1%

Hungary 61 58 57 61 57 -1.8%

Bulgaria 24 21 32 43 46 17.8%

Luxembourg 27 26 27 28 28 1.4%

Estonia 22 26 34 35 26 4.9%

Lithuania 19 16 21 27 25 6.9%

Cyprus 16 20 19 22 24 10.4%

Latvia 15 15 21 24 23 11.3%

Malta 7 7 6 6 5 -6.3%

Total EU27 6,904 6,540 6,984 7,635 7,058 0.6%

Sources: CBI Market Survey and NBK Capital

The EU is one of the world’s

leading sanitary ware markets




Imports

Total EU imports of sanitary ware and ceramic tile grew by 4.4% per year to EUR 8.6 billion in 2008. Imports peaked in 2007 (EUR 9.1 billion) while 2008 showed a decline (-5.2%) as a result of lower consumption due to the start of the economic recession. Imports from developing countries (DC) increased at a faster rate at 13% per year. This resulted in an increasing share of developing countries in EU imports, from 13% in 2004 to 18% in 2008. This signals the increasing competition of products from low-cost countries (LCCs) mainly in the low-end market of the EU. In 2008, China accounted for 58% of all sanitary ware and ceramic tile imports coming from DCs. China was followed by Turkey (22%), Egypt (6.7%), Morocco (1.9%), Thailand (1.6%), Brazil (1.6%), and Croatia (1.1%).

Opportunities for exporters from developing countries

AmajorpartofthedemandforsanitarywareandceramictileinEUisfulfilledbythelocalEUsupply.Themostfavorableoptionsforexportersfromdevelopingcountriesaretotargettofulfillthe demand for low-end products for the do-it-yourself (DIY) market. The DIY market is easily accessible by importers, wholesalers, and agents. In spite of the increasing importance of the DIY market, these exporters face a number of challenges predominantly in the form of transport costs and the risk of damage caused by handling and transport.

sanitary ware market in the Uk

Consumption

The total consumption of sanitary ware in the UK stood at EUR 0.97 billion in 2008. It should be noted here that though we observe a declining trend in consumption kept in the period 2004-2007, the rate of the drop in 2008 was particularly severe, which can be attributed to the recession. In forecasting consumption in the next few years, we need to closely look at the major determinants of sanitary ware, which are private spending activity, general economy outlook, i.e., the change in the gross domestic product (GDP), and the output of the construction industry in terms of completion of new residential projects.

Takingintoconsiderationthereducedlevelofconsumerconfidenceduetothefinancialcrisis,it is expected that the demand outlook for sanitary ware is likely to remain weak in the near future. However, on the other hand, we see some positive trends emerging from this industry: 1) increasing attention to bathrooms, which had been neglected with the primary focus on kitchens, 2)astheaccesstomortgagesfornewhomesisrestrictedduetothefinancialcrisis,renovationof old homes is increasing, and 3) the rise in cheap imports is due to the emergence of a large DIY market.

Figure 6 Trend in Sanitary Ware Consumption in the UK

2004 2005 2006 2007 2008 CAGR % Share in EU

EUR mn EUR mn EUR mn EUR mn EUR mn EUR mn %

Plastic 526 479 471 536 431 -4.8% 15.4%

Ceramic 473 280 432 312 237 -15.9% 10.4%

Iron and Steel 249 258 270 289 210 -4.1% 16.4%

Other 157 142 168 149 93 -12.3% 13.4%

Total sanitary ware 1,405 1,159 1,341 1,285 972 -8.8% 13.8%

Sources: CBI Market Survey and NBK Capital

We observe a declining trend in

sanitary ware sales in the UK

over the last five years




Imports

While comparing the consumption and production data of sanitary ware and ceramic tiles, we observethattheUKisnotself-sufficientandneedsimportstofulfillthelocalmarketdemand.In 2008, the UK was a large importer of sanitary ware and ceramic tiles, ranking third in the EU, behind France and Germany, but ahead of Belgium and Italy. Between 2004 and 2008, total import value annually decreased by an average 0.7% to EUR 990 million in 2008. It was during this time period that imports from developing countries annually increased by 5.5% in value. The total share of developing countries in import value increased from 24% in 2004 to 31% in 2008.

