NCBC_SaudiFactbook_2012

March 23, 2018 | Author: vineet_bm | Category: Fiscal Policy, Gulf Cooperation Council, Economic Growth, Inflation, Saudi Arabia
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MAY 2012www.ncbc.com Equity Research Farouk Miah, CFA Tariq Al-Alaiwat Iyad Ghulam Mahmood Akbar Production Martin K Arokiaraj International Client Contact [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Asma Dakkak Please refer to last page for important disclaimer Saudi Factbook 2012 A Guide to the Kingdom SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Contents EXECUTIVE SUMMARY 3 NCBC RECOMMENDATIONS 4 KSA - ECONOMY AND NATION 7 SAUDI STOCK MARKET 14 Saudi Arabia: Strongest regional market 17 Continued strong earnings growth in 2012E 19 INDUSTRIES & COMPANIES 22 Banking & Financials 24 Petrochemicals 40 Cement 59 Retail 75 Energy & Utilities 88 Agriculture & Food 93 Telecom 110 Insurance 120 Multi Investment 155 Industrial Investment 165 Building & Construction 182 Real Estate 201 Transport 212 Media & Publishing 219 Hotels & Tourism 225 APPENDIX 229 The Saudi economy maintains a positive outlook, enhancing the investment case for the TASÌ. Strong GDP growth expected in 2012 is combined with low debt levels, strong reserves and continued government infrastructure spending, making the Saudi economy resilient to any global slowdown. Despite the good market performance in 1Q12, the TASÌ remains at a discount to historic valuations with good earnings growth supporting upside potential of the market. Saudi Economy remains in an enviable position Through a combination of higher than expected income from petrochemical sales, continued infrastructure spending and a buoyant domestic economy, GDP expanded by 6.8% in 2011, the fastest rate in eight years. Going forward, the economic outlook remains encouraging, even though growth may see some moderation in 2012 due to oil prices retreating somewhat. The ÌMF expects economic growth to marginally slow down to 6.0% in 2012. With SR270bn of construction contracts awarded in 2011, more than double the value in 2010 and surpassing the previous high of SR207bn in 2009, this should support growth in the coming years as these projects are executed. We expect ongoing infrastructure spending by the government to continue to drive the domestic economy in 2012. Saudi market profitability to exceed SR100bn for the first time Due to strong growth from the domestically focused and defensive sectors such as Cement, Telecoms, Retail and Banks, coupled with high absolute profits from the Petrochemical sector, we believe profitability for the listed companies should exceed SR100bn for the first time in 2012. We expect net income of the listed companies to grow by 18% YoY in 2012 to SR112bn. The listed Saudi Banking sector, accounting for 29% of the free float weight of the TASÌ, is expected to record YoY profit growth of 10%, equivalent to net income of SR28bn TASÌ well positioned to grow, although risks exist We believe the Saudi market is well positioned to grow both in the short and medium-to-long term. The TASÌ is currently trading at 15.2x trailing P/E, below its historic average of 17.5x and the 20.0x valuation for similar frontier and emerging markets. This compelling valuation coupled with the good profit growth expectations for the market and limited correlation with other ¨mainstream¨ emerging market economies, we believe, leads to a compelling investment case for the TASÌ. However, we note that the continued global economic uncertainty poses a risk to the Saudi Arabian economy. While progress has been made towards resolving the Eurozone debt crisis, a permanent solution still remains elusive. Similarly, growth concerns in the US and emerging economies continues to weigh on global sentiment. All these factors have a potential to hold back Saudi Arabia's growth momentum with lower oil demand and prices the key initial trigger. MAY 2012 EXECUTÌVE SUMMARY Saudi Arabia remains on growth track 3 EXECUTIVE SUMMARY NCB CAPITAL MAY 2012 NCBC Recommendations Exhibit 1: Summary of stock coverage Stock Current Rating PT (SR) Comments Al Rajhi (1120. SE) Overweight 90.2 Al Rajhi's loan book is likely to grow faster than industry peers benefitting from its large deposit base. Although the bank's margins are contracting due to current low interest rates, the bank will benefit from its lower cost of funds in the long run which will support NSCI. Arab National (1080.SE) Neutral 32.9 We believe ANB's lower loan growth and compressed margins is likely to keep its total operating income growth muted. However, its improved asset quality is a key positive which is likely to offset the muted total operating income. AlBilad (1140. SE) Neutral 21.4 Albilad's retail focus would enable a faster growth in its net loans and increase its NSCI for 2012. In addition, strong non-interest income and improved asset quality is likely to add to bottom-line. However, operating costs remains a concern for its profitability. BJAZ (1020. SE) Neutral 19.6 BJAZ's top-line is likely to benefit from both strong loan growth and fee income aided by strong brokerage revenue from increasing trading volumes on the Tadawul. However, we believe the potential gains from the surge in market activity have been priced-in. . Saudi Fransi (1050. SE) Overweight 38.3 BSF's retail focus is likely to grow its loan books as well as maintain NIMs. This will keep its NSCI strong. Although the retail focus will increase operating costs, we believe strong top-line growth and better asset quality will offset the impact of that on the bottom-line. Riyad Bank (1010. SE) Overweight 33.2 RÌBL's strong corporate and retail presence is likely to benefit the bank to expand its credit portfolio and improving its asset quality. Ìn addition, the bank's aim to maintain margins is likely to enable the bank to post double digit net earnings growth from 2013. SABB (1060. SE) Overweight 40.5 We expect SABB's total operating income in 2012 to be driven by loan volumes and strong fee income. In addition, stable operating expenses and lower provision charges will enable it to marginal growth in net income. SAIB (1030. SE) Neutral 18.2 SAÌB's diversification strategy to grow retail loans will benefit the bank in long term. However, stiff competition from established players may pressurize its net interest margins in the near term.. Samba (1090.SE) Overweight 60.6 The bank's ability to post relatively strong profitability despite having a conservative approach keeps us positive on the stock. As the high-yielding corporate bonds mature, Samba will refocus on expanding its loan book and therefore maintain profitability. Saudi Hollandi (1040.SE) Overweight 32.2 SHB is likely to grow its loan books benefitting from its microfinance initiative. This is also likely to improve its bottom-line. However, we are concerned about SHB's reliance on Tier II subordinated debt for capital adequacy. Considering stringent laws of Basel III, the bank might need to increase its equity which would limit future dividend payouts. SABIC (2010.SE) Overweight 124.5 SABIC benefits from its diversified product mix, an integrated production flow, wide geographical reach and continued feedstock cost advantage at its facilities in Saudi Arabia. At current levels, we believe the stock offers an attractive investment opportunity considering the earnings growth potential and the company's sustained focus on expansion in different product lines and geographies. Sipchem (2310.SE) Overweight 26.7 Ìn 2011, Sipchem's operational efficiency improved as all of its plants (Phase 1 and 2) were operating at their designed capacities, thereby offering full benefits of an integrated product flow. Resultant improvement in profitability is expected to drive the company's earnings in 2012E. 4 EXECUTIVE SUMMARY NCB CAPITAL MAY 2012 Exhibit 1: Summary of stock coverage Stock Current Rating PT (SR) Comments SAFCO (2020.SE) Overweight 212.7 The company's high margins, low capex requirements and short cash conversion cycle result in high free cash flows and thereby high dividend payments. We believe continued strength in demand for fertilizers and the SAFCO 5 project would remain attractive in the long run. NIC (Tasnee) (2060.SE) Neutral 36.7 Tasnee is the only titanium dioxide (TiO2) pigment producer in the Middle East and is monetizing its low-cost feedstock advantage through its petrochemicals business. Continued rise in TiO2 prices could support 2012E earnings growth; however, petrochemical prices are likely to remain weak. Any positive earnings surprises due to higher-than-expected selling prices in the titanium dioxide business and positive news flow related to the ongoing petrochemical projects are key stock price catalysts. Sahara (2260.SE) Neutral 18.5 Sahara's 2012E performance is expected to be driven by the full-year contribution from its Al Waha plant, which commenced operations in April 2011. Furthermore, three new start-ups producing acrylates, caustic soda, ethylene dichloride and superabsorbent polymers are likely to support the company's 2013E earnings. However, poor earnings from the Al Waha project in 2H11 raises concerns over Sahara's operational ability. Yansab (2290.SE) Neutral 48.2 We are optimistic on the company's future earnings growth due to its low cost structure and growing demand from emerging economies. However, we believe the current valuation of stock factors in all positives associated with the company and offers limited upside potential. Moreover, continued uncertainty over economic conditions in Europe (the key end market) weigh heavily on Yansab's near-term earnings outlook. Saudi Kayan (2350.SE) Neutral 18.7 A diversified product mix and strong links with SABIC are key positives for the stock. However, poor performance in 4Q11 indicates Saudi Kayan is facing some technical issues and is not able to manage the integrated product flow as anticipated earlier. In our opinion, the company's ability to ramp up production at full capacity is imperative for growth in future earnings. Petrochem (2002.SE) Underweight 19.7 The company is scheduled to commence operations in 2Q12 and would be entering into ethylene and propylene derivatives through a JV with Chevron Phillips. However, prevailing demand and weakness in pricing are likely to restrict earnings growth in 2012E. Any update on the project commencement would be a key catalyst for the stock price. Yamamah Cement (3020.SE) Neutral 55.8 Strong demand in Riyadh and the ability to sell in different regions are the main advantages. However, high utilization rate and declining stock level are the key negatives. Eastern Cement (3080.SE) Neutral 59.1 Shifting focus to domestic market due to export, but limitation on exports remains key downside. Still focused on Eastern region for sales. Yanbu Cement (3060.SE) Neutral 75.2 Demand shift from Central to the western region is key advantage. The company is located close to the region's main projects. Ìn addition, it has a new line of 3mn tons Saudi Cement (3030.SE) Neutral 82.7 Based in the Eastern region, away from most of the key demand centers. However, Its high stock level, excess capacity and re-operating its old lines are positives. Southern Cement (3050.SE) Neutral 99.5 Well positioned for Jizan Economic City in the South. New facility near Makkah with 1.5mn tons should also help. High stock level and excess capacity supports the outlook. Qassim Cement (3040.SE) Neutral 81.4 Lowest cost cement producer in the country with very low inventory levels. Lack of capacity expansion plans could limit growth. Jarir (4190.SE) Neutral 152.0 Plans to almost double number of stores, coupled with a 50% IT market share, provide strong platform for the stock. Low liquidity and declining price of laptops a concern. Store openings the key catalyst for the stock. Valuation is somewhat stretched at 14.2x 2012e P/E. 5 EXECUTIVE SUMMARY NCB CAPITAL MAY 2012 Exhibit 1: Summary of stock coverage Stock Current Rating PT (SR) Comments Al-Hokair (4240.SE) Neutral 68.0 Al Hokair is undergoing aggressive international expansion in former Soviet Union countries such as Kazakhstan and Azerbaijan. We believe this comes with increased risks vs. its Saudi business. We believe the valuation is not attractive at 11.2x 2013e P/E. Al-Othaim (4001.SE) Overweight 115.0 Al Othaim is the number two food retailer in the KSA. It is well positioned to increase share as market shifts to organized retailing. Entrance of foreign players and rising COGS are key risks. Store expansion is key catalyst for the stock. Ongoing RE acquisition is holding back the stock. Savola (2050.SE) Overweight 39.1 Food retail business is expanding aggressively with margins expected to increase as buying power strengthens. Food business continues to take market share and expand geographically across the region. Move to a ¨holding company¨ may unlock value. Almarai (2280.SE) Neutral 60.4 Geographic expansion of the bakery and juice businesses and the start of operations at the new poultry venture are key drivers for the stock. Our concerns are on the pace of progress at poultry, as well as the returns which can be gained on this SR4bn investment. Saudi Telecom Co. (7010.SE) Overweight 50.2 Key positives of the stock include its dominance in DSL and its higher and more secure ARPU levels. Key concerns on the stock are focused on the limited information available on its international operations as well as FX exposure through its international investments. Mobily (7020.SE) Overweight 75.5 Key positives of the stock include its dominance in wireless internet access and its focused strategy. Key concerns on the stock are focused on its declining ARPU levels and acquisition costs of new customers. Zain KSA (7030.SE) Neutral 7.0 Key positives of the stock include its attractive and innovative packages and increasing market share. Key concerns on the stock are focused on its high debt levels and the financing of this as well as ownership concerns. Saudi Electricity (5110.SE) Neutral 15.3 The new tariff structure on industrial, commercial and government customers came into effect on July 1, 2010. This had a significant impact on the company's profitability, which we believe the market has already priced into the stock. Going forward, the key risks include rising cost of energy purchased from independent producers as well as an increase in depreciation expense. Dar Al Arkan (4300.SE) Neutral 10.8 Dar Al Arkan is currently developing a number of capital-intensive projects; however, banks and financial institutions could be reluctant to lend to the company due to allegations of a crisis on its website. Furthermore, investors' perception, which has been impacted by weak earnings and lack of transparency over the last few years, could improve if management provides further insight into its land bank. The stock outperformed the TASI index, reflecting the limited upside potential. Taiba (4090.SE) Overweight 27.6 With a portfolio of prime assets, expected revenue growth and improvement in margins, we believe Taiba's fundamentals, including its status as one of the holiest cities for Muslims, makes the stock an attractive play in the hospitality sector. Al-Akaria (4020.SE) Neutral 27.3 Good earnings visibility, future growth potential and a large land bank are positives; however, these are partially offset by a low ROE and risk of excess office supply in Riyadh. Source: NCBC Research 6 Global economic growth slowed in 2011 as the Euro zone continued to struggle with the sovereign debt crisis and the pace of the US recovery remained muted. Saudi Arabia withstood global headwinds in 2011 and posted its highest rate of economic growth since 2003 at 6.8%. Although due to the high base effect GDP growth is expected to slow to 6.0% in 2012 (ÌMF), the Saudi economy remains in a strong position. Real non-oil GDP increased 7.7% in 2011, outpacing the 4.3% growth in real oil GDP. Manufacturing (15.0%), construction (11.6%), and Transport & Telecommunications (10.1%) were the leaders in the non-oil economy. Moreover, King Abdullah announced a SR500bn social spending package, which included a two-month basic salary bonus to all public sector workers, rise in housing loans and increase in healthcare spending. This helped in boosting domestic consumption, which expanded by 10.7% (in current prices) in 2011, up from the 8.1% growth recorded in 2010. A sustained increase in government spending since 2009 has also helped boost non-oil GDP in the Kingdom. Most of the increase in expenditure has been aimed at improving human and physical infrastructure. After increasing 23% in 2011, the government is set to increase expenditure by around 19% in 2012 (over the budgeted figure for 2011). Expectations of stable oil prices around the US$100/bbl level is likely to help the Kingdom support its fiscal position even as it funds more non-oil expansion. Exhibit 2:Real GDP - CAGR (2008-13E) Exhibit 3: Annual change in real GDP % % Source: ÌMF, NCBC Research Source: ÌMF, NCBC Research Ìn 2011, Saudi Arabia benefited from increased oil output as production was increased to fill the gap caused by the unrest in Libya. Production peaked at close to 9.9mn bpd in August 2011 before decreasing towards the end-2011.The increase in oil production and relatively sustained strength in oil prices helped increase GDP growth and strengthen government balances further. According to the ÌMF, the fiscal surplus grew to 15.2% of the GDP in 2011 from 6.6% in 2010. The impact of higher oil prices and production was also evident in export earnings, with goods and services exports increasing 36.7% in 2011 (ÌMF). Ìmports grew at a slower pace 9.8%. 0% 3% 6% 9% 12% Brazil China Ìndia Japan Russia KSA UK US -9% -6% -3% 0% 3% 6% 9% World Japan UK US KSA 2008 2009 2010 2011E 2012E 2013F MAY 2012 ECONOMY AND NATÌON KSA's economy to sustain growth momentum 7 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 Separately, inflation remained relatively elevated in 2011 due to rising food inflation and higher domestic rents. The rent related component of the Consumer Price Ìndex (CPÌ) increased 7.8%, followed by food price inflation (5.2%). As a result, overall CPÌ rose 5.0%. However, in 2012, lowering of global food prices since the high of 1Q11 is set to ease domestic inflation, especially with a high base effect also coming into play; the ÌMF expects domestic inflation to moderate to around 4.8% in 2012. Exhibit 4: Saudi Arabia macroeconomic indicators Units as indicated Indicator 2007 2008 2009 2010 2011 2012E 2013E Real GDP growth (%) 2.0 4.2 0.1 4.6 6.8 6.0 4.1 Hydrocarbon (%) (3.6) 4.2 (7.8) 2.4 4.3 4.7 0.0 Non-hydrocarbon (%) 4.6 4.3 3.5 5.5 7.7 6.5 5.6 Ìnflation (%) 4.1 9.9 5.1 5.4 5.0 4.8 4.4 Current account balance (% of GDP) 24.3 27.8 5.6 14.8 24.4 27.9 22.7 Fiscal balance (% of GDP) 15.8 34.4 (4.6) 6.6 15.2 16.6 10.1 ource: ÌMF(Regional Economic Outlook ÷ MENA region, April 2012); NCBC Research Exhibit 5: Shares of oil and non-oil sector in total GDP Exhibit 6: Shares in total non-oil GDP % % Source: Central Department of Statistics & Ìnformation, NCBC Research (2011 data is provisional) Source: Central Department of Statistics & Ìnformation, NCBC Research (2011 data is provisional) Government continues to be proactive in stimulating growth As in previous years, the Saudi Arabian government continued its expansionary fiscal policy in 2011 to promote growth, and improve human and physical infrastructure. Actual expenditure (SR804bn) during 2011 was 39% higher than the budgeted figure (SR580bn).A large part of this increase can be attributed to King Abdullah's SR500bn social spending package announced during the first half of the year. The package was primarily intended to address income levels and social welfare issues like healthcare and housing (especially for low income individuals). SR250bn has been allocated for housing alone; the money will be spent over the next few years in constructing 500,000 new housing units. Encouragingly, despite this fiscal expansion, Saudi Arabia's budget registered a surplus of SR306bn as high oil revenues more than offset higher spending. At the same time, the Kingdom managed to reduce overall gross debt significantly. Thus, while major global economies are grappling with failing fiscal health, the Kingdom continues to consolidate finances with a rise in fiscal surplus, declining debt burden, and higher foreign reserves (according to ÌMF data, gross official reserves increased to US$537bn in 2011 from US$443.7bn in 2010). Meanwhile, in order to support liquidity and maintain low cost for borrowers, the Saudi Arabian Monetary Agency (SAMA) maintained a stable monetary policy by 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011P Non-oil GDP Oil GDP 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 Government services Private services Construction Electricity , Gas and Water Manufacturing (non- oil) Agr icul ture 8 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 keeping its benchmark interest rate, reverse repo, at 0.25%.This is not surprising given that SAMA has to match US Federal Reserve's policy as the riyal is pegged to the US dollar. Exhibit 7: Fiscal balance and gross debt As % of GDP Source: ÌMF (Regional Economic Outlook ÷ MENA region, April 2012); NCBC Research Resilient financial sector Banking sector fundamentals remain sound Saudi Arabian banks have continued to exhibit strong liquidity measure, hence, it is poised to support stronger demand for loans in 2012. The Saudi banking sector has among the lowest loan-to-deposit ratios in the Gulf, and is minimally exposed to real estate. Domestic banks have strong financial ratios, with NPLs at 3% (of total loans), capital adequacy ratio of 17.3% (of the risk-weighted assets), and return on assets at 1.9%. Bank loan growth, to the private sector, rose to around 11.0% in 2011 compared to 4.8% in 2010. Although credit growth is picking up gradually from negative levels in 2009, the pace of growth is likely to accelerate as the economy strengthens. KSA successfully launches project sukuk The Saudi Arabian sukuk market has grown significantly in recent years, and has the potential to become a major source of funding for the corporate sector. Leading blue chip names, notably Saudi Electricity Co. and Saudi Basic Ìndustries Corp. (SABÌC), have repeatedly tapped the market to raise fresh funds. The sukuk market gained further momentum in 2011 after witnessing strong growth in 2010, with six new issuances worth US$4.1bn. Ìn September 2011, the Kingdom successfully launched the world's first project sukuk, which was worth SR3.7bn, for Saudi Aramco Total Refining and Petrochemical Company (SATORP), a joint venture between Saudi Aramco and Total (a leading multinational energy company).The momentum in the sukuk markets has continued in 2012 with the Saudi Arabian General Authority for Civil Aviation (GACA) launching the Kingdom's first ever sovereign guaranteed sukuk worth SR15bn in January. The Saudi Arabian Stock Exchange, Tadawul, currently has a secondary trading platform for sukuk with eight listed issuances as of December 2011. The Kingdom is looking at the possibility of financing various infrastructure projects through sukuk issuance. TASI has strong start to 2012, although some set-backs recently Ìn line with its global peers, Saudi Arabia's equity market faced the fallout of the Eurozone sovereign debt crisis in 2011 with the benchmark TASÌ declining 3.5%. However, the index performed better than several of its key global and -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 2007 2008 2009 2010 2011 2012E 2013F Gross debt Fiscal balance 9 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 GCC peers due to its relatively strong economic and structural fundamentals. For example, the Abu Dhabi All Shares Ìndex fell 12.0%, German DAX 30 declined 17.0%, and Nikkei 225 was down 12.0% in 2011. The equity market in Saudi Arabia has made a strong start in 2012, although of late some this has been negated. We believe much of the reason behind the good start is due to local factors such as the Makkah and Madinah compensation monies from compulsory purchase orders being redirected into the equity markets. This, alongside investors moving assets out of real estate in to equities as well as improving global sentiment in 1Q12 aided the strong performance in this period. The YTD peak occurred on April 3rd when the market was up 23%. However since then, the market has been down for five weeks with it stabilizing at around the 7,200 level at the beginning of May. This correction can be attributed to the renewed fears over Europe due to the outcome of the Greek and French elections, concerns over the economic slowdown in China and the normal summer lull which occurs in Saudi Arabia. Exhibit 8: TASI performance in 2011 Exhibit 9: TASI performance in 2012 (YTD return) % % Source: Bloomberg, NCBC Research Source: Bloomberg, NCBC Research Significant expansion in TASI volumes/value traded YoY, there has been a significant increase in the volumes and average daily value traded. YTD, the average value traded has averaged SR10.7bn, more than double the SR4.4bn recorded in 2011 and compared to the SR3bn in 2010. The total value of shares traded peaked at SR21.6bn in March 2012, the highest since March 2007. Off the back of the points mentioned above, there has been a renewed level of interest in the local equity markets from local retail investors, leading to this increase in activity. Government budgets for surplus in 2012 The government's primary focus over the past few years has been to boost infrastructure to foster a strong diversified economy. Government support has become more pronounced over the last couple of years as it has undertaken stimulus measures due to falling oil prices and continued with its long-term diversification agenda at the same time. Figures from the recently announced budget for 2012 indicate that the government has allocated a total of SR265bn, or 38.4%, of total expenditure for new and ongoing projects. Apart from budgetary outlays, continued commitment to the five economic cities also reflects the government's objective to boost industrial and employment in the economy. The 2012 budget continues to focus on improving human and physical infrastructure, with budgeted expenditure set to increase 19.0% to SR690bn compared to the budgeted figure of SR580bn for 2011. However, this figure is -25% -20% -15% -10% -5% 0% 5% Jan- 11 Feb- 11 Mar- 11 Apr - 11 May- 11 Jun- 11 Jul-11 Aug- 11 Sep- 11 Oct- 11 Nov- 11 Dec- 11 -5% 0% 5% 10% 15% 20% 25% 30% Jan-12 Jan-12 Jan-12 Feb-12 Feb-12 Mar-12 Mar-12 Apr -12 Apr -12 May-12 10 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 lower than the actual outlay of SR804bn in 2011.As in the previous years, the budget statement identified health, education and transport as the priority sectors. Education and training have received 24.4%, or SR168.6bn, of total budgetary spending. Allocations to transportation, telecommunications and health increased to SR121.7bn or 17.6% of total budgeted spending. Ìnterestingly, for the first time since 2008, the government has budgeted for surplus in 2012. The budget estimates revenues at SR702bn and a surplus of SR12bn, the first projected surplus since 2008. Ìnflation expected to remain manageable While inflation remained elevated in 2011 due to rising prices of food and housing related items, it has shown signs of moderation in recent months. Ìn addition, the government has been providing price subsidies on a range of basic goods such as food and electricity to hold back inflation. However, the new Nitaqat labor quota system introduced in November 2011, poses wage-push inflation risks. Under the system, firms are required to hire relatively expensive local workers to improve their Nitaqat ranking. This is in addition to the already increased minimum wages to SR3,000 for public sector employees. Monetary policy will also put upward pressure on inflation as SAMA is expected to keep interest rates low, in line with US Federal Reserve's discount rate to maintain the Riyal ÷ dollar peg. Exhibit 10: KSA CPI, housing and food inflation % Source: SAMA, NCBC Research However, KSA's economy remains exposed to challenges Strong growth in the non-oil sector has been instrumental in providing support to the overall economy for the last couple of years. While this trend is encouraging, the Kingdom's economy is still reliant on crude oil exports. This exposes the economy to the risk of adverse oil price movement. Oil and related sectors continue to contribute around 90% of total government revenues. Therefore, even though the Kingdom continues to enjoy an overall fiscal surplus, non-oil fiscal deficit (as share of non-oil GDP) has surged to 75.1% in 2011 from 20.0% in 2002. -5% 0% 5% 10% 15% 20% 25% Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 General Ìndex Food Housing 11 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 Exhibit 11: Share: Oil and non-oil in total revenues (%) Exhibit 12: Non-oil fiscal deficit (% of non-oil GDP) % % Source: SAMA; ÌMF (2011 and 2012 figures), NCBC Research Source: ÌMF(Regional Economic Outlook ÷ MENA region, April 2012); NCBC Research Although oil prices look to remain stable in 2012, ongoing concerns over the health of the global economy may lead to unexpected pricing pressure. On the other hand, although beneficial to the Saudi Arabian economy in the short-term, a steady increase in oil prices may pose risks to global growth, which, in turn, could adversely impact KSA's economy in the medium term. Bank credit remains subdued Total credit growth rose to 10.5% in 2011, after increasing 5.2% in 2010. Even though growth has picked up, it is well below the peak of around 30.0% during 2004÷08. This trend could be due to the stringent lending norms adopted by banks. Banks have been reluctant to restart lending, and have been focusing on building up their capital adequacy levels. Ìntroduction of salary caps by the central bank has also discouraged lending. Currently, total monthly loan repayments cannot exceed 30% of the borrower's monthly salary. However, lending is expected to pick up in 2012 as business confidence revives and the economy continues to grow. SAMA's role in ensuring stable liquidity in the banking system has also helped to support confidence. Exhibit 13: Credit to private and public sector SR bn Source: SAMA, NCBC Research Economic outlook remains encouraging; global risks persist Despite strong global headwinds, the growth of the Saudi Arabian economy in 2011 was the fastest since 2003. Much of this growth is ascribed to an increase in oil production and continued high prices. Going forward, the outlook remains encouraging; even though growth may see some moderation in 2012 as government spending reduces and oil prices stabilize. The ÌMF expects economic growth to marginally slowdown to 6.0% in 2012. This GDP growth, 0% 20% 40% 60% 80% 100% 2007 2008 2009 2010 2011E 2012E Oil revenue Non-oi l revenue 0% 20% 40% 60% 80% 100% 2006 2007 2008 2009 2010 2011E -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0 100 200 300 400 500 600 700 800 900 1Q- 09 2Q- 09 3Q- 09 4Q- 09 1Q- 10 2Q- 10 3Q- 10 4Q- 10 1Q- 11 2Q- 11 3Q- 11 4Q- 11 Public Sector Private Sector Credit growth - RHS 12 ECONOMY AND NATÌON NCB CAPÌTAL MAY 2012 coupled with ongoing government initiatives should leads to a strong outlook for the Saudi economy. However, global economic and geo-political risks continue to weigh on the economic sentiment. Risks from the European sovereign debt crisis continue with the recent results of the French and Greek elections bringing doubt upon the current ¨austerity¨ driven solution. Similarly, in the US, while growth momentum has picked up in recent months, it has not been enough to bring down high unemployment levels, which continues to be above the 8% mark. Even in emerging markets, tight monetary policy over 2010-11 to tame inflation has led to a deceleration in growth. All this global uncertainty has the potential to adversely impact economic growth in the Kingdom, primarily through the impact of lower hydrocarbon prices. 13 The TASÌ has seen a substantial increase in activity YTD with average daily value traded up 139% YoY to SR10.7bn.The index was up 23% at its peak, although has fallen back somewhat, and is now up 13% as of May 9, 2012 at around the 7,200 level. Despite the strong start to the year, the market remains attractive at 15.2x trailing P/E against the average of 17.5x. With the growth in market earnings remaining strong in the coming years, we believe there is a compelling investment case for the local market. The Saudi market has outperformed the majority of regional peers in 2012 YTD. Ìn fact, all GCC markets, except Qatar's DSM, are trading at higher levels in 2012 YTD. The good growth in earnings across the region in 1Q12 has helped in keeping investor sentiment high. The TASÌ was up 12.5% as of 9 May 2012, second only to Dubai, which rose 13.8% during the same period. Qatar, however, is down 2.1% YTD. Exhibit 14: TASI performance TASÌ Ìndex levels for from 2009 until 2012 YTD Source: Bloomberg, NCBC Research Saudi market takes center stage Among regional markets, we believe the Saudi market offers a compelling value proposition largely due to its strong macroeconomic fundamentals. The Kingdom has the largest and most diverse economy with a strong outlook with the market also the largest in terms of market capitalization and liquidity. Short-term factors such as reasonable valuations, recommencement of margin lending by banks investors moving out of Real Estate, have been aiding the TASÌ's positive momentum YTD in 2012. The index reached a three-and-a-half year high at 7930.6 on April 4, 2012. We believe the rise in volumes YTD also indicate an improvement in investor confidence in the Kingdom. Volumes are trading at substantially elevated levels compared to the previous three years; average daily value traded reached a five-year high of SR21.6bn on March 19, 2012. TASÌ's current share in GCC value traded increased to around 90% during 1Q 12 from 83% in 2011 and 58% in 2008. Aggregate market earnings grew 22% to SR95bn (USD25bn) in 2011, led by the petrochemical sector (net income up 37.5%). We expect market earnings to grow by 18% in 2012e, exceeding the SR100bn level for the first time. With the TASÌ trading at 15.2x earnings versus an average of 17.5x in the last three 3,000 4,000 5,000 6,000 7,000 8,000 9,000 3 1 - D e c - 0 8 2 8 - F e b - 0 9 3 0 - A p r - 0 9 3 0 - J u n - 0 9 3 1 - A u g - 0 9 3 1 - O c t - 0 9 3 1 - D e c - 0 9 2 8 - F e b - 1 0 3 0 - A p r - 1 0 3 0 - J u n - 1 0 3 1 - A u g - 1 0 3 1 - O c t - 1 0 3 1 - D e c - 1 0 2 8 - F e b - 1 1 3 0 - A p r - 1 1 3 0 - J u n - 1 1 3 1 - A u g - 1 1 3 1 - O c t - 1 1 3 1 - D e c - 1 1 2 9 - F e b - 1 2 3 0 - A p r - 1 2 TASI ends the year down 3.1% 03April2012: TASI touches 7,930 June 2009: Saad/Al Gosaibi troubles emerge, impacting Saudi as well as regional markets 25 Nov 2009: Dubai World debt standstill drives the market down TASI ends the year up 27.5%, but down 4% from its peak in November 26 April 2010: 13% rise YTD, but Euro/Greece reverse the trend MAY 2012 KSA STOCK MARKET Significant increase in market activity 14 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 years, the market looks far from expensive. We believe the combination of an inexpensive valuation and steady earnings growth provides a positive outlook for the TASÌ. Exhibit 15: 2011 GCC market performance Exhibit 16: 2012 YTD GCC market performance 2011 performance of GCC markets 2012 YTD performance of GCC markets Source:Bloomberg, NCBC Research Source: Bloomberg, NCBC Research 2012 YTD to 17 April 2012 The key risk to our positive outlook on the TASÌ is the pace of recovery of the global economy. Ìf this is much slower than expected, this in turn could lead to a slowdown in oil demand and subsequently oil prices. Furthermore, the economy also remains vulnerable to the challenges of inflationary pressures especially given the recent upward trend in housing-related inflation and elevated global food prices TASÌ marginally lower in 2011 TASÌ's performance (down 3.1% YoY) was mixed relative to the developed and emerging markets in 2011. Within the emerging markets it outperformed Brazil, China and Ìndia; however it underperformed compared to markets such as Russia and South Africa. Ongoing concerns on the pace of the global recovery in general and the debt issues in Europe in particular were the main points of concern in 2011. From a global perspective, stock markets have generally moved up in 1Q12 on positive US economic data and an improvement in liquidity in Europe. At the end of 1Q12, trading in five of the seven GCC indices was higher versus the start of 2012. Exhibit 17: 2011 performance vs global peers Exhibit 18: 1Q12 performance vs global peers 2011 global market performance 1Q12 global market performance Source: Bloomberg, NCBC Research Source: Bloomberg, NCBC Research 2012 YTD to 17 April -25% -20% -15% -10% -5% 0% 5% Bahrain Dubai Kuwait Oman Abu Dhabi TASÌ Qatar -5% 0% 5% 10% 15% 20% 25% Dubai TASÌ Kuwait Oman Bahrain Abu Dhabi Qatar -25% -20% -15% -10% -5% 0% 5% 10% S h a n g h a i H a n g S e n g N i k k e i 2 2 5 B r a z i l E u r o T o p 1 0 0 T A S Ì N a s d a q D o w J o n e s 0% 4% 8% 12% 16% 20% E u r o T o p 1 0 0 D o w J o n e s S h a n g h a i B r a z i l H a n g S e n g N i k k e i 2 2 5 N a s d a q T A S Ì 15 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 Sector performance in 2011: Slowdown in petrochemicals and banking; cement and retail strong The TASÌ was down 3.1% in 2011 with mixed results across sectors. Major sectors, including petrochemicals, banking and telecom (combined share of 65.1% of TASÌ's free float weighted market capitalization), witnessed a correction in 2011 after two consecutive years of gains. However, this was offset by significant growth in retail (3.1% of free float) and cement (8.1% of free float). Both sectors are highly defensive and largely focused on demand from domestic consumers. Hence, they were relatively resilient to global economic issues and benefited from an increase in consumer spending and strong underlying economic growth in Saudi Arabia. A high dividend yield also fueled the rally in cement stocks. Exhibit 19: TASI performance in 2011 Units as stated Index No. of Daily turnover Mkt cap Free float Change Valuation Index value companies (SR mn) (SR mn) Wt (%) YTD (%) P/BV P/E TTM TASÌ 6,417.7 149 5,653 1,270,028 100.0 (3.1) 1.8 13.6 Banking/Financial 14,581.8 11 281 309,291 29.8 (12.7) 1.7 12.5 Petrochemicals 6,232.9 14 1,339 467,058 28.7 (4.4) 2.2 11.3 Cement 5,336.1 10 157 60,101 8.1 36.0 3.0 13.8 Telecom/ÌT 1,668.6 5 125 114,015 7.0 (13.1) 1.7 11.1 Agri/Food 5,812.7 14 551 52,625 5.7 3.4 2.8 21.3 Real Estate 2,705.2 8 264 43,167 4.4 (1.9) 0.9 22.2 Ìndustrial Ìnv 5,515.9 13 308 41,601 3.6 8.8 1.5 27.6 Retail 6,475.2 10 226 22,986 3.1 31.5 4.0 15.5 Construction 3,264.1 15 390 23,274 2.7 (1.7) 1.8 29.0 Ìnsurance 996.6 31 1,430 25,140 2.1 9.3 2.8 48.9 Energy/Utilities 4,976.3 2 46 59,356 2.1 (0.8) 1.1 23.3 Multi-investment 2,756.4 7 299 38,419 1.1 20.7 1.3 45.2 Transport 2,882.2 4 133 6,607 0.9 (9.9) 0.9 25.4 Media/Publishing 2,149.0 3 43 3,836 0.5 47.3 1.7 32.2 Hotels/Tourism 6,005.9 2 59 2,553 0.3 23.0 1.5 17.1 Source: Zawya, Reuters, NCBC Research Prices as of 31 Dec 2011 Ìn 2012 YTD, the market reached a high of up 23% in early April, although since this date it has been under pressure and is currently up around 13%. The strong start to 1Q12 has been across the board, but amongst the large-cap sectors it has been led by banks and telecoms. Many of the speculative sectors and companies also performed very strongly in 1Q12, a potential sign of concern. Exhibit 20: 2011 sector performance Exhibit 21: 2012 YTD sector performance 2011 sector performance 2012 YTD sector performance Source: Bloomberg, NCBC Research Source: Bloomberg, NCBC Research 2012 YTD to 17 April -13%-13% -10% -4% -3% -2%-1.7%-1% 3% 9% 9% 21% 23% 31% 36% 47% -25% -10% 5% 20% 35% 50% T e l e c o m B a n k i n g T r a n s p o r t P e t r o T A S Ì R e a l E s t a t e C o n s t r u c t i o n E n e r g y A g r i / F o o d Ì n d u s t r i a l Ì n v Ì n s u r a n c e M u l t i - i n v T o u r i s m R e t a i l C e m e n t M e d i a 0% 10% 20% 30% 40% 50% 60% E n e r g y / U t i l i t i e s C o n s t r u c t i o n A g r i / F o o d P e t r o c h e m i c a l s R e t a i l C e m e n t T A S Ì B a n k i n g / F i n a n c i a l Ì n d u s t r i a l Ì n v M e d i a / P u b l i s h i n g H o t e l s / T o u r i s m M u l t i - i n v e s t m e n t Ì n s u r a n c e T e l e c o m / Ì T R e a l E s t a t e T r a n s p o r t 16 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 Saudi Arabia: Strongest regional market Ìn terms of sector diversity, market capitalization, market turnover and liquidity, the Saudi stock market is the biggest in the region. The market is mostly driven by individual investors, with retail investors accounting for around 95.0% of the turnover in April 2012. By April 2012, institutional trading (either mutual funds or swap trades) accounted for 5% of the total trading on the market as opposed to 6.6% a year earlier. However, potential plans to provide greater access to qualified foreign investors and rising liquidity levels offers attractive proposition for greater participation of institutional investors. KSA accounts for 54% of GCC market capitalisation and 90% of the turnover Ìn terms of market capitalization, the Saudi stock market is the largest in GCC, with a share of about 53.9% at the end of 1Q12. Ìt was followed by Kuwait and Qatar at 14% and 13.4% respectively. Exhibit 22: GCC market capitalization: Saudi Arabia constitutes nearly 54% of the region Ìn USD bn Source: NCBC Research, Reuters Over the past few years, the Kingdom accounted for around 70% of the total value traded in GCC. However, 2012 YTD, its share has increased to around 90%. This discrepancy in Saudi Arabia's share compared to the GCC may be ascribed to the fact that other regional markets, such as Kuwait, are seeing heavy trading in stocks that trade below par value Exhibit 23: GCC turnover: TASI comprises around 90% of the GCC turnover % of GCC turnover Source: NCBC Research, Reuters 0 250 500 750 1,000 1,250 J a n - 0 7 A p r - 0 7 J u l - 0 7 O c t - 0 7 J a n - 0 8 A p r - 0 8 J u l - 0 8 O c t - 0 8 J a n - 0 9 A p r - 0 9 J u l - 0 9 O c t - 0 9 J a n - 1 0 A p r - 1 0 J u l - 1 0 O c t - 1 0 J a n - 1 1 A p r - 1 1 J u l - 1 1 O c t - 1 1 J a n - 1 2 A p r - 1 2 Bahrain Oman Qatar Kuwait Abu Dhabi Dubai Saudi 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% J a n - 0 8 M a r - 0 8 M a y - 0 8 J u l - 0 8 S e p - 0 8 N o v - 0 8 J a n - 0 9 M a r - 0 9 M a y - 0 9 J u l - 0 9 S e p - 0 9 N o v - 0 9 J a n - 1 0 M a r - 1 0 M a y - 1 0 J u l - 1 0 S e p - 1 0 N o v - 1 0 J a n - 1 1 M a r - 1 1 M a y - 1 1 J u l - 1 1 S e p - 1 1 N o v - 1 1 J a n - 1 2 M a r - 1 2 M a y - 1 2 Qatar Bahrain Oman Kuwait Abu Dhabi Dubai Saudi 17 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 Highest liquidity and turnover For 2011, the average turnover to market capitalization ratio for the Saudi market was 86%, from 60% in 2010. This is still significantly higher than other GCC markets, where the ratio ranges from 2% (Bahrain) to 36% (Abu Dhabi) during the same period. Exhibit 24: Turnover to market capitalization ratio Yearly market turnover/market capitalization in % Saudi Kuwait Abu Dhabi Dubai Qatar Oman Bahrain 2008 124 70 58 89 43 36 7 2009 117 75 28 124 34 37 3 2010 60 41 13 54 17 18 2 2011 86 25 36 18 18 10 2 Source: NCBC Research, Reuters Nominal price highly correlated to performance in 2012 The TASÌ has seen sharp gains YTD in 2012. The index added 22.1% in 1Q12, mostly driven by stocks with low nominal prices. Additionally, we believe most large-cap stocks have underperformed the TASÌ during the same period. As per our analysis, there exists an inverse relationship between the nominal stock price and stock performance YTD. Therefore, stocks with nominal values up to SR15 are the best performers YTD in 2012 (up 67% on average), while stocks with nominal values above SR90 rose only 5%, on an average, during the same period. On an average, stocks with a nominal price above SR35/share have underperformed the TASÌ on YTD basis and vice-versa. We believe this bias towards low nominal stocks is likely to exist as long as the current trend of high local retail investor participation in the stock market prevails. Exhibit 25: % of total turnover Exhibit 26: YTD %performance relative to the TASI % of turnover (LHS), number of stocks 2012 YTD sector performance Source: Bloomberg, NCBC Research Source: Bloomberg, NCBC Research 2012 YTD to 24 March 18 41 26 42 12 7 0% 5% 10% 15% 20% 25% 30% 35% 40% SR 0-15 SR 15-25 SR 25-35 SR 35-65 SR 65-90 SR 90+ 0 5 10 15 20 25 30 35 40 45 % of Turnover YTD # of Stocks 0% 10% 20% 30% 40% 50% 60% 70% 80% SR 0-15 SR 15-25 SR 25-35 SR 35-65 SR 65-90 SR 90+ Avg YTD % performance TASÌ YTD % 18 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 Continued strong earnings growth in 2012E Strong earnings growth in 2011 Ìn 2011, earnings for the entire Saudi market grew by 22% YoY to SR94.8bn. Market net income growth was mainly due to the 38% growth in Petrochemicals earnings, driven by a rebound in prices as well as new production coming on stream. Banks' earnings were good with a 17% growth due largely to lower YoY provisioning. Earnings in the telecom sector were flat, mostly due to FX losses in 3Q11 from STC and continued losses at Zain KSA. Cement net income increased by 25% YoY due to strong demand and prices. 2012E could continue to see earnings growth Most of the major sectors should see continued earnings expansion in 2012E. The Petrochemicals sector is expected to see growth of 18% in net income despite a weaker demand and price outlook. We believe the prevailing cost advantage, proximity to Asian markets and the full year contribution from Saudi Kayan and Sahara's Al Waha plants are key positives for the sector in 2012. The Banking sector may continue to witness a growth in earnings due to decreasing provisions and an increase in non-interest income ÷ we expect net income growth of 10%. The Retail sector will benefit from ongoing store expansions and fiscal support packages ÷ this should lead to a 19% increase in net income. Exhibit 27: Aggregate market earnings - 2012E could grow further Ìn SR bn Source: NCBC Research, Reuters Petrochemicals a key contributor again As was the case in 2010 and 2011, the Petrochemical sector will likely be the main driver of earnings growth for the market . The Petrochemicals sector is expected to see growth of 18% in net income despite a weaker demand and price outlook. We believe the prevailing cost advantage, proximity to Asian markets and the full year contribution from Saudi Kayan and Sahara's Al Waha plants are key positives for the sector in 2012 Progress in Banking sector profitability key The Banks sector (listed banks) has been on a declining earnings trend for the past four years after sector earnings peaked in 2006. Since then, declining brokerage income, and rising impairments for investments and credit provisions have resulted in weaker net income from 2007-2010. Total deposits are expected to grow at a CAGR of 13.2% (2011-2015E). Sector loan growth is expected to grow at a CAGR of 19.6% through 2015E driven by improved economic activity and corporate sector lending. We expect government funding to the private sector of approximately SR85bn to complement, rather than crowd out, bank lending. Growth in short term loans (which account for 75% in - 20 40 60 80 100 120 2009A 2010A 2011A 2012E Banks Petrochems Telecoms Utilities Cement Other 19 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 corporate loans) is expected to come with increased economic activity and long term loans to be driven by increased expenditure on infrastructure projects. Exhibit 28: Loan to total deposits of KSA banks Ìn SRmn, unless otherwise stated Source: NCBC Research, Reuters NB: The above estimates are not inclusive of the actual reported 1Q11 numbers TASÌ trading below its 17.5x historical average On a valuation basis, the TASÌ remains attractive and is currently trading at around 15.2x trailing P/E against its historic three year average of 17.5x and five year average of over 18x. Exhibit 29: TASI at 15.2x is below its historical 17.5x PE multiple TASÌ index levels (LHS), Price to Earnings multiples (RHS) Source: NCBC Research, Bloomberg The TASÌ positioned to grow in the short-medium term We believe the Saudi market is well positioned to grow both in the short and medium-to-long term. The TASÌ is currently trading at 15.2x trailing P/E, below its historic average of 17.5x and the 20x and above valuation for similar frontier and emerging markets. This compelling valuation coupled with the good profit growth expectations for the market and limited correlation with other ¨mainstream¨ emerging market economies, we believe, leads to a compelling investment case for the TASÌ. However, we note that the continued global uncertainty poses a risk to the Saudi Arabian economy. While progress has been made towards resolving the Eurozone debt crisis, a permanent solution still remains elusive. Similarly, growth concerns in the US and emerging economies continue to weigh on global sentiment. All these factors have a potential to derail Saudi Arabia's growth momentum with lower oil prices the key initial trigger. Sector valuations range from 13x÷45x On a sector level, P/E ranges from 13x for the telecom sector to 45x for the multi- investment sector. Most of the major sectors currently trade at below their 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% RÌBL BJAZ SÌBC Saudi Hollandi Saudi Fransi SABB Arab National SAMBA Al Rajhi AL Bilad 2011A 2012F 2013F 0 10 20 30 40 50 60 - 5,000 10,000 15,000 20,000 25,000 J a n - 0 5 J u n - 0 5 D e c - 0 5 J u n - 0 6 D e c - 0 6 M a y - 0 7 N o v - 0 7 M a y - 0 8 N o v - 0 8 A p r - 0 9 O c t - 0 9 A p r - 1 0 O c t - 1 0 J a n - 1 1 F e b - 1 1 A p r - 1 1 M a y - 1 1 J u n - 1 1 J u l - 1 1 A u g - 1 1 O c t - 1 1 N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 A p r - 1 2 TASÌ (LHS) TTM P/E ( RHS) Average P/E (RHS) 20 KSA STOCK MARKET NCB CAPÌTAL MAY 2012 historical average P/E levels; given the good growth outlook for earnings, we believe this indicates a good entry point for many of these sectors. Additionally, we note the following. x The Petrochemical sector is trading at a P/E of 13x versus its historical average of 23x. With our expectations of 18% earnings growth for the sector, we believe this will be one of the stronger performers again in 2012E, helping to drive the entire market to strong returns. x Banking/financials is trading at a P/E of 13.8x, below its historical average of 15.5x. We believe the Banking sector will continue to witness a growth in earnings due to decreasing provisions and an increase in non-interest income ÷ we expect net income growth of 10% in 2012. x Telecom/ÌT is trading at a P/E of 12.5x. We maintain an overweight rating on two of the three main stocks in the sector: Mobily and Saudi Telecom Company. x The retail sector is trading at a P/E of 15.7x, below its historical average. Exhibit 30: Sector P/Es versus historical P/Es Price to Earnings multiples Source: NCBC Research, Reuters * Average P/E for the Ìnsurance sector is not meaningful Market supported by strong dividend yields Strong dividend yields for most stocks in 2012E add to our positive outlook for the Saudi market. Among the stocks under our coverage, the top 15 dividend yielding companies have 2012E yields ranging from 4.3÷8.4%. Six of the top ten stocks are cement companies with a stable dividend outlook due to their strong cash flows. The remaining four stocks, besides offering lucrative yields, are fairly attractive from a valuation perspective within their respective sectors (telecom, banking and petrochemicals), thus providing potential upside from the current price levels. Exhibit 31: Dividend yields expected for 2012E % Source: NCBC Research, Reuters - 5 10 15 20 25 30 35 40 45 50 T e l e c o m B a n k i n g T r a n s p o r t P e t r o T A S Ì R e a l E s t a t e C o n s t r u c t i o n E n e r g y A g r i / F o o d Ì n d u s t r i a l Ì n v Ì n s u r a n c e M u l t i - i n v T o u r i s m R e t a i l C e m e n t M e d i a TTM PE Average PE 0 1 2 3 4 5 6 7 8 Mobily STC Sipchem Riyad Bank Eastern Cement Qassim Cement SAFCO Southern Cement Saudi Cement Yamamah Cement 21 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Industries & Companies Sector Page No. Banking & Financials 24 Petrochemicals 40 Cement 59 Retail 75 Energy & Utilities 88 Agriculture & Food 93 Telecom 110 Insurance 120 Multi Investment 155 Industrial Investment 165 Building & Construction 182 Real Estate 201 Transport 212 Media & Publishing 219 Hotels & Tourism 225 Please note that our estimates for the companies under coverage have not been updated post the 1Q12 results SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Banking & Financials Ticker Company Page No. 1120 Al Rajhi 28 1090 SAMBA 29 1050 Banque Saudi Fransi 30 1010 RIBL 31 1060 SABB 32 1040 Saudi Hollandi 33 1080 Arab National 34 1030 Saudi Investment 35 1140 Al Bilad 36 1020 BJAZ 37 1150 Al Inma Bank 38 The Saudi banking sector has remained one of the strongest in terms of profitability, asset quality and capital adequacy in the GCC. Ìts strong fundamentals and underpenetrated market offers significant growth potential. We are confident of the sector's ability to improve earnings in the medium-term. We expect the growth in credit to continue in 2012 as banks focus on retail lending. Ìn 2011, loan books grew 11.6% YoY to SR855bn, while customer deposits increased 10.7% YoY to SR1,147bn. Total banking assets of the 12 main domestic banks grew 9.2% YoY to SR1,505bn. However, contraction in NÌMs resulted in only 1.5% YoY growth in NSCÌ. Nonetheless, strong growth in non-interest income kept total operating income growth at reasonable levels of 4.6% YoY. Furthermore, decline in provisions by 39% enabled bottom-line growth of 18.4% YoY. Due to the retail focus of many banks, branch network and the number of ATMs increased by 55 and 881 respectively during 2011. With the addition of two new foreign bank branches, the number of foreign banks operating increased to 11 along with 12 domestic banks. Exhibit 32: Key financials of Saudi banks (2011) - SR million; network of branches and ATMs Banks Branches ATMs Assets Loans & advances Customer deposits Net profits D o m e s t i c B a n k s E s t a b l i s h e d a s S a u d i B a n k s The National Commercial Bank 295 1,791 301,198 135,289 239,458 6,012 Al Rajhi Bank 455 3,034 220,813 140,772 173,429 7,378 Samba Financial Group 69 520 192,774 89,111 137,257 4,303 Riyad Bank 248 2,594 180,887 112,973 139,823 3,149 The Saudi Ìnvestment Bank 48 334 51,946 27,114 36,770 708 Bank Aljazira 51 318 38,898 23,307 31,159 303 Alinma Bank 37 400 36,783 25,259 17,776 431 Bank Albilad 82 586 27,727 13,780 23,038 330 J V w i t h f o r e i g n p a r t n e r s Banque Saudi Fransi 83 437 140,480 92,325 109,963 2,911 SABB 80 524 138,658 84,811 105,577 2,888 Arab National Bank 142 935 117,574 72,844 87,859 2,171 Saudi Hollandi Bank 44 257 57,549 37,745 45,024 1,032 F o r e i g n B a n k s G C C B a n k s Emirates NBD Bank 1 15 Bank Muscat 1 6 National Bank of Bahrain 1 1 National Bank of Kuwait 1 2 Gulf Ìnternational Bank 2 N o n - G C C Deutsche Bank 1 12* BNP Paribas 1 J.P. Morgan Chase N.A. 1 National Bank of Pakistan 1 State bank of Ìndia 1 T C Ziraat Bankasi A.S. 1 Total 1,646 11,766 1,505,288 855,330 1,147,133 31,616 x Source: SAMA, Tadawul, Company data, NCBC Research Note: Financial statements of the banks are consolidated and include financial statements of its subsidiaries, including those located outside KSA. * Five international banks namely, Gulf Ìnternational Bank, Deutsche Bank, BNP Paribas, J.P. Morgan Chase and National Bank of Pakistan operate 12 ATMs across KSA. MAY 2012 BANKÌNG 2012 expected to record continued growth 24 BANKÌNG NCB CAPÌTAL MAY 2012 The Saudi banking sector compared to the GCC. Considering only listed banks in our analysis, the Saudi banking sector stood second in terms of total operating income, after UAE during 2009-11. However, Saudi banks generate higher Return on Equity of 14.4% as compared to UAE Bank's ROE of 11.6%. Saudi bank's strong fundamentals and higher returns justify its premium valuation over UAE. Saudi banks trades at a higher P/E of 14.7x compared to the UAE banks P/E of 8.2x. Exhibit 33: Total operating income of GCC banks, 2009- 11 Exhibit 34: Comparison of RoE and P/E of GCC banks, 2011 USD mn % Source: Reuters, NCBC Research; The companies list is not exhaustive Source: Reuters, NCBC Research; Size of the bubble represents market cap. as on 27 March 2012 in USD mn As of 28 March 2012, Al Rajhi had the largest market capitalization among the 11 listed banks that constitute the Saudi banking index. NCB, one of the largest banks in KSA, is not mentioned in the table as it is a privately-held entity. Exhibit 35: Sector details Units as stated % weight in Index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Al Rajhi Bank (Al Rajhi) 10.2 4.4 23.4 Samba Financial Group (SAMBA) 3.9 2.4 16.0 Banque Saudi Fransi (Saudi Fransi) 3.0 2.5 15.5 Riyad Bank (RÌBL) 2.9 2.5 10.6 Alinma Bank (Alinma) 2.6 3.8 2.7 Arab National Bank (Arab National) 2.2 2.8 13.6 The Saudi British Bank (SABB) 1.8 2.4 17.9 Bank AlBilad (AlBilad) 1.0 3.0 10.1 The Saudi Ìnvestment Bank (SAÌB) 1.0 2.5 8.5 Bank AlJazira (BJAZ) 0.9 2.3 6.2 Saudi Hollandi Bank (Saudi Hollandi) 0.4 2.4 15.0 Source: Bloomberg, Tadawul: Company data; * NÌM stands for Net Ìnterest Margins Exhibits below depict the performance of Saudi banks in terms of net interest income and net interest margin during 2009÷11. Ìn 2011, net interest income increased 1.5% YoY against 1.2% YoY decline in 2010, while net interest margins contracted 15bps over 2010. This was mainly due to faster growth in loans in the low interest rate environment. Alinma and Albilad's net interest income grew rapidly by 79.5% and 12.5% YoY respectively, largely due to loan book expansion. Among larger banks, RÌBL's net interest income grew 1.3% YoY, while Samba and Al Rajhi reported a YoY decline of 3.5% and 1.9% respectively. 0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 2009 2010 2011 KSA UAE Kuwait Qatar Oman Bahrain 0 5 10 15 20 25 0 5 10 15 20 25 30 R o E ( % ) P/E KSA UAE Kuwait Qatar Oman Bahrain 25 BANKÌNG NCB CAPÌTAL MAY 2012 Exhibit 36: Net Interest Income of Banks, 2009-11 Exhibit 37: Net Interest Margin (%) of Banks, 2009-11 SR mn % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research The ROE for most banks increased in 2011 with an exception of Banque Saudi Fransi and Samba. On the P/B multiple front, Al Rajhi continued to dominate followed by SABB while RÌBL and SÌBC reported the lowest figure. Exhibit 38: Comparison of P/B and RoE, 2010 Exhibit 39: Comparison of P/B and RoE, 2011 % % Source: Tadawul, NCBC Research; Size of the bubble represents Mcap. as on 27 March 2012 in USDmn Source: Tadawul, NCBC Research; Size of the bubble represents Mcap. as on 27 March 2012 in USDmn After remaining steady for three quarters, interest rates in KSA increased marginally in 4Q11 in line with LÌBOR. The government maintained the repo rate and reverse repo rate at 2% and 0.25%, respectively, during the year. We expect SAÌBOR to remain at low levels until post 2014 when we believe the Fed will start increasing its benchmark rate. Exhibit 40: Movement in Interbank Interest Rates Exhibit 41: Movement in Repo & Reverse Repo rates % % Source: Bloomberg, Reuters, NCBC Research Source: SAMA, NCBC Research 0 7,000 14,000 21,000 28,000 35,000 2009 2010 2011 Al Rajhi SAMBA RÌBL Arab National Saudi Fransi SABB Saudi Holl andi SÌBC Alinma BJAZ AL Bilad 0 1 2 3 4 5 6 A l R a j h i A l i n m a A L B i l a d A r a b N a t i o n a l S Ì B C S a u d i F r a n s i R Ì B L S A M B A S a u d i H o l l a n d i S A B B B J A Z 2009 2010 2011 Al Rajhi SAMBA SABB RÌBL Saudi Fransi Arab National Saudi Hollandi Alinma SÌBC BJAZ 0 5 10 15 20 25 30 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 R o E ( % ) P/B Al Rajhi SAMBA SABB RÌBL Saudi Fransi Arab National Saudi Hollandi Alinma SÌBC BJAZ 0 5 10 15 20 25 30 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 R o E ( % ) P/B -200 0 200 400 600 800 1000 0.0 1.0 2.0 3.0 4.0 5.0 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Spr eads bps (RHS) SAÌBOR LÌBOR 0 2 4 6 8 10 12 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Repo rate Reverse Repo rate Ìnflation 26 BANKING NCB CAPITAL MAY 2012 27 NCBC recommendations in the sector The year 2011 witnessed strong growth in loans and improved asset quality. However, contraction in NIMs due to lower interest rates and increased competition kept NSCI growth muted. Nonetheless, increased non-interest income and reduced provisions improved the bottom-line. We expect loan growth to continue and NIMs to compress, however, the increase in loan volume is expected to aid NSCI growth. In addition, high trading volumes on the Tadawul will enable banks to grow its brokerage income particularly for the smaller banks. Strong fundamentals and improved asset quality of Saudi banks keep our view positive on the sector. Exhibit 42: Coverage stocks details Stock Current Rating PT (SR) Comments Al Rajhi (1120. SE) Overweight 90.2 Al Rajhi's loan book is likely to grow faster than industry peers benefitting from its large deposit base. Although the bank's margins are contracting due to current low interest rates, the bank will benefit from its lower cost of funds in the long run which will support NSCI. Arab National (1080.SE) Neutral 32.9 We believe ANB's lower loan growth and compressed margins is likely to keep its total operating income growth muted. However, its improved asset quality is a key positive which is likely to offset the muted total operating income. AlBilad (1140. SE) Neutral 21.4 Albilad's retail focus would enable a faster growth in its net loans and increase its NSCI for 2012. In addition, strong non-interest income and improved asset quality is likely to add to bottom-line. However, operating costs remains a concern for its profitability. BJAZ (1020. SE) Neutral 19.6 BJAZ's top-line is likely to benefit from both strong loan growth and fee income aided by strong brokerage revenue from increasing trading volumes on the Tadawul. However, we believe the potential gains from the surge in market activity have been priced-in. . Saudi Fransi (1050. SE) Overweight 38.3 BSF's retail focus is likely to grow its loan books as well as maintain NIMs. This will keep its NSCI strong. Although the retail focus will increase operating costs, we believe strong top-line growth and better asset quality will offset the impact of that on the bottom-line. Riyad Bank (1010. SE) Overweight 33.2 RÌBL's strong corporate and retail presence is likely to benefit the bank to expand its credit portfolio and improving its asset quality. Ìn addition, the bank's aim to maintain margins is likely to enable the bank to post double digit net earnings growth from 2013. SABB (1060. SE) Overweight 40.5 We expect SABB's total operating income in 2012 to be driven by loan volumes and strong fee income. In addition, stable operating expenses and lower provision charges will enable it to marginal growth in net income. SAIB (1030. SE) Neutral 18.2 SAÌB's diversification strategy to grow retail loans will benefit the bank in long term. However, stiff competition from established players may pressurize its net interest margins in the near term.. Samba (1090.SE) Overweight 60.6 The bank's ability to post relatively strong profitability despite having a conservative approach keeps us positive on the stock. As the high-yielding corporate bonds mature, Samba will refocus on expanding its loan book and therefore maintain profitability. Saudi Hollandi (1040.SE) Overweight 32.2 SHB is likely to grow its loan books benefitting from its microfinance initiative. This is also likely to improve its bottom-line. However, we are concerned about SHB's reliance on Tier II subordinated debt for capital adequacy. Considering stringent laws of Basel III, the bank might need to increase its equity which would limit future dividend payouts. Source: NCBC Research custo AI Rajhi Bank (AI Rajhi), the second Iargest bank in KSA in terms of totaI assets, was estabIished in 1976. Being a fuII- fIedged IsIamic bank, AI Rajhi offers Sharia'a-compIiant banking and investment products to its customers through a network of 455 branches and 3,034 ATMs. The bank operates in MaIaysia, Kuwait and Jordan through fuIIy-owned subsidiaries and has offices in the UK, British Virgin IsIands and Jersey. x Business brief Al Rajhi offers Sharia'a-compliant retail as well as corporate banking and treasury services to its customers. Al Rajhi Capital, the bank's subsidiary, manages investment banking, asset management and brokerage businesses. During 2011, the bank established Al Rajhi Bank ÷ Jordan (100% stake) and Al Rajhi Takaful Agency Company (99%). x FinanciaIs Al Rajhi's net income grew 9.0% to YoY SR7.4bn in 2011. Net special commission income declined 1.9% YoY despite a 16.9% growth in loan books. This is mainly due to contraction in NÌMs as interest rates remained low. However, non-special commission income grew 36.2% YoY, leading to a 7.2% increase in total operating income. The bank's provisions declined 13.8% YoY due to improved asset quality. However, other operating expenses grew 17%, pushing the cost-to-income ratio to 28% from 26%. During the year, Al Rajhi's customer deposits grew 21.2%; as a result, the LTD ratio fell to 81% from 84% in 2010. x Recent deveIopments Ìn March 2012, Abdullah bin Sulaiman Al Rajhi resigned as CEO and MD, but would continue to be in the BoD. Suliman bin AbdulAziz Azzabin was appointed the new CEO with effect from 1 April 2012. Ìn January 2012, Al Rajhi announced dividends of SR3bn for the second half of fiscal year 2011. Ìn December 2011, Fitch affirmed Al Rajhi Bank's long-term issuer default rating (ÌDR) at 'A+' with a stable outlook. BANKÌNG ~ MAY 2012 AL RAJHÌ BANK ALSO KNOWN AS: AL RAJHÌ OVERWEIGHT Current price (SR) 75.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 83/65 Market cap ($mn) 30,192 Shares outstanding (mn) 1,500 Price perform (%) 1M 3M 12M Absolute (3.2) 1.7 (0.3) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 140.5 37.5 12M 82.9 22.1 Reuters code 1120.SE Bloomberg code RJHÌ AB www.alrajhibank.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 10.01 Free float 53.16 VALUATION MULTIPLES 10A 11A 12E P/E (x) 16.7 15.3 12.5 P/B (x) 3.7 3.5 3.2 P/S (x) 9.7 9.1 7.9 Div Yield (%) 4.6 5.0 5.6 DPS 3.5 3.8 4.2 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 66 68 70 72 74 76 78 80 82 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al Rajhi (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Sulaiman Abdul Aziz Saleh Al Rajhi 19.9 Saleh Abdul Aziz Saleh Al Rajhi 15.1 GOSÌ 9.9 Abdullah Abdul Aziz Saleh Al Rajhi 5.9 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 8,861 8,689 9,939 11,106 (1.9) 7.8 Operating Ìncome SRmn 11,661 12,502 14,287 16,196 7.2 11.6 Net Ìncome SRmn 6,771 7,378 9,036 10,457 9.0 15.6 Assets SRmn 184,841 220,813 253,666 289,056 19.5 16.1 Equity SRmn 30,318 32,821 34,945 38,317 8.3 8.1 Loans SRmn 120,065 140,396 163,608 189,946 16.9 16.5 Total Deposits SRmn 148,478 180,450 210,425 241,613 21.5 17.6 Net Ìnterest Margin % 5.1 4.4 4.3 4.2 - Cost/Ìncome % 25.6 27.8 26.7 25.6 - ROE % 22.9 23.4 26.7 28.5 - ROA % 3.8 3.6 3.8 3.9 - Div Payout % 77.5 76.2 70.0 75.0 EPS SR 4.5 4.9 6.0 7.0 9.0 15.6 BVPS SR 20.2 21.9 23.3 25.5 8.3 8.1 Source: Company, NCBC Research 28 Samba FinanciaI Group (Samba), the third-Iargest bank in Saudi Arabia in terms of totaI assets, was incorporated in 1980 through the takeover of Citigroup's branches in the Kingdom. Samba operates 69 branches and 520 ATMs. The bank operates in Pakistan through its subsidiary and has branches in the UK, Dubai and Qatar. x Business brief Samba's core banking activities include corporate and retail banking and treasury services. The bank also offers trade finance, Shariah-compliant banking, and corporate investment services. Samba Capital & Ìnvestment Management Co., the investment banking division, handles asset management and brokerage services. Samba Real Estate Co., another subsidiary of the bank, manages real estate projects for Samba Real Estate Fund. x FinanciaIs Samba was the only bank amongst its Saudi peers that reported a decline in net income in 2011. The bank's net special commission income fell 3.5% YoY due to a decline in its NÌMs, which overshadowed 11% YoY expansion in loan book. Ìn addition, the trading losses incurred in 2011 lowered the bank's non-interest income by 7.5% YoY, resulting in a 4.9% decrease in total operating income. Although the bank's provisions on credit losses declined 46% YoY, subdued top line performance resulted in a 3.0% YoY drop in net income to SR4.3bn for 2011. x Recent deveIopments Ìn December 2011, Samba announced cash dividends of SR831mn for the 2H11. Ìn November 2011, Samba Capital, the investment arm of Samba, launched the first Sharia'a compliant US dollar denominated fund, "Al Nafees Global Commodities Equity Fund".. BANKÌNG ~ MAY 2012 SAMBA FÌNANCÌAL GROUP ALSO KNOWN AS: SAMBA OVERWEIGHT Current price (SR) 48.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 57/42 Market cap ($mn) 11,733 Shares outstanding (mn) 900 Price perform (%) 1M 3M 12M Absolute (9.4) (2.2) (9.9) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 18.7 5.0 12M 11.1 3.0 Reuters code 1090.SE Bloomberg code SAMBA AB www.samba.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 3.91 Free float 50.59 VALUATION MULTIPLES 10A 11A 12E P/E (x) 9.9 10.2 9.1 P/B (x) 1.7 1.6 1.4 P/S (x) 6.3 6.7 6.1 Div Yield (%) 3.7 3.7 3.9 DPS 1.8 1.8 1.9 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 45 50 55 60 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SAMBA (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvst Fund 22.9 Public Pension Authority 15.0 GOSÌ 11.4 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 4,536 4,376 4,623 5,163 (3.5) 4.4 Operating Ìncome SRmn 6,901 6,562 7,273 8,163 (4.9) 5.8 Net Ìncome SRmn 4,435 4,303 4,845 5,501 (3.0) 7.4 Assets SRmn 187,416 192,774 214,748 238,068 2.9 8.3 Equity SRmn 25,603 28,257 31,423 35,114 10.4 11.1 Advances SRmn 80,251 89,111 98,688 110,221 11.0 11.2 Total Deposits SRmn 155,138 157,885 176,760 196,455 1.8 8.2 Net Ìnterest Margin % 2.5 2.4 2.4 2.4 - Cost/Ìncome % 27.7 29.8 29.0 28.4 - ROE % 18.4 16.0 16.2 16.5 - ROA % 2.4 2.3 2.4 2.4 - Div Payout % 36.2 37.3 35.0 35.0 EPS SR 4.9 4.8 5.4 6.1 (3.0) 7.4 BVPS SR 28.4 31.4 34.9 39.0 10.4 11.1 Source: Company, NCBC Research 29 BSF, an affiIiate of Crédit AgricoIe Group, commenced operations in December 1977 by taking over the branches of Banque Indosuez. The bank offers conventionaI and IsIamic banking products through a network of 83 branches and 437 ATMs in Saudi Arabia. x Business brief BSF's core activities include retail and corporate banking as well as treasury services. The bank's investment banking activities are conducted by Saudi Fransi Capital. The bank also has an insurance JV with Allianz Group under the name Allianz Saudi Fransi Co. (32.5. Furthermore, the bank has 27.0% stake in Syria-based Banque BEMO Saudi Fransi. x FinanciaIs Ìn 2011, BSF's net income grew 3.9% YoY to SR2.9bn. BSF's loans and deposits 14.5% and 15.4%, respectively. However, net special commission income grew 2.3% YoY as a result of lower net interest spreads. BSF's non- interest income grew 8.9% YoY leading to 4.3% YoY growth in total operating income. BSF's retail focus increased its operating expenses; as a result, its cost-to-income ratio increased to 32.7% from 28.6%. However, improved asset quality reduced provisions for credit losses by 53.5%, enabling the bank to register moderate bottom line growth. x Recent deveIopments Ìn February 2012, together with a number of banks, BSF signed a SR4.5bn syndicated loan agreement for 15 years with Marafiq Company to finance the expenses of the latter's projects and expansion operations in Jubail and Yanbu. Ìn January 2012, BSF announced its plan to increase its paid up capital 25% to SR9.04bn from SR7.23bn through bonus issue. The bank would offer one bonus for every four held. Ìn November 2011, the bank announced its plan to sell its 27% stake in Bemo Saudi Fransi Syria and 10% stake in Bemo Lebanon due to the financial risk involved in Syria. BANKÌNG ~ MAY 2012 BANQUE SAUDÌ FRANSÌ ALSO KNOWN AS: BSF OVERWEIGHT Current price (SR) 37.0 Pricing as of 19-05-2012 STOCK DETAILS 52-week range H/L (SR) 41/30 Market cap ($mn) 8,917 Shares outstanding (mn) 904 Price perform (%) 1M 3M 12M Absolute (4.9) 6.8 (2.6) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 8.4 2.2 12M 5.5 1.5 Reuters code 1050.SE Bloomberg code BSFR AB www.alfransi.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 3.04 Free float 54.67 VALUATION MULTIPLES 10A 11A 12E P/E (x) 11.9 11.5 10.2 P/B (x) 1.9 1.7 1.5 P/S (x) 7.6 7.3 6.5 Div Yield (%) 2.4 1.6 2.0 DPS 0.9 0.6 0.7 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 28 30 32 34 36 38 40 42 5,000 5,500 6,000 6,500 7,000 7,500 8,000 Apr-11 Jul-11 Nov-11 Mar-12 TASÌ Saudi Fransi (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Groupe Crédit Agricole [Calyon] 31.1 GOSÌ 12.8 Rashid Al Abdul Rahman Al Rashid & Sons 9.8 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 3,066 3,137 3,428 3,911 2.3 8.5 Operating Ìncome SRmn 4,395 4,585 5,166 5,884 4.3 10.2 Net Ìncome SRmn 2,801 2,911 3,274 3,813 3.9 10.8 Assets SRmn 123,218 140,480 155,893 172,673 14.0 11.9 Equity SRmn 18,023 19,655 22,602 25,516 9.1 12.3 Advances SRmn 80,977 92,325 102,713 115,408 14.0 12.5 Total Deposits SRmn 100,736 116,257 128,174 141,427 15.4 12.0 Net Ìnterest Margin % 2.6 2.5 2.4 2.5 - Cost/Ìncome % 28.6 32.7 32.7 31.6 - ROE % 16.6 15.5 15.5 15.8 - ROA % 2.3 2.2 2.2 2.3 - Div Payout % 28.6 18.7 20.0 30.0 EPS SR 3.1 3.2 3.6 4.2 3.9 10.8 BVPS SR 19.9 21.7 25.0 28.2 9.1 12.3 Source: Company, NCBC Research 30 Riyad Bank (RIBL), estabIished in 1957. The bank has 248 branches and 2,594 ATMs in KSA, a branch in London, an agency in Houston, and a representative office in Singapore. x Business brief RÌBL performs core banking activities through four divisions: Personal Banking, Corporate Banking, Treasury Services and Ìnternational Banking. The bank offers a range of conventional and Sharia'a compliant banking products. RÌBL provides asset and wealth management, corporate finance, and brokerage services through its wholly owned investment banking subsidiary, Riyad Capital. RÌBL's other subsidiaries operate in the leasing, real estate, and insurance (joint venture with Royal Sun Alliance) segments. x FinanciaIs RÌBL's net income increased 11.5% YoY to SR3.1bn mainly due to a decline in provisions. The bank's net special commission income grew 1.3%; non- interest income increased 15.5%, leading to 5.7% growth in total operating income. The bank's total loans increased 6.5% lower than industry average as the bank focused on maintaining NÌMs. Provisions for credit losses declined 29%, while no recovery was recorded for provisions of impaired investments in 2011 compared to SR85mn in 2010. x Recent deveIopments Ìn March 2012, Fitch affirmed RÌBL's Long-Term Ìssuer Default Rating (ÌDR) at 'A+' with a stable outlook. Ìn January 2012, RÌBL declared dividends of SR1,125mn for the 2H11. During the month, S&P affirmed RÌBL's A+/A-1 rating with 'stable' outlook. Ìn October 2011, the bank signed a bridge loan agreement with Sahara Petrochemicals Company for up to SR1bn to finance the latter's projects. BANKÌNG ~ MAY 2012 RÌYAD BANK ALSO KNOWN AS: RÌBL OVERWEIGHT Current price (SR) 24.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/22 Market cap ($mn) 9,758 Shares outstanding (mn) 1,500 Price perform (%) 1M 3M 12M Absolute (2.0) 0.4 (5.4) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 51.8 13.8 12M 19.0 5.1 Reuters code 1010.SE Bloomberg code RÌBL AB www.riyadbank.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.89 Free float 47.52 VALUATION MULTIPLES 10A 11A 12E P/E (x) 13.0 11.6 11.0 P/B (x) 1.3 1.2 1.2 P/S (x) 6.1 5.8 5.4 Div Yield (%) 5.5 5.7 6.8 DPS 1.3 1.4 1.7 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 23 24 25 26 27 28 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ RÌBL (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvst Fund 21.7 GOSÌ 21.6 PPA 9.1 Al Nahla Group 9.1 Masek Holding Company 8.0 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 4,142 4,197 4,419 4,877 1.3 5.6 Operating Ìncome SRmn 5,980 6,321 6,805 7,493 5.7 7.8 Net Ìncome SRmn 2,825 3,149 3,342 3,765 11.5 10.0 Assets SRmn 173,556 180,887 196,075 213,685 4.2 7.2 Equity SRmn 29,233 30,158 30,972 32,072 3.2 3.1 Advances SRmn 106,035 112,973 124,679 137,849 6.5 9.1 Total Deposits SRmn 139,456 146,064 159,972 175,969 4.7 8.1 Net Ìnterest Margin % 2.4 2.5 2.4 2.5 - - Cost/Ìncome % 38.6 39.7 40.3 39.1 - - ROE % 9.8 10.6 10.9 11.9 - - ROA % 1.6 1.8 1.8 1.8 - - Div Payout % 71.5 66.7 75.0 75.0 EPS SR 1.9 2.1 2.2 2.5 11.5 10.0 BVPS SR 19.5 20.1 20.6 21.4 3.2 3.1 Source: Company, NCBC Research 31 SABB (formerIy The Saudi British Bank) is an affiIiate of HSBC Group. The bank commenced operations in 1978 offering conventionaI and IsIamic products under the brand name of SABB Amanah. SABB operates 80 branches and 524 ATMs. The bank aIso has associate companies offering investment banking soIutions and insurance services. x Business brief SABB offers personal, corporate, private and Ìslamic banking as well as treasury and trade services. During the year 2011, assets and liabilities of SABB Securities (wholly-owned arm of SABB providing brokerage and securities services) were transferred to HSBC Saudi Arabia Ltd. (a firm providing investment banking solutions). This raised SABB's stake in HSBC Saudi Arabia to 51% from 40% (w.e.f. 1 July 2011). SABB also provides Sharia'a-compliant insurance products through SABB Takaful (32.5%). x FinanciaIs SABB's net income surged 53.4% YoY to SR2.9bn in 2011, mainly driven by a decline in provisions. The bank's total operating income grew a marginal 1.2% YoY due to a strong 17.6% increase in non-interest income. SABB's NÌMs declined 29bps YoY due to its focus on increasing loan volumes (up 14.2% YoY). Consequently, net special commission income declined 6.8% YoY. However, the decline in operating expenses (8% YoY) and provisions (61% YoY) helped the bank to offset the impact of subdued top line performance and post significant growth in profits. x Recent deveIopments Ìn March 2012, the bank successfully completed the private placement of five-year Tier ÌÌ Sukuks amounting SR1.5bn with a coupon rate of SÌBOR + 1.2%. This will provide long-term funding base, diversify sources of funds and support its penetration into the retail segment. During the same month, SABB increased its paid-up capital base by 33% to SR10n by issuing one bonus share for every three shares held and distributed cash dividends of SR562.5mn for the year 2011. BANKÌNG ~ MAY 2012 SABB ALSO KNOWN AS: THE SAUDÌ BRÌTÌSH BANK OVERWEIGHT Current price (SR) 35.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 37/28 Market cap ($mn) 9,331 Shares outstanding (mn) 1,000 Price perform (%) 1M 3M 12M Absolute (4.1) 7.8 5.1 Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 8.2 2.2 12M 5.0 1.3 Reuters code 1060.SE Bloomberg code SABB AB www.sabb.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.91 Free float 32.85 VALUATION MULTIPLES 10A 11A 12E P/E (x) 18.6 12.1 11.2 P/B (x) 2.3 2.0 1.8 P/S (x) 7.2 7.1 6.6 Div Yield (%) 1.6 1.6 2.7 DPS 0.6 0.6 0.9 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 27 29 31 33 35 37 39 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SABB (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) HSBC Holdings Co. 40.0 Al Olayan Saudi Ìnvst Co. 16.9 GOSÌ 9.5 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 3,243 3,022 3,241 3,638 (6.8) 3.9 Operating Ìncome SRmn 4,839 4,899 5,290 5,957 1.2 7.2 Net Ìncome SRmn 1,883 2,888 3,121 3,526 53.4 23.3 Assets SRmn 125,373 138,658 153,896 169,907 10.6 10.7 Equity SRmn 15,172 17,166 19,257 21,433 13.1 12.2 Advances SRmn 74,248 84,811 95,513 108,342 14.2 13.4 Total Deposits SRmn 104,997 115,621 128,065 141,111 10.1 10.4 Net Ìnterest Margin % 2.7 2.4 2.3 2.3 - Cost/Ìncome % 36.2 32.8 32.9 32.3 - ROE % 13.3 17.9 17.1 17.3 - ROA % 1.5 2.2 2.1 2.2 - Div Payout % 29.9 19.5 30.0 50.0 EPS SR 1.9 2.9 3.1 3.5 53.4 23.3 BVPS SR 15.2 17.2 19.3 21.4 13.1 12.2 Source: Company, NCBC Research 32 Saudi HoIIandi Bank (SHB), headquartered in Riyadh, was estabIished in 1977, with the conversion of ABN Amro into a joint venture bank. CurrentIy, a consortium Ied by RBS hoIds 40% stake in SHB. The bank offers conventionaI and IsIamic products through a network of 44 branches and 257 ATMs across KSA. x Business brief SHB's core activities include corporate banking, retail banking and treasury services. The bank offers preferred banking services, such as domestic and international share trading services and mutual fund portfolios, to high net worth individuals (HNÌs) under the wealth management segment. x FinanciaIs SHB's net income increased 30.6% YoY in 2011 with a decline in provisions for credit losses. The bank's net special commission income rose just 0.2% YoY, but strong growth in non-interest income (9.0% YoY) led to a moderate growth of 3.2% in total operating income. The bank's total operating income rose 7% YoY. However, a 57% fall in provisions boosted SHB's net income. The bank's loan book expanded at a moderate rate of 7.7% YoY, while total deposits grew 4.7%, raising the total loan-to-deposit ratio to 78.4% in 2011 from 76.2% in 2010. x Recent deveIopments Ìn March 2012, SHB distributed cash dividends of SR331mn for 2011 and increased its paid-up capital base by 20% to SR3,969mn from SR3,307.5mn by issuing one bonus share for every five shares held. Ìn February 2012, Fitch affirmed SHB's Long-term Ìssuer Default Rating (ÌDR) at 'A-' with a stable outlook. Ìn December 2011, the Board of Directors announced the resignation of HE Dr. Fahad Al-Mubarak. Ìn November 2011, SHB appointed John Macedo as Acting Chief Financial Officer; since 2008, he has been associated with the bank as AGM, Planning, Strategy & Business Performance. BANKÌNG ~ MAY 2012 SAUDÌ HOLLANDÌ BANK ALSO KNOWN AS: SHB OVERWEIGHT Current price (SR) 27.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 30/21 Market cap ($ mn) 2,942 Shares outstanding (mn) 397 Price perform (%) 1M 3M 12M Absolute (3.5) 8.7 10.4 Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 5.9 1.6 12M 2.8 0.7 Reuters code 1040.SE Bloomberg code AAAL AB www.shb.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.54 Free float 29.33 VALUATION MULTIPLES 10A 11A 12E P/E (x) 14.0 10.7 9.8 P/B (x) 1.7 1.5 1.4 P/S (x) 5.6 5.5 5.1 Div Yield (%) - 3.4 3.1 DPS - 1.0 0.9 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 21 23 25 27 29 31 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Hollandi (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) RBS, Fortis Group and Banco Santander (ABN AMRO) 39.9 Al Olayan Saudi Ìnvst Co. 20.8 GOSÌ 9.6 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 1,287 1,290 1,370 1,556 0.2 6.5 Operating Ìncome SRmn 1,961 2,023 2,176 2,468 3.2 8.0 Net Ìncome SRmn 790 1,032 1,130 1,310 30.6 18.3 Assets SRmn 53,882 57,549 62,980 71,747 6.8 10.0 Equity SRmn 6,387 7,408 7,992 8,903 16.0 11.7 Advances SRmn 35,039 37,745 42,602 48,177 7.7 11.2 Total Deposits SRmn 45,961 48,136 52,783 60,418 4.7 9.5 Net Ìnterest Margin % 2.3 2.4 2.3 2.4 - Cost/Ìncome % 39.4 40.6 40.2 39.2 - ROE % 13.0 15.0 14.7 15.5 - ROA % 1.4 1.9 1.9 1.9 - Div Payout % - 36.5 30.0 35.0 - EPS SR 2.0 2.6 2.8 3.3 30.6 18.3 BVPS SR 16.1 18.7 20.1 22.4 16.0 11.7 Source: Company, NCBC Research 33 Arab NationaI Bank (ANB) commenced operations in the KSA in 1980, foIIowing the takeover of Arab Bank PLC. The bank operates a network of 142 IocaI branches and 935 ATMs, aIong with one branch in London. ANB hoIds 100% stake in Arab NationaI Investment Co. and 62.5% stake in Arabian Heavy Equipment Leasing Co. x Business brief ANB offers personal banking, corporate banking, treasury services and syndications, and corporate finance services. Besides core banking activities, it offers investment banking, heavy equipment leasing and housing finance services through its subsidiaries and associate companies. ANB Ìnvest handles investment banking and asset management operations, while Arabian Heavy Equipment Leasing Co. operates under Sharia'a guidelines and leases heavy equipment. Saudi Home Loans Co. is an associate providing housing finance services. x FinanciaIs ANB's net income increased 13.6% YoY to SR2.2bn in 2011 despite a marginal growth of 0.7% in net special commission income and 0.8% in total operating income. This was mainly due to a 36% YoY decline in loan loss provisions. ANB's loan book grew 10% YoY; however, lower NÌMs kept the growth in net special commission income muted. The bank's non-interest income grew just 1.1% YoY. Coupled with higher operating expense, ANB's pre-provision profits fell 3% YoY. However, the significant reduction in provisions improved the bottom line performance. x Recent deveIopments Ìn March 2012, ANB signed an agreement worth SR90mn with Jenan Real Estate Company to finance company projects. Ìn December 2011, it announced dividends of SR850mn for the year 2011. Ìn October 2011, the bank converted 20 of its local branches to Ìslamic banking to offer Sharia'a- compliant products to customers. BANKÌNG ~ MAY 2012 ARAB NATÌONAL BANK ALSO KNOWN AS: ANB NEUTRAL Current price (SR) 29.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 34/26 Market cap ($ mn) 6,788 Shares outstanding (mn) 850.0 Price perform (%) 1M 3M 12M Absolute (5.1) 1.0 (9.4) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 5.7 1.5 12M 4.3 1.1 Reuters code 1080.SE Bloomberg code ARNB AB www.anb.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.07 Free float 49.06 VALUATION MULTIPLES 10A 11A 12E P/E (x) 13.3 11.7 10.7 P/B (x) 1.7 1.5 1.4 P/S (x) 5.6 5.6 5.3 Div Yield (%) 2.6 5.0 5.0 DPS 0.8 1.5 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 26 28 30 32 34 36 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Arab National (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Arab Bank 40.0 GOSÌ 10.8 Rashid Al Abdul Rahman Al Rashid & Sons 9.9 Al Jaber Trading Co. 5.6 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 3,158 3,181 3,280 3,659 0.7 5.0 Operating Ìncome SRmn 4,504 4,541 4,760 5,298 0.8 5.6 Net Ìncome SRmn 1,911 2,171 2,365 2,675 13.6 11.9 Assets SRmn 125,373 117,574 126,682 143,739 (6.2) 4.7 Equity SRmn 15,291 16,730 18,243 19,630 9.4 8.7 Advances SRmn 116,035 72,844 80,743 88,592 (37.2) -8.6 Total Deposits SRmn 97,983 98,371 105,842 121,382 0.4 7.4 Net Ìnterest Margin % 2.9 2.8 2.8 2.8 - Cost/Ìncome % 36.5 39.1 38.5 37.9 - ROE % 12.9 13.6 13.5 14.1 - ROA % 1.7 1.8 1.9 2.0 - Div Payout % 34.0 58.7 53.9 54.0 EPS SR 2.2 2.6 2.8 3.1 13.6 11.9 BVPS SR 18.0 19.7 21.5 23.1 9.4 8.7 Source: Company, NCBC Research 34 The Saudi Investment Bank (SAIB) was estabIished in 1976 in Riyadh and now operates a network of 48 branches and 334 ATMs in KSA. SAIB provides investment banking and other reIated services such as Iease financing, insurance & reinsurance, reaI estate financing and financiaI investment. x Business brief SAÌB provides personal, corporate, investment and Ìslamic banking along with treasury services in KSA. Ìn September 2011, Capital Market Authority approved a request by Alistithmar Capital (brokerage and investment banking arm of SAÌB) to acquire BNP Paribas Asset Management Co. (¨AMCO¨, another subsidiary of SAÌB) as well as include all licensed activities such as dealing, managing, arranging, advising, and custody into Alistithmar's business profile. Ìn December 2011, net assets of AMCO were acquired by Alistithmar. SAÌB also offers related services through five associate companies: AMEX (Saudi Arabia) Ltd, Saudi Orix Leasing Company, Medgulf KSA, Amlak Ìnternational, and Naeem Ìnvestment Co. x FinanciaIs SAÌB is the only bank amongst its Saudi peers that reported a decline in loan growth at 12.5% YoY. The bank has reduced its loan book to mitigate concentration risk. As a result, SAÌB's net special commission income and total operating income declined 6.7% and 7.6% YoY, respectively. The bank's operating costs also rose 12% YoY, increasing its cost-to-income ratio to 38.6% from 32% in 2010. However, the fall in total operating income and higher expenses were offset by a steep decline in provisions, which stood at SR373mn in 2011 compared to SR845mn in 2010 (56% lower YoY). This enabled the bank to register a significant 64.8% YoY growth in its net profits. x Recent deveIopments Ìn March 2012, SAÌB distributed cash dividends of SR324.5mn for 2011. The bank distributed dividends for the first time in six years; the last cash dividends were given to shareholders in 2005. The decline in dividends came after muted profit growth as the bank increased its provisions for its exposure to family-owned corporates. BANKÌNG ~ MAY 2012 SAUDÌ ÌNVESTMENT BANK ALSO KNOWN AS: SAÌB NEUTRAL Current price (SR) 17.60 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 21/16 Market cap ($mn) 2,573 Shares outstanding (mn) 550 Price perform (%) 1M 3M 12M Absolute (11.8) 0.3 (7.6) Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 9.6 2.6 12M 4.2 1.1 Reuters code 1030.SE Bloomberg code SÌBC AB www.saib.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.86 Free float 53.67 VALUATION MULTIPLES 10A 11A 12E P/E (x) 22.5 13.7 13.1 P/B (x) 1.2 1.1 1.1 P/S (x) 5.5 6.0 5.9 Div Yield (%) N/A 3.4 3.4 DPS 0.0 0.6 0.6 Source: NCBC Research SHARE PRICE PERFORMANCE 15 16 17 18 19 20 21 22 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SÌBC (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) GOSÌ 21.5 Public Pension Authority 17.3 Saudi Oger Ltd. 8.5 JPMorgan Chase Co. 7.4 National Comm Bank 7.3 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2012E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 1,315 1,226 1,197 1,260 (6.7) -1.4 Operating Ìncome SRmn 1,749 1,616 1,645 1,762 (7.6) 0.2 Net Ìncome SRmn 429 708 737 793 64.8 22.7 Assets SRmn 51,491 51,946 55,615 60,130 0.9 5.3 Equity SRmn 8,141 8,557 8,974 9,367 5.1 4.8 Advances SRmn 31,002 27,114 29,055 31,336 (12.5) 0.4 Total Deposits SRmn 42,611 42,495 45,781 49,862 (0.3) 5.4 Net Ìnterest Margin % 2.7 2.5 2.4 2.3 - Cost/Ìncome % 32.0 38.6 40.7 41.0 - ROE % 5.5 8.5 8.4 8.6 - ROA % 0.8 1.4 1.4 1.4 - Div Payout % - 45.9 45.0 45.0 - EPS SR 0.8 1.3 1.3 1.4 64.8 22.7 BVPS SR 14.8 15.6 16.3 17.0 5.1 4.8 Source: Company, NCBC Research 35 Bank AIbiIad (AIbiIad), headquartered in Riyadh, was estabIished in 2004 through the merger of eight money exchange organizations. The bank operates 82 branches and 586 ATMs. AIbiIad's whoIIy owned subsidiaries are AIbiIad Brokerage & Securities Management Co., AIbiIad Investment Co., and AIbiIad ReaI Estate Co. x Business brief Albilad's business can be divided into three major segments, namely, Consumer service, Corporate Service and Ìnvestment Service. Through its Consumer service segment the bank offers auto financing, personal financing, real estate financing and credit card services. The bank's Corporate Services division provides a range of finance solutions such as Murabaha, Musharaka, Ìstisna'a, and securitization finance, while Ìnvestment Services segment offers investment avenues in various funds, including Akar (GCC Real Estate Fund), Amwal (Equity Fund for Ìslamic Financial Ìnstitutions), Asayel (Saudi Shares Fund), Al-Murabih (Saudi Riyal Murabaha Fund) and Al-Seef (Kuwaiti Shares Fund). The bank also offers internet trading of Saudi shares though Albilad Tadawul. x FinanciaIs Albilad's net income grew 3.4 times to SR330mn in 2011 due to higher growth in total operating income. Ìn 2011, the bank's net financing expanded 12% YoY leading to 12.5% growth in net special commission income. Ìn addition, fee income increased 34% YoY, enabling 41% growth in total operating income. Higher growth in total operating income than in operating costs also improved its cost-to-income ratio for 2011 although it was at an elevated 58%. Provisions for credit losses increased 4.1%; there were no provisions on impaired investments for 2011 compared to SR47mn in 2010. x Recent deveIopments Ìn February 2012, the bank sold the land (310,972 square meter area) located in the Dir'iya province in Riyadh for SR653mn. This resulted in a capital gain of SR373mn for the bank in the first quarter of the 2012. BANKÌNG ~ MAY 2012 BANK ALBÌLAD ALSO KNOWN AS: ALBÌLAD NEUTRAL Current price (SR) 27.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/16 Market cap ($mn) 2,191 Shares outstanding (mn) 300 Price perform (%) 1M 3M 12M Absolute (14.9) 12.8 37.3 Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 57.5 15.3 12M 19.1 5.1 Reuters code 1140.SE Bloomberg code ALBÌ AB www.bankalbilad.