Analyzing the trend in the consumption, production, and import of sanitary ware in the UK shows that imports have continued to constitute a larger share in UK at the cost of local production. Local consumption has declined considerably, and local production has decreased even faster. This has been the result of the poor performance of the home market and the performance of exports. On the other hand, developing countries have continued to perform relatively strongly: while total imports declined by EUR 45 million in absolute value, imports from developing countries have increased by EUR 59 million.




comPany backgRoUnd

Lecico is the world’s sixth-largest sanitary ware player and a leader in the sanitary ware market in Egypt and Lebanon. Though not a market leader, Lecico is still within the top three players in the tile market in Egypt and Lebanon. The company was founded in 1959 in Lebanon and has been majority owned by the Gargour family since 1969; the company was then incorporated in Egypt in 1975.

The company specializes in two business segments: sanitary ware and ceramic tiles. Sanitary ware products include bathroom sets, consoles and washbasins, urinals, kitchen sinks, shower trays,andotheraccessories.Theceramictilesegmentdesignsandmanufacturesfloorandwalltile of all sizes and types, which are mainly sold in Egypt and Lebanon. In Egypt, Lecico caters to themid-rangewithin theceramic tilemarket.According to the2009financial statements,sanitary ware, which is the main segment, accounted for almost 59% of total revenue, while the tile segment accounted for the rest.

sanitary ware segment

Lecico is one of the largest sanitary ware producers in the world, with an annual production capacity of 6.75 million pieces. The company’s sanitary ware products are sold under the Lecico brand, as well as under different manufacturer and customer brands in more than 50 countries. Lecico has come a long way since its modest beginnings as a small Lebanese factory in the late 1950s. Over the past 50 years, the company has grown into one of the largest and most reputable sanitary ware manufacturers in the world. Since the company was incorporated, there have been twomajorcapacityexpansions:thefirstin2004withanincreaseof0.8millionpiecesperyear;while the second in 2008 boosted capacity by 1.39 million pieces per year.

The company has a global competitive advantage: making European-quality sanitary ware at Egyptiancosts.Lecicomaintainsasignificantcostadvantageoverthecompany’sEuropeanandMediterranean peers. Economies of scale and relatively lower costs of skilled labor and energy allow the company to produce European-quality standards at competitive costs.

Figure 7 Sanitary Ware Segment

2005 2006 2007 2008 2009

Capacity (million pieces) 4.80 4.80 5.36 6.75 6.75

Capacity utilization (%) 80% 97% 105% 79% 83%

Sales volume (million pieces) 3.86 4.63 5.62 5.30 5.58

YoY growth (%) -9.5% 20.0% 21.3% -5.6% 5.2%

Average price (EGP per piece) 100.7 95.8 118.9 122.8 111.4

YoY growth (%) -8.4% -4.9% 24.1% 3.3% -9.2%

Sanitary ware revenue (EGP million) 389.0 443.9 668.0 651.0 621.5

YoY growth (%) -17.1% 14.1% 50.5% -2.5% -4.5%

Gross profit margin (%) 42.2% 36.3% 36.5% 34.0% 30.9%


The sanitary ware segment would be incomplete without highlighting the trend in exports over the years. The UK accounted for roughly 34% (last six-year average) of total exports followed by OEM exports for Sanitec (26.5%). Total exports to Europe accounted for an average of 78.3% in the last six years. In 2009, exports to the UK accounted for 40% of total exports. The trend in exports to Middle East is encouraging, with the share of total exports doubling to 14% in 2009 compared to 7% in 2004.

The sanitary ware segment

accounted for an average of

63.3% of the total revenue in

the last eight years




Tile segment

Lecico is a dominant tile producer in Lebanon and Egypt, with a current annual production capacity of 22.5 million sq. m. of tiles. The production capacity is split between two factories, the Khorshid factory in Egypt, with a capacity of 21.4 million sq. m. of tile per year, and the Kfarchima factory in Lebanon, with an annual capacity of 1.1 million sq. m. In mid-2007, the company increased the production capacity in Khorshid factory by 4.4 million sq. m. of tile per year. The tile business is predominantly a domestic play, as Egyptian sales accounted for an averageof71%ofthetotalsalesinthepastfiveyears.

Figure 8 Tile Segment

2005 2006 2007 2008 2009

Capacity (million sq.m) 18.2 18.2 21.0 22.5 22.5

Capacity utilizatio (%) 97.1% 101.2% 102.2% 110.9% 105.0%

Sales volume (million sq.m) 17.7 18.4 21.5 24.9 23.6

YoY growth (%) 15.4% 4.2% 16.4% 16.2% -5.3%

Average price (EGP per sq.m) 14.9 14.9 15.0 17.2 18.4

YoY growth (%) 0.2% 0.4% 0.3% 15.0% 6.6%

Tile revenue (EGP million) 263.4 275.6 321.5 429.6 433.7

YoY growth (%) 15.6% 4.6% 16.7% 33.6% 0.9%

Gross profit margin (%) 29.6% 33.1% 31.9% 36.8% 44.1%


Gross profit margin for the

tile segment has significantly

increased from 29.6% in 2005

to 44.1% in 2009, mainly

due to production efficiencies

as well as an increase in tile

prices




Recent events

Fire at Borg El-Arab Warehouse

OnJune2nd2010, afirebrokeout atLecico’s sanitarywareexport factory inBorgEl-Arab.Thoughtherewerenocasualties,thefiredestroyed402,121piecesofsanitarywarewhichwereready for export. The lost pieces represent approximately 53% of Lecico’s sanitary ware export stock and 28% of total sanitary ware stocks. In addition, most of the company’s stock of seat coversandflushingmechanismsweredestroyedalongwiththewarehouseitself.ThetotaldamageisestimatedatEGP70millionwhichincludesthedamagedfinishedproducts,accessoriesandthe damage to the warehouse.

Accordingly we expect the company to loose around 275,000 – 300,000 pieces in sanitary ware sales volume for the year (entirely export sales volume). We expect this would translate in revenue losses of EGP 32 – EGP 35 million. We forecast additional capex of EGP 15 – EGP 20 million for constructing the new warehouse which is expected to be completed by 1Q2011 end. For comparison purposes, our revenue would have been 3.2% higher and capex 11% lower during the currentyearhadthefirenothappened.Theadditionalcapexshouldbecomfortablymetwiththecurrent cash and cash equivalent reserves (EGP 110 million at the end of 1Q2010) and expected operatingcashflowsfor2010.

Thecompanyisadequatelyinsuredandhencethefinancialconsequencesoflostinventoryandthe damage to the buildings should not be material. Though the management has expressed its concernregardingamomentarydisruptionofthesanitarywareexportbutisconfidenttoovercomethesituationbyvirtueofthecompany’sstrongfinancialhealthandcustomersupport.

Upcoming Stock Dividend

From June 10th 2010 the stock will trade ex-bonus as the management has approved a stock dividend of 1:2. This will result in an additional 20 million bonus shares which translates to total outstanding shares of 60 million. Hence, after the ex-bonus date we will issue a note adjusting our fair value.




financial oVeRView and foRecasTs

Total Revenue

As discussed earlier, Lecico operates in two business segments: sanitary ware and ceramic tiles. To analyze the future trend of total revenues, we will deal with each segment individually and forecast the trend going forward.

Sanitary ware segment

As mentioned earlier, we are a bit conservative in our forecasts for sanitary ware revenue. We expect revenues from the sanitary ware segment to grow at a six-year CAGR of 5.8% between 2009 and 2015. We do not expect any capacity expansion for this segment and forecast the company will reach full capacity by the end of 2014. We expect the sales volume in this segment to grow at a six-year CAGR of 3.2%. The sanitary ware segment will continue to be the export-oriented segment with a increasing focus on the European and Middle Eastern markets. The company is facing problems increasing the head count in the Borg El Arab plant, which is negatively impacting production. We expect this bottleneck to ease going forward, which should result in utilization ratesgoingup.Duetotherecentfireweexpectflatvolumesforthesanitarywaressegmentandwe forecast the increase in prices to be the main driver for the segment revenue in 2010.

Figure 9 Forecasted Trend in Revenue from the Sanitary Ware segment

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Capacity (million pieces) 5.36 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75

Capacity utilization (%) 105% 79% 83% 83% 90% 93% 96% 100% 100%

Sales volume (million pieces) 5.62 5.30 5.58 5.60 6.08 6.28 6.48 6.75 6.75

YoY growth (%) 21.3% -5.6% 5.2% 0.5% 8.4% 3.3% 3.2% 4.2% 0.0%

Average price (EGP per piece) 118.9 122.8 111.4 115.9 118.2 120.6 123.0 125.8 128.9

YoY growth (%) 24.1% 3.3% -9.2% 4.0% 2.0% 2.0% 2.0% 2.3% 2.5%

Sanitary ware revenue (EGP million) 668.0 651.0 621.5 649.3 718.2 756.9 797.0 848.9 870.1

YoY growth (%) 50.5% -2.5% -4.5% 4.5% 10.6% 5.4% 5.3% 6.5% 2.5%


Tile segment

We expect the upcoming capacity expansion of an additional 17 million sq. m. by the end of 2015 to act as a revenue driver for this segment. As a result, we expect tile revenue to grow at a six-year CAGR of 7.9% from EGP 433.7 million in 2009 to EGP 683.5 million in 2015. Revenue from the tile segment will be the main driver for the total revenue going forward. As a result of thesignificantcapacityexpansionandexpectedexcesssupplyinthesector,weareconservativein our outlook for this segment and accordingly lower our forecasts for utilization rates from 2011 onwards.