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.88 Free float 77.18 VALUATION MULTIPLES 10A 11A 12E P/E (x) 89.0 24.9 15.4 P/B (x) 2.6 2.4 2.1 P/S (x) 7.5 6.0 4.8 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ AL Bilad (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Mohd Ìbrahim Mohd Al Subaei 11.6 Abdullah Ìbrahim Mohd Al Subaei 11.1 Abdul Rahman Saleh Abdul Aziz Al Rajhi 6.9 Abdul Rahman Abdul Aziz Saleh Al Rajhi 6.5 First Ìncst Co 5.9 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 625 703 854 1,019 12.5 17.8 Operating Ìncome SRmn 1,099 1,374 1,700 2,071 25.0 23.5 Net Ìncome SRmn 92 330 535 735 257.0 99.7 Assets SRmn 21,117 27,727 32,748 38,155 31.3 21.8 Equity SRmn 3,103 3,416 3,951 4,657 10.1 14.5 Advances SRmn 12,290 13,780 16,872 20,704 12.1 19.1 Total Deposits SRmn 17,315 23,460 27,775 32,273 35.5 23.1 Net Ìnterest Margin % 3.4 3.0 2.9 2.9 Cost/Ìncome % 65.3 57.6 54.3 51.5 ROE % 3.0 10.1 14.5 17.1 ROA % 0.5 1.3 1.8 2.1 Div Payout % - - - 20.0 EPS SR 0.3 1.1 1.8 2.5 257.0 99.7 BVPS SR 10.3 11.4 13.2 15.5 10.1 14.5 Source: Company, NCBC Research 36 Bank AI Jazira (BJAZ) speciaIizes in IsIamic banking and investment products in Saudi Arabia. The bank was estabIished in 1975, foIIowing the takeover of the Saudi Arabian branches of NationaI Bank of Pakistan. BJAZ operates a network of 51 branches and 318 ATMs across the KSA. x Business brief BJAZ offers Sharia'a-compliant retail banking, corporate banking and treasury services. The bank's investment subsidiary, AlJazira Capital (AJC), is one of the leading brokerage houses in Saudi Arabia in terms of value and volume traded. BJAZ also operates Aman Real Estate, which acts as a custodian of collateral in the bank's lending activities. Ìn 2010, the bank received a government approval to establish a Takaful company with a capital of SR350mn. x FinanciaIs BJAZ's net income grew 10.5 times YoY to SR303mn in 2011, led by an 81% decline in provisions. Ìncreasing loan portfolio and growing brokerage income from higher Tadawul turnover enabled the bank to post a 9.0% growth in net special commission and 34% increase in fee income. However, a decline in investment income slightly lowered the growth in total operating income. With the 24.6% YoY increase, the bank saw one of the highest loan book growths among the banks in the Kingdom. Customer deposits also grew significantly at 20.7% YoY. x Recent deveIopments Ìn December 2011, BJAZ announced dividend distribution of SR160mn for the year 2011. Ìn June 2011, BJAZ signed a SR339mn, five-year deal with Nama Chemicals Company. This financial facility would be used to service an existing Murabaha loan (SR263mn) and to establish an administrative building (SR70mn). Ìn June 2011, Capital Ìntelligence lowered BJAZ's Financial Strength Rating (FSR) to 'BBB' from 'BBB+', while the outlook was returned to 'Stable' from 'Negative'. Ìn the same month, Fitch affirmed BJAZ's long-term Ìssuer Default Rating (ÌDR) at 'A-' with stable outlook. BANKÌNG ~ MAY 2012 BANK AL JAZÌRA ALSO KNOWN AS: BJAZ, BAJ NEUTRAL Current price (SR) 26.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/15 Market cap ($mn) 2,087 Shares outstanding (mn) 300 Price perform (%) 1M 3M 12M Absolute (16.6) 29.2 35.2 Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 43.0 11.5 12M 17.3 4.6 Reuters code 1020.SE Bloomberg code BJAZ AB www.baj.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.88 Free float 67.80 VALUATION MULTIPLES 10A 11A 12E P/E (x) 270.8 25.9 19.2 P/B (x) 1.6 1.6 1.5 P/S (x) 6.8 6.5 5.4 Div Yield (%) - 2.0 2.1 DPS - 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ BJAZ (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Rashed Al Abdul Rahman Al Rashid & Sons Co 22.2 Al Okhoah Union for devlp 6.5 National Bank of Pakistan 5.8 Saleh Abdullah Mohd Kamal 5.0 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Net Sp. Com Ìncome SRmn 717 781 894 997 9.0 11.6 Operating Ìncome SRmn 1,155 1,208 1,456 1,640 4.6 12.4 Net Ìncome SRmn 29 303 408 482 947.5 155.4 Assets SRmn 33,018 38,898 43,433 48,995 17.8 14.1 Equity SRmn 4,806 4,937 5,185 5,505 2.7 4.6 Advances SRmn 18,704 23,307 27,189 31,817 24.6 19.4 Total Deposits SRmn 27,734 33,464 37,711 42,910 20.7 15.7 Net Ìnterest Margin % 2.4 2.3 2.3 2.2 - Cost/Ìncome % 66.2 69.1 66.9 64.8 - ROE % 0.6 6.2 8.1 9.0 - ROA % 0.1 0.8 1.0 1.0 - Div Payout % - 52.8 40.0 35.0 EPS SR 0.1 1.0 1.4 1.6 947.5 155.4 BVPS SR 16.0 16.5 17.3 18.4 2.7 4.6 Source: Company, NCBC Research 37 AIinma Bank (AIinma) was estabIished in March 2006 with a share capitaI of SR15bn. It operates as a Shariah-compIiant bank in the KSA, offering retaiI and corporate banking services. The bank began fuII-fIedged operations in 2009 and operates a network of 37 branches and 400 ATMs. x Business brief Alinma is a Shariah-compliant bank that provides retail and corporate banking services. The bank offers asset management, brokerage, investment banking and wealth management services through Alinma Ìnvestment Co. Alinma entered into a joint venture to provide Takaful insurance services. Through this, it aims to capitalize on the vast untapped retail market for Sharia'a-compliant insurance services. x FinanciaIs Alinma's net income grew 28 times to SR431mn in 2011 from just SR15mn in 2010. Loan portfolio increased 62% YoY and deposits grew 113.8% YoY in 2011 primarily due to a lower base in 2010. Owing to growth in loan books, the bank's net special commission income rose 79.5%, while fee income grew 7.4 times; consequently, total operating income increased 109.6%. Alinma's provisions also grew from SR3mn to SR125mn in 2011; however, its cost-to-income ratio declined to 60% from 97%, enabling significant growth in bottom line. x Recent deveIopments Ìn March 2012, Alinma Ìnvestment was appointed lead manager and underwriter for the initial public offering of Tokio Marine Saudi Arabia (Alinma Bank holds 28.75% stake in its SR20mn capital). Ìn March 2012, the bank also signed two agreements with Saudi Real Estate Development Fund to facilitate providing loans. Ìn February 2012, the bank launched a service to finance residential units under construction. During the same month, the bank started its operations in the northern borders region at the branch in the city of Ar'ar, in line with its strategy to make its presence in all the regions of the Kingdom. BANKÌNG ~ MAY 2012 ALÌNMA BANK ALSO KNOWN AS: ALÌNMA NOT COVERED Current price (SR) 14.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 17/9 Market cap ($mn) 5,599 Shares outstanding (mn) 1,500 Price perform (%) 1M 3M 12M Absolute (10.0) 30.2 37.9 Market (6.2) 6.2 7.6 Sector (6.0) 4.9 1.2 Avg daiIy turnover (mn) SR US$ 3M 948.8 252.9 12M 358.7 95.6 Reuters code 1150.SE Bloomberg code ALÌNMA AB www.alinma.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.42 Free float 69.29 VALUATION MULTIPLES 09A 10A 11A P/E (x) 97.7 NM 48.7 P/B (x) 1.3 1.5 1.3 P/S (x) 34.1 31.7 15.1 Div Yield (%) N/A N/A N/A DPS 0.0 0.0 0.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 8 10 12 14 16 18 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Alinma (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvst Fund 10.0 GOSÌ 10.0 Public Pension Authority (PPA) 10.7 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Sp. Com Ìncome SRmn 339 607 619 1,112 79.6 81.1 Operating Ìncome SRmn 339 615 662 1,388 109.7 102.4 Net Ìncome SRmn 390 215 15 431 2,775.6 5.2 Assets SRmn 15,556 17,306 26,669 36,783 37.9 53.8 Equity SRmn 15,390 15,605 15,621 15,894 1.8 1.6 Advances SRmn - 1,112 15,593 25,259 62.0 NA Total Deposits SRmn - 1,501 10,570 20,219 91.3 NA Net Ìnterest Margin % 2.3 3.9 3.02 3.8 Cost/Ìncome % 65.9 67.5 97.3 59.9 ROE % 2.5 1.4 0.1 2.7 ROA % 2.5 1.3 0.1 1.4 Div Payout % - - - - EPS SR 0.3 0.1 0.0 0.3 2,775.6 5.2 BVPS SR 10.26 10.4 10.4 10.6 1.8 1.6 Source: Company, NCBC Research 38 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Petrochemicals Ticker Company Page No. 2010 SABIC 44 2020 SAFCO 45 2310 Sipchem 46 2260 Sahara Petrochemical 47 2060 Industrialization 48 2350 Saudi Kayan 49 2290 YANSAB 50 2002 National Petrochem 51 2250 SIIG 52 2330 Advanced Petrochem 53 2380 Petro Rabigh 54 2210 Nama Chemicals 55 2170 Alujain 56 2001 Methanol Chemicals 57 The Saudi petrochemical sector is well positioned to withstand any weakness in demand by capitalizing on its low feedstock cost and an expanding production base. The full year contribution from Saudi Kayan and Sahara's Al Waha plant, as well as the commencement of Petrochem's commercial operations in 2Q12, should boost the sector's earnings in 2012E. Proximity to growing Asian markets remains a key positive for petrochemical firms in the Kingdom. Global petrochemical prices started to decline in the 2H11 as oil prices fell below USD100/bbl and demand weakened in key end markets. Poor market conditions also impacted the earnings of Saudi petrochemical producers during the same period. However, we believe firms are well placed to withstand the adverse market conditions given their low production cost as ethane and propane (key feedstock for petrochemicals) are supplied at reduced prices by Saudi Aramco. Ìn our opinion, there is little scope of a strong rebound in demand and prices in the near term as most demand indicators are still weak. Petrochemical producers in the Kingdom procure ethane at USD0.75/mmbtu, which is much lower than the global spot prices of over USD2/mmbtu. While reviewing ethane prices in early 2012, the Oil Ministry decided to keep gas prices unchanged for the year. Companies receive propane at a price linked to the discounted rate of naphtha. Though this discount has been reduced marginally over the years (around 30% in 2011), the procurement cost still remains attractive for companies relative to their international counterparts. However, with limited supply of low-cost ethane, Saudi producers are focusing on mixed-feed crackers. The resultant increase in production costs due to an anticipated rise in ethane cost (in 2013E) and inclusion of heavier feedstock is not likely to have a significant impact on the earnings of Saudi producers. This could be ascribed to an expansion in their production base and access to growing markets in Asia and the Middle East. Ìn recent years, petrochemical companies in Saudi Arabia have undertaken aggressive capex to capitalize on rising demand and their feedstock cost advantage. According to BMÌ, total ethylene capacity in the Kingdom is expected to grow to 16.5mn mtpa by 2015 from around 8mn mtpa in 2008. Moreover, SABÌC is seeking opportunities to invest in downstream products such as polyurethanes and polyamides. The company aims to increase R&D spending to over 2% of sales in forthcoming years from 1% budgeted for 2011. Tasnee is undertaking projects to add downstream products, such as acrylic acids and polyols to its petrochemical product mix. The reducing number of anti-dumping claims in key end markets is favorable for the earnings outlook. Ìn January 2012, Ìndia withdrew anti-dumping duties levied on the Kingdom's polypropylene producers in November 2010. Ìn December 2011, the European Commission revoked anti-dumping and anti-subsidy probes against polyethylene terephthalate (PET) from Saudi Arabia. Ìn October 2010, Chinese authorities decided against imposing any duty on Saudi methanol producers after conducting a year-long investigation. The Chinese government MAY 2012 PETROCHEMÌCALS Startups, low production cost to support earnings 40 PETROCHEMÌCALS NCB CAPÌTAL MAY 2012 lowered anti-dumping charges on Sipchem's Butanediol output to 4.5% in December 2009 from 20.9% in May 2009. The sector currently comprises 14 listed companies, with SABÌC being the largest. SABÌC is also the largest petrochemical company in the Middle East. Headquartered in Riyadh, the company's annual production volumes aggregated 67mn mt in 2010 and accounted for 64.3% of total revenues from the petrochemical sector in KSA in 2011. An uptrend in the earnings of petrochemical producers continued in 2011. The sector's net income increased 37.5% YoY to SR40.7bn in 2011, driven by higher prices of petrochemicals and fertilizers, and growth in production volumes. Exhibit 43: Sector details Units as stated Country % weight in Index as on 28 Mar 12 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Basic Ìndustries Corp (SABÌC) 11.0 15.4 22.6 National Ìndustrialization Co (NÌC) 3.7 12.4 24.1 Saudi Kayan Petrochemical Company 1.9 (10.4) (1.6) Yanbu National Petrochemical Co (YANSAB) 1.7 32.9 35.6 Saudi Ìndustrial Ìnvestment Group (SÌÌG) 1.5 11.8 9.1 Saudi Ìnternational Petrochemical Co (Sipchem) 1.2 21.2 13.4 Sahara Petrochemical 1.1 27.0 9.7 Advanced Petrochemical Company 0.8 18.4 26.7 Rabigh Refining and Petrochemical Co 0.6 0.1 0.8 Nama Chemicals 0.3 (33.9) (16.4) Chemanol 0.3 8.5 4.8 Petrochem 0.3 NM (1.4) Alujain Corporation 0.2 (0.7) (1.8) Source: Saudi Stock Exchange (Tadawul) Ìn 2011, the petrochemical sector's combined revenues (all of the 14 companies) increased 25.4% YoY to SR295.2bn, supported by strong prices during the first half of the year, additional revenues from new startups (such as Saudi Kayan and Sahara) and the full year contribution from Yansab and Sipchem's Phase 2 expansion project. SABÌC reported a 25.0% YoY rise in revenues in 2011. Net margins of petrochemical firms expanded to 13.8% in 2011 from 12.6% in 2010. Losses reported by Saudi Kayan, Nama Chemicals, Petrochem and Alujain impacted the overall earnings growth in 2011. Exhibit 44: Revenues of companies, 2005-11 Exhibit 45: Profitability of companies, 2005-11 SR mn % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research Stock multiples improved in 2009 and 2010, after falling drastically in 2008. The uptrend reversed in 2011 as investors adopted a cautious approach amid signs of slower economic growth in developed countries. Of the key stocks in the 50,000 100,000 150,000 200,000 250,000 300,000 2005 2006 2007 2008 2009 2010 2011 SABÌC SAFCO Yansab Sipchem Others 0 10 20 30 40 50 60 70 80 90 2005 2006 2007 2008 2009 2010 2011 SABÌC SAFCO Yansab Sipchem NÌC 41 PETROCHEMÌCALS NCB CAPÌTAL MAY 2012 sector, SABÌC traded at a RoE and P/B multiple of 22.6% and 2.3x at end 2011, respectively, versus 18.8% and 2.7x at end 2010, respectively. Exhibit 46: Comparison of P/B and ROE, 2010 Exhibit 47: Comparison of P/B and ROE, 2011 % % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research Trading turnover of KSA petrochemical stocks averaged to SR94.9mn daily in 2011 compared to SR82.4mn daily in 2010. Within the sector, SABÌC with an average daily turnover of SR617mn in 2011 had the largest turnover. Exhibit 48: Avg. daily turnover, Jan11 - Dec11 Exhibit 49: Share price movement, Jan11 - Dec11 SR mn Rebased to 100 on 1 st Jan-11 Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research The Tadawul Petrochemical index declined 4.5% in 2011, after a growth of 19.8% in 2010. This could be ascribed to the political instability in the region during 1Q11 and ongoing concerns related to the European debt crisis and a slower-than-expected world economic growth. Outlook for the Saudi petrochemical sector remains largely positive Full year contribution from startups ÷ Saudi Kayan and Sahara's Al Waha plants ÷ along with the prevailing feedstock advantage strengthen our outlook for the Kingdom's petrochemical sector in 2012. Furthermore, the scheduled startup at Petrochem could enable producers to benefit from the rising demand in Asian economies. However, we believe a strong rebound in demand in the near-term is unlikely given the ongoing debt concerns in Europe and a slowdown in China's GDP growth. Ìn our opinion, the sector's feedstock advantage and proximity to high-growth markets in Asia and the Middle East would continue to offer support, going forward. SABÌC SAFCO SÌÌG Sahara Yansab Nama Sipchem NÌC Alujain APPC Kayan Rabigh Chemanol Petrochem -10 0 10 20 30 40 50 0 1 2 3 4 5 6 7 R O E ( % ) P/B (x) SABÌC SAFCO SÌÌG Sahara Yansab Nama Sipchem NÌC Alujain APPC Kayan Rabigh Chemanol Petrochem -20 -10 0 10 20 30 40 50 60 0 1 2 3 4 5 6 7 R O E ( % ) P/B (x) 6 1 6 . 9 3 2 . 5 3 1 . 1 6 0 . 3 7 7 . 5 3 4 . 6 4 2 . 3 6 1 . 3 3 2 . 7 4 1 . 3 1 7 2 . 0 6 6 . 0 2 9 . 7 3 0 . 0 0 100 200 300 400 500 600 700 S A B Ì C S A F C O S Ì Ì G S a h a r a Y a n s a b N a m a S i p c h e m N Ì C A l u j a i n A P P C K a y a n R a b i g h C h e m a n o l P e t r o c h e m 50 70 90 110 130 150 Jan-11 Mar-11 May-11 Aug-11 Oct-11 Dec-11 Sipchem NÌC Yansab SAFCO SABÌC 42 PETROCHEMÌCALS NCB CAPÌTAL MAY 2012 NCBC Recommendations in the Sector Petrochemical stocks under our coverage universe include SABÌC, SAFCO, Sipchem, Tasnee, Yansab, Sahara, Saudi Kayan and Petrochem. Detailed information on the companies' performance is included in our KSA Petrochemicals Sector Update released in March 2012. Exhibit 50: Coverage stocks details Stock Current Rating PT (SR) Comments SABÌC (2010.SE) Overweight 124.5 SABÌC benefits from its diversified product mix, an integrated production flow, wide geographical reach and continued feedstock cost advantage at its facilities in Saudi Arabia. At current levels, we believe the stock offers an attractive investment opportunity considering the earnings growth potential and the company's sustained focus on expansion in different product lines and geographies. Sipchem (2310.SE) Overweight 26.7 Ìn 2011, Sipchem's operational efficiency improved as all of its plants (Phase 1 and 2) were operating at their designed capacities, thereby offering full benefits of an integrated product flow. Resultant improvement in profitability is expected to drive the company's earnings in 2012E. SAFCO (2020.SE) Overweight 212.7 The company's high margins, low capex requirements and short cash conversion cycle result in high free cash flows and thereby high dividend payments. We believe continued strength in demand for fertilizers and the SAFCO 5 project would remain attractive in the long run. NÌC (Tasnee) (2060.SE) Neutral 36.7 Tasnee is the only titanium dioxide (TiO2) pigment producer in the Middle East and is monetizing its low-cost feedstock advantage through its petrochemicals business. Continued rise in TiO2 prices could support 2012E earnings growth; however, petrochemical prices are likely to remain weak. Any positive earnings surprises due to higher-than-expected selling prices in the titanium dioxide business and positive news flow related to the ongoing petrochemical projects are key stock price catalysts. Sahara (2260.SE) Neutral 18.5 Sahara's 2012E performance is expected to be driven by the full-year contribution from its Al Waha plant, which commenced operations in April 2011. Furthermore, three new start-ups producing acrylates, caustic soda, ethylene dichloride and superabsorbent polymers are likely to support the company's 2013E earnings. However, poor earnings from the Al Waha project in 2H11 raises concerns over Sahara's operational ability. Yansab (2290.SE) Neutral 48.2 We are optimistic on the company's future earnings growth due to its low cost structure and growing demand from emerging economies. However, we believe the current valuation of stock factors in all positives associated with the company and offers limited upside potential. Moreover, continued uncertainty over economic conditions in Europe (the key end market) weigh heavily on Yansab's near-term earnings outlook. Saudi Kayan (2350.SE) Neutral 18.7 A diversified product mix and strong links with SABÌC are key positives for the stock. However, poor performance in 4Q11 indicates Saudi Kayan is facing some technical issues and is not able to manage the integrated product flow as anticipated earlier. Ìn our opinion, the company's ability to ramp up production at full capacity is imperative for growth in future earnings. Petrochem (2002.SE) Underweight 19.7 The company is scheduled to commence operations in 2Q12 and would be entering into ethylene and propylene derivatives through a JV with Chevron Phillips. However, prevailing demand and weakness in pricing are likely to restrict earnings growth in 2012E. Any update on the project commencement would be a key catalyst for the stock price. Source: NCBC Research 43 Established in 1976, Saudi Basic Industries Corporation (SABIC) is one of the leading petrochemical companies in the world, with sales totaling SR190bn (USD50.7bn) in 2011. The company produces basic chemicals (olefins, oxygenates and aromatics), intermediates and polymers. SABIC also produces fertilizers (through SAFCO, Ibn Al-Baytar and Al-Bayroni) and metals (through Hadeed, ALBA and GARMCO). x Business brief SABÌC operates across the globe through its subsidiaries and associates. Ìt functions through six interlinked divisions: Chemicals, Polymers, Performance Chemicals, Ìnnovative Plastics, Fertilizers, and Metals. The company is targeting an annual production capacity of 130mn mtpa by 2020. x Financials Ìn 2011, SABÌC reported revenues of SR189.9bn (up 25.0% YoY) and net income of SR29.2bn (up 35.7% YoY) due to higher production, sales volumes and selling prices. Full year contribution from three projects ÷ Yansab, Sharq 3 rd expansion project and China-based Sinopec SABÌC Tianjin Petrochemical Co supported the improvement in earnings. EBÌTDA margins remained flat at 31.9% YoY in 2011. x Recent developments Ìn February 2012, SABÌC, along with Sinopec, announced plans to build a methanol complex having methanol-to-petrochemicals and methanol-to- olefins plants in Trinidad. The project's cost is estimated at USD5.3bn. Both companies are holding talks with the Government of Trinidad to procure necessary natural gas for the proposed project. A final and binding agreement is yet to be signed. Ìn May 2011, SABÌC entered into an agreement with Japan's Mitsubishi Rayon Co to construct a methyl methacrylate plant (250k mtpa) and a polymethyl MMA plant (40k mtpa). The SABÌC-Sinopec JV signed a MoU to construct a polycarbonate plant (260k mtpa) at their Tianjin complex which would commence by 2015. PETROCHEMÌCALS ~ MAY 2012 SAUDÌ BASÌC ÌNDUSTRÌES CORPORATÌON ALSO KNOWN AS: SABÌC OVERWEIGHT Current price 99.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 110/88 Market cap ($ mn) 79,180 Shares outstanding (mn) 3,000 Price perform (%) 1M 3M 12M Absolute (5.9) 3.4 (9.2) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 599.5 159.8 12M 588.8 157.0 Reuters code 2010.SE Bloomberg code SABÌC AB www.sabic.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 10.73 Free float 21.72 VALUATION MULTIPLES 10A 11A 12E P/E (x) 13.8 10.2 10.0 P/B (x) 2.5 2.2 1.9 P/S (x) 2.0 1.6 1.6 Div Yield (%) 3.5 5.1 5.1 DPS 3.5 5.0 5.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 85 90 95 100 105 110 115 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ SABÌC (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 70.0 General Organization for Social Ìnsurance (GOSÌ) 5.3 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 151,970 189,923 189,253 181,337 25.0 6.1 EBÌTDA SRmn 48,502 60,600 58,901 56,801 24.9 5.4 Net Ìncome SRmn 21,529 29,213 29,824 29,527 35.7 11.1 Assets SRmn 317,580 332,362 348,686 366,132 4.7 4.9 Equity SRmn 120,782 137,993 152,816 167,342 14.2 11.5 Total Debt SRmn 110,602 102,505 89,513 75,046 (7.3) (12.1) Cash & Equiv SRmn 50,648 50,294 59,312 76,874 (0.7) 14.9 EBÌTDA Mgn % 31.9 31.9 31.1 31.3 - - Net Mgn % 14.2 15.4 15.8 16.3 - - ROE % 18.8 22.6 20.5 18.4 - - ROA % 7.0 9.0 8.8 8.3 - - Div Payout % 48.8 51.3 50.3 50.8 - - EPS SR 7.18 9.74 9.94 9.84 35.7 11.1 BVPS SR 40.26 46.00 50.94 55.78 14.2 11.5 Source: Tadawul, Company, NCBC Research 44 Established in 1965, Saudi Arabian Fertilizer Company (SAFCO) produces ammonia and urea nitrogen-based fertilizers. The company markets its products in Asia, America, Australia, Africa and the Middle East countries. Saudi Basic Industries Corp. (SABIC) holds a 43% stake in SAFCO. x Business brief SAFCO has a urea production capacity over 2.3mn mtpa, the majority of which is exported. Urea is a key nitrogen-based fertilizer across the globe. The company also manufactures 2.1mn mtpa of ammonia, most of which is used as an intermediate raw material for producing urea. x Financials Ìn 2011, revenues grew 33.3% YoY to SR5,051mn mainly due to higher fertilizer prices. Gross margins stood at 74.5% versus the 71.0% reported a year ago. The company's net profit rose 27.1% to SR4,110mn in 2011. Ìn our opinion, SAFCO's revenue and net profit for 2012 are likely to remain broadly in line with 2011 as urea prices are expected to hover around the levels witnessed last year. x Recent developments On 7 December 2011, SAFCO announced the results of the feasibility studies undertaken for the planned urea plant. The company has decided to award the engineering, procurement and construction (EPC) contract for its SAFCO 5 project to Ìtaly-based Saipem. Construction work is scheduled to be completed in 26 months (starting from December 2011) and the project is expected to start commercial operations in 3Q14. The project would add a total annual production capacity of 1.1mn mt of urea, with the project cost totaling SR2bn. The company aims to fund the entire project cost through its own resources. Mr. Abdullah Bin Ali Al Bakr replaced Mr. Fahed Bin Rashed Al Otaibi as SAFCO's new President on 21 September 2011. PETROCHEMÌCALS ~ MAY 2012 SAUDÌ ARABÌAN FERTÌLÌZER CO ALSO KNOWN AS: SAFCO OVERWEIGHT Current price (SR) 181.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 200/162 Market cap ($ mn) 12,080 Shares outstanding (mn) 250 Price perform (%) 1M 3M 12M Absolute (8.0) (0.5) 0.8 Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 42.6 11.4 12M 29.0 7.7 Reuters code 2020.SE Bloomberg code SAFCO AB www.safco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.70 Free float 35.82 VALUATION MULTIPLES 10A 11A 12E P/E (x) 14.0 11.0 11.4 P/B (x) 6.4 5.5 5.1 P/S (x) 12.0 9.0 8.8 Div Yield (%) 6.6 7.2 6.6 DPS 12.0 13.0 12.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 160 170 180 190 200 210 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ SAFCO (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) SABÌC 42.9 General Organization for Social Ìnsurance (GOSÌ) 16.7 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 3,789 5,051 5,177 4,627 33.3 6.9 EBÌTDA SRmn 2,921 3,990 3,912 3,386 36.6 5.1 Net Ìncome SRmn 3,235 4,110 3,978 3,412 27.1 1.8 Assets SRmn 8,379 9,326 10,023 10,467 11.3 7.7 Equity SRmn 7,134 8,210 8,938 9,350 15.1 9.4 Total Debt SRmn 353 80 0 0 (77.3) NM Cash & Equiv SRmn 2,256 3,261 3,517 3,909 44.6 20.1 EBÌTDA Mgn % 77.1 79.0 75.6 73.2 - - Net Mgn % 85.4 81.4 76.8 73.7 - - ROE % 45.7 53.6 46.4 37.3 - - ROA % 37.6 46.4 41.1 33.3 - - Div Payout % 92.7 79.1 75.4 87.9 - - EPS SR 12.94 16.44 15.91 13.65 27.1 1.8 BVPS SR 28.54 32.84 35.75 37.40 15.1 9.4 Source: Tadawul, Company, NCBC Research 45 Established in 1999, Saudi International Petrochemical Co (Sipchem) is engaged in producing petrochemical products such as methanol, butanediol, carbon monoxide, acetic acid and vinyl acetate. The company is expanding its product mix through its Phase III development plan. x Business brief Under Phase Ì, Sipchem established a methanol plant with a production capacity of 1mn tonnes per annum (mtpa) and a butanediol plant with a capacity of 75k mtpa. Following the completion of the Phase ÌÌ expansion in 3Q10, the company added carbon monoxide (345k mtpa), acetic acid (460k mtpa) and vinyl acetate (330k mtpa) to its product mix. Sipchem is currently undertaking its Phase ÌÌÌ expansion to produce ethylene vinyl acetate (EVA), low density polyethylene (LDPE), ethyl acetate and special resin grades used in manufacturing wire and cable products. x Financials Sipchem generated SR3,324mn in revenues in 2011 (SR1,993mn in 2010) driven by the full year contribution from the Phase ÌÌ plants and higher petrochemical prices. The net income increased 86.7% YoY to SR706mn benefiting from improved operational efficiencies as all of its plants (Phase Ì and 2) are operating at their designed capacities, offering full benefits of integrated product flow. x Recent developments Ìn November 2011, Sipchem (through its affiliate, Ìnternational Polymers Company) secured SR600mn (payable in 10 years) from SÌDF. The proceeds would be used to construct the EVA/LDPE plant (200k mtpa), which is expected to commence commercial operations in 2Q13. Ìn October 2011, it awarded an EPC contract for the wire and cable plant (a part of the Phase ÌÌÌ project) to a South Korean firm, Posco Engineering Co. The construction is expected to be completed in two years. Sipchem and South Korea's Hanwha have an equal share in the SR230mn plant. To fund expansion plans, Sipchem raised SR1.8bn through its first issue of Sukuk in July 2011. PETROCHEMÌCALS ~ MAY 2012 SAUDÌ ÌNTERNATÌONAL PETROCHEMÌCAL CO ALSO KNOWN AS: SÌPCHEM OVERWEIGHT Current price (SR) 20.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 25/18 Market cap ($ mn) 2,028 Shares outstanding (mn) 367 Price perform (%) 1M 3M 12M Absolute (11.1) (1.0) (2.6) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 53.0 14.1 12M 36.7 9.8 Reuters code 2310.SE Bloomberg code SÌPCHEM AB www.sipchem.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.17 Free float 92.25 VALUATION MULTIPLES 10A 11A 12E P/E (x) 20.1 10.8 9.7 P/B (x) 1.5 1.4 1.3 P/S (x) 3.8 2.3 2.2 Div Yield (%) 4.8 6.0 4.8 DPS 1.0 1.3 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 17 19 21 23 25 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Sipchem (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Zamil Group Holding Company 9.6 National Manufacturing Holding Co. 8.3 Public Pension Authority 7.7 Al Olayan Financial Company 5.2 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 1,993 3,324 3,531 3,532 66.8 21.0 EBÌTDA SRmn 1,069 1,733 1,924 1,836 62.1 19.7 Net Ìncome SRmn 378 706 782 675 86.7 21.3 Assets SRmn 12,027 14,635 14,167 14,577 21.7 6.6 Equity SRmn 4,921 5,630 5,952 6,258 14.4 8.3 Total Debt SRmn 5,326 6,587 6,106 6,005 23.7 4.1 Cash & Equiv SRmn 1,621 3,606 1,771 739 122.5 (23.0) EBÌTDA Mgn % 53.7 52.1 54.5 52.0 - - Net Mgn % 19.0 21.2 22.2 19.1 - - ROE % 7.7 13.4 13.5 11.1 - - ROA % 3.2 5.3 5.4 4.7 - - Div Payout % 97.0 64.9 46.9 54.3 - - EPS SR 1.03 1.93 2.13 1.84 86.7 21.3 BVPS SR 13.42 15.36 16.23 17.07 14.4 8.3 Source: Tadawul, Company, NCBC Research 46 Sahara Petrochemical Company (Sahara) was established in 2004 by the Al Zamil Group. The company develops, owns and operates production facilities through joint ventures with other companies in the petrochemical sector. Sahara has four subsidiaries: Al Waha Petrochemical (Al Waha), Tasnee & Sahara Olefins (TSOC), Saudi Acrylic Acid Company (SAAC) and Arabian Chlor Vinyl Company (ACVC). x Business brief Al Waha has a production capacity of 467k mtpa of propylene and 450k mtpa of polypropylene. Ìt started commercial production in 2Q11. Saudi Ethylene and Polyethylene Co. (SEPC) (24% owned by Sahara) has a production capacity of 1mn mtpa of ethylene and 800k mtpa of polyethylene. Sahara also has three projects in the pipeline: Saudi Acrylic Monomers Company (SAMC) for producing acrylates, Superabsorbent Polymers Project (SAP Project) for superabsorbent polymers and Arabian Chlor Vinyl Company (ACVC) for caustic soda and ethylene dichoride. x Financials Sahara's 2011 revenues stood at SR1,526mn (2010: nil) with net income at SR412 mn (up 25% YoY), benefiting from the Al Waha startup. Gross profit in 2011 came in at SR240mn (2010: nil), and operating profit stood at SR168mn against an operating loss of SR11mn in 2010. Earlier, SEPC (a 24% owned subsidiary) was the only source of income for the company. x Recent developments Ìn February 2012, SAMC signed a financing agreement of SR600mn with Saudi Ìndustrial Development Fund (SÌDF) which is repayable after 3.5 years. The proceeds would be used to finance Sahara's acrylic acid project. Ìn December 2011, through its affiliates, Sahara signed a 16-year deal of SR5.25bn with nine Saudi Arabia-based banks to fund acrylic acid and superabsorbent polymer projects. During the same month, the company offered 146.3mn shares at a price of SR10 per share through rights issue which increased share capital by 50% to SR4.4bn from SR2.9bn. PETROCHEMÌCALS ~ MAY 2012 SAHARA PETROCHEMÌCAL CO ALSO KNOWN AS: SAHARA, SPCO NEUTRAL Current price (SR) 15.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 23/14 Market cap ($ mn) 1,848 Shares outstanding (mn) 439 Price perform (%) 1M 3M 12M Absolute (17.1) 1.6 (24.0) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 105.7 28.2 12M 78.2 20.8 Reuters code 2260.SE Bloomberg code SPC AB www.saharapcc.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.01 Free float 88.05 VALUATION MULTIPLES 10A 11A 12E P/E (x) 21.1 16.8 9.4 P/B (x) 2.1 1.3 1.2 P/S (x) - 4.5 2.9 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 14 16 18 20 22 24 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ SPC (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Al Zamil Group Holding Company 7.9 Public Pension Authority 5.9 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn - 1,526 2,352 3,608 NM NM EBÌTDA SRmn (5) 323 731 1,170 NM NM Net Ìncome SRmn 329 412 740 868 25.0 38.1 Assets SRmn 6,584 8,410 8,913 9,769 27.7 14.1 Equity SRmn 3,305 5,196 5,936 6,804 57.2 27.2 Total Debt SRmn 2,329 2,179 2,087 1,956 (6.5) (5.6) Cash & Equiv SRmn 164 998 644 1,150 508.0 91.4 EBÌTDA Mgn % - 21.1 31.1 32.4 - - Net Mgn % - 27.0 31.4 24.1 - - ROE % 10.5 9.7 13.3 13.6 - - ROA % 5.2 5.5 8.5 9.3 - - Div Payout % - - - - - - EPS SR 0.75 0.94 1.69 1.98 25.0 38.1 BVPS SR 7.53 11.84 13.53 15.51 57.2 27.2 Source: Tadawul, Company, NCBC Research 47 National Industrialization Company (Tasnee) was established in Riyadh in 1985 to support the Kingdom's industriaI deveIopment. In 2007, Tasnee acquired LyondeIIBaseII's worldwide titanium dioxide business. In 2008, it acquired Australia's Bemax Resources Ltd. and International Titanium Powder (ITP). x Business brief Tasnee's main businesses are in petrochemicals and titanium dioxide (TiO2). The company also has smaller business lines in automotive batteries, carton packaging and related services. Ìn 2006, Tasnee, in a JV with Sahara Olefins and Basell, formed Saudi Ethylene and Polyethylene Co. (SEPC) that started operations in June 2009. SEPC has a capacity of 1mn mtpa of ethylene cracker, and 400k mtpa each of low and high density polyethylene. x Financials Tasnee generated SR19.6bn (up 22.9% YoY) in revenues, with net income reaching SR2.4bn (up 65.9% YoY) in 2011, primarily due to higher prices of petrochemical products and titanium dioxide. The company's EBÌTDA margins increased to 34.4% in 2011 from 27.7% a year ago due to higher selling prices. x Recent developments At the extraordinary general meeting on 4 March 2012, Tasnee's shareholders approved a 1:5 bonus share that, in turn, increasing the share count by 20% to 668.9mn. Ìn February 2012, Saudi Acrylic Monomers Company Limited, an affiliate, signed a SR600mn financing agreement, repayable after 3.5 years, with Saudi Ìndustrial Development Fund (SÌDF). The proceeds would be used to finance Tasnee's acrylic acid project. Ìn December 2011, three subsidiaries ÷ Saudi Acrylic Acid Company (SAAC), Saudi Acrylic Monomers Company (SAMCO) and Saudi Superabsorbent Polymers Company (SAPCO) ÷ signed a 16-year deal of SR5.25bn (USD1.4bn) with nine Saudi banks to fund the acrylic acid and superabsorbent polymer projects. PETROCHEMÌCALS ~ MAY 2012 NATÌONAL ÌNDUSTRÌALÌZATÌON CO ALSO KNOWN AS: NÌC, TASNEE NEUTRAL Current price (SR) 33.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 43/29 Market cap (SR mn) 5,992 Shares outstanding (mn) 669 Price perform (%) 1M 3M 12M Absolute (14.5) 2.1 5.3 Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 63.1 16.8 12M 55.2 14.7 Reuters code 2060.SE Bloomberg code NÌC AB www.tasnee.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 3.28 Free float 87.68 VALUATION MULTIPLES 10A 11A 12E P/E (x) 15.3 9.2 10.1 P/B (x) 2.4 2.0 1.8 P/S (x) 1.4 1.1 1.1 Div Yield (%) 2.5 3.7 3.7 DPS 0.8 1.2 1.2 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 28 33 38 43 48 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ NÌC (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Al Sha'er Trade, Ìndustries and Construction 8.8 General Organization for Social Ìnsurance (GOSÌ) 8.2 Gulf Ìnvestment Corporation 7.3 Kingdom Holding Company 6.2 Swicorp Co. 5.6 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 15,989 19,644 20,565 19,528 22.9 6.9 EBÌTDA SRmn 4,430 6,766 6,213 5,775 52.7 9.2 Net Ìncome SRmn 1,473 2,443 2,234 1,984 65.9 10.4 Assets SRmn 34,748 40,038 45,165 42,980 15.2 7.3 Equity SRmn 9,262 11,019 12,417 13,565 19.0 13.6 Total Debt SRmn 15,987 17,382 18,800 14,095 8.7 (4.1) Cash & Equiv SRmn 3,886 4,636 8,612 6,918 19.3 21.2 EBÌTDA Mgn % 27.7 34.4 30.2 29.6 - - Net Mgn % 9.2 12.4 10.9 10.2 - - ROE % 17.3 24.1 19.1 15.3 - - ROA % 4.3 6.5 5.2 4.5 - - Div Payout % 37.9 34.2 37.4 42.1 - - EPS SR 2.20 3.65 3.34 2.97 65.9 10.4 BVPS SR 13.85 16.47 18.56 20.28 19.0 13.6 Source: Tadawul, Company, NCBC Research 48 Saudi Kayan Petrochemical Company (Kayan) was established by SABIC (35% stake) and Al Kayan Petrochemical (20%) in 2007 to set up a petrochemical complex in Jubail Industrial City. The plant has the capacity to produce approximately 6mn mtpa of petrochemical products each year. x Business brief The complex, which is believed to be one of the world's largest integrated petrochemical plants, manufactures specialized chemicals such as polycarbonate, bisphenol A and acetone. Kayan had commenced trial operations at most of its plants (such as olefins, ethylene glycol, polypropylene, phenolics and high density polyethylene plants) during the 2H10 and January 2011. The company later started commercial operations at its 12 main plants on 1 October 2011. Experimental runs are expected to start at the remaining plants in phases during 2012-2013. x Financials 4Q11 was the first quarter that Kayan reported operating results. However, despite having a full quarter contribution from its key plants, the company incurred an operating loss in 4Q11 as its plants were running at a lower operating rate of 30÷40%. Kayan reported a net loss of SR250.3mn in 2011 compared to SR14.7mn in 2010 due to higher Zakat provisions and lower petrochemical prices in 4Q11. x Recent developments On 27 March 2012, the company announced it had initiated trial runs at its ethanolamines (100k mtpa) and ethoxylates (40k mtpa) plants. On 11 February 2012, Kayan announced that its olefins complex and HDPE plant are operating at normal rates after shutting down for maintenance work during 1-9 February 2012. The company expects the financial impact of this temporary shutdown to be reflected in its 1Q12 results. PETROCHEMÌCALS ~ MAY 2012 SAUDÌ KAYAN PETROCHEMÌCAL CO ALSO KNOWN AS: KAYAN NEUTRAL Current price (SR) 16.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 22/15 Market cap ($ mn) 6,758 Shares outstanding (mn) 1,500 Price perform (%) 1M 3M 12M Absolute (11.7) 4.3 (6.6) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 427.6 114.0 12M 205.2 54.7 Reuters code 2350.SE Bloomberg code KAYAN AB www.saudikayan.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.54 Free float 40.17 VALUATION MULTIPLES 10A 11A 12E P/E (x) - - 13.1 P/B (x) 1.6 1.7 1.5 P/S (x) - 10.5 2.4 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 17 19 21 23 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Kayan (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) SABÌC 35.0 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn - 2,403 10,492 11,797 NM NM EBÌTDA SRmn - 397 4,265 5,037 NM NM Net Ìncome SRmn (15) (250) 1,931 2,411 NM NM Assets SRmn 43,474 46,689 47,017 48,436 7.4 3.7 Equity SRmn 15,463 15,212 17,143 19,553 (1.6) 8.1 Total Debt SRmn 26,089 29,510 27,102 26,040 13.1 (0.1) Cash & Equiv SRmn 967 469 797 425 (51.5) (24.0) EBÌTDA Mgn % - 16.5 40.6 42.7 - - Net Mgn % - - 18.4 20.4 - - ROE % (0.1) (1.6) 11.3 12.3 - - ROA % (0.0) (0.6) 4.1 5.1 - - Div Payout % - - - - - - EPS SR (0.01) (0.17) 1.29 1.61 NM NM BVPS SR 10.31 10.14 11.43 13.04 (1.6) 8.1 Source: Tadawul, Company, NCBC Research 49 Yanbu National Petrochemicals Company (Yansab) was established in 2006 to set up a 4mn mt per annum petrochemical complex in the Yanbu Industrial City. SABIC holds a majority stake (51%) in Yansab. The company commenced commercial operations in March 2010. x Business brief Yansab has a diversified petrochemical product mix, including Ethylene (1.3mn mtpa), Propylene (400k mtpa), Polypropylene (400k mtpa), Polyethylene (both low and high density with 400k mtpa each) and Mono, Di and Tri Ethylene Glycol (770k mtpa total). Other products such as Benzene, Butene, Methyl Tertiary Butyl Ether and Benzene Toluene Xylene have a total production capacity of close to 375k mtpa. x Financials Yansab's revenues grew 65.9% YoY to SR9.7bn in 2011 and net income increased 89.8% to SR3.2bn driven by higher prices and production volumes. Ìn 2011, the company enjoyed the full year contribution from its petrochemical complex, which started commercial operations in March 2010. Yansab reported a gross profit of SR3,793mn in 2011; this represents a gross margin of 39.3%, higher than the 37.3% a year earlier. We believe the current weak demand for petrochemicals in Europe and the anticipated drop in petrochemical prices would restrict growth in Yansab's earnings in 2012E. For 2012E, we project revenues of SR9.5bn (flat YoY), net income of SR3bn (down 6.1% YoY) and gross margin of 39.2% (flat YoY). x Recent developments On 17 March 2012, Yansab held its fourth annual general meeting at Yanbu Ìndustrial City. The company did not pay any dividend for 2011. PETROCHEMÌCALS ~ MAY 2012 YANBU NATÌONAL PETROCHEMÌCAL COMPANY ALSO KNOWN AS: YANSAB NEUTRAL Current price (SR) 49.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 58/42 Market cap ($ mn) 7,468 Shares outstanding (mn) 563 Price perform (%) 1M 3M 12M Absolute (5.6) 8.3 (0.2) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 80.9 21.6 12M 64.4 17.2 Reuters code 2290.SE Bloomberg code YANSAB AB www.yansab.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.75 Free float 37.66 VALUATION MULTIPLES 10A 11A 12E P/E (x) 16.7 8.8 9.4 P/B (x) 3.8 2.7 2.1 P/S (x) 4.8 2.9 2.9 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 45 50 55 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ YANSAB (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) SABÌC 51.0 General Organization for Social Ìnsurance (GOSÌ) 11.0 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 5,822 9,659 9,509 9,305 65.9 16.9 EBÌTDA SRmn 2,881 4,635 4,492 4,236 60.9 13.7 Net Ìncome SRmn 1,673 3,174 2,981 2,833 89.8 19.2 Assets SRmn 23,163 22,975 24,719 25,942 (0.8) 3.8 Equity SRmn 7,340 10,515 13,495 16,329 43.2 30.5 Total Debt SRmn 14,411 11,173 9,810 8,213 (22.5) (17.1) Cash & Equiv SRmn 790 599 2,930 5,106 (24.1) 86.3 EBÌTDA Mgn % 49.5 48.0 47.2 45.5 - - Net Mgn % 28.7 32.9 31.3 30.4 - - ROE % 25.7 35.6 22.1 17.4 - - ROA % 7.6 13.8 12.5 11.2 - - Div Payout % - - - - - - EPS SR 2.97 5.64 5.30 5.04 89.8 19.2 BVPS SR 13.05 18.69 23.99 29.03 43.2 30.5 Source: Tadawul, Company, NCBC Research 50 National Petrochemical Company (Petrochem) was established in 2008. The company is mainly involved in investing in the petrochemical industry through its 65% owned Saudi Polymers Company. x Business brief Petrochem completed the construction of its SR20.8bn petrochemical complex at the end of 2011. Ìt is expected to commence commercial operations in 2Q12. The project cost is estimated to be over SR20.8bn. Once operational, the project would have a production capacity of 3.4mn mtpa, including ethylene, propylene, HDPE, LDPE, polypropylene, polystyrene, and hexane. Petrochem is 50.0% owned by Saudi Ìndustrial Ìnvestment Group (SÌÌG). x Financials Petrochem incurred a net loss of SR64.5mn in 2011, higher than the SR42.6mn in 2010, primarily due to higher general and administrative expenses, and Zakat provisions. The company is in a pre-operational stage and is expected report its first set of operating results in 2Q12. We expect the company's net income to total SR890mn in 2012E, with revenues of SR5.2bn, EBÌTDA margins of 38.9% and net margins of 17.0%. x Recent developments On 18 February 2012, Petrochem announced it is currently conducting trial runs and commissioning at the units of its petrochemical project, Saudi Polymers Company. The company mentioned that commercial operations are scheduled to commence in 2Q12. However, on 7 December 2011, the company had announced commercial operations would start in 1Q12. Petrochem owns a 65% stake in this project, while 35% is held by Arabian Chevron Phillips Petrochemical Company Limited. PETROCHEMÌCALS ~ MAY 2012 NATÌONAL PETROCHEMÌCAL CO ALSO KNOWN AS: SAUDÌ PETROCHEM, PETROCHEM UNDERWEIGHT Current price (SR) 24.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/19 Market cap ($ mn) 3,116 Shares outstanding (mn) 480 Price perform (%) 1M 3M 12M Absolute (4.1) 15.4 4.3 Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 41.7 11.1 12M 26.3 7.0 Reuters code 2002.SE Bloomberg code PETROCH AB www.petrochem.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.34 Free float 17.50 VALUATION MULTIPLES 10A 11A 12E P/E (x) - - 13.1 P/B (x) 2.5 2.5 2.1 P/S (x) - - 2.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 18 20 22 24 26 28 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Petrochem (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Saudi Ìndustrial Ìnvestment Grp Co. 50.0 General Organization for Social Ìnsurance (GOSÌ) 16.2 Public Pension Authority (PPA) 16.2 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn - - 5,238 8,477 NM NM EBÌTDA SRmn (14) (47) 2,036 3,389 NM NM Net Ìncome SRmn (43) (64) 890 1,291 NM NM Assets SRmn 18,320 19,996 21,967 22,713 9.2 7.4 Equity SRmn 4,715 4,650 5,540 6,830 (1.4) 13.2 Total Debt SRmn 11,593 13,352 13,983 13,118 15.2 4.2 Cash & Equiv SRmn 2,103 1,707 117 205 (18.9) (53.9) EBÌTDA Mgn % - - 38.9 40.0 - - Net Mgn % - - 17.0 15.2 - - ROE % (0.9) (1.4) 17.5 20.9 - - ROA % (0.3) (0.3) 4.2 5.8 - - Div Payout % - - - - - - EPS SR (0.09) (0.13) 1.85 2.69 NM NM BVPS SR 9.82 9.69 11.54 14.23 (1.4) 13.2 Source: Tadawul, Company, NCBC Research 51 Saudi Industrial Investment Group (SIIG) was established in 1996 in Riyadh. The company primarily focuses on investment opportunities in the Kingdom's petrochemicaI sector. SIIG operates through three subsidiaries - Saudi Chevron Phillips, Jubail Chevron Phillips and National Petrochemicals Company (PetroChem). x Business brief Of the three subsidiaries, Saudi Chevron Philips and Jubail Chevron Phillips are operational. Saudi Chevron Phillips produces cyclohexane (780k mtpa) and motor gasoline (290k mtpa), while Jubail Chevron Phillips manufactures styrene (750k mtpa) and propylene (150k mtpa). Ìn 2007, SÌÌG, through Petrochem, formed Saudi Polymers Co to manufacture a range of petrochemical products such as ethylene, propylene and their derivatives. The project, entailing an investment of SR21bn, has an annual production capacity of 3.4mn mt and is scheduled to commence operations in 2Q12. x Financials SÌÌG's revenues grew 37.8% YoY to SR4,500.8mn in 2011 from SR3,265.6mn in 2010 on the back of higher petrochemical prices and improved utilization. The company reported a net income of SR528.4mn in 2011, higher than the SR404.6mn in 2010. However, SÌÌG's gross margins contracted to 17.4% in 2011 from 19.7% in 2010 due to the weak pricing environment in 2H11 and additional expenses incurred related to the month- long maintenance shutdown in October 2011. x Recent developments Ìn December 2011, Petrochemical Conversion Company Limited (PCC) awarded a contract of SR700mn to Nesma and Partners Contracting Co Ltd for building its Nylon 6,6 and conversion plants in the Jubail Ìndustrial City. These plants are scheduled to start operations in 2013. PCC is an equally- owned JV between SÌÌG and Arabian Chevron Phillips Petrochemical Co Ltd. Ìn October 2011, SÌÌG conducted a month-long maintenance works at its benzene, cyclohexane, and motor gasoline producing units. PETROCHEMÌCALS ~ MAY 2012 SAUDÌ ÌNDUSTRÌAL ALSO KNOWN AS: SÌÌG NOT COVERED Current price 23.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/18 Market cap ($ mn) 2,807 Shares outstanding (mn) 450 Price perform (%) 1M 3M 12M Absolute (0.2) 10.9 (10.3) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 51.7 13.8 12M 34.2 9.1 Reuters code 2250.SE Bloomberg code SÌÌG AB www.siig.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.54 Free float 87.90 VALUATION MULTIPLES 09A 10A 11A P/E (x) 34.4 26.0 19.9 P/B (x) 1.9 1.9 1.8 P/S (x) 2.8 3.2 2.3 Div Yield (%) 2.1 2.1 4.3 DPS 0.5 0.5 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 17 19 21 23 25 27 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SÌÌG (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Pension Authority (PPA) 10.6 Ali Abdullah Ìbrahim Al Jafaly 6.3 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 2,139 3,760 3,266 4,501 37.8 28.1 EBÌTDA SRmn 221 555 701 809 15.5 54.2 Net Ìncome SRmn 49 306 405 528 30.6 121.3 Assets SRmn 8,649 19,699 23,674 25,602 8.1 43.6 Equity SRmn 5,197 5,503 5,681 5,983 5.3 4.8 Total Debt SRmn 2,731 10,174 12,940 14,538 12.4 74.6 Cash & Equiv SRmn 2,703 4,586 3,769 3,515 (6.8) 9.1 EBÌTDA Mgn % 10.3 14.8 21.5 18.0 - - Net Mgn % 2.3 8.1 12.4 11.7 - - ROE % 1.2 5.7 28.9 36.2 - - ROA % 0.7 2.2 7.5 8.6 - - Div Payout % - 73.5 55.6 85.2 - - EPS SR 0.11 0.68 0.90 1.17 30.6 121.3 BVPS SR 11.55 12.23 12.62 13.29 5.3 4.8 Source: Tadawul, Company, NCBC Research 52 Advanced Petrochemical Company (APPC) was established in 2005. It developed a SR2.9bn integrated propane dehydrogenation and polypropylene complex in Jubail Industrial City. The facility has an annual production capacity of 450k mt of polypropylene. It commenced commercial operations in 2008. x Business brief APPC has an annual production capacity of 450k mt of polypropylene, which is used in several applications such as manufacturing of fabrics, moldings, pipes and furniture. APPC operates a propylene plant (with a capacity of 455k mtpa) by using CATOFÌN-ABB Lumus technology, which converts propane gas into propylene. The company appointed Vinmar Ìnternational Limited, Mitsubishi Corporation and Domo N.V to offtake the output from the complex. Most of the production would be shipped through the ports of Dammam, Jeddah and Jubail. x Financials APPC's revenue grew 37.4% YoY to SR2,791mn in 2011 compared to SR2,031mn in 2010 due to higher polypropylene prices. This coupled with reduced operating and financing expenses in 2011 supported the increase in net income (56.2% YoY to SR512.8mn). APPC's gross margins stood at 20.6% in 2011, up from 19.5% a year ago. x Recent developments On 22 February 2012, APPC's shareholders approved the distribution of a bonus share for every 6.25 shares held, thereby increasing share capital by 16% with the addition of 141.4mn shares. Ìn January 2012, Ìndia decided to withdraw anti-dumping duties that were levied on Saudi Arabia-based polypropylene manufacturers (including APPC) in November 2010. Ìn October 2011, APPC undertook maintenance work at its propylene plant for 10 days. As per the company, the shutdown had limited impact on 4Q11 earnings as APPC met customer orders using inventories. PETROCHEMÌCALS ~ MAY 2012 ADVANCED PETROCHEM ALSO KNOWN AS: APPC NOT COVERED Current price (SR) 26.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 34/22 5 Market cap ($ mn) 1,137 M Shares outstanding (mn) 164 S Price perform (%) 1M 3M 12MP Absolute (19.0) 0.9 (5.8) A Market (6.2) 6.2 7.6 M Sector (9.1) 3.4 (5.7) S Avg daily turnover (mn) SR US$ A 3M 52.0 13.9 3 12M 40.9 10.9 1 Reuters code 2330.SE R Bloomberg code APPC AB B www.advancedpetrochem.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.67 T Free float 94.62 F VALUATION MULTIPLES 09A 10A 11A P/E (x) 33.5 13.0 8.3 P P/B (x) 2.6 2.4 2.1 P P/S (x) 2.9 2.1 1.5 P Div Yield (%) 3.8 6.7 7.7 D DPS 1.0 1.8 2.0 D Source: NCBC Research estimates SHARE PRICE PERFORMANCE 21 24 27 30 33 36 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ APPC (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) National Polypropylene Co. General Organization for Social Ìnsurance (GOSÌ) 7.9 5.3 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,459 1,467 2,031 2,791 37.4 24.1 EBÌTDA SRmn 366 357 570 751 31.9 27.1 Net Ìncome SRmn 210 127 328 513 56.2 34.6 Assets SRmn 3,507 3,414 3,365 3,380 0.5 (1.2) Equity SRmn 1,617 1,670 1,811 2,028 12.0 7.8 Total Debt SRmn 1,713 1,474 1,264 925 (26.8) (18.6) Cash & Equiv SRmn 216 296 457 476 4.3 30.1 EBÌTDA Mgn % 25.1 24.3 28.0 26.9 - - Net Mgn % 14.4 8.7 16.2 18.4 - - ROE % 13.9 7.7 75.4 106.8 - - ROA % 27.8 14.7 38.7 60.8 - - Div Payout % - 129.0 87.4 64.0 - - EPS SR 1.28 0.78 2.00 3.13 56.2 34.6 BVPS SR 9.86 10.19 11.04 12.37 12.0 7.8 Source: Tadawul, Company, NCBC Research 53 Rabigh Refining and Petrochemical Co. (PetroRabigh), established in Rabigh in 2005, is a joint venture between Saudi Aramco and Japan's Sumitomo Chemical. The US$10bn project can produce 130 mn barrels (bbl) of refined products and 2.4mn mt of petrochemical products annually. x Business brief Aramco is expected to supply 400k barrels of crude oil, 95mn cubic feet (mcf) of ethane and about 15k barrels of butane on a long-term and fixed-price basis to PetroRabigh. Sumitomo provides the technological and marketing expertise. The plant is equipped with a sophisticated High Olefins Fluid Catalytic Cracker (HOFCC) and Ethane Cracker. Saudi Aramco is responsible for marketing PetroRabigh's refining petroleum products, while Sumitomo handles the marketing of the petrochemical products. PetroRabigh is planning to commence work on its phase ÌÌ project, which would double its capacity by 2015. x Financials During 2011, PetroRabigh's revenues grew 14.0% YoY to SR53.4bn, while net income dropped 68.4% YoY to SR65.9mn. Net losses incurred during 2Q11 and 3Q11 due to the planned maintenance shutdown from 21 April 2011 to 30 June 2011 impacted the company's earnings for the year. A non- operating, non-recurring income of SR310.8mn from derecognition of leased assets and related lease obligations during 2010 further widened the YoY drop in net income. x Recent developments On 31 December 2011, PetroRabigh announced the completion of the lenders reliability test (LRT) at all its production units. The test (which entailed running the petrochemical complex at an operating rate of 97% for 210 days) validates its production stability and reliability. On 4 December 2011, PetroRabigh announced the successful completion of the performance guarantee test conducted at its High Olefins Fluidized Catalytic Cracking (HOFCC) unit. PETROCHEMÌCALS ~ MAY 2012 RABÌGH REFÌNÌNG AND PETROCHEMÌCAL ALSO KNOWN AS: PETRORABÌGH NOT COVERED Current price (SR) 21.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 29/20 Market cap ($ mn) 5,103 Shares outstanding (mn) 876 Price perform (%) 1M 3M 12M Absolute (14.6) (3.3) (22.0) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 79.4 21.2 12M 51.0 13.6 Reuters code 2380.SE Bloomberg code PETROR AB www.petrorabigh.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.55 Free float 17.42 VALUATION MULTIPLES 09A 10A 11A P/E (x) - 91.7 290.5 P/B (x) 2.4 2.4 2.4 P/S (x) 0.7 0.4 0.4 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 22 24 26 28 30 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Petro Rabigh (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Saudi Arabian Oil Company (Aramco) 37.5 Sumitomo Chemical Company 37.5 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 6,543 29,423 46,838 53,377 14.0 101.3 EBÌTDA SRmn (1,029) (144) 1,906 2,210 15.9 NM Net Ìncome SRmn (1,256) (1,433) 209 66 (68.4) NM Assets SRmn 47,911 52,146 47,243 49,852 5.5 1.3 Equity SRmn 9,264 7,831 8,010 8,086 0.9 (4.4) Total Debt SRmn 31,685 34,103 26,852 25,567 (4.8) (6.9) Cash & Equiv SRmn 1,534 1,306 2,548 2,710 6.3 20.9 EBÌTDA Mgn % (15.7) (0.5) 4.1 4.1 - - Net Mgn % (19.2) (4.9) 0.4 0.1 - - ROE % (16.5) (16.8) 10.5 3.3 - - ROA % (3.4) (2.9) 1.7 0.5 - - Div Payout % - - - - - - EPS SR (1.43) (1.64) 0.24 0.08 (68.4) NM BVPS SR 10.58 8.94 9.14 9.23 0.9 (4.4) Source: Zawya, Tadawul, Company, NCBC Research 54 Established in 1992, Nama Chemicals Company (NAMA) develops, owns and operates industrial projects within the chemical and petrochemical sectors. NAMA functions through its affiliates Arabian Alkali Company (55k mtpa capacity) and Jubail Chemical Industries Company (60k mtpa capacity). x Business brief Arabian Alkali is one of the largest caustic soda producers in the Middle East. Jubail Chemical Ìndustries (JANA) produces epoxy resins and markets them under the brand names RAZEEN and ARALDÌTE. NAMA set up the Hassad Petrochemical Company in 2005, which manufactures different types of chemicals to supply feedstock to both of its subsidiaries. x Financials NAMA's revenues grew 15.8% YoY to SR728mn in 2011, but it posted a net loss of SR247mn (net income of SR34.5mn in 2010) due to higher raw material costs, reduced selling prices, higher financing and depreciation- related cost as well as an additional expense of SR168mn in 2011. Weak global demand for petrochemical products (mainly in Europe) impacted selling prices and NAMA's operating rate in 4Q11. x Recent developments On 21 March 2012, NAMA's subsidiary JANA obtained SR209mn in debt from the SÌDF to fund the hike in cost of its Hassad project. On 12 February 2012, JANA signed an agreement with the Royal Commission of Jubail & Yanbu to use land for constructing a facility producing epoxy resins, caustic soda and calcium chloride. On 30 January 2012, NAMA announced that it would increase its epoxy resins capacity to 120k mtpa from the current 60k mtpa by investing SR109mn. Trial runs are scheduled to start in 3Q12. On 30 January 2012, NAMA announced that it started trial runs at its chloride plant, and the facility is expected to reach full capacity by 4Q12. On 1 January 2012, Mr. Fahed Rached Mohammad Al Otaibi replaced Mr. Abdulrahman Abdullah Al Hammad as NAMA's CEO. PETROCHEMÌCALS ~ MAY 2012 NAMA CHEMÌCALS ALSO KNOWN AS: NAMA NOT COVERED Current price (SR) 18.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 24/9 Market cap ($ mn) 630 Shares outstanding (mn) 129 Price perform (%) 1M 3M 12M Absolute (17.3) 29.6 60.0 Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 288.8 77.0 12M 120.3 32.1 Reuters code 2210.SE Bloomberg code NAMA AB www.nama.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.39 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) - 68.6 - P/B (x) 1.5 1.5 1.7 P/S (x) 5.9 3.8 3.3 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 8 13 18 23 28 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ NAMA (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Ahmed Hamad Al Gosaibi Co. 7.4 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 622 398 628 728 15.8 5.4 EBÌTDA SRmn 27 (28) 62 13 (79.0) (21.4) Net Ìncome SRmn (67) (50) 34 (247) NM NM Assets SRmn 2,545 2,396 2,448 2,392 (2.3) (2.0) Equity SRmn 1,557 1,565 1,630 1,382 (15.2) (3.9) Total Debt SRmn 800 702 660 826 25.1 1.1 Cash & Equiv SRmn 487 23 216 123 (43.2) (36.9) EBÌTDA Mgn % 4.3 (7.0) 9.8 1.8 - - Net Mgn % (10.9) (12.5) 5.5 (33.9) - - ROE % (5.4) (3.2) 2.2 (65.5) - - ROA % (3.1) (2.0) 1.4 (40.7) - - Div Payout % - - - - - - EPS SR (0.53) (0.39) 0.27 (1.92) NM NM BVPS SR 12.12 12.18 12.68 10.75 (15.2) (3.9) Source: Zawya, Tadwul, Company, NCBC Research 55 Alujain Corporation (Alujain), an industrial investment firm, was established in 1991 and promoted by Xenel Industries (one of the oldest conglomerates in the Kingdom). The company's investments incIude a 57.4% stake in NationaI Petrochemical Co. (NatPet) and a 100% stake in Arab Pesticide Co. (MOBEED). x Business brief Alujain predominantly invests in the Saudi petrochemical, energy, mining and metals sectors. The company transferred its Alfasel propylene production facility to the Teldene polypropylene project, promoted by its associate NatPet, in May 2006. NatPet owns a SR2.3bn propylene and polypropylene plant, with a 400k mtpa capacity. The company signed a contract with Noble Group for the offtake of its production. x Financials Ìn 2011, Alujain reported revenues of SR1,472mn, indicating a YoY growth of 72.7%, driven by the full year contribution from its subsidiary (NatPet), which started commercial operations on 6 August 2010. However, it reported net loss of SR10mn in 2011 (net profit of SR42.2mn in 2010) due to lower production volumes, higher feedstock cost, increased interest expense in 4Q11, and a SR5.1mn expense related to a write-off of a subsidiary's project development cost in 4Q11. An unplanned shutdown of 23 days in 4Q11 and planned turnaround work for 49 days in 2Q11 lowered volumes in 2011. x Recent developments On 19 October 2011, Alujain announced that its Natpet complex resumed operations after an unplanned closure on 26 September 2011 caused by a technical issue at the dehydrogenation unit. On 20 June 2011, Alujain announced that the Natpet complex resumed operations at its plants after conducting process and machinery enhancement work for a period of 49 days. Alujain finished the turnaround work 11 days before schedule. PETROCHEMÌCALS ~ MAY 2012 ALUJAÌN CORPORATÌON ALSO KNOWN AS: ALUJAÌN NOT COVERED Current price (SR) 19.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 24/17 Market cap ($ mn) 350 Shares outstanding (mn) 69 Price perform (%) 1M 3M 12M Absolute (19.4) (1.0) (9.8) Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 89.6 23.9 12M 48.8 13.0 Reuters code 2170.SE Bloomberg code ALCO AB www.alujaincorporation.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.19 Free float 85.09 VALUATION MULTIPLES 09A 10A 11A P/E (x) - 31.1 - P/B (x) 2.5 2.4 2.4 P/S (x) - 1.5 0.9 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 17 19 21 23 25 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ ALCO (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Safra Co 14.9 Khalid Abdul Rahman Saleh Al Rajhi 9.9 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn - - 852 1,472 72.7 NM EBÌTDA SRmn (59) (63) 183 240 30.6 NM Net Ìncome SRmn (65) (27) 42 (10) NM NM Assets SRmn 3,229 3,406 3,559 3,355 (5.7) 1.3 Equity SRmn 515 519 554 557 0.5 2.7 Total Debt SRmn 2,142 2,077 2,171 1,941 (10.6) (3.2) Cash & Equiv SRmn 113 52 312 86 (72.3) (8.7) EBÌTDA Mgn % - - 21.5 16.3 - - Net Mgn % - - 5.0 (0.7) - - ROE % (11.2) (5.3) 31.5 (7.2) - - ROA % (2.2) (0.8) 4.8 (1.2) - - Div Payout % - - - - - - EPS SR (0.94) (0.39) 0.61 (0.14) NM NM BVPS SR 7.44 7.49 8.01 8.05 0.5 2.7 Source: Zawya, Tadawul, Company, NCBC Research 56 Established in 1989, Methanol Chemicals Company (Chemanol) is a manufacturer of methanol, formaldehyde and its derivatives, including urea formaldehyde, acetaldehyde, hexamine, resins and super plasticizers. The company exports around 83% of products to more than 50 countries, including the UK, France, Germany, South Africa, the US, Canada, and Japan. x Business brief Chemanol produces and supplies methanol, formaldehyde and its derivatives for use across industries such as agricultural, pharmaceutical, paper manufacturing and construction. The company had its Ìnitial Public Offering (ÌPO) on the Saudi Stock Exchange in August 2008 to finance an expansion plan involving around SR2bn investment. x Financials Chemanol's revenues grew to SR830mn in 2011 (SR590mn in 2010), while net income increased to SR70.2mn (from SR6mn). This was due to higher selling prices and sales volumes along with improved operational efficiency. Earnings for 2011 benefited from the full-year contribution made by the dimethylformamide plant (started commercial operations on 28 June 2010). x Recent developments Chemanol conducted technical enhancement works at its methanol and dimethylformamide plants during 12÷24 October 2011 to improve their efficiency and productivity. On 5 June 2011, it secured a Murabaha refinancing facility (in which SABB, Riyadh Bank and Samba participated) of SR832mn to fund cost overruns and working capital needs. Ìt would be repaid in 14 semi-annual installments starting from 15 July 2011 to 15 December 2017. On 7 May 2011, Chemanol and Sahara signed a MoU to build a 50k-mtpa neopentyl glycol plant, estimated to cost SR470mn. Chemanol would hold 15% stake in it and provide formaldehyde (key feedstock) to this facility. The project is scheduled to be completed by 2Q14. PETROCHEMÌCALS ~ MAY 2012 METHANOL CHEMÌCALS ALSO KNOWN AS: CHEMANOL NOT COVERED Current price (SR) 17.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 22/10 Market cap ($ mn) 550 Shares outstanding (mn) 121 Price perform (%) 1M 3M 12M Absolute (15.3) 18.8 20.4 Market (6.2) 6.2 7.6 Sector (9.1) 3.4 (5.7) Avg daily turnover (mn) SR US$ 3M 205.4 54.8 12M 78.6 21.0 Reuters code 2001.SE Bloomberg code CHEMANOL AB www.chemanol.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.30 Free float 77.50 VALUATION MULTIPLES 09A 10A 11A P/E (x) 93.5 341.4 29.4 P/B (x) 1.5 1.5 1.4 P/S (x) 5.1 3.5 2.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 14 18 22 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Chemanol (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Yusuf Bin Ahmed Kanoo Co. Ltd 11.2 Zamil Group Holding Co 8.2 Mohammed Jalal & Sons Co. 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 571 402 589 830 40.8 13.3 EBÌTDA SRmn 73 59 138 256 86.2 52.0 Net Ìncome SRmn 38 22 6 70 1,062.3 22.5 Assets SRmn 2,640 3,033 3,092 3,028 (2.1) 4.7 Equity SRmn 1,390 1,411 1,415 1,483 4.9 2.2 Total Debt SRmn 1,150 1,449 1,488 1,429 (4.0) 7.5 Cash & Equiv SRmn 375 270 136 122 (10.3) (31.2) EBÌTDA Mgn % 12.8 14.6 23.3 30.9 - - Net Mgn % 6.7 5.5 1.0 8.5 - - ROE % 3.7 1.6 1.7 19.4 - - ROA % 1.9 0.8 0.8 9.2 - - Div Payout % - - - - - - EPS SR 0.32 0.18 0.05 0.58 1,062.3 22.5 BVPS SR 11.53 11.70 11.73 12.30 4.9 2.2 Source: Zawya, Tadawul, Company, NCBC Research 57 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Cement Ticker Company Page No. 3030 Saudi Cement 64 3020 Yamamah Cement 65 3050 Southern Cement 66 3040 Qassim Cement 67 3080 Eastern Cement 68 3060 Yanbu Cement 69 3010 Arabian Cement 70 3091 Al Jouf Cement 71 3090 Tabuk Cement 72 3001 Hail Cement 73 KSA's cement sector expanded significantly in 2011 after three years of negative and weak performance. We expect demand to continue to be strong in 2012 driven by robust expenditure by the government on infrastructure projects and housing. We estimate demand for cement to grow 10.8% (to 52.2mn tons) in 2012 and 8% in 2013. Cement sales are estimated to increase at a CAGR of 6.3% until 2016 driven primarily by increased government spending on infrastructure and housing in the medium term. As per our estimates, government spending in 2012 will be 13% higher than budgeted at SR780bn in addition to the SR120bn allocated to build 500,000 housing units. Additionally, the value of construction contracts awarded in Saudi Arabia rose 155% YoY to SR270bn in 2011, with nearly 69% awarded during the second half of the year. Another key trend in the sector is the shift in local demand from the central to the western region due to the government's redevelopment projects. Furthermore, the western region is now the center of mega project developments including the Haramain Railway, Jeddah's new airport, major drainage and other infrastructure works. Ìn 2011, the Saudi cement sector had a capacity of 51mn tons, while demand totaled 47mn tons. Considering the expected growth in demand, the country is likely to witness a demand-supply gap, especially in the western region. However, on the back off the government's recent intervention to aid supply, we believe prices are likely to stabilize in the near term (close to ceiling levels). Ìn the medium term, the healthy demand outlook should provide strong pricing support. Moreover, in February 2012, the Saudi government imposed a ban on the export of clinker and cement (exports constituted 4% of total cement sales in 2011). Fuel ÷ Key catalyst in the near term The recent fuel allocations are likely to temporarily benefit several companies, including Yanbu Cement (3mn tons new line capacity) and Southern Cement (1.5mn tons new line capacity), in the short term. However, uncertain fuel supply is expected to be the main constraint on cement capacity addition over the long term. The government set up a committee to analyze and forecast demand of cement. The committee is required to report its suggestions within six months when the current order approving fuel supply ends. MAY 2012 CEMENT Government spending key to prospective growth 59 CEMENT NCB CAPÌTAL MAY 2012 Exhibit 51: Clinker stock per company Exhibit 52: Cement stock per company '000 tons '000 tons Source: Yamamah Cement, NCBC Research Source: Yamamah Cement, NCBC Research Ìntrinsic cost advantages compared to other GCC players Saudi cement companies post impressive returns compared to their GCC peers primarily due to significant cost advantages. Cement companies in KSA have access to limestone quarries under licenses granted by the government. Furthermore, in KSA, the cost of natural gas/oil, which is used as fuel by cement plants and is a major component of a cement firm's overall expenses, is low. Consequently, the cost of production for KSA-based companies is much lower than that for other GCC and global players. Thus average gross margin for Saudi cement companies was around 54% in 2011 relative to the GCC average of 37%.The average cost of cement per ton increased marginally to SR112/ton in 2011. Exhibit 53: Gross margin, 2011 Exhibit 54: Comparison of ROE and P/E of GCC cos, 2011 % % Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research. The mkt cap of bubble is as on 4 Apr.' 12. The sector fares well on a ROE basis as well as attractive P/E multiples compared to other countries in the GCC. With the enlistment of Hail Cement Company in 2011, there are currently ten listed cement players on the Tadawul Ìndex. Exhibit 55: Sector details Units as stated Country % weight in Index as on Mar 2011 Net margin (%), 2011 ROE (%) 2011 Div. Yield (%) 2011 Saudi Cement Co. 1.7 48.4 25.0 9.0 Yamama Saudi Cement Co. 1.4 51.3 22.6 5.7 Yanbu Cement Co 1.0 46.7 19.7 3.7 Southern Province Cement Co 0.9 53.0 34.8 7.3 Arabian Cement Co 0.7 37.8 15.4 NA Qassim Cement Co 0.6 53.4 29.0 7.9 Eastern Province Cement Co 0.6 44.8 17.1 6.3 Tabuk Cement Co 0.4 39.1 12.7 NA Al Jouf Cement 0.4 26.1 6.3 NA Source: Bloomberg, Tadawul: Company data, NCBC Research 0 600 1,200 1,800 2,400 3,000 Yamama Cement Saudi Cement Eastern Cement Qassim Cement Yanbu Cement Arabian Cement Southern Cement Tabuk Cement Feb-12 Mar-12 Apr -12 0 40 80 120 160 Yamama Cement Saudi Cement Eastern Cement Qassim Cement Yanbu Cement Arabian Cement Southern Cement Tabuk Cement Feb-12 Mar-12 Apr -12 0 10 20 30 40 50 60 70 KSA Kuwait Oman Qatar UAE 2009 2010 2011 0 5 10 15 20 25 30 5 10 15 20 25 30 35 R O E ( % ) P/E (x) KSA Kuwait Oman Qatar UAE 60 CEMENT NCB CAPÌTAL MAY 2012 Cement production in KSA grew 12.8% YoY to 48.4mt, whereas the total cement and clinker sales volume increased 11% YoY to 49.3mt during 2011, driven by increased construction activity. Southern Cement reported the strongest sales volume growth up 25.3% and Eastern cement was weakest with volumes declining by 8.3%YoY. The four unlisted private companies total sales volume increased by 1.7% to 10.1mn tons in 2011. The revenues of KSA's nine listed cement companies increased by 21% YoY in 2011 to SR9.6bn. Apart from Jouf cement which tripled the revenues as its factory reached full production, Arabian Cement reported the strongest growth of 45% YoY with Eastern cement reporting the weakest with revenues declining by 1% YoY. The average Net income margin of the sector improved 230 bps to 44.5% in 2011. Prices to remain near ceiling levels Following its directive on fuel supply, in March 2012, the KSA government reduced the price cap of cement from SR250/ton to SR240/ton. Prior to this, cement prices in the western region were close to the then government-set ceiling of SR250/ton, while those in the eastern region were marginally lower at SR244/ton. However, amid increased monitoring by the government, all companies started selling cement at SR240/ton since March 21, 2012. The continued pricing pressure that we have seen in last few years has stalled. The average price of cement per ton grew significantly, up 7.3% to SR245 in 2011 after falling to SR228 in 2010 from SR235 in 2009 and SR255 in 2008. Due to this, the sector's adjusted net profit increased 24.6% to SR4.5bn in 2011. Arabian Cement among the listed companies reported the highest average price at SR284/ton in 2011. Exhibit 56: Price/Cost of cement per ton Exhibit 57: Net profit for the sector, 2008-11 SR per ton SR mn Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research Reasonable valuations The sector's 2011 P/E and P/BV multiple currently stands at 14.4x and 3.0x, respectively, versus 19.9x and 1.8x for the overall GCC cement market. While Southern Cement reported the highest RoEs of around 35%, Al Jouf Cement reported the lowest RoE in the industry at 6% for 2011. 150 175 200 225 250 275 300 325 0 25 50 75 100 125 150 1 Q - 0 7 2 Q - 0 7 3 Q - 0 7 4 Q - 0 7 1 Q - 0 8 2 Q - 0 8 3 Q - 0 8 4 Q - 0 8 1 Q - 0 9 2 Q - 0 9 3 Q - 0 9 4 Q - 0 9 1 Q - 1 0 2 Q - 1 0 3 Q - 1 0 4 Q - 1 0 1 Q - 1 1 2 Q - 1 1 3 Q - 1 1 4 Q - 1 1 Average Cost (per ton) Average Price (per ton) RHS 0 1,000 2,000 3,000 4,000 5,000 2008 2009 2010 2011 61 CEMENT NCB CAPÌTAL MAY 2012 Exhibit 58: Comparison of P/B and ROE, 2010 Exhibit 59: Comparison of P/B and ROE, 2011 % % Source: Bloomberg, Tadawul, NCBC Research. Source: Bloomberg, Tadawul, NCBC Research Average daily turnover for the sector stood at SR58mn per day in 2011 up from SR36.9mn per day in 2010. Arabian Cement had the highest average daily turnover at SR14.6mn in 2011, followed by Saudi Cement at SR10.9mn. Exhibit 60: Average daily turnover, Jan-Dec 11 Exhibit 61: Share price movement, Jan-Dec 11 SR mn Rebased to 100 on 1 st Jan-11 Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research NCBC Recommendations in the Sector Although, the demand outlook for the sector remains bullish due to strong government spending on infrastructure and housing, we remain Neutral for the sector as a whole as we believe the positive outlook is currently priced in. Ìn the current environment, we believe companies with excess stock/capacity as well as in close proximity to key demand points (gradually shifting to the western region) stand to benefit the most. Currently, we have six stocks under our coverage: Yamama Cement, Eastern Cement, Yanbu Cement, Saudi Cement, Southern Cement and Qassim Cement. -10 -5 0 5 10 15 20 25 30 35 40 0 1 2 3 4 5 6 7 R O E ( % ) P/BV (x) Saudi Cement Yamamah Cement Southern Province Yanbu Cement Qassim Cement Eastern Province Arabian Cement Tabuk Cement AL Jouf Cement -20 -10 0 10 20 30 40 50 60 0 1 2 3 4 5 6 7 R O E ( % ) P/BV (x) Saudi Cement Yamamah Cement Southern Province Yanbu Cement Qassim Cement Eastern Province Arabian Cement Tabuk Cement AL Jouf Cement 15 11 9 6 6 5 4 2 1 3 5 7 9 11 13 15 17 19 Arabian Saudi YamamaQassim Eastern Tabuk Yanbu Southern 70 90 110 130 150 Jan-11 Mar-11 May-11 Aug-11 Oct-11 Dec-11 Yamama Saudi Eastern Qassim Yanbu Arabian Southern Tabuk Al Jouf 62 CEMENT NCB CAPÌTAL MAY 2012 Exhibit 62: Coverage stocks details Stock Current Rating PT (SR) Comments Yamamah Cement (3020.SE) Neutral 55.8 Strong demand in Riyadh and the ability to sell in different regions are the main advantages. However, high utilization rate and declining stock level are the key negatives. Eastern Cement (3080.SE) Neutral 59.1 Shifting focus to domestic market due to export, but limitation on exports remains key downside. Still focused on Eastern region for sales. Yanbu Cement (3060.SE) Neutral 75.2 Demand shift from Central to the western region is key advantage. The company is located close to the region's main projects. Ìn addition, it has a new line of 3mn tons Saudi Cement (3030.SE) Neutral 82.7 Based in the Eastern region, away from most of the key demand centers. However, Ìts high stock level, excess capacity and re-operating its old lines are positives. Southern Cement (3050.SE) Neutral 99.5 Well positioned for Jizan Economic City in the South. New facility near Makkah with 1.5mn tons should also help. High stock level and excess capacity supports the outlook. Qassim Cement (3040.SE) Neutral 81.4 Lowest cost cement producer in the country with very low inventory levels. Lack of capacity expansion plans could limit growth. Source: NCBC Research 63 Saudi Cement Company (SCC) is one of the Iargest cement companies in Saudi Arabia. A Iow cost base given its reIativeIy new production Iines aIong with high stock IeveIs are the company's key strengths. AdditionaIIy the resumption of operations in its oId Iines and the seIIing of cIinker stocks are key advantages in the near term. x Business brief SCC was established in 1955 and specializes in the production of ordinary Portland cement, sulphate resistant cement, and oil well cement. SCC, which has the largest production capacity (7.2mn tons of cement/year) in Saudi, would further increase it by 24% (extra total production of 5,325 tons/day) on reopening the old lines. SCC has been losing ground in the domestic market in the past few years, mainly due to competition from new entrants. Ìn 2011, SCC had a market share of 14.7%, which has declined from 19% in 2006. SCC has a 36% equity stake in United Cement Company (Bahrain) and another 33.0% in Cement Product Ìndustry Co. Ltd. x FinanciaIs Revenues grew 12.4% YoY to SR1,716mn in 2011 attributed to growth in sales volume in the backdrop of increased demand from the local market, combined with YoY increase in prices. EBÌTDA increased 17.5% to SR1,051mn due to lower costs as a result of efficiency gains from the new production lines. Consequently, net profit of the year also rose 26.0% to SR831mn. x Recent deveIopments On March 17, 2012, SCC approved the distribution of SR4.5 per share cash dividend for the 2H11, changing the full year dividend to SR6.5 per share. Furthermore, on February 15, 2012, the company signed an agreement to sell 400,000 tons of clinker to Arabian and Qassim Cement. Finally, on February 14, 2012, the company announced the re-opening of four of its production lines, with a capacity of 5,325 clinker tons/day, by May 2012. CEMENT ~ MAY 2012 SAUDÌ CEMENT ALSO KNOWN AS: SCC NEUTRAL Current price (SR) 89.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 99/55 Market cap ($ mn) 3,661 Shares outstanding (mn) 153 Price perform (%) 1M 3M 12M Absolute 2.6 8.1 50.8 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 20.2 5.4 12M 9.6 2.6 Reuters code 3030.SE Bloomberg code SACCO AB www.saudicement.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.97 Free float 86.1 VALUATION MULTIPLES 10A 11A 12E P/E (x) 20.8 16.5 12.9 P/B (x) 4.1 4.2 4.0 P/S (x) 9.0 8.0 6.6 Div Yield (%) 4.5 7.2 6.7 DPS 4.0 6.5 6.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 50 60 70 80 90 100 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) General Organization for Social Ìnsurance (GOSÌ) 8.5 Khalid Abdul Rahman Saleh Al Rajhi 7.9 Public Pension Authority (PPA) 5.3 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 1,526 1,716 2,089 2,147 12.4 12.0 EBÌTDA SRmn 894 1,051 1,269 1,304 17.5 13.4 Net Ìncome SRmn 660 831 1,062 1,099 26.0 18.5 Assets SRmn 4,617 4,599 4,870 4,926 (0.4) 2.2 Equity SRmn 3,371 3,282 3,424 3,603 (2.6) 2.2 Total Debt SRmn 927 970 1,042 912 4.7 (0.5) Cash & Equiv SRmn 91 232 554 738 155.4 101.1 EBÌTDA Mgn % 58.6 61.3 60.7 60.7 - - Net Mgn % 43.2 48.4 50.8 51.2 - - ROE % 20.5 25.0 31.7 31.3 - - ROA % 13.8 18.0 22.4 22.4 - - Div Payout % 92.7 119.6 86.4 83.5 - - EPS SR 4.31 5.43 6.94 7.18 26.0 18.5 BVPS SR 22.03 21.45 22.38 23.55 (2.6) 2.2 Source: Tadawul, Zawya, Company, NCBC Research 64 65 Yamama Cement Company (YSCC), which is located in Riyadh is one of the oldest and largest cement companies in Saudi Arabia. Its stock level is the key advantage while the limited excess capacity and the shift in demand to the western region are the main concerns. x Business brief YSCC was founded in 1961 and is one of the largest cement companies in Saudi Arabia with annual cement and clinker production capacities of 6.3mn tons and 6.0mn tons, respectively. Based in Riyadh, YSCC is strategically located to take advantage of the increased momentum of the construction sector in 2011, particularly in the Central region. Although it has declined, from 2009, YSCC maintains one of the highest cement market shares in the country (12.2% in 2011 and 13.5% in 2009). x Financials In 2011, YSCC's revenues were up 13.4% YoY to SR1,442mn driven by increased sales volume combined with a YoY increase in cement prices. EBITDA grew 10.4% YoY to SR946mn, with net income up 12.6% YoY to SR740mn driven largely by the top-line growth. However, net margin fell slightly by 36bps YoY to 51.3% in 2011 from 51.6% in 2010 due to higher SG&A expenses during the year. x Recent developments On February 26, 2012, YSCC approved the distribution of SR2 per share cash dividend for the six month period ending December 31, 2011. Additionally, on October 2011, the company announced the liquidation of its holding in Sudani Kuwaiti Holding Company, where the company's share of liquidation amounted to SR13,975mn. CEMENT ~ MAY 2012 YAMAMA CEMENT ALSO KNOWN AS: YSCC NEUTRAL Current price (SR) 47.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 57/37 Market cap ($ mn) 2,570 Shares outstanding (mn) 202 Price perform (%) 1M 3M 12M Absolute (3.1) (6.1) 18.5 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daily turnover (mn) SR US$ 3M 36.1 9.6 12M 17.0 4.5 Reuters code 3020.SE Bloomberg code YACCO AB www.yamamacement.com WEIGHTING & FREEFLOAT (%) TASI (free float weight) 1.38 Free float 86.27 VALUATION MULTIPLES 10A 11A 12E P/E (x) 14.7 13.0 11.4 P/B (x) 3.1 2.9 2.8 P/S (x) 7.6 6.7 5.8 Div Yield (%) 5.6 5.6 6.3 DPS 2.7 2.7 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 33 38 43 48 53 58 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASI Yamamah Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Prince Sultan M.S. Al Saud 9.7 General Org. for Social Insurance 7.8 Public Pension Agency (PPA) 5.3 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 1,272 1,442 1,672 1,687 13.4 9.9 EBITDA SRmn 857 946 1,039 1,049 10.4 7.0 Net Income SRmn 657 740 846 856 12.6 9.2 Assets SRmn 3,653 3,822 3,874 3,831 4.6 1.6 Equity SRmn 3,159 3,375 3,409 3,453 6.8 3.0 Total Debt SRmn 267 190 190 98 (28.8) (28.4) Cash & Equiv SRmn 700 898 1,000 1,053 28.3 14.6 EBITDA Mgn % 67.4 65.6 62.1 62.2 - - Net Mgn % 51.6 51.3 50.6 50.8 - - ROE % 21.1 22.7 24.9 24.9 - - ROA % 17.9 19.8 22.0 22.2 - - Div Payout % 82.2 73.0 71.8 76.9 - - EPS SR 3.24 3.65 4.18 4.23 12.6 9.2 BVPS SR 15.60 16.67 16.83 17.05 6.8 3.0 Source: Tadawul, Company, NCBC Research Southern Province Cement Company (SPCC) is Saudi Arabia's Iargest cement producer in terms of market capitaIization and the second-Iargest in terms of capacity. SPCC's high capacity and stock IeveIs wouId better enabIe it to meet the incrementaI increase in domestic demand. x Business brief SPCC was set up in 1978 and operates production facilities in Jazan, Bisha, and Tuhama, with the bulk of the production taking place in the first two facilities. Ìt has a cement production capacity of 7.5mn tons per year. SPCC's share in the domestic market continues to decline mainly due to rising competition from several new players in the industry. Ìts share has fallen from 15.3% in 2008 to 13.9% in 2011. The Public Ìnvestment Fund owns a 37.4% stake in the company. x FinanciaIs Revenues increased 29.2% YoY to SR1,691mn in 2011 due to increased sales volume and the increase in prices. Driven by this, EBÌTDA grew 30.2% YoY to SR1,039mn in 2011; net income increased 36.0% YoY to SR896mn. x Recent deveIopments On March 20, 2012, Southern Cement approved the distribution of SR3.5 per share cash dividend for the second half of 2011. Additionally, on March 04, 2012, the company announced the commencement of the commercial production at its second line in Tuhama plant on March 01, 2012. With this, the total production capacity for the three plants would reach 23,000 tons of clinker/day, equaling 24,000 tons of cement/day. CEMENT ~ MAY 2012 SOUTHERN CEMENT ALSO KNOWN AS: SPCC NEUTRAL Current price 98.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 116/67 Market cap ($ mn) 3,676 Shares outstanding (mn) 140 Price perform (%) 1M 3M 12M Absolute 0.5 13.5 42..8 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 7.6 2.0 12M 4.0 1.1 Reuters code 3050.SE Bloomberg code SOCCO AB www.spcc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.97 Free float 42.34 VALUATION MULTIPLES 10A 11A 12E P/E (x) 20.9 15.4 13.0 P/B (x) 5.5 5.2 4.9 P/S (x) 10.5 8.2 7.0 Div Yield (%) 4.6 6.3 6.3 DPS 4.5 6.3 6.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 67 77 87 97 107 117 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Southern Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 37.4 General Organization for Social Ìnsurance (GOSÌ) 15.4 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 1,309 1,691 1,962 2,149 29.2 18.0 EBÌTDA SRmn 798 1,046 1,206 1,336 30.0 18.7 Net Ìncome SRmn 659 896 1,057 1,199 36.0 22.1 Assets SRmn 2,832 2,992 3,185 3,415 5.6 6.4 Equity SRmn 2,488 2,648 2,828 3,045 6.4 7.0 Total Debt SRmn - - - - - - Cash & Equiv SRmn 77 129 104 144 67.5 23.2 EBÌTDA Mgn % 61.0 61.4 61.5 62.2 - - Net Mgn % 50.3 53.0 53.9 55.8 - - ROE % 26.6 34.9 38.6 40.8 - - ROA % 23.4 30.8 34.2 36.3 - - Div Payout % 95.7 97.7 82.8 81.7 - - EPS SR 4.7 6.4 7.6 8.6 36.0 22.1 BVPS SR 17.8 18.9 20.2 21.8 6.4 7.0 Source: Tadawul, Zawya, Company, NCBC Research 66 Qassim Cement Company (QCC) was founded in 1976 in Buraydah, which is Iocated in the centraI region of KSA. As of December 2010, QCC had a totaI production capacity of 4.1mn tons of cement and 3.5mn tons of cIinker. QCC's high dividend yieId remains a key strength of the company; high utiIization rates and Iow inventory IeveIs remain key concerns. x Business brief QCC held a steady share of the KSA's cement market for many years; however, this fell to 8.6% in 2011 from 11.1% in 2009, led by increased competition from private players. Nevertheless, QCC is still one of the most efficient companies in the domestic cement sector. Ìn 2011, QCC produced cement at SR101 per ton, compared to the industry average of SR112 per ton. However, it is expected to increase to SR105 as a result of buying clinker from Saudi Cement. x FinanciaIs Qassim's revenues grew 6.9% in 2011 compared to the 2.0% decline in 2010 attributable to higher sales volume and stable prices. Driven by this, EBÌTDA grew by 7.5% YoY to SR663mn during the year. Net profit also increased by 10.5% YoY to SR553mn in 2011, led by improved operating performance of its subsidiary companies. x Recent deveIopments On March 21, 2012, Qassim Cement Company approved the distribution of SR3.5 per share cash dividend for the second half of 2011. Additionally, according to the local press, QCC is investigating the possibility of opening a new line of production. Finally, on January 09, 2011, the company announced that they have successfully performed a proposal study with respect to the new production line, but received a reply from Aramco that it would not supply the fuel. CEMENT ~ MAY 2012 QASSÌM CEMENT ALSO KNOWN AS: QCC NEUTRAL Current price (SR) 79.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 94/63 Market cap ($ mn) 1,896 Shares outstanding (mn) 90 Price perform (%) 1M 3M 12M Absolute (1.3) 5.3 20.2 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 10.8 2.9 12M 6.5 1.7 Reuters code 3040.SE Bloomberg code QACCO AB www.qcc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.60 Free float 51.2 VALUATION MULTIPLES 10A 11A 12E P/E (x) 14.2 12.9 12.1 P/B (x) 3.8 3.6 3.5 P/S (x) 7.3 6.9 6.3 Div Yield (%) 6.3 7.3 7.3 DPS 5.0 5.8 5.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 57 67 77 87 97 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Qassim Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 23.3 General Organization for Social Ìnsurance (GOSÌ) 19.9 Public Pension Authority (PFA) 5.4 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 969 1,035 1,120 1,061 6.9 3.1 EBÌTDA SRmn 617 663 682 679 7.5 3.2 Net Ìncome SRmn 501 553 587 581 10.5 5.1 Assets SRmn 2,023 2,124 2,199 2,255 5.0 3.7 Equity SRmn 1,854 1,956 2,025 2,087 5.5 4.0 Total Debt SRmn - - - - - - Cash & Equiv SRmn 20 245 298 379 1,141.1 167.9 EBÌTDA Mgn % 63.7 64.1 60.9 64.0 - - Net Mgn % 51.7 53.4 52.4 54.8 - - ROE % 27.2 29.0 29.5 28.3 - - ROA % 23.5 26.7 27.2 26.1 - - Div Payout % 89.9 93.6 88.2 89.1 - - EPS SR 5.56 6.14 6.52 6.46 10.5 5.1 BVPS SR 20.60 21.73 22.50 23.19 5.5 4.0 Source: Tadawul, Company, NCBC Research 67 Eastern Cement Co. (EPCC) was estabIished in 1982 near Dammam in the Eastern region of KSA. EPCC was a reguIar exporter of cement to neighboring countries. Limited spare capacity and Iow inventory wouId hinder the company's abiIity to meet increasing demand. x Business brief EPCC's market share has been declining over the years; it fell to 6.9% in 2011 from 8.3% in 2010 and 2009, 9.5% in 2008 and 12.0% in 2007. The company had a production capacity of 3.5mn tons of cement. EPCC holds a 30% stake in Arabian Yemeni Cement Company, 5.4% in Ìndustrialization and Energy Services Company; and 1.2% in Saudi Ìndustrial Ìnvestment Group. x FinanciaIs EPCC's revenue declined 0.8% YoY to SR813mn in 2011 largely due to a decline in sales volumes by 8%, however, partially offset by higher cement prices during the year. Despite this, EBÌTDA grew 7.3% to SR478mn and net income rose 6.1% to SR364mn mainly due to the YoY decline in the unit cost of producing cement. x Recent deveIopments On March 18, 2011, EPCC approved the distribution of 35% of its capital (SR3.5 per share) as cash dividend for 2011. Ìn January 2012, the company received a 10-year license from the Ministry of Petroleum and Mineral Resources to quarry limestone in the Wadi Al-Ahsa province. Ìn September 2011, the company repaid the total loan due (SR25mn) to Saudi Ìndustrial Development Fund before maturity. CEMENT ~ MAY 2012 EASTERN CEMENT ALSO KNOWN AS: EPCC NEUTRAL Current price (SR) 55.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 71/44 Market cap ($ mn) 1,261 Shares outstanding (mn) 86 Price perform (%) 1M 3M 12M Absolute (5.6) (8.3) 13.4 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 8.8 2.3 12M 5.6 1.5 Reuters code 3080.SE Bloomberg code EACCO AB www.eastern-cement.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.54 Free float 68.0 VALUATION MULTIPLES 10A 11A 12E P/E (x) 13.8 13.0 11.5 P/B (x) 2.2 2.2 2.1 P/S (x) 5.8 5.8 5.4 Div Yield (%) 6.4 6.4 7.3 DPS 3.5 3.5 4. 0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 45 50 55 60 65 70 75 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Eastern Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Pension Authority (PFA) 10.6 Public Ìnvestment Fund 10.0 General Organization for Social Ìnsurance (GOSÌ) 10.0 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 819 813 882 895 (0.8) 3.0 EBÌTDA SRmn 445 478 516 526 7.3 5.7 Net Ìncome SRmn 343 364 412 417 6.1 6.7 Assets SRmn 2,360 2,340 2,402 2,470 (0.9) 1.5 Equity SRmn 2,111 2,158 2,224 2,295 2.2 2.8 Total Debt SRmn 75 - - - NM NM Cash & Equiv SRmn 401 321 440 493 (19.8) 7.2 EBÌTDA Mgn % 54.3 58.8 58.5 58.8 - - Net Mgn % 41.9 44.8 46.7 46.6 - - ROE % 16.6 17.1 18.8 18.5 - - ROA % 14.7 15.5 17.4 17.1 - - Div Payout % 87.8 82.7 83.5 82.5 - - EPS SR 3.99 4.23 4.79 4.85 6.1 6.7 BVPS SR 24.55 25.09 25.86 26.69 2.2 2.8 Source: Tadawul, Company, NCBC Research 68 Yanbu Cement Company (YCC) is a medium-sized cement company based in Jeddah. YCC's Iocation which is cIose to the western region's main projects and its potentiaI excess capacity are the stock's key cataIysts. x Business brief Jeddah-based Yanbu Cement Company was established in March 1976 with an initial production capacity of 3,000 tons of clinker per day. The company was set up at Ras Baridi near Yanbu on the west coast of Saudi Arabia. Currently, YCC's total cement production capacity stands at 4.8mn tons per year. The company's market share has been declining due to increasing competition. Ìn the domestic market, YCC's share fell to 9.0% in 2011 from 15.2% in 2007. x FinanciaIs The company's revenue increased 26.4% YoY to SR1,132mn in 2011 off the back of higher sales volumes, coupled with increased cement prices. As a result, net profit grew 22.9% YoY to SR529mn during the year. x Recent deveIopments On April 18, 2012, Yanbu Cement Company signed a contract with Saudi Aramco to provide fuel for the operation of its fifth line with a daily production capacity of 10,000 tons of clinker. Furthermore, on March 7, 2012, YCC approved the distribution of a cash dividend of 25.0% of share capital or SR2.5 per share. Finally, on December 2011, the company restarted production in three of its four lines, in which it had stalled production in October due to diversion of fuel to test new production lines. CEMENT ~ MAY 2012 YANBU CEMENT ALSO KNOWN AS: YCC NEUTRAL Current price (SR) 77.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 82/48 Market cap ($ mn) 2,169 Shares outstanding (mn) 105 Price perform (%) 1M 3M 12M Absolute 0.6 17.0 55.3 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 16.5 4.4 12M 7.9 2.1 Reuters code 3060.SE Bloomberg code YNCCO AB www.yanbucement.