We expect revenues from the

sanitary ware segment to grow

at a six-year CAGR of 5.8%

between 2009 and 2015




Figure 10 Forecasted Trend in Revenue from the Tile Segment

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Capacity (million sq.m) 21.0 22.5 22.5 22.5 28.9 31.0 37.4 37.4 39.5

Capacity utilization (%) 102% 111% 105% 107% 90% 90% 88% 89% 90.0%

Sales volume (million sq.m) 21.5 24.9 23.6 24.0 26.0 27.9 32.7 33.3 35.6

YoY growth (%) 16.4% 16.2% -5.3% 1.4% 8.5% 7.3% 17.3% 1.7% 6.8%

Average price (EGP per sq.m) 15.0 17.2 18.4 18.0 17.8 18.1 18.4 18.8 19.2

YoY growth (%) 0.3% 15.0% 6.6% -2.0% -1.0% 1.5% 1.8% 2.0% 2.5%

Tile revenue (EGP million) 321.5 429.6 433.7 431.0 463.1 504.2 601.8 624.4 683.5

YoY growth (%) 16.7% 33.6% 0.9% -0.6% 7.5% 8.9% 19.3% 3.7% 9.5%


Total Revenue

We expect total revenues for the company to grow at a six-year CAGR of 6.9% between 2009 and 2015. We expect the revenue mix to tilt toward the tile segment as its share in total revenue is expected to increase to 43.3% in 2015, compared to 41% in 2009. Accordingly, the share of sanitary ware segment operations will decrease to a six-year average of 57.8% (2010-2015), compared to the historical eight-year average of 63.3% until 2009.

Figure 11 Trends in Total Revenue

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Sanitary ware revenue (EGP million) Tiles revenue (EGP million) Total revenue (EGP million)


Revenue from the tile segment

will be the main driver for the

total revenue going forward

We expect the share of revenue

from the tile segment to

increase to 43.3% of the total

revenue by 2015




ebiTda and ebiTda margin

We expect the EBITDA margin to expand marginally from 24.4% in 2009 to 24.8% in 2010 mainly due to higher prices in the sanitary ware segment and higher utilization rates in the tile segment. Lecico was able to successfully counter the slowdown in 2009 by effectively controlling costs. As a result, the company reported an increase of almost 250 basis points in the EBITDA margins amid the tough market conditions that prevailed in 2009. We expect that the margin contraction in the tile segment will negatively impact the company’s overall EBITDA margin going forward. We forecast the EBITDA margin to average 24.7% over our forecast period, marginally highercomparedtothesix-yearhistoricalaverage.However,asisevidentfromthefigurebelow,we expect the EBITDA margins to be in a narrow declining range.

Figure 12 Trends in EBITDA and EBITDA Margins

210.2

238.1

257.1270.4

298.5

319.0

350.4

367.2385.2

21.2%

22.0%

24.4%

24.8%25.0% 24.9%

24.7%

24.6% 24.4%

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

EBITDA (EGP million) EBITDA Margin (%)


capital expenditure and depreciation

As discussed earlier, the company plans to boost its tile production capacity by building a new tile plant with a capacity of 17 million sq. m. (worth EGP 235 million) in Borg El Arab. The expansion is already under way and is expected to be completed in two phases by the end of 2015. The entire plant is divided into a 12.8 million sq. m. facility for red body tile and 4.2 million sq. m. facility for glazed porcelain tile. Each phase of the expansion includes 6.4 million sq. m. for red bodytileand2.1millionsq.m.forglazedporcelaintile.Thefirstphaserequiredaninvestmentof EGP 154 million, and the company expects the red body portion of this phase to be operational by 2Q2011 and the porcelain phase to be operational by 4Q2011. However, conservatively, we expect a delay of around three to four months for both phrases. The second phase will cost around EGP 81 million with the red body tile facility expected to begin operation by mid-2013 and the porcelain tile facility by early 2015. In the second phase of expansion, we have also accounted for possible delays. Per our discussions with management, we do not expect any other capacity additions over our forecast horizon.

Expansion in the 2010

EBITDA margin is due to better

production efficiency




balance sheet

Lecico is a cash-rich company with a strong balance sheet. At the end of 1Q2010, the company’s cash and cash equivalent balance was EGP 110 million. This includes investments worth EGP 73.7 million in treasury bonds and money market instruments. The company’s total debt stood at RO 464.6 million; the majority is a bank overdraft of EGP 365.4 million.