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.03 Free float 76.24 VALUATION MULTIPLES 09A 10A 11E P/E (x) 18.9 15.4 14.6 P/B (x) 3.2 2.9 2.6 P/S (x) 9.1 7.2 6.6 Div Yield (%) 2.6 3.2 3.9 DPS 2.0 2.5 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 47 57 67 77 87 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Yanbu Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) General Organization for Social Ìnsurance (GOSÌ) 11.8 Public Ìnvestment Fund 10.0 Sulaiman Abdul Aziz Saleh Al Rajhi 8.4 Abdullah Abdul Aziz Saleh Al Rajhi 5.8 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 895 1,132 1,233 1,518 26.4 19.2 EBÌTDA SRmn 539 642 747 940 19.0 20.3 Net Ìncome SRmn 430 529 557 727 22.9 19.1 Assets SRmn 4,092 4,559 4,715 4,806 11.4 5.5 Equity SRmn 2,529 2,846 3,138 3,549 12.5 12.0 Total Debt SRmn 1,072 1,284 1,143 743 19.8 (11.5) Cash & Equiv SRmn 320 558 124 136 74.4 (24.8) EBÌTDA Mgn % 60.2 56.7 60.6 61.9 - - Net Mgn % 48.1 46.7 45.2 47.9 - - ROE % 17.4 19.7 18.6 21.7 - - ROA % 12.4 12.2 12.0 15.3 - - Div Payout % 48.8 49.6 56.6 43.3 - - EPS SR 4.10 5.04 5.30 6.92 22.9 19.1 BVPS SR 24.09 27.10 29.89 33.80 12.5 12.0 Source: Tadawul, Company, NCBC Research 69 Arabian Cement Company (ACC) was the first to commence cement production in Saudi Arabia in 1958. The company mainIy produces portIand cement, portIand pozzoIan cement, suIfate-resistant cement and ready-mix concrete. As of 2011, ACC had a production capacity of around 3.81mn tons of cement and 3.4mn tons of cIinker per year. x Business brief ACC, the oldest cement company in the Kingdom, produced 3.8mn tons of cement and 3.4mn tons of clinker in 2011. The company's market share has declined consistently from 11.6% in 2005 to 8.3% in 2008, and to 7.8% at the end of 2011. This was mainly due to increased competition following the entry of four new players in the Saudi market. x FinanciaIs ACC's revenue grew 44.9% YoY to SR1,079mn in 2011 driven largely by higher sales volumes and increased cement prices. EBÌTDA margin increased to 57.3% in 2011 compared to 53.2% in 2010 due to lower cost per ton and SG&A expenses during the year. Driven by this, net margin also moved up to 37.8% in 2011 from 34.3% in 2010; net profit grew 59.4% YoY to SR407mn. x Recent deveIopments On April 1, 2012, ACC approved the distribution of SR2 per share cash dividend for the six month period ending December 21, 2011. On February 12, 2012 the company announced the purchase of 200,000 tons of clinker from Saudi Cement Company. CEMENT ~ MAY 2012 ARABÌAN CEMENT ALSO KNOWN AS: ACC NOT COVERED Current price (SR) 57.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 62/37 Market cap ($ mn) 1,226 Shares outstanding (mn) 80 Price perform (%) 1M 3M 12M Absolute 2.7 21.6 28.3 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 22.6 6.0 12M 16.5 4.4 Reuters code 3010.SE Bloomberg code ARCCO AB www.arabiacement.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.72 Free float 94.3 VALUATION MULTIPLES 09A 10A 11A P/E (x) 26.7 18.0 11.3 P/B (x) 2.0 1.8 1.6 P/S (x) 6.2 6.2 4.3 Div Yield (%) 2.2 1.7 5.2 DPS 1.3 1.0 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 32 42 52 62 72 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Arab Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdulaziz Al Sulaiman 7.5 Sulaiman Abdul Aziz Saleh Al Rajhi 6.1 National Commercial Bank 5.9 Public Pension Authority (PPA) 5.1 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 917 737 745 1,079 44.9 5.6 EBÌTDA SRmn 389 451 396 618 56.2 16.7 Net Ìncome SRmn 324 172 255 407 59.4 7.9 Assets SRmn 3,518 3,830 4,155 4,447 7.0 8.1 Equity SRmn 2,244 2,276 2,503 2,795 11.7 7.6 Total Debt SRmn 1,017 1,296 1,405 1,391 (1.0) 11.0 Cash & Equiv SRmn 451 66 147 304 106.6 (12.3) EBÌTDA Mgn % 42.4 61.2 53.2 57.3 - - Net Mgn % 35.3 23.3 34.3 37.8 - - ROE % 15.9 7.6 10.7 15.4 - - ROA % 11.0 4.7 6.4 9.5 - - Div Payout % 74.0 58.1 31.3 19.6 - - EPS SR 4.05 2.15 3.19 5.09 59.4 7.9 BVPS SR 28.06 28.45 31.28 34.93 11.7 7.6 Source: Tadawul, Zawya, Company, NCBC Research 70 AI Jouf Cement Company (JCC) has recorded a significant growth after commencing commerciaI production in 2010. The company tripIed its revenues in 2011 as most of its production units ran cIose to fuII capacity. JCC's Iocation (north western region cIose to the Jordanian and Iraqi border) is its key strength. In 2011, the company had an annuaI production capacity of 1.75mn tons of cement. x Business brief Since commencing production in July 2010, JCC has produced an average of 107k tons of cement per month with domestic cement sales averaging 106k tons per month. The company had a 0.9% share in the local cement market in 2010, which increased to 3.0% in 2011. x FinanciaIs JCC commenced commercial sales in 2010. The company generated SR316mn in revenues in 2011 compared to SR103mn in 2010 led by higher sales volume. EBÌTDA increased to SR151mn in 2011 from SR52mn the previous year as operational efficiency led to lower costs. Driven by this, net profit also increased to SR83mn during the year from SR15mn last year. x Recent deveIopments On March 10, 2012, JCC signed a contract with Wartsila to supply and install an electrical plant with a capacity of 42 MW worth SR183mn. Additionally, on January 2, 2012, the company announced that it would set up a second production line for clinker with a capacity of 5,000 tons per day at a cost of SR885mn. CEMENT ~ MAY 2012 AL JOUF CEMENT COMPANY ALSO KNOWN AS: JCC NOT COVERED Current price (SR) 18.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 21/14 Market cap ($ mn) 653 Shares outstanding (mn) 130 Price perform (%) 1M 3M 12M Absolute (2.8) 12.2 28.2 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 103.4 27.6 12M 73.7 19.6 Reuters code 3091.SE Bloomberg code JOUF AB www.joufcem.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.41 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 166.1 29.7 P/B (x) 2.5 1.9 1.8 P/S (x) NM 23.7 7.8 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 14 16 18 20 22 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al Jouf Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) KSB Capital Group 5.7 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn - - 103 316 206.0 NM EBÌTDA SRmn (3) (6) 52 151 193.4 NM Net Ìncome SRmn (11) (32) 15 83 459.6 NM Assets SRmn 1,065 1,130 1,678 1,809 7.8 19.3 Equity SRmn 1,004 972 1,266 1,348 6.5 10.3 Total Debt SRmn - - 380 420 10.4 NM Cash & Equiv SRmn 20 17 188 218 16.0 123.1 EBÌTDA Mgn % - - 50.0 48.0 - - Net Mgn % - - 14.3 26.1 - - ROE % (1.1) (3.2) 1.3 6.3 - - ROA % (1.0) (2.9) 1.1 4.7 - - Div Payout % - - - - - - EPS SR (0.08) (0.25) 0.11 0.64 459.6 NM BVPS SR 7.72 7.48 9.74 10.37 6.5 10.3 Source: Tadawul, Company, NCBC Research 71 3090 Tabuk Cement Company (TCC), founded in 1994, is among the smallest cement manufacturers in KSA in terms of market capitalization and capacity. In 2011, the company had an annual production capacity of 1.46mn tons of cement at its plant in the north-west region of the Kingdom. TCC's Iocation enables it to cater to the demand for cement in the northern region. x Business brief TCC's share in the domestic cement market has declined from 4.4% in 2007, to 3.4% in 2011. The company holds 3.37% stake in Ìndustrialization & Energy Services Company, a support services and product manufacturing organization catering to the energy sector. Ìn addition, TCC holds a marginal stake in Saudi Cement Company. x Financials TCC's revenues grew 27.4% YoY to SR350mn in 2011 due to higher sales volumes driven by increased domestic demand. EBÌTDA rose 17.7% YoY to SR210mn and net profit increased 13.2% YoY to SR137mn during the year. However, net margins declined to 39.1% in 2011 from 44.0% in 2010 due to an increase in operating cost and a decrease in other income. x Recent developments Ìn April 2012, TCC announced a cash dividend of 14% of capital for full-year 2011, which includes 9% for the first half of the year. Furthermore, on April 3, 2012, TCC announced its joint venture with Yamatik Finland Company and a Malaysian firm to form a new company to produce concrete cement; TCC would own a 60.0% stake in the venture. CEMENT ~ MAY 2012 TABUK CEMENT ALSO KNOWN AS: TCC NOT COVERED Current price (SR) 24.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 28/21 Market cap ($ mn) 597 Shares outstanding (mn) 90 Price perform (%) 1M 3M 12M Absolute (5.3) 7.1 8.5 Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daily turnover (mn) SR US$ 3M 7.4 2.0 12M 6.1 1.6 Reuters code 3090.SE Bloomberg code TACCO AB www.tcc-sa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.35 Free float 94.36 VALUATION MULTIPLES 09A 10A 11A P/E (x) 18.5 18.5 16.4 P/B (x) 2.1 2.1 2.1 P/S (x) 8.4 8.2 6.4 Div Yield (%) 5.0 5.4 5.6 DPS 1.3 1.4 1.4 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 22 24 26 28 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Tabuk Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Khaled Saleh Abdul Rahman Al Shathry 9.6 Public Pension Authority (PPA) 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 291 267 275 350 27.4 6.3 EBÌTDA SRmn 195 175 179 210 17.7 2.5 Net Ìncome SRmn 151 121 121 137 13.2 (3.2) Assets SRmn 1,226 1,279 1,256 1,280 1.8 1.4 Equity SRmn 1,044 1,052 1,090 1,059 (2.8) 0.5 Total Debt SRmn - - - NA NA Cash & Equiv SRmn 353 427 392 329 (16.2) (2.3) EBÌTDA Mgn % 67.2 65.4 65.0 60.1 - - Net Mgn % 51.9 45.4 44.0 39.1 - - ROE % 14.6 11.6 11.3 12.7 - - ROA % 11.7 9.7 9.5 10.8 - - Div Payout % 89.3 92.8 100.5 92.0 - - EPS SR 1.68 1.35 1.34 1.52 13.2 (3.2) BVPS SR 11.61 11.69 12.11 11.77 (2.8) 0.5 Source: Tadawul, Zawya, Company, NCBC Research 72 HaiI Cement Company (HCC) was estabIished in November 2010 in Saudi Arabia. The company is engaged in the production, packaging and distribution of cIinker, ordinary PortIand cement and suIfate resisting cement. HCC's IPO raised SR490mn in September 2011 and was Iisted in October 2011. x Business brief HCC was established to produce clinker and all types of cement derivatives and building materials, and distribute them in and outside the Kingdom. The company's plants are currently under construction; it is expected to start operations in 2013. Upon completion, HCC would have an annual production capacity of 1.64mn tons of clinker, 1.7mn tons of of cement. x FinanciaIs HCC did not generate any revenue in 2011, as it is not yet operational. The company reported a loss of SR41mn for the last 13 months mainly due to high pre-operating expenses. x Recent deveIopments On January 1, 2012, HCC announced that it had signed a housing contract worth SR117.8mn with the joint venture between Teberak Trading & Contracting Company and Moenis Mohammed Al-Shayeb Foundation for civil construction. The total area of the housing campus would be 80,000 Sq.mts. The project is expected to be complete within a span of 18 months. CEMENT ~ MAY 2012 HAÌL CEMENT ALSO KNOWN AS: HCC NOT COVERED Current price (SR) 21.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/12 Market cap ($ mn) 561 Shares outstanding (mn) 98 Price perform (%) 1M 3M 12M Absolute (7.3) 17.2 - Market (6.2) 6.2 7.6 Sector (0.6) 6.9 33.2 Avg daiIy turnover (mn) SR US$ 3M 85.9 22.9 12M - - Reuters code 3001.SE Bloomberg code HCC AB www.hailcement.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.2 Free float 50.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 4.4 2.2 P/S (x) - NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 5,000 5,500 6,000 6,500 7,000 7,500 8,000 Oct-11 Dec-11 Feb-12 May-12 TASÌ Hail Cement (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Yamama Saudi Cement Company 6.1 Saudi Real Estate Company 6.1 Al-Mal Ìnvestment 6.1 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010* 2011** YoY (%) CAGR (%) (08-10) Revenues SRmn - - - - NM - EBÌTDA SRmn - - - (13) NM - Net Ìncome SRmn - - (11) (41) NM - Assets SRmn - - 497 1,025 106.3 - Equity SRmn - - 479 938 95.9 - Total Debt SRmn - - 9 - NM - Cash & Equiv SRmn - - 385 646 67.9 - EBÌTDA Mgn % - - NM NM - - Net Mgn % - - NM NM - - ROE % - - (2.2) (5.8) - - ROA % - - (2.1) (5.4) - - Div Payout % - - - - - - EPS SR - - (0.11) (0.42) NM - BVPS SR - - 4.94 9.67 95.9 - Source: Tadawul, Company, NCBC Research * 1month December 2010 figures ** 13 months figures FY 11 73 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Retail Ticker Company Page No. 4001 Al Othaim 77 4190 Jarir Marketing 78 4240 AlHokair 79 4200 Aldrees 80 4002 Mouwasat 81 4050 SASCO 82 4180 Fitaihi Group 83 4290 Alkhaleej Trng 84 4160 National Agriculture 85 4003 Extra 86 KSA's retail sector is driven by increasing urbanization, rising disposable incomes, growing brand awareness and greater access to organized retail. Additionally, government initiatives such as unemployment benefits, minimum wage rates and public sector wage increases should support near-term retail spending. A fragmented market provides opportunities for the market leaders to take market share. Saudisation needs, entry of foreign firms and supply-chain management are risks to the growth prospects of the sector. According to EÌU estimates, total retail sales in Saudi Arabia for 2011 came in at an estimated US$98bn, up from US$87bn in 2010. Retail sales as a whole are expected to grow by an estimated 10% in 2012 to US$108bn and increase to US$138bn by 2015. From the retail total, approximately 49% of the sales value in 2011 came from food sales (US$48.4bn). Through a combination of positive macro factors (high oil price, large population which is young and growing, increased move towards organised retailing etc), we believe this supports the long term growth outlook of the sector. Sustained YoY profitability growth in 2011 Of the nine companies in the sector, Jarir Marketing Co and Fawaz Abdulaziz Al-Hokair Co are the largest, with a market capitalization of SR9.2bn and SR5.3bn, respectively, as of 3 April 2012. The two companies' respective weight in the TASÌ index was 1.4% and 0.4%, whereas the retail sector as a whole accounted for 2.9%. The combined revenue of the nine companies rose 25.6% YoY to SR17.2bn in 2011. The sector's net earnings grew 22% YoY to SR1.5bn during the same period. Jarir Marketing reported a 28% YoY increase in net profit to SR513mn in 2011, while Al-Hokair's net profit grew 36.3% YoY to SR315mn in the same year. Jarir Marketing and Al-Hokair posted net margins of 12.4% and 13.4%, respectively, higher than the industry average of 7.4%. Exhibit 63: Revenue of companies, 2009-2011 Exhibit 64: Profitability of companies, 2009-2011 SR mn % Source: Zawya Source: Zawya As of 31 December 2011, the average P/B multiple of Saudi retail companies dropped to 4.7x from 5.5x in 2010. However, the average reported return on equity increased by 350 basis points to 24.2% in 2011. 0 2500 5000 7500 10000 12500 15000 17500 2009 2010 2011 Jarir Al Othaim AlHokair Others 2.0% 3.6% 5.2% 6.8% 8.4% 10.0% 0 400 800 1200 1600 2000 2009 2010 2011 Net income Net margin APRÌL 2012 RETAÌL Volume growth potential remains high 75 RETAÌL NCB CAPÌTAL APRÌL 2012 Exhibit 65: Comparison of P/B and ROE, 2010 Exhibit 66: Comparison of P/B and ROE, 2011 % % Source: Zawya Source: Zawya Long-term drivers intact, unemployment benefits to support growth in the near term Looking ahead, KSA's retail sector is likely to be driven by population growth, rising incomes, and the spread of organized retail. Additionally, the unemployment benefit scheme introduced in late 2011 which pays unemployed Saudi nationals SR2,000 a month could help accelerate spending in the cash- based retail sector. Similarly, a 35%-100% increase in public sector wages could drive revenue growth for major players, such as Jarir and AL-Hokair, in the sector. NCBC Recommendations for the Sector Ìn the long term, we are positive on Saudi Arabia's retail sector, considering the strong fundamentals of the domestic market, as well as government stimulus supporting consumer spending. We currently have three stocks in the sector under our coverage: Jarir, Al-Hokair, and Al-Othaim. Exhibit 67: Coverage stocks details Stock Current Rating PT (SR) Comments Jarir (4190.SE) Neutral 152.0 Plans to almost double number of stores, coupled with a 50% ÌT market share, provide strong platform for the stock. Low liquidity and declining price of laptops a concern. Store openings the key catalyst for the stock. Valuation is somewhat stretched at 14.2x 2012e P/E. Al-Hokair (4240.SE) Neutral 68.0 Al Hokair is undergoing aggressive international expansion in former Soviet Union countries such as Kazakhstan and Azerbaijan. We believe this comes with increased risks vs. its Saudi business. We believe the valuation is not attractive at 11.2x 2013e P/E. Al-Othaim (4001.SE) Overweight 115.0 Al Othaim is the number two food retailer in the KSA. Ìt is well positioned to increase share as market shifts to organized retailing. Entrance of foreign players and rising COGS are key risks. Store expansion is key catalyst for the stock. Ongoing RE acquisition is holding back the stock. Source: NCBC Research SASCO National Agri Fitahi Group Jarir Aldrees AlHokair Alkhaleej Al Othaim Al Mouwasat United Electronics -40 -20 0 20 40 60 80 0 2 4 6 8 10 12 14 R O E ( % ) P/B (x) SASCO National Agri Fitahi Group Jarir Aldrees AlHokair Alkhaleej Al Othaim Al Mouwasat United Electronics -40 -20 0 20 40 60 80 0 2 4 6 8 10 12 R O E ( % ) P/B (x) 76 With operations commencing in 1956, Abdullah Al Othaim Markets Company (Al Othaim) is the second-largest food retailer in Saudi Arabia. It is well positioned to take advantage of the growth prospects of organised food retail in Saudi Arabia. However, high food prices and the company's limited ability to pass on cost inflation amid rising competition are the key risks for the stock. x Business brief Al Othaim operates four store formats: hypermarkets, supermarkets, corner stores and wholesale stores. The company runs a chain of over 108 stores, primarily in central Saudi Arabia, and is looking to open 12 new stores in 2012. Al Othaim has signed an agreement to buy the remaining stake in its real estate arm in, although the deal is yet to complete. x Financials Al Othaim's revenues grew 16.3% YoY to SR4,091mn in 2011, largely driven by an increase in the store count (108 at the end of 2011 and 96 at the end of 2010) as well as organic growth. EBÌTDA rose 19.6% YoY to SR232mn during the year. Net profit decreased 7.3% YoY to SR150mn in 2011 due to the absence of one-off income (SR6.5mn in 2010), as well as lower rebates from suppliers. Adjusting for Other income, net income for the year fell 3.4% mainly due to higher depreciation charges as well as discontinuation of the capitalization of financial charges in 2011. Continued store expansion and the associated increase in volumes sold are expected to drive growth in revenues in the coming years. However, we believe organic growth would remain subdued amid increasing competition. x Recent developments To build warehouses and residences for its employees, Al Othaim acquired 433,345 square meters of land worth SR102mn in the industrial zone of Riyadh in August 2011. RETAÌL ~ MAY 2012 ABDULLAH AL OTHAÌM ALSO KNOWN AS: AL OTHAÌM OVERWEIGHT Current price (SR) 86.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 106/83 Market cap ($ mn) 516 Shares outstanding (mn) 23 Price perform (%) 1M 3M 12M Absolute (7.3) (3.9) (13.4) Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 9.6 2.5 12M 6.5 1.7 Reuters code 4001.SE Bloomberg code AOTHAÌM AB www.othaimmarkets.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.18 Free float 54.6 VALUATION MULTIPLES 11A 12A 13E P/E (x) 12.9 11.5 10.2 P/B (x) 3.6 3.1 2.6 P/S (x) 0.5 0.4 0.4 Div Yield (%) 3.5 3.5 3.5 DPS 3.0 3.0 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 80 85 90 95 100 105 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ A. Othaim Markets (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Othaim Holding Company 27.6 Abdul Aziz Saleh Al Othaim 17.7 Abdullah Saleh Ali Al Othaim 6.0 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 3,519 4,091 4,614 5,174 16.3 13.7 EBÌTDA SRmn 194 232 243 268 19.6 11.4 Net Ìncome SRmn 162 150 168 190 (7.3) 5.5 Assets SRmn 1,480 1,676 1,793 1,969 13.2 10.0 Equity SRmn 449 531 632 754 18.5 18.9 Total Debt SRmn 351 331 243 186 (5.7) (19.1) Cash & Equiv SRmn 45 44 36 144 (3.6) 47.1 EBÌTDA Mgn % 5.5 5.7 5.3 5.2 - - Net Mgn % 4.6 3.7 3.6 3.7 - - ROE % 40.9 30.6 28.9 27.4 - - ROA % 11.9 9.5 9.7 10.1 - - Div Payout % 41.7 45.0 40.2 35.5 - - EPS SR 7.20 6.67 7.47 8.44 (7.3) 5.5 BVPS SR 19.93 23.61 28.09 33.51 18.5 18.9 Source: Tadawul, Zawya, Company, NCBC Research 77 Jarir Marketing Company (Jarir) was established in Riyadh in 1979. Historically, the company was focused on the sale of books, school items and office supplies. In the past five years, Jarir has increasingly focused on the sale of electronics such as laptops, gaming devices and smartphones. The company's position as one of the leading electronics retailer in the region is a key positive; pressure on margins from competition is a key risk. x Business brief Jarir's business activities are divided into four broad segments: School Supplies, Office Supplies, Consumer Electronics and Books. The company had 30 stores across the GCC as of 2011, up from 23 in 2008. Jarir has benefited from the young demographics of the region to become one of the leading consumer electronics retailers in the GCC. x Financials Jarir's revenues grew 37.6% YoY to SR4,147mn in 2011 due to strong sales in electronic items, particularly tablets and smartphones; the company increased its store count to 30 from 28 a year ago. Although margins declined due to Jarir's aggressive pricing and the ongoing shift in the sales mix towards lower margin electronic items, EBÌDTA increased 27% YoY to SR528mn in 2011. Net income grew 28% YoY to SR513mn in 2011, while net margin declined to 12.4% in 2011 from 13.3% in 2010. x Recent developments On April 3, 2012, Jarir announced the opening of its 27 th store in Saudi (31 st store in the GCC) with a total floor space of 3,760 sq. mtrs for a total of SR15mn. The company also mentioned that it plans to open one more store in Riyadh; this would take its total store count to 32 at the end of 2012. Ìn December 2011, Jarir announced that its EGM had approved the 50% rise in capital, which would increase its number of outstanding shares from 40mn to 60mn. On August 23, 2011, Jarir announced the opening of a new 3,700 sq. mtr store in Al Refaai Group Center in Mekkah. RETAÌL ~ MAY 2012 JARÌR MARKETÌNG ALSO KNOWN AS: JARÌR NEUTRAL Current price (SR) 152.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 169/106 Market cap ($ mn) 2435 Shares outstanding (mn) 60 Price perform (%) 1M 3M 12M Absolute (1.3) 8.7 42.1 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 10.5 2.8 12M 8.7 2.3 Reuters code 4190.SE Bloomberg code JARÌR AB www.jarirbookstore.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.52 Free float 100.0 VALUATION MULTIPLES 11A 12A 13E P/E (x) 17.8 14.2 13.1 P/B (x) 10.1 8.9 8.0 P/S (x) 2.2 1.8 1.6 Div Yield (%) 4.6 5.8 6.2 DPS 7.0 8.8 9.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 90 110 130 150 170 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Jarir (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Jarir Commercial Ìnvestment Co. 9.5 Mohammed Abdul Rahman Nasser Al Aqeel 9.0 Abdul Salam Abdul Rahman Nasser Al Aqeel 9.0 Abdullah Abdul Rahman Nasser Al Aqeel 9.0 Abdul Karim Abdul Rahman Nasser Al Aqeel 9.0 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 3,015 4,147 4,964 5,594 37.6 22.9 EBÌTDA SRmn 415 528 657 717 27.2 20.0 Net Ìncome SRmn 401 513 642 697 28.0 20.3 Assets SRmn 1,433 1,720 1,930 2,126 20.0 14.0 Equity SRmn 798 907 1,023 1,149 13.7 12.9 Total Debt SRmn 150 175 134 100 16.7 (12.7) Cash & Equiv SRmn 52 60 (56) (12) NM NM EBÌTDA Mgn % 13.8 12.7 13.2 12.8 - - Net Mgn % 13.3 12.4 12.9 12.5 - - ROE % 52.7 60.2 66.5 64.2 - - ROA % 29.9 32.5 35.2 34.4 - - Div Payout % 77.9 81.9 82.2 81.8 - - EPS SR 6.68 8.55 10.70 11.62 28.0 20.3 BVPS SR 13.29 15.11 17.05 19.15 13.7 12.9 Source: Tadawul, Zawya, Company, NCBC Research 78 Fawaz Abdulaziz AlHokair Company (AlHokair), established in 1990, is the largest fashion retail franchise player in Saudi Arabia, accounting for roughly half of the mid-market fashion retail business in the KSA through its 70 plus brands. The firm's position as a leading player in the growing market is a key positive, while increased risk from overseas expansion and potential margin pressure are the concerns for the stock. x Business brief AlHokair operates around 1300 fashion stores and is the retail franchise partner for over 70 global brands. Brands under its control include Zara, Banana Republic, GAP, Monsoon and Marks & Spencers. AlHokair owns a majority stake in Retail Group Egypt and Retail Group Jordan (both acquired from its parent in June 2010). After initial expansion in Jordan, Egypt and Kazakhstan, Al-Hokair is now targeting other ex-CÌS countries such as Azerbaijan, Georgia and Armenia. x Financials AlHokair's revenues rose 24.4% YoY to SR3,203mn for the year ended March 2012 (FY12), mainly due to the growth in same store sales and opening of 255 new stores during the year. EBÌDTA grew 48% YoY to SR539mn in FY12 as EBÌTDA margin expanded to 16.8% from 14.1% last year due to lower operating expenses as a percentage of sales. This and a YoY jump in other income led to net income growing by 42% to SR447mn in FY12. We expect sustained expansion in revenues in the coming years, driven by the continued store expansion plan with a primary focus on international markets. The recent commencement of payment to unemployed locals by the Saudi government should boost spending on discretionary items, thereby benefitting companies such as Al Hokair. x Recent developments On October 31, 2011, the company approved the SR187.5mn financing agreement with the Ìnternational Finance Corporation (ÌFC), one of the institutions of the World Bank. RETAÌL ~ MAY 2012 FAWAZ ABDULAZÌZ ALHOKAÌR ALSO KNOWN AS: ALHOKAÌR NEUTRAL Current price (SR) 82.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 90/45 Market cap ($ mn) 1535 Shares outstanding (mn) 70 Price perform (%) 1M 3M 12M Absolute 6.8 17.5 70.3 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 11.9 3.2 12M 8.7 2.3 Reuters code 4240.SE Bloomberg code ALHOKAÌR AB www.alhokair.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.49 Free float 51.0 VALUATION MULTIPLES 11A 12A 13E P/E (x) 18.3 12.9 11.2 P/B (x) 5.3 4.1 3.3 P/S (x) 2.2 1.8 1.5 Div Yield (%) 3.0 2.4 2.4 DPS 2.5 2.0 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 50 60 70 80 90 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ AlHokair (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Fawaz Alhokair Group 49.0 Fawaz Abdul Aziz Fahd Al Hokair 7.0 Dr Abdulmajeed Abdulaziz Fahed Alhokair 7.0 Dr Salman Abdulaziz Fahed Alhokair 7.0 Source: Tadawul, NCBC Research Company financials FY11 FY12 FY13E FY14E YoY (%) CAGR (%) (10-13E) Revenues SRmn 2,575 3,203 3,836 4,240 24.4 18.1 EBÌTDA SRmn 364 539 639 715 48.1 25.2 Net Ìncome SRmn 315 447 512 567 41.8 21.6 Assets SRmn 2,169 2,594 3,154 3,614 19.6 18.5 Equity SRmn 1,095 1,402 1,769 2,196 28.1 26.1 Total Debt SRmn 386 539 361 286 39.7 (9.5) Cash & Equiv SRmn 107 198 402 555 84.5 72.9 EBÌTDA Mgn % 14.1 16.8 16.7 16.9 - - Net Mgn % 12.3 14.0 13.3 13.4 - - ROE % 28.8 35.8 32.3 28.6 - - ROA % 15.6 18.8 17.8 16.8 - - Div Payout % 55.5 31.3 27.3 24.7 - - EPS SR 4.51 6.39 7.31 8.10 41.8 21.6 BVPS SR 15.64 20.03 25.27 31.37 28.1 26.1 Source: Tadawul, Zawya, Company, NCBC Research 79 Aldrees Petroleum and Transport Services Co. (Aldrees), established in 1963, has three main operational divisions: Petroleum, Transport and Food. The company owns a 98% stake in Aldrees Sudan, which is engaged in marine, land and air transportation. x Business brief Aldrees' Petroleum division operates a network of 410 gas stations under the brand name 'Petrol'. Ìt operates on 2÷3 year contracts and supplies fuel to government and private companies. The Transport segment operates and maintains a fleet of more than 2,500 carriers, ranging from chemical/lubricant tankers, trailers and bulkers to flat beds. The Super 2 division runs coffee and cake stores under the brand name 'Super Café'. Ìt also handles car wash and car detailing centers (located in the company's gas station network) under the brand name 'Super Wash'. x Financials Aldrees' revenue grew 14.4% YoY to SR1,694mn in 2011 on higher sales volume due to expansion of stations. EBÌDTA increased 10.1% YoY to SR154mn in 2011 mainly owing to increase in operational efficiency. Net profit increased 7.1% YoY to SR92mn in 2011. x Recent developments Ìn February 2012, CMA approved a 20% increase in Aldrees' share capital (from SR250mn to SR300mn) through the distribution of one bonus share for every five existing shares. Subsequently, Aldrees' approved the capital increase in its EGM held on 10 March 2012. The cost of distribution of bonus shares would be met from the company's retained earnings. Ìn addition, the company announced the payment of cash dividend of SR2.0 per share for 2011. RETAÌL ~ MAY 2012 ALDREES PETROLEUM ALSO KNOWN AS: APTSCO, ALDREES NOT COVERED Current price (SR) 35.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 45/31 Market cap ($ mn) 280 Shares outstanding (mn) 30 Price perform (%) 1M 3M 12M Absolute (10.7) (8.7) (10.3) Market (2.8) 7.5 33.1 Sector (6.2) 6.2 7.6 Avg daily turnover (mn) SR US$ 3M 22.2 5.9 12M 9.6 2.6 Reuters code 4200.SE Bloomberg code ALDREES AB www.aldrees.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.17 Free float 100 VALUATION MULTIPLES 09A 10A 11A P/E (x) 15.2 12.2 11.4 P/B (x) 3.0 2.7 2.4 P/S (x) 0.8 0.7 0.6 Div Yield (%) 4.3 5.7 5.7 DPS 1.5 2.0 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 32 37 42 47 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Aldrees (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Hamad Mohammed Saad Al Drees 6.7 Abdul Mohsen Mohammed Saad Al Drees 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,134 1,309.5 1,480.4 1,694 14.4 14.3 EBÌTDA SRmn 93 118 140 154 10.1 18.3 Net Ìncome SRmn 53 68.9 86.0 92 7.1 20.3 Assets SRmn 664 734 770 830 7.8 7.7 Equity SRmn 317 347 393 434 10.3 11.0 Total Debt SRmn 122 155 137 174 26.7 12.6 Cash & Equiv SRmn 27 70 18 21 15.9 (7.2) EBÌTDA Mgn % 8.2 9.0 9.5 9.1 - - Net Mgn % 4.7 5.3 5.8 5.4 - - ROE % 17.3 20.8 23.3 22.3 - - ROA % 8.9 9.9 11.4 11.5 - - Div Payout % 84.9 65.3 69.8 65.1 - - EPS SR 1.77 2.30 2.87 3.07 7.1 20.3 BVPS SR 10.57 11.55 13.11 14.47 10.3 11.0 Source: Tadawul, Zawya, Company, NCBC Research 80 Mouwasat Medical Services (Mouwasat) owns, manages and operates hospitals, dispensaries and pharmacies across Saudi Arabia. Incorporated in 1974, the company commenced its first owned comprehensive medical facility in 1988. x Business brief Mouwasat operates in the field of medical services across the Kingdom and owns nine pharmacies, two dispensaries and five hospitals (with a combined capacity of 953 beds). Ìts medical network covers the main cities of Saudi Arabia, including Dammam, Jubail, Qatif, Al Ahsa, Riyadh and Al Madina. Al Mouwasat converted from a limited liability company to a joint stock company in January 2006. x Financials Mouwasat's revenue grew 15.5% YoY to SR687mn in 2011 due to increased efficiency in the operation of assets as well as rise in the number of outpatient clinics. EBÌTDA rose 24.4% YoY to SR256mn in 2011. Net income increased 24.9% YoY to SR148mn. x Recent developments On April 02, 2012, Mouwasat's board approved distribution of 100% bonus shares for 2011, thereby increasing the company's share capital to SR500mn. Ìn September 2011, the company signed two Murabaha facilities agreements worth SR175mn with Samba Financial Group to finance the construction of the Dhahran hospital and its residential complex. RETAÌL ~ MAY 2012 MOUWASAT MEDÌCAL SERVÌCES ALSO KNOWN AS: MOUWASAT NOT COVERED Current price (SR) 50.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 58/36 Market cap ($ mn) 670 Shares outstanding (mn) 50 Price perform (%) 1M 3M 12M Absolute (2.9) 8.6 22.9 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 14.9 4.0 12M 6.9 1.8 Reuters code 4002.SE Bloomberg code MOUWASAT AB www.mouwasat.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.20 Free float 47.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 23.5 21.2 17.0 P/B (x) 5.0 4.1 3.5 P/S (x) 4.9 4.3 3.7 Div Yield (%) 1.0 2.0 3.0 DPS 0.5 1.0 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 35 40 45 50 55 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Mouwasat (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mohammed Sultan Hammad Al Subaei 17.5 Nasser Sultan Fahad Al Subaei 17.5 Sulaiman Mohammed Sulaiman Al Saleem 17.5 EFG-Hermes UAE 5.1 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 455 518 587 678 15.5 14.3 EBÌTDA SRmn 140 156 206 256 24.4 22.3 Net Ìncome SRmn 97 107 119 148 24.9 15.1 Assets SRmn 622 720 891 985 10.5 16.5 Equity SRmn 426 503 608 711 17.0 18.6 Total Debt SRmn 113 116 167 138 (16.9) 6.9 Cash & Equiv SRmn 29 48 137 193 40.5 87.0 EBÌTDA Mgn % 30.8 30.1 35.0 37.7 - - Net Mgn % 21.4 20.7 20.2 21.8 - - ROE % 24.9 23.0 21.3 22.5 - - ROA % 16.5 15.9 14.7 15.8 - - Div Payout % 43.8 23.4 42.2 50.7 - - EPS SR 1.94 2.14 2.37 2.96 24.9 15.1 BVPS SR 8.52 10.06 12.15 14.22 17.0 18.6 Source: Company, NCBC Research ^ % Var indicates variance from NCBC forecasts 81 Saudi Automotive Services Company (SASCO), established in 1982 and headquartered in Riyadh, provides a variety of services and utilities for cars, motorists and travelers. It owns specialized maintenance workshops in Saudi Arabia. The company also owns and manages supermarkets, rest areas and restaurants for travelers. x Business brief SASCO offers services such as car maintenance and repair, spare parts, car rescue, first aid, issuance of car test certificates and international driving licenses. The company also operates a network of supermarkets, petrol pumps, housing facilities, rest areas, restaurants and other facilities across Saudi Arabia to service motorists and travelers. Ìt has minority investments in four firms: Middle East Battery Co. (7.94%), Ìndustrialization & Energy Services Co. (3.37%), National Co. for Tourism (0.4%) and United Rally Co. (25%). x Financials SASCO recorded a 14.5% YoY growth in revenue at SR244mn in 2011. EBÌDTA margin for the year declined to 7.9% compared to 9.1% in 2010 due to higher operating expenses, mainly incurred for re-qualification of some petrol stations. Net income increased 11.3% YoY to SR40mn due to a rise in investment income and gains from sale of assets worth SR5.3mn. x Recent developments On February 28, 2012, SASCO signed an agreement with Ultra Tune Australia to form a joint venture company with a capital of USD1mn; the JV would offer maintenance services for vehicles and passenger cars at gasoline stations in the Kingdom. SASCO signed an agreement to sell its stake (2mn shares worth SR38mn) in Ìndustrialization and Energy Services Company to the latter company. The effect of this transaction would be reflected in 1Q12. RETAÌL ~ MAY 2012 SAUDÌ AUTOMOTÌVE ALSO KNOWN AS: SASCO NOT COVERED Current price (SR) 20.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 26/12 Market cap ($ mn) 247 Shares outstanding (mn) 45 Price perform (%) 1M 3M 12M Absolute (12.9) 8.2 41.7 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 56.9 15.2 12M 24.9 6.6 Reuters code 4050.SE Bloomberg code SACO AB www.sasco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 89.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 29.3 25.7 23.1 P/B (x) 1.9 1.8 1.7 P/S (x) 4.9 4.3 3.8 Div Yield (%) - 2.4 2.4 DPS - 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SASCO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Nahaz Trade Ìnvestment Company 10.5 Ìbrahim Mohammed Ìbrahim Al Hadithi 9.7 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 214 191 213 244 14.5 4.5 EBÌTDA SRmn 33 18 19 19 (0.2) (16.1) Net Ìncome SRmn 36 32 36 40 11.3 4.1 Assets SRmn 469 556 587 678 15.3 13.1 Equity SRmn 413 499 513 544 6.2 9.7 Total Debt SRmn - - - 61 NM NM Cash & Equiv SRmn 134 129 59 57 (4.0) (24.9) EBÌTDA Mgn % 15.3 9.6 9.1 7.9 - - Net Mgn % 16.6 16.5 16.9 16.4 - - ROE % 8.5 6.9 7.1 7.6 - - ROA % 7.5 6.1 6.3 6.3 - - Div Payout % 0.0 0.0 62.5 56.2 - - EPS SR 0.79 0.70 0.80 0.89 11.3 4.1 BVPS SR 9.17 11.09 11.39 12.10 6.2 9.7 Source: Tadawul, Zawya, Company, NCBC Research 82 Established in 1992, Fitaihi Group Holding Company undertakes designing, manufacture, and wholesale and retail distribution of gems, jewelry and precious stones. The company has two marketing subsidiaries, Marina B Creation Vados and Marina B Geneve, which market its products worldwide. It is also engaged in the management of leading hospitals in the region. x Business brief Fitaihi's product portfolio includes precious stones, jewelry, beauty products, kitchenware, leather products and clothing, accessories, perfumes, medical equipment, and industrial parts. The company has presence in the hospital industry through a 19.3% investment in Ìnternational Medical Center and 5.7% stake in Dar Al Fouad Hospital. Fitaihi also has a 20% stake in Fitaihi Junior. The company owns two premium department stores under the brand name 'Fitaihi' in Jeddah and Riyadh, in addition to other outlets. x Financials Fitaihi's revenues for 2011 increased 24.5% YoY to SR207mn. EBÌTDA rose 50.8% YoY to SR40mn. However, the company reported a net loss of SR43mn in 2011 compared to net profit of SR22mn in 2010. This was mainly due to losses in investments in Egypt (SR57.2mn) and the US (SR7.1mn), reduction in value of inventory (SR7.2mn) and provision for zakat related to previous year (SR3.7mn). x Recent developments Fitaihi's BOD approved a 10% increase in the company's capital to SR550mn (55mn shares) from SR500mn (50mn shares) by granting one bonus share for every 10 shares owned. RETAÌL ~ MAY 2012 FÌTAÌHÌ GROUP HOLDÌNG ALSO KNOWN AS: FÌTAÌHÌ NOT COVERED Current price (SR) 17.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 24/9 Market cap ($ mn) 277 Shares outstanding (mn) 55 Price perform (%) 1M 3M 12M Absolute (17.1) 12.9 43.9 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 89.9 24.0 12M 47.4 12.6 Reuters code 4180.SE Bloomberg code AHFCO AB www.fitaihigroup.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.12 Free float 77.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) 100.9 47.8 NM P/B (x) 1.7 1.6 1.6 P/S (x) 6.8 6.3 5.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 8 13 18 23 28 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Fitaihi (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Ahmed Hussain Ahmed Fitaihi 22.2 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 194 153 166 207 24.5 2.1 EBÌTDA SRmn 34 25 26 40 50.8 5.1 Net Ìncome SRmn 19 10 22 (46) NM NM Assets SRmn 720 731 702 686 (2.3) (1.6) Equity SRmn 560 616 659 635 (3.6) 4.3 Total Debt SRmn 71 55 0 0 NA NA Cash & Equiv SRmn 14 10 11 54 407.5 57.6 EBÌTDA Mgn % 17.6 16.1 15.8 19.2 - - Net Mgn % 9.9 6.7 13.1 (22.4) - - ROE % 3.2 1.8 3.4 (7.2) - - ROA % 2.6 1.4 3.0 (6.7) - - Div Payout % - - - - - - EPS SR 0.35 0.19 0.40 NM NM NM BVPS SR 10.18 11.21 11.98 11.55 (3.6) 4.3 Source: Tadawul, Zawya, Company, NCBC Research 83 Established in 1992, Alkhaleej Training and Education Company (Alkhaleej) conducts training programs in the fields of IT, electronics and English language, and also offers administrative and financial services. It operates more than 82 branches in the KSA, and has presence in over 19 locations in the Middle East and nine facilities outside the region. x Business brief Alkhaleej implements training programs through various divisions, including New Horizons (centers for computer learning, and the largest independent ÌT training company in the KSA), Direct English centers, Platinum (center for advanced training solutions ÷ offers advanced computer courses), Takniat (for training, business and professional development; specializes in management training), Kawader (employs graduates of the company's programs), E-Learning (provides over 2000 courses online) and Al Dhiafa (hospitality and tourism training). x Financials Alkhaleej's revenue grew 30.2% YoY to SR515mn in 2011 on higher sales in the government sector. EBÌDTA increased 18.1% YoY to SR87mn; however, EBÌTDA margins declined to 16.9% in 2011 from 18.6% due to higher operating expenses. Net income grew 15.9% YoY to SR53mn in 2011 mainly owing to rise in profits from subsidiaries and education projects. x Recent developments On April 10, 2012, Alkhaleej's board approved distribution of cash dividend of 5% of capital for 2011. Ìn addition, the board granted approval for increasing the share capital of the company by 25% to SR250mn by issuing bonus shares in the ratio of 1:4. Ìn July 2011, Alkhaleej signed a loan agreement worth SR30mn with Riyadh Bank to fund the construction of administrative offices in Riyadh. The loan would be repaid in 10 semi-annual installments of SR3mn from December 15, 2013. RETAÌL ~ MAY 2012 ALKHALEEJ TRAÌNÌNG ALSO KNOWN AS: ALKHALEEJ NOT COVERED Current price (SR) 35.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 44/27 Market cap ($ mn) 239 Shares outstanding (mn) 25 Price perform (%) 1M 3M 12M Absolute (12.0) 0.4 16.3 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 9.3 2.5 12M 7.1 1.9 Reuters code 4290.SE Bloomberg code ALKHLEEJ AB www.alkhaleej.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.04 Free float 32.1 VALUATION MULTIPLES 09A 10A 11A P/E (x) 21.3 19.8 17.0 P/B (x) 3.9 3.4 2.9 P/S (x) 2.6 2.3 1.7 Div Yield (%) 1.1 1.1 1.1 DPS 0.4 0.4 0.4 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 30 35 40 45 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Alkhaleej Trng (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdulaziz Rashid Abdul Al Rashid 20.3 Ahmed Ali Ahmed Al Shadwi 13.3 EFG-Hermes UAE Ltd 12.6 Al Waleed Abdul Saleh Al Dreian 11.8 Abdulaziz Hamaad N Al Belaihid 10.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 346 350 395 515 30.2 14.1 EBÌTDA SRmn 70 70 74 87 18.1 7.6 Net Ìncome SRmn 41 42 45 53 15.9 8.5 Assets SRmn 357 425 481 541 12.5 14.9 Equity SRmn 195 228 264 309 16.8 16.6 Total Debt SRmn 89 109 119 134 12.6 14.5 Cash & Equiv SRmn 34 31 33 26 (21.2) (8.1) EBÌTDA Mgn % 20.1 19.9 18.6 16.9 - - Net Mgn % 11.9 12.0 11.5 10.2 - - ROE % 23.7 19.9 18.5 18.4 - - ROA % 12.5 10.8 10.0 10.3 - - Div Payout % 36.4 23.8 22.0 19.0 - - EPS SR 1.65 1.68 1.82 2.11 15.9 8.5 BVPS SR 7.78 9.11 10.57 12.35 16.8 16.6 Source: Tadawul, Zawya, Company, NCBC Research 84 National Agriculture Marketing Co (THIMAR), established in 1987 and headquartered in Riyadh, manufactures, procures, processes and markets agricultural products, accessories, meat and other supplies through various dealers. The company, which holds a 100% stake in Wasmi Meat, runs 23 stores in Saudi Arabia. x Business brief THÌMAR primarily sells agricultural and meat products to its clients from different sectors such as hotels, restaurants and the military. The company also provides services for the operation, management and marketing of agricultural projects. Ìt also undertakes wholesale and retail trading of agricultural and meat products. x Financials THÌMAR's revenues fell 27.6% YoY to SR55mn in 2011. EBÌDTA for the year decreased 77% YoY to SR4mn. However, the company reported a net income of SR5mn in 2011, compared to a net loss of SR18mn in 2010, due to gain (SR19.2mn) realized from the sale of land in Jeddah. x Recent developments Ìn December, THÌMAR's board approved reduction in share capital from SR100mn to SR75mn; however, this is awaiting approval from the EGM. Ìn the same month, the company sold 7,650sq metres of land in Jeddah through an auction, with a gross sale value of SR32.1mn. The company realized a SR19.2mn capital gain from the sale. RETAÌL ~ MAY 2012 NATÌONAL AGRÌCULTURE ALSO KNOWN AS: THÌMAR NOT COVERED Current price (SR) 27.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 40/18 Market cap ($ mn) 74 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (3.5) (16.0) 9.4 Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 49.3 13.1 12M 39.3 10.5 Reuters code 4160.SE Bloomberg code THÌMAR AB www.thimar.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 100 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM 75.4 P/B (x) 4.0 8.3 7.5 P/S (x) 2.1 3.7 5.1 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May- 11 Aug- 11 Nov- 11 Feb- 12 May- 12 TASÌ Thim'ar (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 146 132 76 55 (27.6) (27.9) EBÌTDA SRmn 1 (10) (16) (4) NM NM Net Ìncome SRmn (10) (11) (18) 5 NM NM Assets SRmn 115 99 59 65 9.8 (17.3) Equity SRmn 81 69 33 37 10.5 (22.9) Total Debt SRmn - - - 0.3 NM NM Cash & Equiv SRmn 5 7 2 33 NM 86.0 EBÌTDA Mgn % 1 (7) (21) (7) - - Net Mgn % (7.0) (8.1) (23.7) 8.4 - - ROE % (11.9) (14.2) (35.1) 13.1 - - ROA % (8.7) (9.9) (22.7) 7.4 - - Div Payout % - - - - - - EPS SR (1.02) (1.06) (1.80) 0.46 NM NM) BVPS SR 8.07 6.89 3.35 3.70 10.5 (22.9) Source: Tadawul, Zawya, Company, NCBC Research 85 Established in 1994, Extra (UEC, United Electronics Company) is the largest consumer electronics retailer in Saudi Arabia. Extra provides electronic, household and communication devices as well as related solutions and services. The company serves around 90% of customers in Saudi Arabia annually, with more than 12,000 products across 25 stores. x Business brief Extra is engaged in the retail trading of consumer electronics and home appliances. Ìt offers all leading international brands and stocks an extensive product range. The product range is supported by comprehensive after-sales services through its trade mark 'Force 24/7', with three dedicated service centers across the Kingdom. Ìt has 25 stores, which include seven in Riyadh; three in Jeddah; two in Dammam; and one each in Makkah, Madinah, Al Khobar and Al Hassa. x Financials Extra's revenue grew 38.4% YoY to SR2,462mn in 2011 mainly due to the continued expansion of its store network (from 17 in 2010 to 24 in 2011) as well as increase in market share (led by promotional activity) amid steady growth in demand for electronic devices and smartphones. EBÌDTA rose 32.1% YoY to SR158mn in 2011 from SR118mn in 2010. As a result, net income increased 35% YoY to SR132mn during the year. x Recent developments Extra signed a JV with Al Meera Holding (Qatar) in February 2012 to open its first big-box store in Qatar during 2013. Extra would form a limited liability company with an initial capital investment of QR200,000. RETAÌL ~ MAY 2012 EXTRA ALSO KNOWN AS: UEC, United Electronics Company NOT COVERED Current price (SR) 88.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 94/65 Market cap ($ mn) 563 Shares outstanding (mn) 24 Price perform (%) 1M 3M 12M Absolute (2.2) 3.5 - Market (6.2) 6.2 7.6 Sector (2.8) 7.5 33.1 Avg daily turnover (mn) SR US$ 3M 11.8 3.1 12M 56.6 15.1 Reuters code 4003.SE Bloomberg code EXTRA AB www.extra.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.11 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 51.5 21.6 16.0 P/B (x) 14.5 8.7 5.6 P/S (x) 1.5 1.2 0.9 Div Yield (%) - - 2.8 DPS - - 2.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 70 75 80 85 90 95 5,500 6,000 6,500 7,000 7,500 8,000 Dec- 11 Jan- 12 Feb- 12 Mar- 12 Apr- 12 May- 12 TASÌ Extra (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Fozan Holding Company 45.4 Abdulaziz Alsaghyir Commercial 14.9 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,263 1,440 1,778 2,462 38.4 24.9 EBÌTDA SRmn 46 62 120 158 32.1 50.6 Net Ìncome SRmn 29 41 98 132 35.1 65.5 Assets SRmn 502 633 589 775 31.5 15.6 Equity SRmn 104 146 243 375 54.3 53.2 Total Debt SRmn 87 91 21 0 NM) NM) Cash & Equiv SRmn 55 15 30 65 113.7 5.7 EBÌTDA Mgn % 3.7 4.3 6.7 6.4 - - Net Mgn % 2.3 2.9 5.5 5.4 - - ROE % 7.9 32.8 50.3 42.7 - - ROA % 4.6 7.2 16.0 19.4 - - Div Payout % - - - 45.4 - - EPS SR 1.21 1.71 4.07 5.50 35.1 65.5 BVPS SR 4.35 6.06 10.14 15.64 54.3 53.2 Source: Tadawul, Zawya, Company, NCBC Research 86 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Energy & Utilities Ticker Company Page No. 5110 Saudi Electricity 90 2080 GASCO 91 Saudi Arabia's power sector is being mainly driven by sustained expansionary policies, rising infrastructure investment and population growth. According to the Ministry of Water and Electricity, the demand for power in the Kingdom is likely to grow at an annual rate of 4.5% until 2023, thereby increasing the demand to an estimated 75,000MW. Ìn order to cater to this strong demand, the government is investing heavily in the power sector, and plans to add a production capacity of 3,000÷4,000MW each year. The Saudi Arabian government is encouraging more private sector participation in the power and desalination sectors. The initial series of the three Ìndependent Power Projects (ÌPPs) awarded by Saudi Electricity Company (SECO) is scheduled for completion by 2014. These projects (combined capacity of 5,200MW) were announced in 2007, and would be built in Rabigh, Riyadh and Qurayyah. Two additional ÌPPs at Qurayyah and Dheba are scheduled to come online by 2017. Several Ìndependent Water and Power Projects (ÌWPPs) have also been commissioned, with the most prominent one being developed by Marafiq. The government is supporting this massive expansion by increasing allocation to the water and infrastructure sectors by about 13% to SR57.5bn. Exhibit 68: Revenue of GCC energy and utilities companies, 2009-11 Exhibit 69: Comparison of ROE, P/E & Mcap of GCC companies, 2011 USD mn % Source: Tadawul, Zawya, NCBC Research; Source: Tadawul, Zawya, NCBC Research The Saudi Stock Exchange (Tadawul) currently has two companies trading under the Energy & Utilities sector; Saudi Electricity Company (SECO), and National Gas and Ìndustrialization Co. (NGÌC). SECO is one of the heavyweights in the market, accounting for about 1.82% of the TASÌ's free float. SECO has a near monopoly in Saudi Arabia's electricity sector. After the delay in 2011, implementation of SECO's restructuring and privatization plan is expected to go ahead in 2012. As part of the restructuring plan, the company would be split into four power generation units, one distribution firm and one transmission firm, while SECO would operate as a holding company. Ìn 2011, the company's revenue grew 9.7% YoY to SR30.6bn, while net profit fell 2.9% YoY to SR2.2bn. NGÌC's revenues rose 5.7% YoY to SR1.7bn during the year, while net profit increased 17.9% to SR106.4mn from SR90.2mn in 2010. 0 1500 3000 4500 6000 7500 9000 2009 2010 2011 KSA Kuwait Qatar UAE Oman -3.0 2.0 7.0 12.0 17.0 22.0 27.0 32.0 -6% 0% 6% 12% 18% 24% 30% 36% P / E ROE (%) KSA Kuwait Qatar UAE Oman MAY 2012 ENERGY & UTÌLÌTÌES Primary focus ÷ Power and Water 88 ENERGY & UTÌLÌTÌES NCB CAPÌTAL MAY 2012 Exhibit 70: Sector details Units as stated Country % weight in Index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Electricity Co (SEC) 1.82 7.2 4.26 National Gas & Ìndustrialization Co (NGÌC) 0.21 6.4 10.33 Source: Bloomberg, Tadawul: Company data Exhibit 71: Revenue of companies, 2009-11 Exhibit 72: Profitability of SECO, relative to sector avg SR mn % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research The Kingdom is keen to reduce its dependence on fossil fuels and develop alternative energy sources such as solar, hydro and nuclear power. King Abdullah City for Renewable Energy (KACRE) plans to increase the share of alternative fuels in the Kingdom's energy mix from zero at present to 43% by 2030 and 85% by 2050. NCBC Recommendations in the Sector We are cautiously positive on the sector given the increased demand for power. We currently are neutral on Saudi Electricity. Exhibit 73: Coverage stocks details Stock Current Rating PT (SR) Comments Saudi Electricity (5110.SE) Neutral 15.3 The new tariff structure on industrial, commercial and government customers came into effect on July 1, 2010. This had a significant impact on the company's profitability, which we believe the market has already priced into the stock. Going forward, the key risks include rising cost of energy purchased from independent producers as well as an increase in depreciation expense. Source: NCBC Research 1,500 1,550 1,600 1,650 1,700 20,000 24,000 28,000 32,000 2009 2010 2011 SECO NGÌC 0% 2% 4% 6% 8% 2009 2010 2011 Sector Average SECO 89 Saudi Electricity Company (SEC) is the largest power generator in Saudi Arabia. Established in 2000, the company is engaged in the generation, transmission and distribution of electric power across the Kingdom. SEC was formed through the consolidation of 10 regional electricity companies. x Business brief SEC has a monopoly in the transmission and distribution of electricity in Saudi Arabia and a near-monopoly in generation. The company also exports and imports energy, and invests in various power projects in the Kingdom. SEC had a total available capacity of 51,743 megawatts (MW) at the end of 2011. x Financials Revenues grew 9.7% YoY to SR30,570mn in 2011, mainly driven by the increase in consumption due to rising demand for electricity and expansion of capacity across the Kingdom. Net profit came in at SR2,213mn, down 3%. This was mainly due to the rise in the cost of purchased energy and higher- than-expected depreciation. x Recent developments On March 31, 2012, SEC announced that it had been granted a loan of USD1.4bn to finance the construction of its sixth power plant in Rabigh. The loan would be repaid in semi-annual installments over a period of 15 years. SEC plans to build a 2,400 MW, heavy fuel oil burning plant, to be called Jeddah South. The oil-fired power plant is expected to be completed by 2016. To meet the growing demand, SEC plans to set up power transport lines, gas-powered generating units and transformers in different parts of the Kingdom. Ìn line with this, the company signed 11 contracts worth SR2bn in December 2011. Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 27,858 30,570 32,708 34,973 9.7 7.9 EBÌTDA SRmn 10,186 11,743 12,747 13,504 15.3 9.9 Net Ìncome SRmn 2,279 2,213 2,226 2,243 (2.9) (0.5) Assets SRmn 190,872 208,882 240,036 261,388 9.4 11.0 Equity SRmn 50,657 52,325 54,003 55,699 3.3 3.2 Total Debt SRmn 30,509 30,715 56,901 67,706 0.7 30.4 Cash & Equiv SRmn 7,231 2734 1635 1749 (62.2) (37.7) EBÌTDA Mgn % 36.6 38.4 39.0 38.6 - - Net Mgn % 8.2 7.2 6.8 6.4 - - ROE % 4.6 4.3 4.2 4.1 - - ROA % 1.3 1.1 1.0 0.9 - - Div Payout % 128.0 132.1 132.1 129.6 - - EPS SR 0.55 0.53 0.53 0.54 (2.9) (0.5) BVPS SR 12.16 12.56 12.96 13.37 3.3 3.2 Source: Tadawul, Zawya, Company, NCBC Research UTÌLÌTÌES ~MAY 2012 SAUDÌ ELECTRÌCÌTY ALSO KNOWN AS: SEC, SECO OVERWEIGHT Current price (SR) 13.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 16/13 Market cap ($ mn) 14,607 Shares outstanding (mn) 4,167 Price perform (%) 1M 3M 12M Absolute (11.1) (6.4) (3.3) Market (6.2) 6.2 7.6 Sector (10.1) (4.9) (1.4) Avg daily turnover (mn) SR US$ 3M 164.6 43.9 12M 76.2 20.3 Reuters code 5110.SE Bloomberg code SECO AB www.se.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.56 Free float 17.18 VALUATION MULTIPLES 10A 11A 12E P/E (x) 24.0 24.8 24.6 P/B (x) 1.1 1.0 1.0 P/S (x) 2.0 1.8 1.7 Div Yield (%) 5.3 5.3 5.3 DPS 0.7 0.7 0.7 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 13 14 15 16 17 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Saudi Electricity (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Government ownership in SEC Capital 74.3 ARAMCO 6.9 Public 18.8 Source: Tadawul, NCBC Research 90 National Gas & Industrialization Company (GASCO) was established in 1963 through the merger of two companies. GASCO is engaged in filling, refilling and distributing liquefied petroleum gas (LPG); designing and building gas networks; and selling as well as installing gas tanks and cylinders. x Business brief GASCO sells LPG gas cylinders (in 26.5 and 52.5 liter sizes) across Saudi Arabia. The company also provides various types of gas tanks and related accessories. Of its total carriers, about 350 have a capacity of 40,000 liters each, while the remaining 42 have capacity in the range of 11,000÷23,000 liters. The company's filling plants are located in Riyadh, Jeddah, Dammam, Al Madinah, Taif, Bureidah and Khamis Mushait. GASCO also designs and installs gas networks for retail and industrial customers. x Financials GASCO's revenues grew 5.7% to SR1,672mn in 2011 from SR1,582mn in 2010. Net income for the year increased 17.8% to SR106mn from SR90mn. Net income grew due to profit from the sale of the company's investment in banks and other non-core investments. x Recent developments GASCO announced a cash dividend of SR1.0 per share for 2011 on March 27, 2012. . UTÌLÌTÌES ~MAY 2012 NATÌONAL GAS & ÌNDUSTRÌALÌZATÌON COMPANY ALSO KNOWN AS: GASCO NOT COVERED Current price (SR) 22.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 26/17 Market cap ($ mn) 450 Shares outstanding (mn) 75 Price perform (%) 1M 3M 12M Absolute (0.2) 9.8 17.2 Market (6.2) 6.2 7.6 Sector (10.1) (4.9) (1.4) Avg daily turnover (mn) SR US$ 3M 12.8 3.4 12M 7.6 2.0 Reuters code 2080.SE Bloomberg code NGÌC AB www.gasco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.19 Free float 67.46 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 18.8 15.9 P/B (x) 1.7 1.7 1.6 P/S (x) 1.1 1.2 1.0 Div Yield (%) 2.2 3.1 4.4 DPS 0.5 0.7 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Gas&Ìndustrialization (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Saeed Ali Ghadran Al Ghamdi 11.9 Public Ìnvestment Fund 10.9 General Organization for Social Ìnsurance (GOSÌ) 6.1 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,471 1,546 1,582 1,672 5.7 4.4 EBÌTDA SRmn 115 136 138 171 23.8 14.2 Net Ìncome SRmn 149 (59) 90 106 17.8 (10.7) Assets SRmn 1,297 1,344 1,425 1,489 4.5 4.7 Equity SRmn 941 991 1,002 1,029 2.7 3.0 Total Debt SRmn - - - - - - Cash & Equiv SRmn 133 262 240 42 (82.5) (32.0) EBÌTDA Mgn % 7.8 8.8 8.7 10.2 - - Net Mgn % 10.1 (3.8) 5.7 6.3 - - ROE % 14.6 (6.1) 9.0 10.4 - - ROA % 10.7 (4.5) 6.5 7.3 - - Div Payout % 75.5 - 58.3 70.8 - - EPS SR 1.99 (0.79) 1.2 1.41 17.8 (10.7) BVPS SR 12.55 13.22 13.36 13.72 2.7 3.0 Source: Tadawul, Zawya, Company, NCBC Research 91 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Agriculture & Food Ticker Company Page No. 2050 Savola Group 95 2280 Almarai 96 6090 Jazan Development 97 2270 SADAFCO 98 6010 NADEC 99 6002 Herfy Foods 100 6070 Jouff Agriculture 101 6020 Qassim Agriculture 102 4061 Anaam International 103 6001 Halwani Bros 104 6050 Saudi Fisheries 105 2100 Wafra Food 106 6040 Tabuk Agriculture 107 6060 Sharqiya Dev Co. 108 Saudi Arabia is the largest food market in the GCC, accounting for 65% of total food consumption in 2011. The Kingdom's food market is estimated to be worth SR115bn in 2011, increasing to SR140bn in 2015 according to EÌU estimates. Factors such as Saudi Arabia's relatively large and young demographics (70% of the population is under 30 years of age) and rising per capita income are the key long-term demand drivers. However, the country's reliance on imported food and its inability to pass on the increased cost to consumers remain the main concerns. Saudi Food market the largest in the GCC By far the Saudi Food and Agriculture sector is the largest in the GCC, largely off the back of around 70% of the population of the GCC being based in Saudi Arabia. Ìn terms of listed companies, again, the revenues generated by Saudi companies exceeded USD10bn in 2011, compared to less than USD400mn in other major GCC countries. Exhibit 74: Revenue of listed GCC agri. companies Exhibit 75: Comparison of ROE & P/E of GCC Cos, 2011 USD mn % Source: Tadawul, Bloomberg, NCBC Research Source: Tadawul, Bloomberg, NCBC Research High dependence on food imports According to the Saudi Ports Authority, Saudi Arabia imported 20mn tons of food items in 2010 (equivalent to 80% of the total volume consumed in Saudi Arabia) and up from 15mn tons in 2006. The reliance on imports is due to the scarcity of water and adverse weather conditions which make domestic agricultural production difficult. At SR63bn in 2010, food and agricultural imports accounted for 15.8% of overall imports in to KSA and grew by 19% YoY. According to the Economist Ìntelligence Unit (EÌU), food imports are set to more than double to SR132bn in 2020. Given its reliance on imports, the Kingdom remains vulnerable to a rise in global food prices Almarai and Savola, key stocks in the food sector Of the 14 companies in the sector, Almarai and Savola are by far the largest, with a market capitalization of SR26.2bn and SR18.1bn, respectively (75% of the total sector market capitalization). These accounted for 1.9% and 1.7%, respectively, of the Tadawul as of 1 April 2012. Revenue for the sector increased 17.6% YoY to SR38.4bn in 2011, while the industry's net earnings rose 6.8% YoY to SR2.8bn. Savola recorded 19.8% YoY 0 2,000 4,000 6,000 8,000 10,000 0 100 200 300 400 500 2009 2010 2011 Kuwait UAE Qatar KSA (RHS) -4 0 4 8 12 16 20 24 28 0 9 18 27 36 R O E ( % ) P/E (x) KSA Kuwait UAE Qatar April 2012 AGRÌCULTURE & FOOD Exposure to global food prices a concern 93 AGRÌCULTURE & FOOD NCB CAPÌTAL APRÌL 2012 revenue growth and a 35.6% YoY increase in earnings. The good performance was mainly based on increased market share and increased margins at its food retail business. Almarai's revenues increased 14.7% during the year although reported net income decline by 11.4% due mainly to a provision on its Zain KSA holding. However, excluding one-off gains/losses, Savola's net income grew 11% in 2011, while Almarai's net income grew 1% YoY during the year. Exhibit 76: Revenue of listed companies, 2009-2011 Exhibit 77: Savola - Profitability relative to sector average SR mn % Source: Tadawul, Bloomberg, NCBC Research Source: Tadawul, Bloomberg, NCBC Research Long-term growth drivers intact; stable food prices key to profitability in near to medium term We expect Saudi Arabia's favorable demographics to continue driving the sector's growth. The Kingdom's relatively large population, low per capita food consumption, rising income levels and increased religious pilgrims will continue driving growth in the sector. However, KSA's ongoing dependence on imported food and the phasing out of subsidies by the government are risks for the sector. Both listed and private companies in the sector are attempting to mitigate these risks by expanding geographically, as well as investing in agricultural projects in less developing countries. NCBC recommendation We are cautiously optimistic about the sector's performance in the long term. We believe most of the demand for the sector is locally driven and therefore likely to remain strong despite ongoing global challenges. However, the Kingdom's dependence on imported food is a key weakness. Nevertheless, in the short-run, the moderate global outlook for 2012-2013 will likely ensure that commodity prices will be under pressure, allowing margin expansion. We currently rate Savola as overweight as we believe the margin expansion potential at the retail business is significant, with the food business continuing to grow its volumes. We are currently neutral on Almarai given our concerns on the return on investment from the poultry business, alongside the time it will take for the new businesses to become profitable. Exhibit 78: Coverage stocks details Stock Current Rating PT (SR) Comments Savola (2050.SE) Overweight 39.1 Food retail business is expanding aggressively with margins expected to increase as buying power strengthens. Food business continues to take market share and expand geographically across the region. Move to a ¨holding company¨ may unlock value. Almarai (2280.SE) Neutral 60.4 Geographic expansion of the bakery and juice businesses and the start of operations at the new poultry venture are key drivers for the stock. Our concerns are on the pace of progress at poultry, as well as the returns which can be gained on this SR4bn investment. Source: NCBC Research 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2009 2010 2011 Savola Almarai Others 0% 2% 4% 6% 8% 2009 2010 2011 Sector Average Savola 94 SavoIa is one of the Ieading food companies in the MENA region with operations stretching from Morocco to Kazakhstan. The company is weII positioned to benefit from the growth in mass grocery retaiI in the region as weII as increased spending on food. SavoIa's move towards a 'FinanciaI HoIding Company' structure may unIock some of the congIomerate discount currentIy present in the stock. Limited abiIity to pass on the rise in raw materiaI prices to consumers is a key risk. x Business brief Savola's business interests are divided into three segments: Savola Foods (edible oils, sugar and pasta), Savola Retail (Panda and Hyper Panda) and Savola Plastic. With more than 131 outlets across the KSA, Savola enjoys a leading position in retailing. Savola has major investments in Almarai Dairy Co. (30%), Herfy Foods Co. (47.6%), Kinan (30%), and Alexandria Sugar (45.5%), among others. The company is also one of the founding shareholders of KEC in Madinah and KAEC in Rabigh, KSA. x FinanciaIs Savola's revenues grew 19.8% to SR25.2bn in 2011 from SR21bn the previous year, driven by market share gains in the food and retail division as well as continued geographic expansions. Net income rose 35.6% YoY to SR1.2bn during the year due to one-off gains from the sale of land during 4Q11 as opposed to one-off losses in the form of impairment during the last quarter of 2010. Adjusting for these, net income increased at a slower pace of 11% YoY to SR1,085mn as net margin declined from 4.6% in 2010 to 4.3% in 2011 due to higher financial charges. x Recent deveIopments Ìn April 2012, Savola acquired 9.7% and 3.6% stakes in its subsidiaries USC (KSA) and USCE (Egypt), respectively, from UK-based Tate & Lyle. Ìn December 2011, it announced the sale of its stakes in various lands and bought the remaining stake in a pasta company in Egypt. AGRÌCULTURE & FOOD | MAY 2012 SAVOLA GROUP ALSO KNOWN AS: SAVOLA OVERWEIGHT Current price (SR) 34.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 36/23 Market cap ($ mn) 4,532 Shares outstanding (mn) 500 Price perform (%) 1M 3M 12M Absolute (2.9) 9.3 21.0 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 18.1 4.8 12M 12.5 3.3 Reuters code 2050.SE Bloomberg code SAVOLA AB www.savola.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.08 Free float 73.4 VALUATION MULTIPLES 11A 12A 13E P/E (x) 15.7 14.3 12.9 P/B (x) 2.2 2.0 1.8 P/S (x) 0.7 0.6 0.6 Div Yield (%) 3.8 3.5 3.5 DPS 1.3 1.2 1.2 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 22 27 32 37 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SAVOLA Group (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mohammed Ìbrahim Mohammed Al Essa 12.0 General Organization for Social Ìnsurance (GOSÌ) 10.9 Abdullah Mohammed Abdullah Al Rabeah 8.7 Abdul Qader Al Muhaidib and Sons Co. 8.5 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 21,029 25,196 28,222 29,703 19.8 12.2 EBÌTDA SRmn 2,312 2,359 2,547 2,792 2.0 6.5 Adjusted Net Ìncome SRmn 975 1,085 1,185 1,321 11.3 10.7 Assets SRmn 17,782 20,101 21,943 22,968 13.0 8.9 Equity SRmn 7,020 7,722 8,537 9,258 10.0 9.7 Total Debt SRmn 5,174 6,232 6,813 7,026 20.4 10.7 Cash & Equiv SRmn 577 1,214 2,084 2,447 110.4 61.9 EBÌTDA Mgn % 11.0 9.4 9.0 9.4 - - Net Mgn % 4.6 4.3 4.2 4.4 - - ROE % 14.0 14.7 14.6 14.8 - - ROA % 5.6 5.7 5.6 5.9 - - Div Payout % 64.1 59.9 50.6 45.4 - - EPS SR 2.0 2.2 2.4 2.6 10.0 9.1 BVPS SR 14.0 15.4 17.1 18.5 10.0 9.7 Source: Tadawul, Zawya, Company, NCBC Research 95 AImarai is the Ieading dairy company in the MiddIe East. RecentIy, AImarai expanded into fruit juice, bakery, pouItry and infant miIk as it seeks to become the Ieading food company in the region. Key cataIysts for the coming year incIude the pace of progress in its new pouItry business, as weII as expansion of juice and bakery into the rest of the GCC. x Business brief Almarai's product range includes fresh and long-life dairy products, several fruit juice flavors, cheese and butter, and bakery products. The company recently entered the poultry and infant milk markets. The company expects to increase the poultry output capacity fivefold to 100mn birds per year by 2012 and 150mn birds by 2014; the trial operation of Ìnfant Milk and integration of the recently acquired Fondomonte is anticipated in 2012. x FinanciaIs Almarai's revenues grew 14.7% YoY to SR7.9bn in 2011 led by higher market share across key products, diversification and focus on product innovation, service and quality. However, growth was lower vs. the average of 27% over the last five years. Fruit Juice and Bakery segments registered the strongest growth of 19% and 18%, respectively, during the year. Adjusted net income grew just 1% YoY to SR1.3bn as margins came under pressure due to higher commodity prices and limited pricing power. Management expects 15÷20% YoY growth in revenue in 2012. x Recent deveIopments On April 3, 2012, Almarai approved a 74% increase in share capital through bonus shares. On March 28, 2012, it raised its stake in Ìnternational Dairy and Juice from 48% to 52%. Ìn the same month, Almarai announced the completion of its first sukuk for SR1bn. Ìn January 2012, it announced a trial run at the local production facility for Ìnfant Milk has been scheduled during March÷May 2012. Ìn December 2011, Almarai announced the full acquisition of Fondomonte S.A. (Argentina) for SR312mn. AGRÌCULTURE & FOOD ~ MAY 2012 ALMARAÌ COMPANY ALSO KNOWN AS: ALMARAÌ NEUTRAL Current price (SR) 66.8 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 75/47 Market cap ($ mn) 7,118 Shares outstandi ng (mn) 400 Price perform (%) 1M 3M 12M Absol ute 0.0 12.7 24.1 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 44.4 11.8 12M 25.3 6.7 Reuters code 2280.SE Bloomberg code ALMARAÌ AB www.al marai .com WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 1.84 Free fl oat 41.4 VALUATION MULTIPLES 11A 12A 13E P/E (x) 20.5 17.2 15.2 P/B (x) 4.0 3.5 3.1 P/S (x) 3.4 2.9 2.6 Di v Yi eld (%) 3.4 4.2 4.6 DPS 2.3 2.8 3.1 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 45 50 55 60 65 70 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Almarai (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Savol a Group 29.9 HH Pri nce Sul tan bin Mohammed Saud Al Kabi r Al Saud 28.6 Omran Mohammed Al Omran and Company 5.7 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 6,931 7,951 9,141 10,329 14.7 14.2 EBÌTDA SRmn 1,886 2,037 2,470 2,906 8.0 15.5 Net Ìncome SRmn 1,287 1,300 1,554 1,762 1.0 11.0 Assets SRmn 12,571 15,654 17,889 19,675 24.5 16.1 Equi ty SRmn 6,134 6,718 7,621 8,731 9.5 12.5 Total Debt SRmn 4,847 6,926 7,925 8,325 42.9 19.8 Cash & Equi v SRmn 241 272 351 376 13.0 16.0 EBÌTDA Mgn % 27.2 25.6 27.0 28.1 - - Net Mgn % 18.6 14.3 17.0 17.1 - - ROE % 22.4 17.7 21.7 21.6 - - ROA % 10.9 8.1 9.3 9.4 - - Di v Payout % 69.9 70.7 72.0 70.3 - - EPS SR 3.22 3.25 3.89 4.41 1.0 11.0 BVPS SR 15.35 16.81 19.07 21.84 9.5 12.5 Source: Company, NCBC Research ^ % Var indicates variance from NCBC forecasts 96 Jazan DeveIopment Co. (JAZADCO) is headquartered in Jazan. The company was estabIished in 1993 to conduct agricuIture and aquacuIture activities in KSA. JAZADCO's subsidiaries incIude Fish Hatcheries Company (40%), Jannat AgricuIturaI Investment Company (25%) and Tabuk Fisheries Company (20%). x Business brief JAZADCO's principal activities comprise ownership and operation of fish, shrimp and fruit farms; investment in real estate and agricultural sectors; production of mineral water and seafood; distribution of industrial, electrical and food retail equipment; and real estate development including establishment and operation of industrial projects. The company sells products across Saudi Arabia as well as exports to other countries in GCC, Europe and Far East. JAZADCO has an annual production capacity of 3,000 tons of shrimp, 46mn liters of mineral water and 800 tons of mangoes. x FinanciaIs Revenues declined 6.9% YoY to SR70mn in 2011. However, EBÌTDA fell significantly to report a loss of SR8mn due to low production and high cost of shrimp (owing to infection in the farm due to the white spot syndrome virus). Net loss increased to SR69mn from SR22mn in 2010 due to the 50% drop in Tabuk Fisheries Company's share capital (Jazadco holds a 20% stake) and losses from the sale of Selonda UK. x Recent deveIopments On January 17, 2012, the company announced a loss of SR12mn from the sale of Selonda UK, its 50% owned subsidiary, for a total value of GBP1.2mn. On December 12, 2011, JAZADCO filed a lawsuit against the former Board of Directors of Tabuk Fisheries Company for not following company procedures that led to losses of SR85mn; the company had to reduce its share capital by 50% to SR100mn to cover these losses. AGRÌCULTURE & FOOD ~ MAY 2012 JAZAN DEVELOPMENT ALSO KNOWN AS: JAZADCO NOT COVERED Current price (SR) 20.4 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 37/16 Market cap ($ mn) 271 Shares outstandi ng (mn) 50 Price perform (%) 1M 3M 12M Absol ute (13.4) (21.7) (4.0) Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 104.3 27.8 12M 48.4 12.9 Reuters code 6090.SE Bloomberg code GÌZACO AB www.j azadco.com.sa WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 0.17 Free fl oat 98.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 1.6 1.7 1.9 P/S (x) 24.3 13.5 14.5 Di v Yi eld (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Jazan Development (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 42 42 75 70 (6.9) 18.7 EBÌTDA SRmn 0 11 6 (8) (237.7) (364.1) Net Ìncome SRmn 20 (29) (22) (69) 217.8 (251.1) Assets SRmn 723 730 703 627 (10.8) (4.6) Equi ty SRmn 675 649 600 527 (12.2) (7.9) Total Debt SRmn 20 20 38 38 (0.0) 23.7 Cash & Equi v SRmn 83 42 35 29 (17.5) (29.4) EBÌTDA Mgn % 1.0 26.4 7.5 (11.1) - - Net Mgn % 47.6 (69.0) (28.8) (98.3) - - ROE % 3.0 (4.4) (3.5) (12.3) - - ROA % 2.8 (4.0) (3.0) (10.4) - - Di v Payout % 125.0 - - - - - EPS SR 0.40 (0.58) (0.43) (1.38) 217.8 (251.1) BVPS SR 13.50 12.98 12.00 10.54 (12.2) (7.9) Source: Tadawul, Zawya, Company, NCBC Research 97 Jeddah-based Saudia Dairy and Foodstuff Company (SADAFCO) focuses on dairy products. It commenced operations in 1977, and has since diversified its product Iine by entering into joint ventures with other food companies. SADAFCO's portfoIio comprises more than 100 products soId under the SAUDIA brand. x Business brief SADAFCO operates through five main segments: Milk, Juices, Snacks, Ìce Cream and Other Food items. Under the Milk division, SADAFCO offers a wide range of milk packs, milk powder, cheddar cheese and milk shakes. The Ìce Cream segment sells a number of ice cream flavors, while the Other Food segment produces tomato ketchup and paste, as well as hummus. x FinanciaIs SADAFCO's revenues grew 10.9% YoY to SR1,134mn in 2011 due to a robust growth in core categories, including milk and ice cream, along with successful new innovations. EBÌTDA grew 1.4% YoY to SR165mn in 2011. The company reported a net income of SR130mn in 2011 compared to SR203mn in 2010, which was due to exceptional gains from sale of investment. x Recent deveIopments On February 15, 2012, SADAFCO's Board of Directors approved the establishment of a SR65mn regional distribution center in Riyadh, which is expected to start operations by 2014. On September 27, 2011, SADAFCO announced plans to reactivate the Dammam factory to expand production capacity and meet the expected consumer demand. AGRÌCULTURE & FOOD | MAY 2012 SAUDÌA DAÌRY AND FOODSTUFF COMPANY ALSO KNOWN AS: SADAFCO NOT COVERED Current price (SR) 56.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 64/35 Market cap ($ mn) 490 Shares outstanding (mn) 33 Price perform (%) 1M 3M 12M Absolute (0.4) 8.7 29.0 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 14.8 3.9 12M 14.4 3.8 Reuters code 2270.SE Bloomberg code SADAFCO AB www.sadafco.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.18 Free float 58.2 VALUATION MULTIPLES 09A 10A 11A P/E (x) 64.9 9.0 14.2 P/B (x) 3.7 2.8 2.5 P/S (x) 2.0 1.8 1.6 Div Yield (%) - 5.3 5.3 DPS - 3.0 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 33 43 53 63 73 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SADAFCO(RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) United Manufacturing Co. 30.1 Al Samh Trading Ltd. 11.6 Global Ìnvestment House 8.9 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 878 922 1,023 1,134 10.9 8.9 EBÌTDA SRmn 104 103 163 165 1.4 16.7 Net Ìncome SRmn 58 28 203 130 (36.3) 30.4 Assets SRmn 764 719 964 1,074 11.4 12.0 Equity SRmn 515 502 667 731 9.7 12.4 Total Debt SRmn 6 18 0 0 NM NM Cash & Equiv SRmn 83 50 323 338 4.5 59.7 EBÌTDA Mgn % 11.8 11.2 15.9 14.6 - - Net Mgn % 6.7 3.1 19.9 11.4 - - ROE % 11.7 5.6 34.8 18.5 - - ROA % 7.8 3.8 24.1 12.7 - - Div Payout % 83.4 0.0 48.0 75.3 - - EPS SR 1.80 0.87 6.25 3.99 (36.3) 30.4 BVPS SR 15.85 15.45 20.51 22.49 9.7 12.4 Source: Tadawul, Zawya, Company, NCBC Research, Year end March 31 98 NationaI AgricuIture DeveIopment Company (NADEC) commenced operations in 1981 with a 20% government stake. The company focuses on agricuIturaI production, food processing and distribution. NADEC operates through three business segments: agricuIturaI, dairy and juice products. The company seIIs products under the NADEC brand. x Business brief NADEC offers a wide range of products under each of its operating segments. The company provides manufactured products such as tomato paste, grains, vegetables, fruits, fodder, olives and honey under the agricultural segment. The dairy products segment offers long-life products (including cheese and milk), desserts and special products. The juice segment offers a range of fresh and long-life juices in containers of various sizes. NADEC has an annual production capacity of 106,000 tons of potatoes, 150,000 tons of wheat, 82,000 tons of wheat seeds, 53,000 liters of olive oil, 300,000 tons of alfalfa, 40,000 tons of onion, 5,000 tons of dates, 60,000 tons of maize, 9 tons of honey and 6,000 tons of grain maize. The company also produces 800,000 liters of dairy products per day. NADEC operates five agricultural projects, six cattle farms and two modern dairy plants across Saudi Arabia. x FinanciaIs NADEC's revenues increased 7.5% YoY to SR1,556mn in 2011. The company's EBÌTDA grew 36.4% YoY to SR305mn during the year. As a result, EBÌTDA margin expanded to 19.6% from 15.4% in 2010. NADEC benefited from a recovery in the agricultural and dairy segments (vis-à-vis the previous year) and an improvement in efficiency through cost control programs. The company's net income rose to SR91mn during the year compared to a profit of SR11mn in 2010. x Recent deveIopments On March 20, 2012, the company recommended the distribution of 7.5% cash dividends (SR0.75 per share) for 2011. AGRÌCULTURE & FOOD ~ MAY 2012 NATÌONAL AGRÌCULTURE ALSO KNOWN AS: NADEC NOT COVERED Current price (SR) 30.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 36/21 Market cap ($ mn) 480 Shares outstanding (mn) 60 Price perform (%) 1M 3M 12M Absolute (8.3) (4.2) 9.1 Market (6.2) (6.2) 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 39.7 10.6 12M 25.2 6.7 Reuters code 6010.SE Bloomberg code NADEC AB www.nadec.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.21 Free float 68.6 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 171.4 19.7 P/B (x) 1.8 1.9 1.7 P/S (x) 1.3 1.2 1.2 Div Yield (%) - - 2.5 DPS - - 0.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 22 27 32 37 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ NADEC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 20.0 Saleh Abdul Aziz Saleh Al Rajhi 11.4 Abdullah Abdul Aziz Saleh Al Rajhi 8.3 Sulaiman Abdul Aziz Saleh Al Rajhi 7.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,339 1,335 1,448 1,556 7.5 5.1 EBÌTDA SRmn 260 212 224 305 36.4 5.5 Net Ìncome SRmn 69 (43) 11 91 769.3 9.9 Assets SRmn 2,442 2,510 2,375 2,342 (1.4) (1.4) Equity SRmn 1,059 975 972 1,063 9.4 0.1 Total Debt SRmn 922 1,103 980 907 (7.4) (0.5) Cash & Equiv SRmn 18 35 47 28 (41.2) 15.5 EBÌTDA Mgn % 19.4 15.9 15.4 19.6 - - Net Mgn % 5.1 (2.9) 0.7 5.9 - - ROE % 6.7 (3.8) 1.1 9.0 - - ROA % 3.2 (1.6) 0.4 4.9 - - Div Payout % 65.2 0.0 0.0 49.3 - - EPS SR 1.15 (0.64) 0.18 1.52 769.3 9.9 BVPS SR 17.65 16.26 16.19 17.72 9.4 0.1 Source: Tadawul, Zawya, Company, NCBC Research 99 EstabIished in 1981, Herfy Food Services Company (Herfy) has a chain of fast food restaurants as weII as pastry, bakery and chocoIate showrooms across Saudi Arabia. Herfy is KSA's Iargest food chain with over 170 fast food restaurants, 16 pastry and chocoIate showrooms and one meat processing pIant. x Business brief Herfy operates fast food restaurants, food retail outlets, bakeries and chocolate showrooms. The company is also engaged in meat processing. Ìts combined production capacity of sweets and bakery products stands at 13,400 tons per annum and frozen meat capacity at 4,090 tons a year. x FinanciaIs Herfy's revenues grew 22.2% to SR709mn in 2011 from SR580mn in 2010 largely due to the opening of 20 new restaurants during the year and the first branch of the Herfy Cafe & Grill restaurant in 4Q11. Net income increased 18.0% YoY to SR147mn in 2011 as the company improved operating efficiency through cost controls, thereby limiting the impact of higher raw material prices. Cost containment also limited the impact on margins, restricting the decline÷EBÌTDA margin stood at 26.7% and net margin at 20.7% during the year, as compared to 27.1% and 21.4%, respectively, in 2010. x Recent deveIopments On March 11, 2012, Herfy announced that the AGM would be held to approve the distribution of 15% cash dividend. On August 25, 2011, Herfy announced it had secured a SR45mn loan from the Saudi Ìndustrial Development Fund to finance its cake and pastry plant project, expected to start production in the coming six months. AGRÌCULTURE & FOOD ~ MAY 2012 HERFY FOOD SERVÌCES ALSO KNOWN AS: HERFY NOT COVERED Current price (SR) 86.5 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 100/69 Market cap ($ mn) 769 Shares outstandi ng (mn) 30 Price perform (%) 1M 3M 12M Absol ute (3.1) (7.0) 9.8 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 4.4 1.2 12M 3.3 0.9 Reuters code 6002.SE Bloomberg code HERFY AB www.herfy.com WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 0.14 Free fl oat 32.1 VALUATION MULTIPLES 09A 10A 11A P/E (x) 25.2 23.2 19.7 P/B (x) 9.1 7.6 6.6 P/S (x) 5.6 5.0 4.1 Di v Yi eld (%) - 3.5 3.5 DPS - 3.0 3.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 70 75 80 85 90 95 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Herfy Foods (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Savol a Group 47.6 Ahmed Hamad Mohammed Al Sai d 20.3 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 466 518 580 709 22.2 15.0 EBÌTDA SRmn 118 141 158 189 20.1 17.2 Net Ìncome SRmn 91 115 124 147 18.0 17.1 Assets SRmn 355 411 499 587 17.7 18.3 Equi ty SRmn 262 317 380 440 15.6 18.8 Total Debt SRmn 30 18 34 41 21.9 11.3 Cash & Equi v SRmn 21 20 50 58 15.4 39.5 EBÌTDA Mgn % 25.2 27.3 27.2 26.7 - - Net Mgn % 19.6 22.1 21.4 20.7 - - ROE % 37.0 39.6 35.7 35.8 - - ROA % 26.8 30.0 27.3 27.0 - - Di v Payout % - - 72.4 61.4 - - EPS SR 3.04 3.82 4.14 4.89 18.0 17.1 BVPS SR 8.74 10.56 12.67 14.55 15.6 18.8 Source: Tadawul, Zawya, Company, NCBC Research 100 AI-Jouf AgricuIture DeveIopment Co (AI Jouf) was estabIished in 1988. Headquartered in AI Jouf, the company processes and seIIs agricuIturaI and animaI products. AI Jouf seIIs across Saudi Arabia as weII as neighboring countries through its marketing outIets. x Business brief Al Jouf's core activities are processing and marketing agricultural and animal products. The company's product portfolio includes potatoes and potato seeds, onion and onion seeds, and fruits such as peaches, plums, apples, apricots and grapes. Ìt also offers products such as olive oil, honey, dates, wheat, barley, and alfalfa fodder for livestock and fodder dealers. Other projects undertaken by the company include milk production and processing (under the brand Al-Safwa Dairies), and sheep breeding and fattening. x FinanciaIs Revenues increased 18.8% to SR293mn from SR247mn in 2010. Top-line growth was supported by higher sales. Furthermore, EBÌTDA margin improved to 44.5% during the year from 43.5% in 2010, aided by a decline in the share of cost of sales in total revenues. Consequently, net income grew 27.7% to SR85mn in 2011 from SR66mn in 2010. x Recent deveIopments On March 31, 2012, the Board of Directors announced that the AGM would be held on April 18, 2012, to approve the distribution of cash dividend of SR2.0 per share for 2011. On December 18, 2011, the Governor of Al-Jouf, Prince Fahd bin Badr, inaugurated the Olive Ìndustrial Complex in the Basta area. The factory is expected to have a daily production capacity of 200 tons of olive. AGRÌCULTURE & FOOD | MAY 2012 AL-JOUF AGRÌCULTURE ALSO KNOWN AS: AL JOUF, JADCO NOT COVERED Current price (SR) 37.7 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 45/24 Market cap ($ mn) 251 Shares outstandi ng (mn) 25 Price perform (%) 1M 3M 12M Absol ute (10.5) 1.6 40.7 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 14.5 3.9 12M 19.0 5.1 Reuters code 6070.SE Bloomberg code JADCO AB www.al j ouf.com.sa WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 0.15 Free fl oat 95.2 VALUATION MULTIPLES 09A 10A 11A P/E (x) 15.0 14.2 11.1 P/B (x) 1.8 1.7 1.6 P/S (x) 3.5 3.8 3.2 Di v Yi eld (%) 5.3 5.3 5.3 DPS 2.0 2.0 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 23 28 33 38 43 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Jouff Agriculture (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 213 266 247 293 18.8 11.3 EBÌTDA SRmn 96 107 107 131 21.6 10.8 Net Ìncome SRmn 54 63 66 85 27.7 15.8 Assets SRmn 545 578 610 706 15.7 9.0 Equi ty SRmn 472 535 558 600 7.4 8.3 Total Debt SRmn 6 1 0 18 NM 46.1 Cash & Equi v SRmn 28 94 65 26 (59.8) (2.3) EBÌTDA Mgn % 45.1 40.2 43.5 44.5 - - Net Mgn % 25.5 23.7 26.8 28.8 - - ROE % 12.1 12.5 12.1 14.6 - - ROA % 10.3 11.2 11.2 12.9 - - Di v Payout % 23.0 79.4 75.5 59.1 - - EPS SR 2.18 2.52 2.65 3.38 27.7 15.8 BVPS SR 18.89 21.41 22.33 23.98 7.4 8.3 Source: Tadawul, Zawya, Company, NCBC Research 101 Qassim AgricuIture Co. (GACO), estabIished in 1984 and headquartered in Qassim, invests in agricuIturaI and Iivestock businesses. It has two business divisions - Farming and Manufacturing. GACO is engaged in agricuIturaI and animaI farming, harvesting and importing of grains and seeds. x Business brief GACO mainly undertakes crop production, food processing and animal farming activities. The company produces 2,500 tons of dates, 25,000 tons of corn and 42,000 tons of wheat annually. GACO is also a distributor of dates and dairy products. The company invests in the construction of cooling stores as well as transportation and import of fodder, cereals and agricultural equipment to meet internal requirements. x FinanciaIs GACO's revenues fell 21.8% YoY to SR63mn in 2011. The company reported lower losses (SR2mn) in EBÌTDA during the year. Net loss for the year stood at SR16mn, compared to losses of SR18mn in 2010, due to improved levels of productivity for wheat and maize, and restructuring of projects. Furthermore, the operating efficiency was enhanced due to administrative and technical skills that helped in resolving many issues. x Recent deveIopments On April 4, 2012, GACO announced that the change in the company's name from 'Al Qassim Agricultural Company' to 'Al Qassim Holding' would be considered in the upcoming EGM. On April 2, 2012, GACO announced the filing of a lawsuit against Najdiyah Marketing Company for breach of terms of the lease agreement of the company's dairy factory. On July 26, 2011, the company leased out its poultry project to National Poultry Company for a period of 15 years and a total value of SR150mn. AGRÌCULTURE & FOOD | MAY 2012 QASSÌM AGRÌCULTURE ALSO KNOWN AS: GACO NOT COVERED Current price (SR) 24.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/8 Market cap ($ mn) 320 Shares outstanding (mn) 50 Price perform (%) 1M 3M 12M Absolute (16.7) (17.0) 110.5 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 68.1 18.2 12M 58.0 15.5 Reuters code 6020.SE Bloomberg code QAACO AB www.gaco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.20 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 3.0 3.1 3.3 P/S (x) 14.2 14.8 19.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5 15 25 35 45 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Qassim Agriculture (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 88 84 81 63 (21.8) (10.4) EBÌTDA SRmn 14 6 (7) (2) (77.4) (149.3) Net Ìncome SRmn 0 (7) (18) (16) (9.1) (482.5) Assets SRmn 574 562 539 510 (5.3) (3.8) Equity SRmn 405 399 381 365 (4.3) (3.5) Total Debt SRmn 61 58 43 15 (64.7) (37.2) Cash & Equiv SRmn 2 0 3 1 (66.7) (20.1) EBÌTDA Mgn % 15.5 7.6 (9.0) (2.6) - - Net Mgn % 0.3 (8.2) (21.8) (25.4) - - ROE % 0.1 (1.7) (4.5) (4.3) - - ROA % 0.1 (1.2) (3.2) (3.1) - - Div Payout % - - - - - - EPS SR 0.01 (0.14) (0.35) (0.32) (9.1) (482.5) BVPS SR 8.11 7.97 7.62 7.30 (4.3) (3.5) Source: Tadawul, Zawya, Company, NCBC Research 102 EstabIished in 1982, Anaam InternationaI is headquartered in Jeddah, Saudi Arabia. The company imports, produces and seIIs frozen food and animaI feed. Anaam aIso invests in industriaI projects and Iivestock trade. The company's factories and pIants are Iocated in Jouf and Qassim. x Business brief Anaam is engaged in the import, export, supply, trade, transportation and breeding of livestock in Saudi Arabia. The company also trades in marine equipment. Other activities include production and transportation of meat, management and operation of slaughter houses, processing of meat imports, wholesale trade of frozen food, production of animal feed, and investments in industrial projects. Anaam has a production capacity of 66,000 tons per year of animal feed. The company is also involved in real estate development. x FinanciaIs Anaam's revenues rose 53.7% to SR215mn in 2011 from SR140mn in 2010 mainly due to the 57% rise in the food division's sales. The company's EBÌTDA margins narrowed to 4.1% from 7.4% in 2010. Net profit improved 5.5% YoY to SR12mn in 2011. This was ascribed to the collection of previous debt, an adjustment of SR7.6mn in provisions and a gain of SR3mn from the sale of property and equipment. x Recent deveIopments On October 11, 2011, the company announced plans to expand its dry and frozen foods businesses, along with the livestock-feed unit. AGRÌCULTURE & FOOD ~ MAY 2012 ANAAM ÌNTERNATÌONAL ALSO KNOWN AS: ANAAM NOT COVERED Current price (SR) 72.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 82/36 Market cap ($ mn) 211 Shares outstanding (mn) 11 Price perform (%) 1M 3M 12M Absolute (1.7) 6.2 55.9 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 104.6 27.9 12M 76.8 20.5 Reuters code 4061.SE Bloomberg code ANAAM AB www.anaam.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.13 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 69.9 66.3 P/B (x) 7.1 6.4 5.9 P/S (x) 12.6 5.7 3.7 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 35 45 55 65 75 85 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Anaam Holding (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Prince Abdullah bin Turki bin Abdul Aziz Al Saud 9.9 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 103 63 140 215 53.7 27.7 EBÌTDA SRmn 9 6 10 9 (13.8) 0.8 Net Ìncome SRmn 5 (8) 11 12 5.5 33.6 Assets SRmn 248 233 237 243 2.6 (0.7) Equity SRmn 120 112 123 135 9.7 4.0 Total Debt SRmn 22 19 15 33 110.5 13.9 Cash & Equiv SRmn 14 21 4 4 2.3 (32.3) EBÌTDA Mgn % 8.4 10.2 7.4 4.1 - - Net Mgn % 4.9 (12.8) 8.1 5.6 - - ROE % 4.3 (7.0) 9.6 9.3 - - ROA % 2.0 (3.4) 4.8 5.0 - - Div Payout % - - - - - - EPS SR 0.46 (0.74) 1.04 1.09 5.5 33.6 BVPS SR 11.01 10.24 11.28 12.37 9.7 4.0 Source: Tadawul, Zawya, Company, NCBC Research 103 HaIwani Brothers Company (HB) produces, markets and distributes food products in and outside Saudi Arabia. HB has over 26 brands and 15 pIants in Saudi Arabia and Egypt. EstabIished in 1952, the company is headquartered in Jeddah, Saudi Arabia. x Business brief HB produces cheese, ice-creams, frozen and processed meat, jams, grains, juices, dates and Arabic sweets, as well as manufacturing tissues. The company has the capacity to produce 12,100 tons of tahina, 20,100 tons of Arabic sweets, 22,950 tons of meat, 3,000 tons of cheese, 3,348 tons of Arabic sweets, 4,500 tons of dairy products and 9,996 tons of jam per year. x FinanciaIs HB's revenues grew 11.2% YoY to SR814mn in 2011. However, top-line growth was offset by higher raw material costs. Ìncreased cost of sales lowered the EBÌTDA margin 138 bps to 15.7% as the company did not pass on higher costs to consumers. EBÌTDA grew just 2.2% YoY to SR127mn. Net income rose a marginal 0.2% to SR81mn in 2011 from SR80mn in 2010. Growth in revenues was also impacted by a slowdown in operations in Egypt due to the political and economic conditions in the country. x Recent deveIopments On April 11, 2012, HB announced a dividend of SR2 per share for 2011. On March 15, 2012, the company expanded operations in Egypt, raising its annual production capacity of processed meat by 50%. On August 16, 2011, HB signed an 18-month contract worth SR77mn with Union Engineering Projects Company to complete the civil and steel structure work of the second phase of the company's industrial complex. AGRÌCULTURE & FOOD ~ MAY 2012 HALWANÌ BROTHERS ALSO KNOWN AS: HALWANÌ, HB NOT COVERED Current price (SR) 42.9 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 69/30 Market cap ($ mn) 327 Shares outstandi ng (mn) 29 Price perform (%) 1M 3M 12M Absol ute (7.3) (11.2) 19.8 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 18.7 5.0 12M 23.7 6.3 Reuters code 6001.SE Bloomberg code HB AB www.hal wani .com.sa WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 0.09 Free fl oat 44.