Thecompanyhadanaveragedebt-to-equity ratioof0.83x inthe lastfiveyearswiththeratiodeclining in recent years due to repayments. The company repaid EGP 66.8 million in 2009, which resulted in the debt-to-equity ratio dropping to 0.56x. At the end of 1Q2010, the debt-to-equity ratio stood at 0.59x. EGP 57 million of debt is due in the next year.

High free cash flow is likely to lead to attractive dividend Payouts

Lecico has historically exhibited an exceptional ability to generate significant free cash flowsfrom operations (FCFOs). The company generated positive FCFOs in spite of notable capex in the last two years. We expect the company to generate healthy FCFOs going forward as well, which shouldplayasignificantroleinboostingthedividendyieldsgoingforward.Onthe2010payout,thestockcurrentlytradesatadividendyieldof7.5%.Ourfreecashflowanalysissuggeststhereisstillsignificantupsidepotentialforthedividendyieldfromcurrentlevels,takingintoaccountanotablefreecashflowyieldof15.1%and18.3%onforecastedFCFOsin2011and2012.Wewouldalsoliketohighlightthatstrongfree-cash-flow-generatingabilitieswouldcomeinhandyinrecouping the capital outlay for the earlier mentioned capex.

Figure 13 Free Cash Flow Analysis

2010f 2011f 2012f 2013f 2014f

all figures in EGP millions, otherwise stated

NetProfit 113.5 129.0 140.5 163.4 176.3

Free Cash Flow from Operations 65.4 121.1 146.9 177.5 192.3

Cash Dividends 60.0 60.0 65.0 70.0 75.0

FCFO/NetProfit(%) 58% 94% 105% 109% 109%

Dividend Cover (x) 1.1 2.0 2.3 2.5 2.6

Dividend Payout Ratio (%) 53% 47% 46% 43% 43%

Free Cash Flow Yield (%) 8.2% 15.1% 18.3% 22.2% 24.0%

Cash Dividend Yield (%) 7.5% 7.5% 8.1% 8.7% 9.4%


The company has robust free

cash-flow-generating ability




1Q2010 – solid ResUlTs

• Lecico reported 11.2% growth in total revenue entirely fueled by a 20% increase in sanitary ware revenue. This increase in sanitary ware revenues was mainly due to the 14.1% increase insalesvolume.ThetilerevenuewasalmostflatatEGP107.9million,mainlyduetotheincrease in sales volume offsetting the decline in prices.

• EBITDA was up 8.2% to EGP 67.3 million in 1Q2010 compared to 1Q2009; however, the margin was down 70 basis points to 25%.

• Netprofitjumped24.5%during1Q2010comparedto1Q2009mainlyduetolowerinterestexpense. Interest expense decreased almost 22% to EGP 12.6 million during the quarter.

Figure 14 1Q2010 Performance

Key Figures (in EGP millions) 1Q2009 1Q2010 Growth (%)

Sanitary ware revenue 134.6 161.6 20.1%

Tile revenue 107.8 107.9 0.1%

Total revenue 242.4 269.5 11.2%

Cost of sales 136.40 155.80 14.2%

Gross profit 106.00 113.70 7.3%

Administration and distribution expenses 41.60 44.50 7.0%

Other operating expenses 2.20 1.90 -13.6%

EBITDA 62.20 67.30 8.2%

Netprofit 21.60 26.90 24.5%

Margins (%) 1Q2009 1Q2010

Gross profit margin 43.7% 42.2%

EBITDA margin 25.7% 25.0%

Netprofitmargin 8.9% 10.0%

Operating Highlights 1Q2009 1Q2010 Growth (%)

Sanitary ware sales volume (million pcs) 1.23 1.40 14.1%

Tile sales volume (million sq.m.) 5.87 6.03 2.7%

Average price - sanitary ware (EGP per pcs) 109.8 115.5 5.2%

Average price - tile (EGP per sq.m.) 18.4 17.9 -2.6%


Net profit jumped 24.5%

during 1Q2010 compared to

1Q2009 mainly due to lower

interest expense




financial sTaTemenTs

Income Statement (EGP Thousands)Fiscal Year Ends December 2008 2009 2010 2011 2012 2013 2014

Total Revenue 1,080,653 1,055,262 1,090,304 1,196,295 1,281,181 1,418,779 1,495,724

Cost of Revenue 630,967 595,862 620,383 676,505 726,430 811,541 857,050

Gross Profit 449,686 459,400 469,921 519,790 554,751 607,237 638,674

Selling/General/Admin. Expenses 195,926 186,039 183,171 204,566 217,801 237,645 250,534