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 28.7 15.3 15.2 P/B (x) 2.6 2.4 2.3 P/S (x) 2.0 1.7 1.5 Di v Yi eld (%) 2.3 3.5 4.7 DPS 1.0 1.5 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 35 45 55 65 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ H B (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Dal ah Ìndustri al Ìnvestment Co. 55.5 Mohamed Abdel Hameed Mahmood Hal wani 6.9 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 664 617 732 814 11.2 7.0 EBÌTDA SRmn 71 89 125 128 2.2 21.4 Net Ìncome SRmn 58 43 80 81 0.2 11.3 Assets SRmn 646 570 653 689 5.5 2.2 Equi ty SRmn 485 463 508 538 6.0 3.5 Total Debt SRmn 66 0 0 13 NM (42.3) Cash & Equi v SRmn 188 144 117 121 3.6 (13.6) EBÌTDA Mgn % 10.8 14.5 17.1 15.7 - - Net Mgn % 8.8 6.9 11.0 9.9 - - ROE % 15.5 9.0 16.6 15.4 - - ROA % 10.8 7.0 13.1 12.0 - - Di v Payout % 36.7 67.0 53.3 71.0 - - EPS SR 2.04 1.49 2.81 2.82 0.2 11.3 BVPS SR 16.97 16.21 17.76 18.82 6.0 3.5 Source: Tadawul, Zawya, Company, NCBC Research 104 Dammam-based Saudi Fisheries Company (SFC) commenced operations in 1981. With ALASMAK as its fIagship brand, the company operates in fishing, aquacuIture, and seafood manufacturing and distribution. SFC manufactures products at its processing pIants and deIivers them using its own fIeet. x Business brief SFC generates revenues from four operating segments: Value-added Products (2,000 tons production capacity), Ìndividually Quick-Frozen or ÌQF Products (1,000 tons capacity), Fish Products and a new product called Alasmak Tuna. The Value-added Products segment comprises fish sticks, fish burgers, shrimp nuggets, king shrimp and golden crispy shrimp. The ÌQF division offers ÌQF shrimp in retail packs. A company-owned chain of retail shops and fish service counters handles the distribution process. The company operates four processing plants (Dammam, Jeddah, Jazan and Riyadh). x FinanciaIs SFC's revenues declined 11.6% YoY to SR87mn in 2011 compared to SR98mn in 2010 mainly due to a decline in shrimp farm production as a result of the white spot disease. EBÌTDA losses increased to SR13mn compared to SR10mn in 2010. Furthermore, net losses increased to SR31m in 2011 from SR27mn in 2010 due to the extraordinary losses incurred on account of the disease that spread in the shrimp farm. As a result, a huge stockpile of shrimp stock had to be discarded. x Recent deveIopments On September 14, 2011, an increase in the company's capital through a 168% rights issue was approved in the EGM. AGRÌCULTURE & FOOD ~ MAY 2012 SAUDÌ FÌSHERÌES ALSO KNOWN AS: ALASMAK, SFC NOT COVERED Current price (SR) 33.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 51/19 Market cap ($ mn) 472 Shares outstanding (mn) 54 Price perform (%) 1M 3M 12M Absolute (11.7) (10.7) 22.1 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 87.5 23.3 12M 84.1 22.4 Reuters code 6050.SE Bloomberg code SFÌCO AB www.saudi-fisheries.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.11 Free float 38.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 13.1 16.3 4.3 P/S (x) 15.0 18.1 20.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 17 27 37 47 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Fisheries (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public investment Fund 39.9 Prince Mete'eb Bin Abdul Aziz Al Saud 21.4 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 123 118 98 87 (11.6) (11.1) EBÌTDA SRmn (12) (11) (10) (13) 34.8 2.5 Net Ìncome SRmn (26) (29) (27) (31) 14.4 6.0 Assets SRmn 200 187 197 536 172.4 38.8 Equity SRmn 164 136 109 413 280.0 36.0 Total Debt SRmn 2 9 48 71 47.8 248.3 Cash & Equiv SRmn 2 2 2 355 20162.5 461.9 EBÌTDA Mgn % (9.8) (9.4) (9.8) (14.9) - - Net Mgn % (21.0) (24.3) (27.5) (35.5) - - ROE % (14.6) (19.1) (22.0) (11.8) - - ROA % (12.1) (14.8) (14.0) (8.4) - - Div Payout % - - - - - - EPS SR (0.48) (0.54) (0.50) (0.57) 14.4 6.0 BVPS SR 3.07 2.53 2.03 7.72 280.0 36.0 Source: Tadawul, Zawya, Company, NCBC Research 105 Riyadh-based Food Products Company was estabIished in 1989 to provide food products in Saudi Arabia. The company focuses on processing, marketing, distributing and exporting vaIue-added food items. Its target markets incIude Asia and the MiddIe East. x Business brief Food Products Company operates under the brand name 'WAFRA' and has a 11.1% stake in Jannat Agricultural Ìnvestment Co. The company classifies its operations under four business segments: Meat Factory (offers beef and chicken burgers, kebabs, frankfurters); Vegetable Factory (offers frozen French fries, potato wedges and a variety of peanuts); Pasta Factory (produces a wide range of pastas under various brands); and Breakfast Cereals (supplies corn flakes, frosted flakes and rice crispies). x FinanciaIs The company's revenues grew 11.4% YoY to SR82mn in 2011. However, higher cost of sales (as a percentage of total revenues) due to rising raw material prices lowered the EBÌTDA 2.2% YoY to SR16mn during the year. The company's net income declined 43.8% YoY to SR10mn in 2011 due to higher general and administrative expenses and lower rent income (as it conceded the right of rent after it sold one of its building premises for SR9.7mn). x Recent deveIopments On April 11, 2012, the company announced it had signed a contract with Tabuk Agricultural Development Company for SR20.07mn to buy processed potatoes. The company also announced signing a SR9.75mn contract with an Ìtalian company to supply a new line of pastas and noodles, which would be reflected in its financial statements for 2Q12. On December 4, 2011, the company declared it had signed a memorandum of understanding with East Asia Company to contribute SR5mn to the initial capital of Agricultural Development and Ìnvestment Company, which is currently in the process of being established. AGRÌCULTURE & FOOD | MAY 2012 FOOD PRODUCTS COMPANY NOT COVERED Current price (SR) 28.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/18 Market cap ($ mn) 154 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (7.1) (1.7) 57.9 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 75.1 20.0 12M 61.2 16.3 Reuters code 2100.SE Bloomberg code FPCO AB www.wafrah.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.09 Free float 87.7 VALUATION MULTIPLES 09A 10A 11A P/E (x) 100.6 33.1 58.8 P/B (x) 3.3 3.0 2.8 P/S (x) 8.1 7.9 7.1 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Food (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdulhakeem A. O. Al Sheikh 10.2 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 76 71 73 82 11.4 2.5 EBÌTDA SRmn 18 14 16 16 (2.2) (4.2) Net Ìncome SRmn 14 6 17 10 (43.8) (11.1) Assets SRmn 185 200 210 219 4.5 5.7 Equity SRmn 170 177 194 205 5.2 6.4 Total Debt SRmn - - - - NM NM Cash & Equiv SRmn 5 5 67 74 10.3 141.3 EBÌTDA Mgn % 23.7 19.5 22.0 19.3 - - Net Mgn % 18.4 8.1 23.8 12.0 - - ROE % 8.5 3.3 9.4 4.9 - - ROA % 7.6 3.0 8.5 4.6 - - Div Payout % 0.0 0.0 0.0 0.0 - - EPS SR 0.70 0.29 0.87 0.49 (43.8) (11.1) BVPS SR 8.50 8.83 9.72 10.23 5.2 6.4 Source: Tadawul, Zawya, Company, NCBC Research 106 Tabuk AgricuIture DeveIopment Company (TADCO), estabIished in 1983 and headquartered in Tabuk, primariIy manufactures and markets agricuIturaI products. It is aIso engaged in environment protection and water resource management. Its products incIude fruits, vegetabIes, forage products, grains & seeds, and processed products such as oIive oiI and honey. x Business brief TADCO operates through five business units: Forage (produces alfalfa to sell mainly to dairy farms), Olive (produces and processes olive oil through olive tree cultivation), Vegetable (mainly yields and markets onions and potatoes), Fruit (cultivates fruits such as peaches, apricots, plums, nectarines and pears) and Grain (produces wheat and wheat seeds). x FinanciaIs TADCO's revenues increased 15.4% YoY to SR174mn in 2011 due to higher sales price realization for some products. EBÌTDA improved significantly by 52.6% YoY to SR58mn during the period as cost of production declined for some of the products. Consequently, net income surged 185.1% YoY to SR33mn in 2011. x Recent deveIopments On April 11, 2012, TADCO announced that it has signed a SR20mn contract with Food Products Company to sell processed potatoes. On April 3, 2012, the company informed it had signed a SR20mn contract with Al Safi Dairy Company (Saudi Arabia) to provide the latter with green feed from April to November 2012. On March 25, 2012, the company announced that it had signed a Memorandum of Understanding to start a due diligence with Naji El Dine Group (Morocco) for acquiring three of the latter's subsidiaries. The acquisition would be financed by the company and its partners. AGRÌCULTURE & FOOD | MAY 2012 TABUK AGRÌCULTURE ALSO KNOWN AS: TADCO NOT COVERED Current price (SR) 30.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 39/21 Market cap ($ mn) 160 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (15.7) (13.8) 31.9 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 54.1 14.4 12M 69.5 18.5 Reuters code 6040.SE Bloomberg code TAACO AB www.tadco-agri.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.07 Free float 72.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 85.2 51.7 18.1 P/B (x) 1.7 1.7 1.6 P/S (x) 3.6 4.0 3.5 Div Yield (%) 1.7 1.7 1.7 DPS 0.5 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Tabuk Agriculture (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdullah Abdul Aziz Saleh Al Rajhi 25.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 172 168 151 174 15.4 0.3 EBÌTDA SRmn 51 35 38 58 52.6 4.3 Net Ìncome SRmn 24 7 12 33 185.1 12.0 Assets SRmn 435 423 422 450 6.6 1.2 Equity SRmn 369 364 357 371 4.0 0.1 Total Debt SRmn 4 3 6 22 281.6 80.5 Cash & Equiv SRmn 4 10 5 5 0.7 6.4 EBÌTDA Mgn % 29.7 20.8 25.2 33.3 - - Net Mgn % 13.7 4.2 7.7 19.1 - - ROE % 6.2 1.9 3.2 9.1 - - ROA % 5.3 1.6 2.7 7.6 - - Div Payout % 42.4 142.0 86.1 30.2 - - EPS SR 1.18 0.35 0.58 1.66 185.1 12.0 BVPS SR 18.47 18.18 17.85 18.56 4.0 0.1 Source: Tadawul, Zawya, Company, NCBC Research 107 Ash-Sharqiyah DeveIopment Company (Ash-Sharqiyah), was estabIished in 1986 and seIIs meat and agricuIturaI products. The company aIso undertakes agricuIturaI projects, Iand rehabiIitation and irrigation work. Ash-Sharqiyah owns stakes in AI Hassa Food Industries, United Dairy Farms and Pure Breed PouItry. x Business brief Ash-Sharqiyah is engaged in the production and marketing of wheat, barley, fodder crops (such as alfalfa and rhodes grass), wheat and barley straw and potatoes. The company has an annual production capacity of 14.5 million tons of milk, 14,000 tons of wheat and 550 kilograms of honey. Other projects undertaken by the company include breeding of calf and sheep and production of bio-fertilizers. Ash-Sharqiyah also owns a shopping center in Dammam. x FinanciaIs The company's revenues declined 10.5% YoY to SR32mn in 2011. Higher cost of production inputs and lower productivity levels of some agricultural crops led to a fall in EBÌTDA margins to 0.1% from 18.8% in 2010. Furthermore, higher administrative and marketing expenses increased annual net losses to SR9mn in 2011 from SR5mn the previous year. x Recent deveIopments On December 7, 2011, the sale of the company's 50% owned subsidiary, Al Ahsa Food Ìndustries Company, was approved by the BOD for a total value of SR8mn. AGRÌCULTURE & FOOD ~ MAY 2012 ASH-SHARQÌYAH ALSO KNOWN AS: SHADCO NOT COVERED Current price (SR) 53.0 Pri ci ng as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 95/29 Market cap ($ mn) 106 Shares outstandi ng (mn) 8 Price perform (%) 1M 3M 12M Absol ute (6.2) (15.2) 27.7 Market (6.2) 6.2 7.6 Sector (3.8) 4.7 23.9 Avg daiIy turnover (mn) SR US$ 3M 61.7 16.4 12M 50.7 13.5 Reuters code 6060.SE Bloomberg code ASACO AB www.asharqi yah.com.sa WEIGHTI NG & FREEFLOAT (%) TASÌ (free fl oat wei ght) 0.07 Free fl oat 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 4.7 5.0 5.7 P/S (x) 12.3 11.2 12.5 Di v Yi eld (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 40 60 80 100 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Eastern Agriculture (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 51 32 35 32 (10.5) (14.7) EBÌTDA SRmn 21 7 7 0 (99.7) (90.2) Net Ìncome SRmn (12) (5) (5) (9) 80.8 (8.4) Assets SRmn 133 115 106 97 (8.5) (9.9) Equi ty SRmn 104 85 80 70 (11.6) (12.2) Total Debt SRmn 11 8 1 - NM NM Cash & Equi v SRmn 1 0 1 0 (71.4) (21.8) EBÌTDA Mgn % 41.2 22.0 18.8 0.1 - - Net Mgn % (23.5) (14.9) (14.4) (29.1) - - ROE % (10.9) (5.1) (6.2) (12.3) - - ROA % (8.7) (3.9) (4.6) (9.1) - - Di v Payout % - - - - - - EPS SR (1.60) (0.64) (0.68) (1.23) 80.8 (8.4) BVPS SR 13.87 11.29 10.61 9.38 (11.6) (12.2) Source: Company, NCBC Research ^ % Var indicates variance from NCBC forecasts 108 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Telecom Ticker Company Page No. 7020 Etihad Etisalat 114 7010 STC 115 7030 Zain KSA 116 7040 Etihad Atheeb 117 7050 Saudi Integrated 118 The liberalization of the telecom sector in Saudi Arabia since 2006 has led to significant growth in the sector. The sector's subscriber base has grown from 19.7mn in 2006 to 53.7mn in 2011. The introduction of mid- and low-end smart phones, improved technical capability coupled with the young population of Saudi Arabia has led to an increase in the mobile broadband penetration rate to 39.6% at the end of 2011 from 0.1% in 2006. We believe broadband potential remains significant; pressure on pricing and margins are concerns. Saudi Arabia remains the largest market for mobile services in the GCC, with the mobile penetration rate having reached 188% at the end of 2011. With penetration reaching this level, we believe the focus of operators is moving away from acquiring new incremental subscribers to deriving more value from existing subscribers. Therefore, we expect the penetration rate to grow at a slower pace of 5% YoY in 2012. Ìnternet penetration reached 47.6% in 2011 with 13.6mn subscribers from 41% penetration rate and 11.4mn subscribers in 2010, while broadband subscribers are likely to increase to 19mn by 2015 from 11.3mn at the end of 2011. At 39.6% in 2011, broadband penetration in KSA was still below that in Bahrain, Qatar and the UAE (more than 50% in all three countries). KSA's fixed-line penetration increased almost 10% to 4.63mn subscriptions at the end of 2011 from 4.13m at the end of 2010. Growth in the segment remained subdued during 2008÷2010 with a higher number of people preferring mobiles and the corporate segment remaining restrained amid the global economic downturn. Nevertheless, subscriptions grew significantly during 2011, largely due to the buoyant construction activities in the country as well as the entry of new player 'Atheeb' that resulted in competition-led growth. Over the longer term, factors such as reducing household size, growing population and increased demand from corporates are expected to drive fixed-line growth. Margin stability key to outlook Ìn 2011, the telecom sector in Saudi Arabia faced margin pressure (mainly the international voice segment). Access charges were the main cost items dragging the bottom line, while other gross and operating costs were relatively well managed across the sector. Decline in ARPU as a result of the aggressive pricing policy pursued by Zain KSA exerted further pressure on margins. However, going forward, we believe companies would continue to focus on the data segment (primarily mobile broadband) and subscriber conversions from prepaid to postpaid. This, in turn, will stabilize ARPU and offset some of the margin pressure. According to CÌTC data, 300k net additions were made to the post-paid subscriber base in 2011 compared to just 200k in 2010. MAY 2012 TELECOM Broadband to drive the next phase of growth 110 TELECOM NCB CAPÌTAL MAY 2012 Exhibit 79: Fixed-line and mobile penetration rate Exhibit 80: Broadband & internet penetration rate % % Source: EÌU, BMÌ, ÌTU, CÌTC (as per latest data available) Source: EÌU, BMÌ, ÌTU, CÌTC, (as per latest data available) The rapid growth in the Saudi Arabian telecom market has positioned it as the largest in the GCC in revenue terms in 2011. However, the sector was behind its GCC peers in terms of return on equity, mainly due to the losses incurred by Zain KSA and Atheeb. The sector is trading at a P/E multiple of 9.8x, above the GCC average of 8.1x. Exhibit 81: GCC TeIco's revenues, 2009-11 Exhibit 82: GCC TeIco's RoE and P/E comparison, 2011 USD mn % Source: Reuters, Tadawul, Bloomberg The companies list is not exhaustive. Source: Reuters, Tadawul, Bloomberg, NCBC Research Size of the bubble represents market cap. as on 4 April 2012 Saudi listed telecoms market STC is the largest company in the Kingdom's telecommunication sector (market cap of SR81bn as on 4 April 2012), followed by Mobily (market cap of SR46.4bn). Zain had its initial public offering in 2008 and launched commercial services in August 2008. Atheeb listed in March 2009, while Saudi Ìntegrated Telecom Company made its debut on the bourse in July 2011. Exhibit 83: Sector details Units as indicated Country % weight in Index as of March 2012 NIM (%), 2011 Avg. RoE (%), 2011 Etihad Etisalat Co (Mobily) 4.0 25.4 30.0 Saudi Telecom Co (STC) 2.1 13.9 17.0 Mobile Telecommunication Co. (Zain) 1.1 (28.8) (37.0) Atheeb Telecom 0.1 NA NA Source: Bloomberg, Tadawul, Reuters; *start periods may differ based on the availability of data Despite intense competition, Mobily reported robust revenue growth of 25.2% during 2011. This can be largely ascribed to the higher usage (minutes and data transmission) and increased broadband subscribers. STC's revenues grew 7.5% to SR55.6bn during 2011 due to an increase in revenues from international 0% 40% 80% 120% 160% 200% 10% 12% 13% 15% 16% 18% 2004 2005 2006 2007 2008 2009 2010 2011 Fixed-line Mobile (RHS) 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% 2004 2005 2006 2007 2008 2009 2010 2011 Broadband Ìnternet (RHS) 0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000 22,500 2009 2010 2011 KSA UAE Kuwait Qatar Oman Bahrain -60.0 -40.0 -20.0 0.0 20.0 40.0 7 9 11 13 R O E ( % ) P/E (x) KSA UAE Kuwait Qatar Oman Bahrain 111 TELECOM NCB CAPÌTAL MAY 2012 operations and data services. However, net profit (excluding capital gain) declined 18.1% due to increased cost of services and operating expenses. Zain KSA's revenues grew 12.9% YoY, but it incurred losses of SR1.9bn during 2011. Atheeb proved to be a significant gainer in the sector in terms of growth, with a fourfold increase in revenues to SR186.6mn. Exhibit 84 Revenue of companies, 2009-2011 Exhibit 85: Net profit margin, 2009-2011 SR mn % Source: Tadawul Source: Tadawul As of 31 December 2011, the P/B multiples of STC and Mobily stood at 1.7x and 2.5x, respectively, while that of Zain stood at 3x. ROE of STC and Mobily stood at 17% and 30%, respectively. With Zain and Atheeb continuing to report losses, their ROE remained negative. Exhibit 86: Comparison of P/B and RoE, 2010 Exhibit 87: Comparison of P/B and RoE, 2011 % % Source: Bloomberg, Tadawul Size of the bubble represents market cap. as on 4 April 2012 Source: Bloomberg, Tadawul Size of the bubble represents market cap. as on 4 April 2012 Zain was the most active stock in the telecom sector (turnover of SR62.5mn per day in 2011), followed by Mobily (SR60.2mn per day). 0 12000 24000 36000 48000 60000 72000 84000 96000 2009 2010 2011 Atheeb Zain Mobily STC 10% 14% 18% 22% 26% 30% 2009 2010 2011 STC Mobily -75 -45 -15 15 45 75 0 1 2 3 4 5 6 7 8 R O E ( % ) P/BV (x) STC Mobily Zain KSA Atheeb -200 -150 -100 -50 0 50 100 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 R O E ( % ) P/BV (x) STC Mobily Zain KSA Atheeb 112 TELECOM NCB CAPÌTAL MAY 2012 Exhibit 88: Avg. daily turnover, Jan11 - Dec11 Exhibit 89: Share price movement, Jan11 - Dec11 SR mn Rebased to 100 on 1 st Jan-11 Source: Bloomberg, Tadawul Source: Bloomberg, Tadawul The Saudi Arabian telecommunication sector is witnessing strong price based competition with the focus shifting from voice to data. The drive to capture the evolving data segment, which is largely underpenetrated now, is leading to significant pricing pressure. Nevertheless, we believe the long-term growth drivers for the sector remain intact due to the increased adoption of value-added services amid lower tariff & handset prices and the evolution of smart phones (sales of smart handheld devices increased 154% in 2010, according to CÌTC). A relatively young population and their willingness to adopt new technologies as well as the rising disposable income in KSA should support the demand for these services. We believe the existing pressure on margins is likely to rationalize after CÌTC's comment of avoiding price wars given it is adverse to long term investment in the sector. NCBC Recommendations in the Sector We have a cautiously optimistic view on the Saudi Arabian telecom sector as a whole. Concerns exist over declining ARPUs, limited room for operating efficiencies, high mobile penetration levels and a saturating voice market. However, increasing focus on the largely underpenetrated data sub-segment (primarily value added services and broadband access), increasing equipment demand, potential international exposure and strong underlying macroeconomic factors are likely to supplement the sector's growth in the near term. We are currently covering three stocks in the sector: Saudi Telecom Co, Mobily and Zain KSA. Exhibit 90: Coverage stocks details Stock Current Rating PT (SR) Comments Saudi Telecom Co. (7010.SE) Overweight 50.2 Key positives of the stock include its dominance in DSL and its higher and more secure ARPU levels. Key concerns on the stock are focused on the limited information available on its international operations as well as FX exposure through its international investments. Mobily (7020.SE) Overweight 75.5 Key positives of the stock include its dominance in wireless internet access and its focused strategy. Key concerns on the stock are focused on its declining ARPU levels and acquisition costs of new customers. Zain KSA (7030.SE) Neutral 7.0 Key positives of the stock include its attractive and innovative packages and increasing market share. Key concerns on the stock are focused on its high debt levels and the financing of this as well as ownership concerns. Source: NCBC Research 60 62 32 (5) 5 15 25 35 45 55 65 Mobily Zain STC 60 80 100 120 140 Jan-11 Mar-11 May-11 Aug-11 Oct-11 Dec-11 Mobily Zain KSA STC 113 Etihad Etisalat Company (Mobily) is the second largest mobile operator in Saudi Arabia. As of December 2011, the company had a market share of around 40%. Stable ARPU, increased equipment sales, gains in data, and a potential upside in the size and frequency of dividends are key positives. The possibility of continued price-led competition, particularly in the international call segment, is a key threat. x Business brief Mobily was established in 2004 with UAE-based Emirates Telecommunications Corporation (Etisalat) as the majority owner. Mobily commenced operations in 2005 by providing wireless telecommunication services. The company offers mobile telephony services in the Kingdom using GSM, 3/3.5G and Wimax technologies. Mobily's broadband subscribers totaled 8.7mn in 2011. x Financials Mobily's revenues grew 25.2% YoY to SR20,052mn in FY11 attributable largely to increased % of revenue from data (22% against 18% in 2010) as broadband subscribers grew from 2.3mn in 2010 to 8.7mn in 2011. Ìncrease in postpaid subscribers and expansion of business sector revenue by 50% and 85%, respectively, also supported the revenue growth. EBÌTDA surged 20.9% YoY to SR7,454mn in FY11 as margins declined due to increased competition in the international call and data business, as well as higher contribution of low-margin smart phones and tablet PCs' during the year. Due to this, net income came in at SR5,083mn, up 20.7% YoY. Net margin declined by 95bps YoY to 25.4% in 2011 as compared to 26.3% in 2010. x Recent Developments Ìn February 2012, Mobily signed a refinancing agreement worth SR10bn with seven local banks to refinance three of its existing short, medium and long term loans. Ìn March, 2012, the company announced collaboration with Etihad Atheeb Telecom (GO) to provide fixed voice services. TELECOM ~ MAY 2012 ETÌHAD ETÌSALAT ALSO KNOWN AS: MOBÌLY OVERWEIGHT Current price (SR) 65.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 70/50 Market cap ($ mn) 12,270 Shares outstanding (mn) 700 Price perform (%) 1M 3M 12M Absolute (1.1) 12.9 26.4 Market (6.2) 6.2 7.6 Sector (1.1) 15.3 24.5 Avg daily turnover (mn) SR US$ 3M 76.8 20.5 12M 53.4 14.2 Reuters code 7020.SE Bloomberg code EEC AB www.mobily.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 4.47 Free float 58.4 VALUATION MULTIPLES 11A 12A 13E P/E (x) 9.1 8.2 7.8 P/B (x) 2.5 2.2 1.9 P/S (x) 2.3 2.0 1.9 Div Yield (%) 4.9 6.1 7.0 DPS 3.3 4.0 4.6 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 45 50 55 60 65 70 75 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Etihad Etisalat Co Source: Bloomberg TOP 5 SHAREHOLDERS (%) Etisalat ÷ UAE 27.4 General Organization for Social Ìnsurance (GOSÌ) 11.2 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 16,013 20,052 22,546 23,681 25.2 13.9 EBÌTDA SRmn 6,165 7,454 8,223 8,770 20.9 12.5 Net Ìncome SRmn 4,211 5,083 5,595 5,867 20.7 11.7 Assets SRmn 33,430 37,501 39,377 41,033 12.2 7.1 Equity SRmn 15,580 18,388 21,183 23,820 18.0 15.2 Total Debt SRmn 7,972 7,073 5,995 5,004 (11.3) (14.4) Cash & Equiv SRmn 1,661 1,690 1,307 1,648 1.7 (0.3) EBÌTDA Mgn % 38 37 36.5 37.0 - - Net Mgn % 26.3 25.4 24.8 24.8 - - ROE % 30.3 29.9 28.3 26.1 - - ROA % 13.1 14.3 14.6 14.6 - - Div Payout % 33.2 44.8 50.0 55.0 - - EPS SR 6.0 7.3 8.0 8.4 20.7 11.7 BVPS SR 22.3 26.3 30.3 34.0 18.0 15.2 Source: Tadawul, Zawya, Company, NCBC Research 114 Despite liberalization of the sector, STC remains the leading telecom company in Saudi Arabia by revenues and market share. Bottom line progress in its international operations and continued growth in the Saudi market are STC's key positives; price-led competition and FX exposure are key areas of concern. x Business brief Saudi Telecom (STC) was established in 1998 as Saudi Arabia's first telecom operator. STC classifies its operating segments in terms of service offerings: GSM, PSTN, and DATA. The GSM segment includes mobile, 3G, prepaid cards, international roaming and messaging services; PSTN comprises fixed- line, card telephones, interconnect and international call services. DATA services consist of leased data transmissions, DSL and Ìnternet services. More than 30% of 2011 revenues came from abroad, including Turkey, Malaysia and Ìndia. x Financials Despite increased domestic competition, the group's revenues grew 7.5% in 2011 due to improved contribution from international business and a 131% YoY increase in broadband revenues. EBÌTDA grew 8.9% YoY due to a 7.0% decline in SG&A expenses in 2011 compared to an 18% rise in 2010. EBÌTDA margin is expected to remain close to 35% in 2012, since the adverse impact of lower margin handset sales has mostly been felt in 2011. However, a 20% YoY increase in financial charges led to an 18.1% decline in net income in FY11. The company is expected to continue to invest in upgrading networks and increasing its international presence, which might increase its debt levels. x Recent developments Ìn December 2011, STC entered into an agreement with Saudi Research and Marketing Group to purchase SRMG's 20% share in Ìntigral. STC abandoned a plan to bid for Ìraq's fourth mobile phone license after delays in awarding the contract. TELECOM ~ MAY 2012 SAUDÌ TELECOM ALSO KNOWN AS: STC OVERWEIGHT Current price (SR) 41.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 43/33 Market cap ($ mn) 22021 Shares outstanding (mn) 2,000 Price perform (%) 1M 3M 12M Absolute 3.3 15.0 14.1 Market (6.2) 6.2 7.6 Sector (1.1) 15.3 24.5 Avg daily turnover (mn) SR US$ 3M 58.7 15.7 12M 36.1 9.6 Reuters code 7010.SE Bloomberg code STC AB www.stc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 2.23 Free float 16.3 VALUATION MULTIPLES 11A 12A 13E P/E (x) 8.8 10.7 10.1 P/B (x) 1.5 1.5 1.6 P/S (x) 1.6 1.5 1.4 Div Yield (%) 7.3 4.8 6.9 DPS 3.0 2.0 2.9 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 35 40 45 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ STC (RHS) Source:Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 70.0 General Organization for Social Ìnsurance (GOSÌ) 7.0 Public Pension Authority (PPA) 6.6 Source: Tadawul, NCBC Research Company financials 2010 2011 2012E 2013E YoY CAGR (%) Revenues SRmn 51,787 55,662 59,733 60,987 7.5 5.6 EBÌTDA SRmn 19,621 21,371 21,496 22,246 8.9 4.3 Net Ìncome SRmn 9,436 7,729 8,163 8,425 (18.1) (3.7) Assets SRmn 110,781 111,402 116,684 120,405 0.6 2.8 Equity SRmn 53,464 54,082 51,072 55,497 1.2 1.3 Total Debt SRmn 21,741 24,969 24,707 23,436 14.8 2.5 Cash & Equiv SRmn 6,051 6,589 9,906 10,190 8.9 19.0 EBÌTDA Mgn % 37.9 38.4 36.0 36.5 - - Net Mgn % 18.2 13.9 13.7 13.8 - - ROE % 18.1 14.4 15.5 15.8 - - ROA % 8.6 7.0 7.2 7.1 - - Div Payout % 63.6 51.8 70.1 67.9 - - EPS SR 4.7 3.9 4.1 4.2 (18.1) (3.7) BVPS SR 26.7 27.0 25.5 27.7 1.2 1.3 Source: Tadawul, Zawya, Company, NCBC Research 115 Mobile Telecommunications Company Saudi Arabia (Zain KSA)-a member of Mobile Telecommunications Group (Zain), Kuwait-was established in 2007 in Saudi Arabia to provide wireless telecommunications services. Good progress in growing its subscriber base is a key positive of Zain; continued management change and further delay in balance sheet restructuring are key risks. x Business brief Zain KSA is the third mobile operator in the Kingdom, which offers both voice and data services. The company launched commercial services in August 2008 and is said to have 10mn subscribers as of December 2011. Zain KSA became EBÌTDA positive in 2010. However, the company's ability to generate net profits is hampered by a high debt burden and continuous management change, as the company announced its new CEO on 3 March, 2012 (third CEO in six months). x Financials Due to its increased subscriber base and broadband customers, Zain KSA recorded a 13% YoY revenue growth in 2011. COGS declined 19.0% in FY11 compared to 37% in FY10, leading to a positive EBÌTDA of SR899mn compared to SR331mn in 2010. The 7.0% fall in financial charges in FY11 vis-a-vis 47.0% in FY10 limited net losses to SR1, 925mn YoY. x Recent developments On March 3, 2012, the Board appointed Mr. Fraser Curley as the new CEO of the company. On 26 January, 2012, the company received investor approval for a SAR 9.75bn syndicated Murabaha financing to extend the murabaha's maturity till 27 July, 2012. TELECOM ~ MAY 2012 ZAÌN KSA ALSO KNOWN AS: ZAÌN NEUTRAL Current price (SR) 9.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 12/5 Market cap ($ mn) 3,415 Shares outstanding (mn) 1,400 Price perform (%) 1M 3M 12M Absolute (8.5) 24.5 30.7 Market (6.2) 6.2 7.6 Sector (1.1) 15.3 24.5 Avg daily turnover (mn) SR US$ 3M 722.9 192.7 12M 237.7 63.4 Reuters code 7030.SE Bloomberg code ZAÌNKSA AB www.sa.zain.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.06 Free float 45.0 VALUATION MULTIPLES 11A 12A 13E P/E (x) - - - P/B (x) 3.0 3.8 4.6 P/S (x) 1.9 1.7 1.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 4 6 8 10 12 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Zain (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mobile Telecommunications Co 25.0 Faden Commercial & Real Estate Establishment 6.8 Factory Steak Saudi ELPLA 6.8 Source: Tadawul NCBC Research Company financials 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 5,934 6,699 7,694 8,356 12.9 12.1 EBÌTDA SRmn 491 975 1,599 2,058 98.6 61.2 Net Ìncome SRmn (2,358) (1,925) (903) (616) (18.4) (36.1) Assets SRmn 28,055 26,744 26,027 25,590 (4.7) (3.0) Equity SRmn 6,129 4,293 3,390 2,775 (30.0) (23.2) Total Debt SRmn 13,980 6,396 0 9,748 (54.3) (11.3) Cash & Equiv SRmn 702 780 484 641 11.1 (3.0) EBÌTDA Mgn % 8.3 14.6 20.8 24.6 - - Net Mgn % (39.7) (28.7) (11.7) (7.4) - - ROE % (32.0) (36.9) (23.5) (20.0) - - ROA % (8.4) (7.0) (3.4) (2.4) - - Div Payout % 0.0 0.0 0.0 0.0 - - EPS SR (1.68) (1.38) (0.65) (0.44) (18.4) (36.1) BVPS SR 4.38 3.07 2.42 1.98 (30.0) (23.2) Source: Tadawul, Zawya, Company, NCBC Research 116 Etihad Atheeb Telecommunications Company (Atheeb) was established in 2008 to provide fixed-line telecommunication services in KSA. The company is a joint venture between Bahrain Telecom and KSA-based Atheeb Trading Co, Al-Nahla Trading Co, and Traco Group. x Business brief Atheeb was established to build, operate and maintain the second fixed-line telecommunication network in Saudi Arabia. The company offers video services, internet telephony and broadband internet, as well as voice telephone communications and data services. The company offers voice and internet services across 11 cities in KSA under the ¨GO¨ brand. x Financials Atheeb's revenues increased 31.2% YoY to SR179mn in 9M12 compared to SR137mn in 9M11. Furthermore, a 56.0% decline in COGS restricted EBÌTDA losses to SR72mn (SR319mn loss in 9M11). Other income increased to SR287mn, leading to a net profit of SR21mn in 9M12 against a net loss of SR453mn in 9M11. The company expanded its proposed SR600mn rights issue to SR1.175bn to meet additional funding needs. x Recent developments On March 19, 2012, Atheeb announced collaboration with Etihad Etisalat Company (Mobily) to provide fixed voice services to several commercial and residential complexes which would be agreed upon in due course. Ìn March 2012, Atheeb Telecom (GO) announced collaboration with Saudi Telecom Company (STC) on offering commercial services. TELECOM ~ MAY 2012 ETÌHAD ATHEEB ALSO KNOWN AS: ATHEEB NOT COVERED Current price (SR) 18.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 31/14 Market cap ($ mn) 756 Shares outstanding (mn) 157 Price perform (%) 1M 3M 12M Absolute (5.3) NA 1.4 Market (6.2) 6.2 7.6 Sector (1.1) 15.3 24.5 Avg daily turnover (mn) SR US$ 3M NA NA 12M NA NA Reuters code 7040.SE Bloomberg code EAT AB www.go.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.16 Free float 35.0 VALUATION MULTIPLES 10A 11A TTM P/E (x) - - - P/B (x) 4.6 61.9 42.3 P/S (x) 80.0 15.2 12.4 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 17 22 27 32 5,500 6,000 6,500 7,000 7,500 8,000 May-11 May-11 Apr-12 Apr-12 May-12 TASÌ Atheeb (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Atheeb Trading Co. Ltd. 16.1 Bahrain Telecom 15.0 Al Nahla Commercial & Real Estate 13.7 TRACO 5.8 Source: Tadawul, NCBC Research Company financials* FY09 FY10** FY11 9M12* YoY (%) CAGR (%) (09-12E) Revenues SRmn - 35 187 179 0.3 - EBÌTDA SRmn - (310) (265) (72) (0.8) - Net Ìncome SRmn - (379) (575) 21 (1.0) - Assets SRmn - 2,114 2,113 1,779 (0.2) - Equity SRmn - 621 46 67 (0.6) - Total Debt SRmn - 1,008 1,610 1,125 (0.3) - Cash & Equiv SRmn - 77 187 22 (0.9) - EBÌTDA Mgn % - (875.7) (141.8) (40.2) - - Net Mgn % - (1,069.4) (308.3) 11.7 - - ROE % - (61.0) (172.5) 17.9 - - ROA % - (17.9) (26.7) 1.0 - - Div Payout % - - - - - - EPS SR - (2.41) (3.66) 0.13 (1.0) - BVPS SR - 3.96 0.29 0.43 (0.6) - Source: Tadawul, Zawya, Company, NCBC Research, *company's year ending is 31 March, **Atheeb started operations in January 2010 117 Saudi Company for Integrated Telecommunications Company (SITC) was formed as a partnership between Integrated Telecom (ITC) and PCCW (one of the biggest telecommunication providers in Hong Kong). In June 2011, SITC launched its IPO to offer 35mn shares, representing 35% of its share capital and was listed on the Tadawul Stock Exchange on June 28, 2011. x Business brief SÌTC was established to offer next-generation solutions for broadband, interconnection and satellite services in Saudi Arabia. According to the terms of the agreement, PWCC would manage the business for five years on a build-operate-and-transfer basis. ÌTC, the founder company, is one of the leading telecommunication firms in the Kingdom, with six international gateways. One of the key benefits that ÌTC enjoys is gains from significant investments in independent and state-of-the-art fiber network of 12,000 KM connecting key cities in the Kingdom and another 10,000 KM in metro areas. x Financials SÌTC has not completed one full year of operations; hence, financials have not been discussed. x Recent developments The Board of the Capital Markets Authority (CMA) announced suspension of trading in SÌTC's shares from 01 April 2012 as the company did not disclose its 2011 financial results by the stipulated deadline set by the CMA. TELECOM ~ MAY 2012 SAUDÌ ÌNTEGRATED ALSO KNOWN AS: ALMUTAKA SA NOT COVERED Current price (SR) 27.20 Pricing as of 31-03-2012* STOCK DETAILS 52-week range H/L (SR) 53/10 Market cap ($ mn) 2,720 Shares outstanding (mn) 100 Price perform (%) 1M 3M 12M Absolute NA NA NA Market (6.2) 6.2 7.6 Sector (1.1) 15.3 24.5 Avg daily turnover (mn) SR US$ 3M 259.9 69.3 6M - - Reuters code 7050.SE Bloomberg code ALMUTAKA AB www.itc.net.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.16 Free float 35.0 VALUATION MULTIPLES 08A 09A 10A P/E (x) - - - P/B (x) - - - P/S (x) - - - Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 6 16 26 36 46 56 5,500 6,000 6,500 7,000 7,500 8,000 Jun-11 Sep-11 Dec-11 Mar-12 TASÌ Almutaka (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Mawarid Ìnvestment Co. Ltd. 28.0 PCCW Cascade Middle East 15.0 Ìntegrated Telecommunications Ltd 8.0 Al Mawarid Electronic Co Ltd 7.0 Public Pension Agency 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn - - - - - - EBÌTDA SRmn - - - - - - Net Ìncome SRmn - - - (43) - - Assets SRmn - - - 314 - - Equity SRmn - - - 307 - - Total Debt SRmn - - - - - - Cash & Equiv SRmn - - - - - - EBÌTDA Mgn % - - - - - - Net Mgn % - - - - - - ROE % - - - (14.1) - - ROA % - - - (13.8) - - Div Payout % - - - - - - EPS SR - - - (0.43) - - BVPS SR - - - 3.07 - - Source: Tadawul, Zawya, Company, NCBC Research , * Trading suspended since 01-04-2012 118 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Insurance Ticker Company Page No. 8010 Tawuniya 122 8030 MEDGULF 123 8020 Malath Insurance 124 8310 AMANA Insurance 125 8200 Saudi Re 126 8290 Solidarity 127 8210 BUPA Arabia 128 8260 Gulf General 129 8250 AXA-Cooperative 130 8230 ARCCI 131 8170 Trade Union 132 8190 U C A 133 8080 SABB Takaful 134 8130 Alahli Takaful 135 8180 Sagr Insurance 136 8280 Al Alamiya 137 8220 Weqaya Takaful 138 8160 Arabia Insurance 139 8060 Walaa Insurance 140 8120 Gulf Union 141 8070 Arabian Shield 142 8270 Buruj Insurance 143 8090 SANAD 144 8300 Wataniya Insurance 145 8240 ACE Arabia 146 8040 ALLIANZ SF 147 8050 Saudi Salama 148 8140 Al-Ahlia Insurance 149 8150 ACIG 150 8100 SAICO 151 8110 Saudi Indian 152 8311 Saudi Enaya 153 Saudi Arabia is one of the largest insurance markets in the GCC. However, insurance penetration in the Kingdom is among the lowest in the region. Ìn KSA, non-life policies generate most of the premium income (93%) compared to life policies (7%). According to the Economist Ìntelligence Unit (EÌU), health insurance is the biggest line of business (53% of the insurance market in 2010), followed by general insurance (41%), which includes property and automobile insurance. Favorable demographic profile, regulatory support and wider acceptance for Takaful insurance are likely to drive growth in the industry. The insurance sector in Saudi Arabia continued to expand in 2011÷sector revenue rose 23.9% YoY to USD3.7bn from USD3.0bn in 2010. The sector continues to offer significant growth opportunities, given that insurance penetration in the Kingdom is low with the ratio of total estimated premiums to GDP pegged at 1.1% in 2010 (according to Swiss Re). High population growth with rising proportion of young people and supportive government regulations (mandatory health insurance for expats and most nationals) reinforce the outlook for growth in the industry. However, with around 50 insurance players in the Kingdom, the industry faces intense competition. Listed insurance companies in KSA are trading at a higher P/B multiple of 5.9x compared to the GCC average of 2.0x. However, the average ROE for players in the Kingdom is as low as -4.0% compared to the GCC average of 3.8%. This is because majority of the companies continue to make losses (39% of the total listed companies in the sector incurred losses in 2011), which indicates that the sector is still in the nascent stage of development. Exhibit 91: Revenue of GCC insurance companies, 2009-11 Exhibit 92: Comparison of ROE and P/E of GCC companies, 2011 USD mn % Source: Zawya, Bloomberg, Tadawul, NCBC Research Source: Zawya, Bloomberg, Tadawul, NCBC Research As of March 28, 2012, market capitalization of the 32 companies in KSA's insurance sector stood at USD7.2bn. The erstwhile state-owned monopoly, Tawuniya, is the largest company in Saudi Arabia, accounting for 16.4% of the total market capitalization, followed by Mediterranean & Gulf Ìnsurance & Reinsurance Co. (MEDGULF, 10.7%). Given that insurance is a capital intensive business with a high gestation period and that KSA's insurance sector is still in 0 500 1000 1500 2000 2500 3000 3500 4000 2009 2010 2011 KSA UAE Qatar Kuwait Bahrain Oman -8% -4% 0% 4% 8% 12% 16% 0.0 5.0 10.0 15.0 20.0 25.0 30.0 KSA UAE Qatar Kuwait Bahrain Oman MAY 2012 ÌNSURANCE Health insurance drives insurance market 120 ÌNSURANCE NCB CAPÌTAL MAY 2012 its early stages, several listed companies are experiencing low levels of profitability or losses. Exhibit 93: Sector details Units as stated Country % weight in Index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Fransi Co-operative Ìnsurance Co. (Allianz SF) 0.94 0.4 1.0 The Company for Co-operative Ìnsurance (Tawuniya) 0.37 13.3 23.0 The Mediterranean & Gulf Ìnsurance and Reinsurance Co. (MEDGULF) 0.16 11.9 21.1 Malath Co-operative Ìnsurance and Reinsurance Co. (Malath) 0.14 3.2 5.2 Solidarity Saudi Takaful Co (Solidarity) 0.10 NM (17.3) Saudi Enaya Cooperative Ìnsurance Company 0.10 NM NM SABB Takaful (SABB) 0.08 (5.9) (3.2) Amana Cooperative Ìnsurance Co (Amana) 0.08 (49.4) (24.9) Bupa Arabia for Co-operative Ìnsurance Co. (Bupa) 0.07 2.2 8.3 Saudi United Cooperative Ìnsurance Co. (Walaa) 0.06 2.5 3.0 Gulf Union Co-operative Ìnsurance Co. (Gulf Union) 0.06 (34.5) (34.9) United Co-operative Assurance (UCA) 0.06 6.6 16.5 Weqaya Takaful insurance & reinsurance Co. (Weqaya) 0.06 (107.4) (30.7) Al-Rajhi Company for Cooperative Ìnsurance (ARCCÌ) 0.06 (11.7) (26.0) Gulf General Cooperative Ìnsurance Company (Gulf General) 0.06 (29.9) (44.2) Arabian Shield Co-operative Ìnsurance Co. (Arabian Shield) 0.05 5.5 5.0 The Saudi Arabian Cooperative Ìnsurance Co. (SAÌCO) 0.05 (2.1) (11.4) Alahli Takaful Company (ATC) 0.05 (349.8) (4.8) Al-Ahlia Ìnsurance Co. (Al-Ahlia) 0.05 (2.8) (14.3) Arabia Ìnsurance Co-operative Co. (AÌCC) 0.05 4.8 (10.3) Trade Union Co-operative Ìnsurance (Trade Union) 0.05 7.2 8.8 Al-Sagr Cooperative Ìnsurance Co. (Al Sagr) 0.05 15.5 13.4 ACE Arabia Cooperative Ìnsurance Co. (ACE) 0.05 13.3 11.9 AXA Cooperative Ìnsurance Co. (AXA-Cooperative) 0.05 (6.7) (13.6) Al Alamiya for Cooperative Ìnsurance Company (Al Alamiya) 0.05 NM NM Buruj Cooperative Ìnsurance Company (Buruj) 0.05 34.9 20.1 Wataniya Ìnsurance Company (Wataniya) 0.05 (7.9) (13.0) Ìslamic Arab Ìnsurance Co. (SALAMA) 0.04 1.8 3.0 Sanad Ìnsurance and Reinsurance Co-operative Co. (Sanad) 0.04 (15.4) (23.1) Saudi Ìndian Company for Cooperative Ìnsurance (Saudi Ìndian) 0.04 (1.7) (2.2) Allied Co-operative insurance group (ACÌG) 0.04 (2.0) (9.2) Saudi Re for Co-operative Reinsurance Co. (Saudi Re) 0.01 (45.9) (3.6) Source: Zawya, Bloomberg, Tadawul: Company data The sector's profit fell 31% to USD129.3mn in 2011 from USD188.0mn in 2010 as new companies incurred higher losses. Tawuniya's revenue grew 16.4% to SR3.2bn, while net income fell about 9.5%. MEDGULF's revenue rose 7.6% YoY to SR2.0bn, while BUPA's revenue increased 19.7% YoY to SR1.9bn, in 2011. Exhibit 94: Revenue of companies, 2009-2011 Exhibit 95: Profitability of companies, 2009-2011 SR mn % Source: Zawya, Bloomberg, Tadawul, NCBC Research Source: Zawya, Bloomberg, Tadawul, NCBC Research; 0 2000 4000 6000 8000 10000 12000 14000 2009 2010 2011 Tawuniya Medgulf Bupa Arabia Others 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2009 2010 2011 Tawuniya Medgulf Bupa Arabia 121 The Company for Cooperative Insurance (NCCI), wideIy known as Tawuniya, was estabIished in Riyadh in 1986. Tawuniya provides IsIamic as weII as conventionaI generaI and famiIy insurance services. It aIso undertakes reinsurance and agency activities. The company's subsidiaries incIude United Insurance Company (50% stake), WaseeI Co. (45%) and Cooperative ReaI Estate Investment Co. (33.33%). x Business brief Tawuniya's product portfolio falls under two broad categories: retail and corporate. The retail segment provides motor vehicle, medical & accident, fire & property, and miscellaneous insurance. The corporate division offers motor vehicle, medical, fire & property, casualty, engineering, marine, aviation and energy insurance services. To aid its insurance services, the company entered into agreements with international re-insurers such as Munich Re. x FinanciaIs Tawuniya's gross written premium increased 6.0% YoY to SR4.10bn for the year ended December 2011. The company's net premium earned rose 16.5% YoY to SR3.1bn. As a result, total revenue grew 16.4% YoY to SR3.3bn. However, net income declined 9.5% YoY as net claims increased 35.5% YoY. Profit margins also fell due to a decline in prices and policyholders' investment income. x Recent deveIopments Ìn March 2012, Tawuniya announced the distribution of SR3.5 per share cash dividend for the year ended 31December 2011. ÌNSURANCE ~ MAY 2012 TAWUNÌYA ALSO KNOWN AS: TAWUNÌYA NOT COVERED Current price (SR) 49.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 67/46 Market cap (SR mn) 980 Shares outstanding (mn) 75 Price perform (%) 1M 3M 12M Absolute (18.7) (15.5) (26.0) Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 23.5 6.3 12M 12.7 3.4 Reuters code 8010.SE Bloomberg code TAWUNÌYA AB www.tawuniya.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.33 T Free float 53.37 F VALUATION MULTIPLES 09A 10A 11A P/E (x) 12.4 7.6 8.4 P/B (x) 2.6 2.1 1.8 P/S (x) 1.7 1.3 1.1 Div Yield (%) 8.2 6.1 7.1 DPS 4.0 3.0 3.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 45 50 55 60 65 70 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Tawuniya (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Pension Authority 23.7 General Organization for Social Ìnsurance (GOSÌ) 22.8 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 1,271 2,064 2,659 3,098 16.5 34.6 Total Revenues SRmn 1,602 2,175 2,829 3,293 16.4 27.2 Net Ìncome SRmn 67 296 485 439 (9.5) 86.9 Assets SRmn 5,097 7,227 7,532 7,384 (2.0) 13.2 Equity SRmn 1,073 1,416 1,769 2,049 15.8 24.0 Ìnvestments SRmn 1,081 1,407 1,816 2,052 13.0 23.8 Technical Reserves SRmn 2,783 1,838 2,198 2,316 5.3 (5.9) Combined Ratio % 110.1 88.4 86.8 91.0 - - Net Mgn % 4.2 13.6 17.1 13.3 - - ROE % 4.6 23.8 30.4 23.0 - - ROA % 1.3 4.8 6.6 5.9 - - Div Payout % 223.1 101.2 46.4 59.8 - - EPS SR 0.9 4.0 6.5 5.9 (9.5) 86.9 BVPS SR 14.3 18.9 23.6 27.3 15.8 24.0 Source: Tadawul, Zawya, Company, NCBC Research 122 Mediterranean & GuIf Insurance & Reinsurance Co. (MEDGULF), a subsidiary of MedguIf Group, is a Ieading insurance and reinsurance company in the MiddIe East with operations across Saudi Arabia, Bahrain, Lebanon, Turkey, Jordan, the UAE, and the UK. EstabIished in 2006, the company currentIy operates through offices in Riyadh, Jeddah and Khobar. x Business brief MEDGULF provides insurance products including motor, health, aviation, banker's blanket bonds, burglary, contractor's all risk, credit, employer's liability, fidelity guarantee, marine cargo and hull insurance. The company offers one-stop solution by providing insurance and reinsurance services along with risk management and third-party administration. x FinanciaIs Net insurance premium, which contributes around 93% to MEDGULF's total revenue, grew 4.4% YoY to SR1.8bn in 2011. Consequently, total revenue rose 7.6% YoY to SR2bn. Despite an increase in combined ratio to 94% in 2011 from 91% in 2010, the company's net income grew 3.3% YoY to SR240mn. The rise in net income can be attributed to increased insurance operation surplus. x Recent deveIopments Ìn March 2012, MEDGULF approved the distribution of cash dividend of SR2 per share for the year ended December 31, 2011. Ìn August 2011, the company appointed Khaled Abdullah Shathry and Emad Jalal Baban as independent board of directors. Ìn May 2011, MEDGULF entered into a three-year contract with SABÌC to provide health insurance to the latter's employees and family members as per contract terms and conditions. During the same month, the company obtained an A- credit rating from Standards & Poor's. ÌNSURANCE ~ MAY 2012 MEDGULF ALSO KNOWN AS: MEDGULF SAUDÌ NOT COVERED Current price (SR) 30.