Depreciation/Amortization 70,446 76,603 78,929 85,979 93,093 97,468 101,530

Other operating expenses 15,632 16,257 16,355 16,748 17,937 19,154 20,940

Operating Income 167,682 180,501 191,466 212,497 225,921 252,970 265,670

InterestIncome(Exp),NetNon-Operating (53,640) (51,279) (43,384) (42,393) (42,128) (42,134) (44,153)

Interest/InvestIncome-Non-Operating 15,711 8,396 1,000 1,000 1,000 1,000 1,000

Other net 403 (8,741) (2,737) (4,807) (3,067) 179 7,744

Net Income before Taxes 130,156 128,877 146,346 166,297 181,726 212,015 230,261

Provision for Income Taxes 19,811 19,629 32,196 36,585 40,434 47,703 52,960

Net Income after Taxes 110,345 109,248 114,150 129,712 141,292 164,312 177,301

Minority Interest 1,499 (930) (600) (700) (800) (900) (1,000)

Net Income after minority interest 108,846 110,178 113,550 129,012 140,492 163,412 176,301

Historical Forecast

Balance Sheet (EGP Thousands)Fiscal Year Ends December 2008 2009 2010 2011 2012 2013 2014

ASSETS

Cash and Short-Term Investments 196,019 99,581 27,258 48,603 93,541 163,986 309,208

TotalReceivables,Net 235,614 269,611 275,302 300,270 320,295 351,148 366,452

Total Inventory 431,231 408,482 438,847 461,770 499,661 546,230 588,568

Total Current Assets 862,863 777,674 741,407 810,643 913,496 1,061,363 1,264,228

Property/Plant/Equipment,Total-Net 698,591 672,062 726,133 734,154 721,061 693,593 657,063

TOTAL ASSETS 1,657,558 1,571,460 1,589,264 1,666,521 1,756,282 1,876,681 2,043,016

LIABILITIES & EQUITY

Accounts Payable 148,467 142,382 152,643 167,481 187,052 223,458 235,577

Short-Term Debt 523,852 408,765 387,022 384,929 417,627 404,509 452,823

Other Liabilities 17,959 15,011 15,000 17,000 18,500 19,700 20,800

Total Current Liabilities 690,279 566,159 554,664 569,410 623,179 647,666 709,200

Minority Interest 9,402 3,537 2,500 3,000 3,500 4,000 4,500

Other Liabilities 122,823 96,689 90,000 85,000 80,000 77,000 75,000

Total Liabilities 939,169 742,911 707,164 715,410 724,679 746,666 806,700

Total Equity 718,389 828,550 882,099 951,111 1,031,603 1,130,014 1,236,316

TOTAL LIABILITIES AND EQUITY 1,657,558 1,571,460 1,589,264 1,666,521 1,756,282 1,876,681 2,043,016

Historical Forecast

Cash Flow (EGP Thousands)Fiscal Year Ends December 2008 2009 2010 2011 2012 2013 2014

Cash from Operating Activities 320,715 196,751 199,283 217,737 229,016 250,963 259,180

Cash from Investing Activities (125,091) (75,975) (140,933) (101,727) (86,472) (72,165) (60,883)

Cash from Financing Activities (177,724) (83,105) (129,956) (94,664) (97,606) (108,352) (53,075)

NetChangeinCash 17,900 37,671 (71,607) 21,345 44,938 70,445 145,223

Historical Forecast





Risk and RecommendaTion gUide

RecommendaTion UPside (downside) PoTenTial

BUY MORE THAN 20%

ACCUMULATE BETWEEN 5% AND 20%

HOLD BETWEEN -10% AND 5%

REDUCE BETWEEN -25% AND -10%

SELL LESS THAN -25%

Risk leVel

low Risk HigH Risk

1 2 3 4 5

disclaimeR

The information, opinions, tools, and materials contained in this report (the “Content”) are not addressed to, or intended for publication, distribution to, or use by, any individual or legal entity who is a citizen or resident of or domiciled in any jurisdiction where such distribution, publication, availability, or use would constitute a breachofthelawsorregulationsofsuchjurisdictionorthatwouldrequireWataniInvestmentCompanyKSCC(“NBKCapital”)oritssubsidiariesoritsaffiliatestoobtainlicenses, approvals, or permissions from the regulatory bodies or authorities of such jurisdiction. The Content, unless expressly mentioned otherwise, is under copyright toNBKCapital.NeithertheContentnoranycopyofitmaybeinanywayreproduced,amended,transmittedto,copied,ordistributedtoanyotherpartywithoutthepriorexpresswrittenconsentofNBKCapital.Alltrademarks,servicemarks,andlogosusedinthisreportaretrademarksorservicemarksorregisteredtrademarksorregisteredservicemarksofNBKCapital.

The Content is provided to you for information purposes only and is not to be used, construed, or considered as an offer or the solicitation of an offer to sell or to buy or tosubscribeforanyinvestment(includingbutnotlimitedtosecuritiesorotherfinancialinstruments).Norepresentationorwarranty,expressorimplied,isgivenbyNBKCapitaloranyofitsrespectivedirectors,partners,officers,affiliates,employees,advisors,orrepresentativesthattheinvestmentreferredtointhisreportissuitableforyouorforanyparticularinvestor.ReceivingthisreportshallnotmeanorbeinterpretedthatNBKCapitalwilltreatyouasitscustomer.Ifyouareindoubtaboutsuchinvestment, we recommend that you consult an independent investment advisor since the investment contained or referred to in this report may not be suitable for you andNBKCapitalmakesnorepresentationorwarrantyinthisrespect.

The Content shall not be considered investment, legal, accounting, or tax advice or a representation that any investment or strategy is suitable or appropriate for your individualcircumstancesorotherwiseconstitutesapersonalrecommendationtoyou.NBKCapitaldoesnotofferadviceonthetaxconsequencesofinvestments,andyou are advised to contact an independent tax adviser.

TheinformationandopinionscontainedinthisreporthavebeenobtainedorderivedfromsourcesthatNBKCapitalbelievesarereliablewithoutbeingindependentlyverifiedastotheiraccuracyorcompleteness.NBKCapitalbelievestheinformationandopinionsexpressedinthisreportareaccurateandcomplete;however,NBKCapital gives no representations or warranty, express or implied, as to the accuracy or completeness of the Content. Additional information may be available upon request. NBKCapitalacceptsnoliabilityforanydirect,indirect,orconsequentiallossarisingfromtheuseoftheContent.Thisreportisnottoberelieduponasasubstitutionfortheexerciseofindependentjudgment.Inaddition,NBKCapitalmayhaveissued,andmayinthefutureissue,otherreportsthatareinconsistentwithandreachdifferentconclusionsfromtheinformationpresentedinthisreport.Thosereportsreflectthedifferentassumptions,views,andanalyticalmethodsoftheanalystswhopreparedthereports,andNBKCapitalisundernoobligationtoensurethatsuchotherreportsarebroughttoyourattention.NBKCapitalmaybeinvolvedinmanybusinessesthatrelate to companies mentioned in this report and may engage with them. Past performance should not be taken as an indication or guarantee of future performance, and norepresentationorwarranty,expressorimplied,ismaderegardingfutureperformance.Information,opinions,andestimatescontainedinthisreportreflectajudgmentatthereport’soriginaldateofpublicationbyNBKCapitalandaresubjecttochangewithoutnotice.

The value of any investment or income may fall as well as rise, and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price, or income of that investment.Inthecaseofinvestmentsforwhichthereisnorecognizedmarket,itmaybedifficultforinvestorstoselltheirinvestmentsortoobtainreliableinformationabout their value or the extent of the risk to which they are exposed.

NBKCapitalhasnotreviewedtheaddressesof,thehyperlinksto,orthewebsitesreferredtointhereportandtakesnoresponsibilityforthecontentcontainedtherein.Suchaddressorhyperlink(includingaddressesorhyperlinkstoNBKCapital’sownwebsitematerial)isprovidedsolelyforyourconvenienceandinformation,andthecontentofthelinkedsitedoesnotinanywayformpartofthisdocument.AccessingsuchwebsitesorfollowingsuchlinksthroughthisreportorNBKCapital’swebsiteshall be at your own risk.

© coPyRigHT noTice

ThisisapublicationofNBKCapital.NopartofthispublicationmaybereproducedorduplicatedwithoutthepriorconsentofNBKCapital.




Kuwait

National Bank of Kuwait SAKAbdullah Al-Ahmed StreetP.O. Box 95, Safat 13001Kuwait City, KuwaitT. +965 2242 2011F. +965 2243 1888Telex:22043-22451NATBANK

inTeRnaTional neTwoRk

Bahrain

National Bank of Kuwait SAKBahrain BranchSeef Tower, Al-Seef DistrictP.O. Box 5290, Manama, BahrainT. +973 17 583 333F. +973 17 587 111

Saudi Arabia

National Bank of Kuwait SAKJeddah BranchAl-Andalus Street, Red Sea PlazaP.O. Box 15385Jeddah 21444, Saudi ArabiaT. +966 2 653 8600F. +966 2 653 8653

United Arab Emirates

National Bank of Kuwait SAKDubai BranchSheikh Rashed Road, Port Saeed Area, ACICO Business ParkP.O. Box 88867, DubaiUnited Arab EmiratesT. +971 4 2929 222F. +971 4 2943 337

Jordan

National Bank of Kuwait SAKHeadOfficeAl Hajj Mohd Abdul Rahim StreetHijazi Plaza, Building # 70P.O.Box 941297,Amman -11194, JordanT. +962 6 580 0400F. +962 6 580 0441

Lebanon

National Bank of Kuwait(Lebanon) SALSanayehHeadOfficeBAC Building, Justinian StreetP.O. Box 11-5727, Riyad El Solh1107 2200 Beirut, LebanonT. +961 1 759 700F. +961 1 747 866

Iraq

Credit Bank of IraqStreet 9, Building 187Sadoon Street, District 102P.O.Box 3420, Baghdad, IraqT. +964 1 7182198/7191944 +964 1 7188406/7171673F. +964 1 7170156

Egypt

Al Watany Bank of Egypt13 Al Themar StreetGameat Al Dowal AlArabiaFouad Mohie El Din SquareMohandessin, Giza, EgyptT. +202 333 888 16/17F. +202 333 79302

United States of America

National Bank of Kuwait SAKNew York Branch299 Park Avenue, 17th FloorNewYork,NY10171,USAT. +1 212 303 9800F. +1 212 319 8269

United Kingdom

National Bank of Kuwait (Intl.) PlcHeadOffice13 George Street,London W1U 3QJ, UKT. +44 20 7224 2277F. +44 20 7224 2101

NBK InvestmentManagement Limited13 George StreetLondon W1U 3QJ, UKT. +44 20 7224 2288F. +44 20 7224 2102

France

National Bank of Kuwait (Intl.) PlcParis Branch90 Avenue des Champs-Elysees75008 Paris, FranceT. +33 1 5659 8600F. +33 1 5659 8623

Singapore

National Bank of Kuwait SAKSingapore Branch9RafflesPlace#51-01/02Republic Plaza, Singapore 048619T. +65 6222 5348F. +65 6224 5438

Vietnam

National Bank of Kuwait SAKVietnamRepresentativeOfficeRoom 2006, Sun Wah Tower115NguyenHueBlvd,District1Ho Chi Minh City, VietnamT. +84 8 3827 8008F. +84 8 3827 8009

China

National Bank of Kuwait SAKShanghaiRepresentativeOfficeSuite 1003, 10th Floor,Azia Center, 1233 Lujiazui Ring Rd.Shanghai 200120, ChinaT. +86 21 6888 1092F. +86 21 5047 1011

associaTes

Qatar

International Bank of Qatar (QSC)Suhaim bin Hamad StreetP.O.Box 2001Doha, QatarT. +974 447 3700F. +974 447 3710

Turkey

Turkish BankHeadOfficeValikonaglAvenueNo.1P.O.Box34371Nisantasi,Istanbul, TurkeyT. +90 212 373 6373F. +90 212 225 0353

naTional bank of kUwaiT

Kuwait

HeadOffice38th Floor, Arraya IIAl Shuhada Street, Block 6, SharqP.O.Box 4950, Safat 13050KuwaitT. +965 2224 6900F. +965 2224 6905

MENA Research35th Floor, Arraya IIAl Shuhada Street, Block 6, SharqP.O.Box 4950, Safat 13050, KuwaitT. +965 2224 6663F. +965 2224 6905E. [email protected]

Brokerage37th Floor, Arraya IIAl Shuhada Street, Block 6, SharqP.O.Box 4950, Safat 13050, KuwaitT. +965 2224 6964F. +965 2224 6978E. [email protected]

United Arab Emirates

NBK Capital LimitedPrecinctBuilding3,Office404Dubai International Financial CenterP.O.Box 506506Dubai, UAET. +971 4 365 2800F. +971 4 365 2805

Turkey

NBK CapitalArastima ve Musavirlik AS,Sun Plaza, 30th Floor,DereboyuSk.No.24Maslak 34398, Istanbul, TurkeyT. +90 212 276 5400F. +90 212 276 5401

nbk caPiTal


mailto:menaresearch%40nbkcapital.com.kw%20?subject=

KUWAIT DUBAI ISTANBUL CAIRO

lecicomec.biz/term/uploads/lcsw-09-06-2010.pdfsep 06, 2010 · ceramic tile manufacturer. lecico is...

Documents