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 38/24 Market cap ($mn) 646 Shares outstanding (mn) 80 Price perform (%) 1M 3M 12M Absolute (11.4) (4.4) (7.1) Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 17.9 4.8 12M 11.2 3.0 Reuters code 8030.SE Bloomberg code MEDGULF AB www.medgulf.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 35.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 16.5 10.4 10.1 P/B (x) 2.6 2.3 2.1 P/S (x) 1.8 1.3 1.2 Div Yield (%) 2.5 4.1 6.6 DPS 0.8 1.3 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ MEDGULF (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) MEDGULF 40.5 Saudi Ìnvestment Bank 19.0 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 1,300 1,792 1,871 4.4 NM Total Revenues SRmn - 1,354 1,870 2,012 7.6 NM Net Ìncome SRmn 5 147 232 240 3.3 255.6 Assets SRmn 807 2,961 3,914 3,922 0.2 69.4 Equity SRmn 788 925 1,069 1,174 9.8 14.2 Ìnvestments SRmn 773 576 593 593 (0.0) (8.5) Technical Reserves SRmn - 1,411 1,945 2,131 9.6 NM Combined Ratio % - 92 91 94 - - Net Mgn % - 10.8 12.4 11.9 - - ROE % 0.7 17.1 23.3 21.4 - - ROA % 0.7 7.8 6.8 6.1 - - Div Payout % - 41.0 43.0 66.6 - - EPS SR 0.07 1.83 2.90 3.00 3.3 255.6 BVPS SR 9.85 11.57 13.36 14.67 9.8 14.2 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 20 Months 123 MaIath Cooperative Insurance and Reinsurance Company (MaIath) was estabIished in 2007. Headquartered in Riyadh, MaIath, was the second insurance company (after Tawuniya) to be Iisted on the Saudi Stock Exchange. In addition to generaI insurance, the company aIso provides facuItative reinsurance products. x Business brief Malath's Corporate Products segment offers health, group life, motor, property, engineering, marine, aviation and energy insurance. Under the Retail division, the company provides health, medical malpractice, travel and motor insurance. Malath derives premium income mainly from motor, medical, property, aviation, marine cargo & hull, energy, and engineering insurance. x FinanciaIs Malath's total revenue increased 15.7% YoY to SR444mn in 2011. The growth can be mainly attributed to a rise in net insurance premium earned, which grew 22.5% YoY to SR398mn from SR325mn in 2010. However, the company's net income declined 22% YoY to SR14mn in 2011 compared to SR18mn in 2010. The fall was mainly due to credit sales and a change in the bad debt provision calculation method based on Saudi Arabian Monetary Agency's requirements, which increased bad debt provision by SR12mn in 2011. Motor claims provision also rose as a result of the new royal decree on blood money. x Recent deveIopments Ìn November 2011, Malath entered into a one-year agreement with Aviva British Co. to provide health insurance services to students on UK scholarship. This contract is worth more than 10% of the company's annual sales in 2010. Ìn May 2011, Standards & Poor's revised the company's outlook to positive from stable and affirmed its credit rating at 'BBB'. ÌNSURANCE ~ MAY 2012 MALATH COOPERATÌVE ALSO KNOWN AS: MALATH NOT COVERED Current price (SR) 24.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/13 Market cap ($mn) 192 Shares outstanding (mn) 30 Price perform (%) 1M 3M 12M Absolute (22.5) 14.6 33.1 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 78.5 20.9 12M 35.2 9.4 Reuters code 8020.SE Bloomberg code MALATH AB www.malath.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.12 Free float 100.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 99.4 39.8 51.0 P/B (x) 2.8 2.7 2.6 P/S (x) 4.3 1.9 1.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Malath Ìnsurance(RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 27 131 325 398 22.5 145.2 Total Revenues SRmn 44 166 383 444 15.7 116.0 Net Ìncome SRmn (33) 7 18 14 (22.0) NM Assets SRmn 447 697 990 1028 3.9 32.0 Equity SRmn 232 252 263 281 6.8 6.5 Ìnvestments SRmn 114 217 215 238 10.5 27.7 Technical Reserves SRmn 121 321 575 567 (1.4) 67.2 Combined Ratio % 256.0 118.2 110.2 105.9 - - Net Mgn % (75.9) 4.4 4.7 3.2 - - ROE % (13.0) 3.0 7.0 5.2 - - ROA % (8.6) 1.3 2.1 1.4 - - Div Payout % - - - - - - EPS SR (1.1) 0.2 0.6 0.5 (22.0) NM BVPS SR 7.7 8.4 8.8 9.4 6.8 6.5 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 21 Months 124 Amana Cooperative Insurance Company (Amana), Iisted on 13 June 2010 on the TASI, provides various insurance products to companies and individuaIs. Headquartered in Riyadh, the company has branches in Jeddah and Khobar. x Business brief Amana was established by three companies: El Seif Co., FAL Holding, and Libano-Suisse Group; these firms together own 60% of its shares. The company provides insurance services through two broad segments: individual and corporate. Under the individual products segment, Amana offers medical, accident (personal accident, motor, travel and others), fire, and marine insurance products. Under the corporate division, the company provides health, fire, car, engineering, property, marine and land shipments, and other miscellaneous insurance products. x FinanciaIs Amana reported net loss of SR17.1mn, 64.5% lower than the previous year's loss of SR48mn. The company's net insurance premium grew tremendously from just SR4mn in 2010 to SR127.9mn in 2011. However, higher operating expenses (due to early start-up stage of business) resulted in net loss for 2011. Nonetheless, Amana was able to reduce its combined ratio to 110.5% in 2011 from 479.6% in 2010. x Recent DeveIopments Ìn January 2012, Amana received approval from Saudi Arabian Monetary Agency (SAMA) to offer travel insurance products for a period of six months. Ìn November 2011, the company announced that SAMA extended provisional approval of 25 insurance products for a period of six months. Ìn October 2011, Amana appointed Saleh Bin Nasser Al Omair as Managing Director and member of BOD, replacing Lucien Joseph. ÌNSURANCE ~ MAY 2012 AMANA COOPERATÌVE ALSO KNOWN AS: AMANA NOT COVERED Current price (SR) 31.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 45/27 Market cap ($ mn) 270 Shares outstanding (mn) 32 Price perform (%) 1M 3M 12M Absolute (14.6) (29.5) (10.0) Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 76.0 20.3 12M 73.3 19.5 Reuters code 8310.SE Bloomberg code AMANA AB www.amana-coop.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.07 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 3.7 4.0 P/S (x) - NM 7.9 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 25 30 35 40 45 50 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Amana (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Amana Gulf Ìnsurance Co. 18.3 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 4 127.9 3,096.2 - Total Revenues SRmn - - 4 128.4 3,076.2 - Net Ìncome SRmn - - (48) (17.1) (64.5) - Assets SRmn - - 352 489 39.0 - Equity SRmn - - 272 255 (6.3) - Ìnvestments SRmn - - 239 105 (56.0) - Technical Reserves SRmn - - 49 79 61.0 - Combined Ratio % - - 479.6 110.5 - - Net Mgn % - - (1,195.7) (13.4) - - ROE % - - (13.7) (4.1) - - ROA % - - (17.8) (6.5) - - Div Payout % - - NA NA - - EPS SR - - (1.51) (0.54) (64.5) - BVPS SR - - 8.49 7.95 (6.3) - Source: Tadawul, Zawya, Company, NCBC Research 125 EstabIished in May 2008, Saudi Reinsurance Co. (Saudi Re) is the first cooperative reinsurance company in Saudi Arabia. Headquartered in Riyadh, the company provides Iife and non- Iife Sharia'a-compIiant reinsurance products. Its products cover treaty and facuItative types of reinsurance in aII cIasses of business in the Kingdom as weII as other countries across the MENA region. x Business brief Saudi Re offers reinsurance-related products such as fire, marine (hull and cargo), general accident, engineering (machinery breakdown and contractor's risks), aviation, motor, third-party liability, as well as life and medical insurances. x FinanciaIs Saudi Re's gross premiums written grew 48.5% YoY to SR159mn in 2011 from SR107mn in 2010. The company's net insurance premium rose 88.6% YoY to SR55mn. As a result, its revenue increased 88.6% to SR75mn in 2011. However, Saudi Re posted a loss of SR34mn in 2011 due to a significant increase in net claims (205%) as well as higher general and administrative expenses (95%). x Recent deveIopments Ìn May 2011, Saudi Re appointed its Sharia'a Board to fulfill clients' requirements and provide Sharia'a-compliant reinsurance solutions in the Takaful industry. Members of the board include Sheikh Dr. Abdulsattar Abu Ghuddah, Sheikh Dr. Mohamed Ali Elgari, and Sheikh Yousef Al-Farraj Ìn April 2011, the company announced that Standard and Poor's Ratings Service had rated its financial strength as BBB+. ÌNSURANCE ~ MAY 2012 SAUDÌ REÌNSURANCE ALSO KNOWN AS: SAUDÌ RE NOT COVERED Current price (SR) 13.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 19/8 Market cap (SR mn) 371 Shares outstanding (mn) 100 Price perform (%) 1M 3M 12M Absolute (7.6) 0.7 33.7 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 126.0 33.6 12M 56.7 15.1 Reuters code 8200.SE Bloomberg code SAUDÌRE AB www.saudi-re.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 42.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 287.8 NM NM P/B (x) 1.4 1.4 1.5 P/S (x) 105.7 30.9 18.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 7 9 11 13 15 17 19 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Re (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Jordanian Ìslamic Finance Bank 5.0 Ahmad Hamad AlGosaibi & Bros. Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 0 8 29 55 88.6 NM Total Revenues SRmn 0 13 45 75 66.4 NM Net Ìncome SRmn 26 5 0 (34) NM NM Assets SRmn 1,033 1,094 1,196 1,256 5.0 6.7 Equity SRmn 1,026 1,006 984 930 (5.5) (3.2) Ìnvestments SRmn 1,012 1,035 1,024 964 (5.8) (1.6) Technical Reserves SRmn 1 15 111 228 104.7 633.7 Combined Ratio % NM 403.9 229.7 237 - - Net Mgn % NM 36.7 0.1 (45.9) - - ROE % 2.5 0.5 0.0 (3.6) - - ROA % 2.5 0.5 0.0 (2.8) - - Div Payout % NA NA NA NA - - EPS SR 0.26 0.05 0.00 (0.34) NM NM BVPS SR 10.26 10.06 9.84 9.30 (2.1) (3.2) Source: Tadawul, Zawya, Company, NCBC Research 126 SoIidarity Saudi TakafuI Company (SoIidarity) was Iisted on the Saudi Stock Exchange (TadawuI) in June 2010. Headquartered in Riyadh, the company provides insurance services in segments such as property, medicaI, marine (cargo and huII), generaI accident and motor. x Business brief Solidarity, which has a paid up capital base of SR555mn, offers insurance products including property insurance, medical insurance, marine (cargo and hull) insurance, general accident insurance, engineering insurance and motor insurance. The company operates through branches in Riyadh, Jeddah, and Khobar. Solidarity plans to open new branches across major cities in Saudi Arabia. x FinanciaIs Solidarity's total gross written premiums (GWP) and net written premiums earned for 2011 totaled SR0.133mn and SR0.020mn, respectively. The company reported a net loss of SR84.3mn in 2011 as it is still in the stage of setting up operations. x Recent deveIopments Ìn April 2012, Solidarity's 33 insurance products' temporary approval was extended for a period of six months. Ìn March 2012, the company received approval from Saudi Arabian Monetary Agency (SAMA) to market and sell medical insurance products. During the same month, Solidarity obtained approval from SAMA and the Council of Cooperative Health Ìnsurance to sell and market group health insurance products. Ìn September 2011, the Board appointed Adel bin Abdulaziz Al-Essa as Chief Executive Officer, replacing Saleh bin Nasser Al-Omair. Ìn May 2011, SAMA approved Solidarity's 18 vehicle insurance products. ÌNSURANCE ~ MAY 2012 SOLÌDARÌTY SAUDÌ ALSO KNOWN AS: SSTC, SOLÌDARÌTY NOT COVERED Current price (SR) 23.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (S) 32/14 Market cap ($mn) 348 Shares outstanding (mn) 55 Price perform (%) 1M 3M 12M Absolute (15.6) (4.8) 27.0 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 138.6 37.0 12M 98.1 26.1 Reuters code 8290.SE Bloomberg code SOLÌDARÌ AB www.sstc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.09 T Free float 40.00 F VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 2.6 2.8 P/S (x) - NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Solidarity (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Solidarity Company 27.5 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 0 0 NM - Total Revenues SRmn - - 0 0 NM - Net Ìncome SRmn - - (38) (84) 123.3 - Assets SRmn - - 519 505 (2.7) - Equity SRmn - - 503 470 (6.4) - Ìnvestments SRmn - - 510 412 (19.1) - Technical Reserves SRmn - - 0 0 NM - Combined Ratio % - - NM NM NM - Net Mgn % - - NM NM NM - ROE % - - NM NM NM - ROA % - - NM NM NM - Div Payout % - - NA NA NA - EPS SR - - (0.68) (1.52) 123.3 - BVPS SR - - 9.06 8.48 (6.4) - Source: Tadawul, Zawya, Company, NCBC Research 127 Bupa Arabia for Cooperative Insurance, a medicaI insurance company, was estabIished in Jeddah in 2008. Prior to its Iisting on TadawuI, Bupa Arabia conducted business under a joint venture between Nazer Group and BUPA Group (UK). x Business brief Bupa Arabia offers medical insurance to companies, businesses and families. The company's corporate services include customized healthcare plans, which have been divided into BUPA Direct and BUPA Corporate Health Care Scheme. BUPA Direct targets companies with 10÷50 employees through three main schemes: Executive, Classic, and Essential. BUPA Corporate Health Care Scheme targets companies with over 50 employees. Bupa Arabia also offers a medical insurance scheme under the Bupa Corporate scheme for companies with more than 100 employees. x FinanciaIs Bupa Arabia's total revenue grew 19.7% YoY to SR1,928mn in 2011, mainly due to 19.8% YoY growth in net insurance premium. However, the company's net income declined 40.3% YoY to SR42mn due to a change in the method of calculating bad debts provision as per changes in regulatory requirements. Consequently, bad debt provision increased by SR33mn in 2011. Ìn addition, general and administration expenses increased, resulting in a higher combined loss ratio of 97.3% compared to 95.2% in 2010. x Recent deveIopments Ìn October 2011, Council of Cooperative Ìnsurance (CCHÌ) approved the company's requalification for CCHÌ health insurance. Ìn July 2011, Bupa signed a one-year renewable agreement to receive Sharia advisory and audit services on its activities and operations with the Shariyah Review Bureau. Ìn June 2011, the company renewed its activities license for three years from Saudi Arabian Monetary Agency. ÌNSURANCE ~ MAY 2012 BUPA ARABÌA ALSO KNOWN AS: BUPA ARABÌA NOT COVERED Current price (SR) 23.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/17 Market cap ($ mn) 254 Shares outstanding (mn) 40.0 Price perform (%) 1M 3M 12M Absolute (16.0) (14.2) 16.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 50.4 13.4 12M 28.2 7.5 Reuters code 8210.SE Bloomberg code BUPA AB www.bupa.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 20.7 16.4 27.5 P/B (x) 2.7 2.4 2.2 P/S (x) 1.0 0.7 0.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 17 22 27 32 37 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Bupa Arabia (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Bupa Middle East Holdings 22.5 Bupa Ìnvestments Limited 15.0 Modern Software Solutions Co 5.0 Nadher Group Holding Co 5.0 Assas Company for Healthcare 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Net Ìns. Premium SRmn - 1,205 1,609 1,928 19.8 26.5 Total Revenues SRmn - 1,208 1,613 1,931 19.7 26.4 Net Ìncome SRmn - 56 71 42 (40.3) (13.2) Assets SRmn - 1,403 1,669 1,830 9.7 14.2 Equity SRmn - 437 493 527 6.8 9.7 Ìnvestments SRmn - 309 313 312 (0.2) 0.6 Technical Reserves SRmn - 798 1,012 1,104 9.1 17.6 Combined Ratio % - 95.3 95.2 97.3 - - Net Mgn % - 4.6 4.4 2.2 - - ROE % - 12.8 15.2 8.3 - - ROA % - 4.0 4.6 2.4 - - Div Payout % - - - - - - EPS SR - 1.40 1.77 1.06 (40.3) (13.2) BVPS SR - 10.93 12.32 13.16 6.8 9.7 Source: Tadawul, Zawya, Company, NCBC Research 128 GuIf GeneraI Cooperative Insurance Company (GuIf GeneraI) was estabIished in December 2009 through the merger of Saudi GeneraI Insurance Co. (SGI) and GuIf Cooperation Insurance Co. (GCI). Headquartered in Jeddah, the company provides various generaI insurance services in Saudi Arabia. x Business brief Gulf General offers insurance services in segments including fire, accident, property, engineering, vehicle, marine (cargo and hull), health, aviation and energy. The company has also been authorized to provide personal accident, workmen compensation, life, theft/burglary, money, fidelity, pecuniary and liability insurance services. Gulf General has offices in Jeddah, Riyadh, and Dammam. x FinanciaIs Gulf General's net insurance premium rose 419% YoY to SR187mn in 2011 from SR36mn in 2010. Consequently, total revenue grew 418% YoY to SR212mn. However, due to an increase in the provision for doubtful debts, ÌBNR provisions and pre-operating expenses, the company reported a net loss of SR63mn during the year compared to a loss of SR43mn in 2010. x Recent deveIopments Gulf General received approval from Saudi Arabian Monetary Agency (SAMA) to market and sell group insurance products in April 2012, as well as vehicle insurance and insurance that covers personal accident for individuals as well as companies in March 2012. The company also obtained SAMA's six-month extension of temporary approval to sell 28 insurance products in March 2012. Furthermore, it received approval from SAMA in January 2012 for insurance products covering commercial general liability. SAMA granted six-month extension of temporary approval to Gulf General to market 31 insurance products in September 2011. Ìn July 2011, the company received property insurance claim (worth about SR39mn) for fire in Alesayi Plaza in Jeddah÷Gulf General claims 95% of the value is reinsured. ÌNSURANCE ~ MAY 2012 GULF GENERAL ALSO KNOWN AS: GGÌ, GGCÌ NOT COVERED Current price (SR) 38.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 58/28 Market cap ($ mn) 203 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (15.4) (12.8) (2.8) Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 56.6 15.1 12M 59.4 15.8 Reuters code 8260.SE Bloomberg code GGCÌ AB www.ggi-sa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 5.0 5.7 P/S (x) - 18.6 3.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 35 45 55 65 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Gulf General (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Saudi General Ìnsurance Co. 15.0 Gulf Cooperative Ìnsurance Co. 15.0 Al Fadel Ìnvestments 5.0 Mohammed Said Tamr Commercial Ìnvestment 5.0 Abella Ìnternational Real Estate Development Co. Ansaf Ìnternational Real Estate Development Co. 5.0 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 36 187 418.5 - Total Revenues SRmn - - 41 212 417.5 - Net Ìncome SRmn - - (43) (63) 45.9 - Assets SRmn - - 369 475 28.6 - Equity SRmn - - 154 134 (13.0) - Ìnvestments SRmn - - 151 117 (22.8) - Technical Reserves SRmn - - 120 278 132.6 - Combined Ratio % - - 181.7 134.3 - - Net Mgn % - - (106.2) (29.9) - - ROE % - - (28.3) (44.2) - - ROA % - - (11.8) (15.0) - - Div Payout % - - - - - - EPS SR - - (2.17) (3.17) 45.9 - BVPS SR - - 7.68 6.68 (13.0) - Source: Tadawul, Zawya, Company, NCBC Research 129 AXA Cooperative Insurance Company (AXA Cooperative) is part of the AXA Group headquartered in France. EstabIished in JuIy 2008, AXA Cooperative is engaged in providing various insurance and reinsurance services for individuaI and institutionaI cIients in Saudi Arabia. x Business brief AXA Cooperative provides insurance policies suitable for individual as well as business needs. The company offers motor, property, golf, relocation, yacht, health, travel and home insurance products for individuals. Ìt also provides marine, fire, engineering, life and liability insurance services to corporate customers. AXA Cooperative operates through offices in Riyadh, Jeddah and Dammam in Saudi Arabia. x FinanciaIs Net insurance premium stood at SR361mn in 2011 compared to SR128mn for the 19 months ended December 2010. Total revenues were reported at SR371mn for 2011. However, the company recorded a net loss of SR25mn due to a rise in net claims incurred, which increased by SR197mn compared to previous reported numbers for the 19 months. x Recent DeveIopments Ìn January 2012, AXA Cooperative announced Saudi Arabian Monetary Agency's (SAMA) approval for the extension of provisional approval of 28 insurance products for a period of six months. Ìn October 2011, the company announced that the losses it incurred due to the fire in Center Point (Riyadh) were 77.5% reinsured. Ìn September 2011, AXA Cooperative announced that it appointed Waseela Ìnsurance Agency as the company's sales and marketing agent. ÌNSURANCE ~ MAY 2012 AXA COOPERATÌVE ALSO KNOWN AS : AXA NOT COVERED Current price (SR) 33.9 Pricing of as 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 73/31 Market cap ($ mn) 181 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (14.4) (9.1) (3.1) Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 48.5 12.9 12M 52.5 14.0 Reuters code 8250.SE Bloomberg code AXA AB www.axa-gulf.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 3.5 3.5 4.0 P/S (x) - 5.2 1.8 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 70 80 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ AXA (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) AXA Ìnsurance Gulf Bahrain 32.0 AXA Mediterranean Sea Holding 18.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Net Ìns. Premium SRmn - - 128* 361 182.1 - Total Revenues SRmn - - 131* 371 183.0 - Net Ìncome SRmn - 0 1* (25) NM NM Assets SRmn - 205 550 601 9.2 71.4 Equity SRmn - 195 195 171 (12.7) (6.4) Ìnvestments SRmn - 204 205 229 11.3 5.8 Technical Reserves SRmn - - 222 337 51.9 - Combined Ratio % - - 101.5 108.6 - - Net Mgn % - - 0.7 (6.7) - - ROE % - 0.1 0.5 (13.6) - - ROA % - 0.1 0.2 (4.3) - - Div Payout % - - - - - - EPS SR - 0.01 0.04 (1.24) NM NM BVPS SR - 9.73 9.77 8.53 (12.7) (6.4) Source: Tadawul, Zawya, Company, NCBC Research *2010 numbers are for 19 months from 3 June 2009 to 31 December 2010 130 EstabIished in 1990 in Bahrain, AI Rajhi Company for Cooperative Insurance (ARCCI) is an IsIamic insurance company. The company set up operations in Saudi Arabia in JuIy 2008. ARCCI provides cooperative insurance and reinsurance services in compIiance with Sharia'a principIes to individuaIs and corporates in Saudi Arabia. x Business brief ARCCÌ offers general, health and family insurance products and services. Under general insurance, the company provides property, marine (hull and cargo) & aviation, engineering, liability, casualty, travel, motor, workmen's compensation, fidelity guarantee, medical malpractice and related products. Under health insurance, the company offers products for individuals, families and companies. ARCCÌ offers health plans that fully comply with the requirements of the Council for Cooperative Health Ìnsurance (CCHÌ). The company operates through a network of three branches in Riyadh, Jeddah and Dammam; its head office is located in Riyadh. x FinanciaIs ARCCÌ recorded total revenues amounting to SR280mn in 2011 compared to SR82mn for the 19 months ended December 2010. Net insurance premium, which accounted for 96.8% of the revenues, stood at SR271mn. Despite increased revenues, the company reported a net loss of SR33mn due to a 337% increase in net claims incurred compared to the 19-month period from 1 June 2009 to 31 December 2010; there was also a rise in the general and administration expenses. x Recent deveIopments Ìn March 2012, the company announced the change of its name from "Al Rajhi Company for Cooperative Ìnsurance" to "Al Rajhi Company for Cooperative Ìnsurance Takaful Al Rajhi", which would be approved in the EGM soon. The company received SAMA's interim approval for its personal accident insurance product in November 2011, and errors and omission insurance product in September 2011. ÌNSURANCE ~ MAY 2012 AL RAJHÌ COOPERATÌVE ALSO KNOWN AS: ARCCÌ NOT COVERED Current price (SR) 56.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 66/32 Market cap ($ mn) 301 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (4.2) 0.0 21.2 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 68.6 18.3 12M 44.9 12.0 Reuters code 8230.SE Bloomberg code ARCCÌ AB www.alrajhitakaful.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 30.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 6.5 7.9 10.3 P/S (x) - 13.9 4.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 40 50 60 70 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al Rajhi Co (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Rajhi Banking and Ìnvestment 22.5 Al Rajhi Ìnsurance Ltd. 22.5 Oman Ìnsurance Company 10.0 Al Ramtan Summit Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Net Ìns. Premium SRmn - - 73* 271 NM NM Total Revenues SRmn - - 82* 280 NM NM Net Ìncome SRmn - (29) (58)* (33) NM NM Assets SRmn - 193 439 816 85.8 105.5 Equity SRmn - 173 143 109 (23.7) (20.4) Ìnvestments SRmn - 187 213 252 18.0 16.2 Technical Reserves SRmn - - 157 343 118.4 - Combined Ratio % - - 214.6 148.1 - - Net Mgn % - - (70.8) (11.7) - - ROE % - (16.7) (36.6) (26.0) - - ROA % - (14.9) (18.3) (5.2) - - Div Payout % - - - - - - EPS SR - (1.44) (2.89) (1.65) NM NM BVPS SR - 8.63 7.17 5.47 (23.7) (20.4) Source: Tadawul, Zawya, Company, NCBC Research *2010 figures are for 19 months 131 Saudi Arabia-based Trade Union Cooperative Insurance & Reinsurance Company (Trade Union) was estabIished in 2007. The company is headquartered in AI Khobar and registered with the CounciI of Cooperative HeaIth Insurance (CCHI). x Business brief Trade Union's product portfolio includes property insurance (fire and allied perils), liability insurance (general and product), marine insurance (hull, cargo and land transit), crime insurance (burglary and computer fraud), engineering insurance (machinery breakdown and contractor's risks), motor insurance (commercial or heavy vehicles) and personal lines (personal accident, new vehicle warranty and household comprehensive). The company also provides medical and life insurance products as well as reinsurance services led by Swiss Reinsurance Co. Ìts medical treaty is secured by Munich Re. Trade Union has reinsurance treaties with eight re-insurers: Hanover Re, Swiss Re, CCR, R+V Re, Odessey Re, SCOR, Paris Re, and Mapere Re. Hanover Re is the company's leading re-insurer. x FinanciaIs Trade Union's net insurance premium grew 27.5% YoY to SR329mn in 2011 from SR258mn in 2010. Consequently, total revenues rose 25.2% YoY as net insurance premium earned accounts for 94% of total revenue. The company's net income also increased in tandem with revenue rising 20.8% YoY to SR25mn. The growth in net income can be ascribed to an increase in shareholders' net investment return. x Recent deveIopments Ìn April 2012, Saudi Arabian Monetary Agency (SAMA) approved change in the company's name from "Trade Union Cooperative Ìnsurance Company" to "Trade Union Cooperative Ìnsurance Company¨ (Ìttihad). SAMA granted six- month extension to provisional approval on the company's 16 insurance products during the same month. Ìn February 2012, Trade Union announced plans to increase its capital by 10% through bonus shares to SR275mn. Ìn December 2011, it received BBB+ credit rating from AM Best. ÌNSURANCE ~ MAY 2012 TRADE UNÌON CO-OP ALSO KNOWN AS: TUCÌC, TUCÌ NOT COVERED Current price (SR) 25.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/17 Market cap (SR mn) 188 Shares outstanding (mn) 25 Price perform (%) 1M 3M 12M Absolute (5.8) (8.0) 7.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 41.7 11.1 12M 22.2 5.9 Reuters code 8170.SE Bloomberg code TRDUNÌON AB www.tui-sa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 42.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 47.6 33.3 28.0 P/B (x) 2.7 2.5 2.4 P/S (x) 2.5 2.5 2.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Trade Union (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) United Commercial Ìnsurance Co 22.3 Al Ahlia Ìnsurance Company 10.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn NA 254 258 329 27.5 NM Total Revenues SRmn 7 281 280 351 25.2 270.5 Net Ìncome SRmn NA 15 21 25 20.8 NM Assets SRmn 262 858 860 970 12.8 54.8 Equity SRmn 248 261 276 295 6.5 6.0 Ìnvestments SRmn 257 243 242 258 6.6 0.1 Technical Reserves SRmn NA 346 354 426 20.3 NM Combined Ratio % NM 103.4 99.5 99.5 - - Net Mgn % NA 5.3 7.4 7.2 - - ROE % NA 5.8 7.8 8.8 - - ROA % NA 2.6 2.4 2.8 - - Div Payout % NA NA NA NA - - EPS SR NA 0.59 0.83 1.01 20.8 NM BVPS SR 9.90 10.45 11.06 11.78 6.5 6.0 Source: Tadawul, Zawya, Company, NCBC Research 132 United Cooperative Assurance Company (UCA) is engaged in the insurance business in Saudi Arabia. The company was estabIished in Jeddah in 2007 as a separate entity from UCA Insurance Co. of Bahrain. UCA was Iisted on TadawuI in June 2008. x Business brief UCA offers insurance products such as engineering (contractor's risks, machinery, and plant & equipment used for construction), medical, personal accident and protection, motor insurance, and marine cargo. The company's 220 employees serve clients through offices in three major cities of the Kingdom (Jeddah, Riyadh, and Khobar). x FinanciaIs UCA's net insurance premium and total revenue grew 14.9% and 12.2% YoY, respectively, in 2011. However, net income declined 10.6% YoY to SR51mn. The fall in net income can be mainly ascribed to higher general and administrative expenses and technical reserves due to an increase in gross written premiums. A decline in investment income from policyholders' portfolio also contributed toward lower net income. x Recent deveIopments Ìn March 2012, UCA announced the approval of distribution of 10% cash dividends (SR1 per share) for the year 2011. Ìn November 2011, the company received approval from the Saudi Arabian Monetary Agency to renew insurance and reinsurance license to proceed with its General Ìnsurance and Medical Ìnsurance activities for a three-year term. UCA's qualification was renewed by The Council of Cooperative Health Ìnsurance in July 2012. This would enable the company to issue health insurance policies in accordance with cooperative health insurance policy standards. ÌNSURANCE ~ MAY2012 UNÌTED COOPERATÌVE ALSO KNOWN AS: UCA NOT COVERED Current price (SR) 37.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 54/24 Market cap (SR mn) 199 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (11.8) 7.8 24.7 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 43.2 11.5 12M 25.2 6.7 Reuters code 8190.SE Bloomberg code UCA AB www.uca.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 14.9 13.2 14.7 P/B (x) 3.0 2.5 2.3 P/S (x) 1.1 1.1 1.1 Div Yield (%) - 2.7 2.7 DPS - 1.0 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ U C A (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) UCA Ìnsurance Co. 32.5 Al Faisaliah Group Holding 5.0 Civil Woks Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn NA 628* 623 716 14.9 NM Total Revenues SRmn NA 674* 680 763 12.2 NM Net Ìncome SRmn (10) 50* 57 51 (10.6) NM Assets SRmn 207 1,188 1,260 1,283 1.8 83.7 Equity SRmn 190 246 295 318 7.6 18.7 Ìnvestments SRmn 206 169 170 219 28.4 2.0 Technical Reserves SRmn NA 647 531 662 24.8 NM Combined Ratio % NA 96.6 98.6 99.2 - - Net Mgn % N/M 7.4 8.3 6.6 - - ROE % (5.4) 23.1 21.0 16.5 - - ROA % (4.9) 7.2 4.6 4.0 - - Div Payout % NA NA 35.3 39.5 - - EPS SR (0.51) 2.51 2.83 2.53 (10.6) NM BVPS SR 9.49 12.28 14.75 15.88 7.6 18.7 Source: Tadawul, Zawya, Company, NCBC Research * For the 20 months to end 2009 133 SABB TakafuI was estabIished in 2007 in Riyadh as an associate company of SABB and HSBC. The company conducts its business through SABB's estabIished distribution network (80 branches) and direct saIes team across Saudi Arabia. SABB TakafuI's insurance products are Sharia'a compIiant. x Business brief SABB Takaful offers products under the Family, General, Corporate, and Group Takaful categories. Under the Family Takaful segment, the company covers education, savings, retirement, and investment plans. The General Takaful segment covers everyday travel, home, and personal accident risks. Corporate Takaful provides cover for marine cargo, commercial fire protection, and business takaful solutions for SMEs. x FinanciaIs Ìn 2011, the company's net insurance premium registered 13% YoY growth to SR166mn. SABB Takaful's net earned premium contributes 95.4% of its total revenues. Consequently, total revenues increased 12.2% YoY to SR174mn. SABB Takaful's net income rose to SR10mn in 2011 from a loss of SR5.6mn in 2010 due to an increase in the net earned contribution owing to the release of reserves and 11% fall in operating expense during the year. x Recent deveIopments Ìn October 2011, the company received an extension of the provisional approval of its 11 insurance products from Saudi Arabian Monetary Agency (SAMA). Ìn August 2011, SAMA approved two new products of SABB Takaful for a period of six months. ÌNSURANCE ~ MAY 2012 SABB TAKAFUL ALSO KNOWN AS: MEDGULF SAUDÌ NOT COVERED Current price (SR) 35.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 49/13 Market cap ($mn) 325 Shares outstanding (mn) 34 Price perform (%) 1M 3M 12M Absolute (13.7) 8.5 89.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 105.0 28.0 12M 58.4 15.6 Reuters code 8080.SE Bloomberg code SABBT AB www.sabbtakaful.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.07 Free float 35.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM 119.5 P/B (x) 3.7 3.8 3.7 P/S (x) 17.5 7.9 7.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 20 30 40 50 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SABB Takaful (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) SABB 32.5 HSBC Holding Co. 31.0 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 46 63 147 166 13.0 53.2 Total Revenues SRmn 51 70 155 174 12.2 50.9 Net Ìncome SRmn (48) (16) (6) 10 NM NM Assets SRmn 209 793 971 985 1.4 67.7 Equity SRmn 51 330 320 326 1.8 85.5 Ìnvestments SRmn 28 287 313 319 2.0 126.4 Technical Reserves SRmn 115 403 566 617 9.0 75.1 Combined Ratio % 127.8 125.1 105.2 96.2 - - Net Mgn % (95.0) (23.6) (3.6) 5.9 - - ROE % (90.5) (8.6) (1.7) 3.2 - - ROA % (33.5) (3.3) (0.6) 1.0 - - Div Payout % - - - - - - EPS SR (1.4) (0.5) (0.2) 0.3 NM NM BVPS SR 1.5 9.7 9.4 9.6 1.8 85.5 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 20 Months 134 AIAhIi TakafuI Company (ATC), estabIished in 2006, is a joint venture between NationaI CommerciaI Bank, FWU AG, InternationaI FinanciaI Corporation and VHV. The company, headquartered in Jeddah, provides a range of takafuI insurance products and services in Saudi Arabia. x Business brief ATC offers a range of financial planning products for savings, retirement, education and marriage. The company's ¨AlAhli Takaful and Saving Program¨ provides maturity benefit by investing regular contributions, and death benefit through the coverage of paid and future contributions. x FinanciaIs Ìn 2011, ATC's total revenues decreased 44.8% YoY to SR1.4mn due to a fall in net insurance premium earned in 2011, the company's only source of revenue. Net income losses decreased to SR5mn in 2011 compared to SR9mn in 2010 due to a fall in general and administrative expenses (in line with the company's strategy to reduce expenses). x Recent deveIopments Ìn December 2012, ATC announced that it had signed an agreement with National Commercial Bank to provide the latter's employees with insurance products. Ìn November, the company announced plans to increase its capital by 66.67% from SR100mn to SR166.7mn by issuing 5-for-3 right issue shares at SR12 per share. ÌNSURANCE ~ MAY 2012 ALAHLÌ TAKAFUL ALSO KNOWN AS: ATC NOT COVERED Current price (SR) 62.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 120/39 Market cap ($ mn) 165 Shares outstanding (mn) 17 Price perform (%) 1M 3M 12M Absolute (9.8) (4.2) 26.4 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 57.1 15.2 12M 48.3 12.9 Reuters code 8130.SE Bloomberg code ATC AB www.alahlitakaful.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.07 Free float 26.45 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 13.4 15.5 7.6 P/S (x) NM NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 50 70 90 110 130 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ ATC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) National Commercial Bank 29.9 FWU Group 13.1 Ìnternational Finance Corporation 13.1 VHV Co. 7.4 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 1 3 1 (44.8) NM Total Revenues SRmn (0) 1 3 1 (44.8) NM Net Ìncome SRmn (12) (5) (9) (5) NM NM Assets SRmn 95 158 315 523 66.0 76.7 Equity SRmn 83 77 67 136 102.9 17.7 Ìnvestments SRmn 72 66 59 133 125.2 22.7 Technical Reserves SRmn 2 67 229 356 55.3 459.8 Combined Ratio % 52.4 131.2 72.1 77.5 - - Net Mgn % - (456.3) (355.6) (349.8) - - ROE % (13.5) (6.5) (12.5) (4.8) - - ROA % (12.6) (4.1) (3.8) (1.2) - - Div Payout % - - - - - - EPS SR (0.72) (0.31) (0.54) (0.29) NM NM BVPS SR 4.99 4.61 4.01 8.13 102.9 17.7 Source: Tadawul, Zawya, Company, NCBC Research 135 AI Sagr Company for Cooperative Insurance (Sagr Insurance) commenced operations in Saudi Arabia in 1983 as a branch of AI Sagr NationaI Insurance Co. (ASNIC), Dubai. Headquartered in AI Khobar, Sagr Insurance operates through its three branches in Dammam, Riyadh and Jeddah. x Business brief Sagr Ìnsurance's wide range of insurance products comprises fire and general (property, engineering, liability and miscellaneous), marine (cargo and hull), motor, life and medical insurance services. The company also provides jewellery merchant insurance, hotel/furnished apartments - blanket insurance and reinsurance services. Ìt has reinsurance treaties with 10 re- insurers in the Middle East and Europe, including Allianz Re and Converium (Germany), Odyssey Re (France), Takaful Re (UAE) and BEST RE (Tunis). x FinanciaIs Sagr Ìnsurance's net insurance premium grew 20.1% YoY to SR196.3mn in 2011. Total revenues increased 18.0% to SR206.1mn, mainly due to growth in net insurance premium, which contributed 95.2% to total earnings. Sagr Ìnsurance's net income increased significantly by 85.3% YoY to SR37mn in 2011 as its total operating costs increased just 12% YoY against an 18% growth in revenue. Consequently, its combined ratio also fell from 91.5% in 2010 to 85.2% in 2011, thus increasing its net margin to 18% from 11.4% in 2010. x Recent deveIopments Ìn January 2012, Sagr Ìnsurance was assigned a 'BBB' long-term counterparty credit and insurer financial strength rating with stable outlook by Standard & Poor's. Ìn December 2011, the company received Saudi Arabian Monetary Agency's approval on 14 new insurance products. Ìn May 2011, it started seven new branches (Jeddah, Abha, Khamis Mushayt, Al Khobar, Al Qatif, Tabuk and Najran). ÌNSURANCE ~ MAY 2012 AL SAGR COMPANY ALSO KNOWN AS: AL SAGR SAUDÌ NOT COVERED Current price (SR) 27.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 39/17 Market cap ($ mn) 144 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (14.0) (10.3) 18.6 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 36.7 9.8 12M 30.3 8.1 Reuters code 8180.SE Bloomberg code SAGR AB www.alsagrsaudi.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 42.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 186.0 27.1 14.6 P/B (x) 2.7 2.4 2.1 P/S (x) NM 3.1 2.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 20 30 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Sagr Ìnsurance (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Saqar National Ìnsurance Co. 26.0 Arabian Red Land Ìndustrial Services 5.0 Abdullah Rasheed Al Rasheed & Sons Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 124 163 196 20.1 - Total Revenues SRmn - 134 175 206 18.0 - Net Ìncome SRmn 2 3 20 37 85.3 147.2 Assets SRmn 208 432 522 575 10.0 40.3 Equity SRmn 202 203 223 255 14.4 8.0 Ìnvestments SRmn 185 192 214 196 (8.2) 2.0 Technical Reserves SRmn 0 137 167 174 4.1 - Combined Ratio % - 105.3 91.5 85.2 - - Net Mgn % - 2.2 11.4 18.0 - - ROE % 1.2 1.4 9.4 15.5 - - ROA % 1.2 0.9 4.2 6.8 - - Div Payout % - - - - - EPS SR 0.12 0.15 1.00 1.85 85.3 147.2 BVPS SR 10.12 10.15 11.14 12.75 14.4 8.0 Source: Tadawul, Zawya, Company, NCBC Research 136 AI AIamiya Cooperative Insurance Company (AI AIamiya) was estabIished in Riyadh in June 2009. The company was Iisted on the Saudi Arabian Stock Exchange (TadawuI) in December 2009. AI AIamiya is in the initiaI stages of business and offers fire, motor, marine, property and heaIth insurance. x Business brief Al Alamiya has received approval for conducting operations as well as selling insurance products in Saudi Arabia. However, many of the company's products are undergoing the regulatory approval process with Saudi Arabian Monetary Agency (SAMA). Ìn February 2012, the company acquired the insurance business of Royal & Sun Alliance Ìnsurance Co. x FinanciaIs Al Alamiya reported nil revenues for 2011 as the company is still in operational phase. Net loss before zakat of SR0.08mn was due to general and administrative costs being more than income from bank deposits, and also owing to high incorporation and floatation expense. x Recent deveIopments Ìn February, 2012, Al Alamiya announced that SAMA has agreed upon the portfolio transfer from Royal & Sun Alliance (Middle East) Limited to Al Alamiya; this would reflect in the company's 1Q12 financial statements. Ìn October 2011, the company announced that SAMA has extended its approval of 29 insurance products for a period of six months. Ìn October 2011, it appointed Mr. Michael William Jakeman as Managing Director on an interim basis. He replaced Mr. Hassan Ali Nasser, who resigned in September 2011 as Managing Director and Chief Executive Officer. ÌNSURANCE ~ MAY 2012 AL ALAMÌYA ALSO KNOWN AS: AL ALAMÌYA NOT COVERED Current price (SR) 49.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 62/22 Market cap ($mn) 261 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (7.1) 4.3 54.1 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 61.0 16.3 12M 49.8 13.3 Reuters code 8280.SE Bloomberg code ALALAMÌY AB www.alamiyainsurance.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 30.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 5.7 5.8 P/S (x) - NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Alamiyah (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Royal & Sun Alliance Ìnsurance 50.0 Riyad Bank Ìnvestment Portfolio 19.9 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 0 0 - - Total Revenues SRmn - - 0 0 - - Net Ìncome SRmn - - (25) (0.1) (99.7) - Assets SRmn - - 178 174 (1.9) - Equity SRmn - - 172 168 (1.9) - Ìnvestments SRmn - - 177 163 (8.3) - Technical Reserves SRmn - - 0 0 - - Combined Ratio % - - 0 0 - - Net Mgn % - - NM NM - - ROE % - - NM NM - - ROA % - - NM NM - - Div Payout % - - NA NA - - EPS SR - - (1.25) (0.00) (99.7) - BVPS SR - - 8.58 8.42 (1.9) - Source: Tadawul, Zawya, Company, NCBC Research 137 Weqaya TakafuI Insurance & Reinsurance Company (Weqaya) was estabIished in May 2009 with a paid up capitaI of SR200mn. The company is headquartered in Riyadh with regionaI offices in Jeddah and Dammam. Weqaya offers insurance products in heaIthcare, generaI insurance and reinsurance segments. x Business brief Weqaya's insurance portfolio includes motor, property, engineering, marine cargo, accident, health as well as Takaful protection and savings products. x FinanciaIs Weqaya's net insurance premium rose to SR37mn in 2011 from SR0.4mn in 2010. Consequently, total revenue increased to SR39mn from SR1mn in 2010. Despite higher revenues, the company reported a net loss of SR42mn in 2011, 5% lower than the previous year's loss of SR44mn. This is mainly due to higher provisions, which include high custom unearned premiums and allowance of reported and unreported claims. x Recent deveIopments Ìn November 2011, Weqaya announced the extension of temporary approval from Saudi Arabian Monetary Agency on 14 insurance products for a six- month period. During the same month, Standard & Poor's assigned the company BBB rating for its long-term counterparty credit and financial strength. Ìn June 2011, Weqaya's qualification was renewed by The Council of Cooperative Health for one year. ÌNSURANCE ~ MAY 2012 WEQAYA TAKAFUL ALSO KNOWN AS: WEQAYA NOT COVERED Current price (SR) 43.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (S) 60/20 Market cap ($mn) 229 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (23.9) 28.0 84.5 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 80.1 21.3 12M 59.2 15.8 Reuters code 8220.SE Bloomberg code WEQAYA AB www.weqaya.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 4.7 5.4 7.4 P/S (x) NM NM 21.9 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 22 32 42 52 62 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Weqaya (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) First Ìnvestment Takaful Co. 20.0 Rana Ìnvestment Co. 5.0 Abdul Aziz Al Ajlan & Sons 5.0 Al Mal Ìnvesmtment House 5.0 Ìnternational Financial Advisors 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Net Ìns. Premium SRmn - NA 0 37 NM NM Total Revenues SRmn - NA 1 39 NM NM Net Ìncome SRmn - (11) (44) (42) (5.4) NM Assets SRmn - 190 188 246 30.5 13.7 Equity SRmn - 181 158 117 (26.1) (19.8) Ìnvestments SRmn - 183 159 145 (8.9) (10.8) Technical Reserves SRmn - - 4 71 N/M NM Combined Ratio % - NA 3,722 212.2 - - Net Mgn % - NA (8,002) (107.4) - - ROE % - (6.1) (26.2) (30.6) - - ROA % - (5.8) (23.5) (19.4) - - Div Payout % - NA NA NA - - EPS SR - (0.55) (2.22) (2.10) (5.4) NM BVPS SR - 9.07 7.90 5.84 (26.1) (19.8) Source: Tadawul, Zawya, Company, NCBC Research *2010 numbers are for six months period from 1 June to 31 December. 138 EstabIished in 2007, Arabia Insurance Cooperative Company (AICC) is headquartered in Riyadh. The company has been issuing insurance poIicies since January 2009. x Business brief AÌCC is engaged in insurance as well as reinsurance activities and services across Saudi Arabia. The company is authorized to offer insurance products including motor, property, marine, engineering, health and general accident insurance. AÌCC also offers term insurance protection plans and unit-linked savings plans. Furthermore, it is looking to expand into the market for Takaful life policies and investment products. The company operates through its branches in Riyadh, Jeddah, Mekkah, Taif, Damam, Khobar, Hafuf, and Khamis Mushet. x FinanciaIs AÌCC's revenue increased 32.1% YoY to SR361mn in 2011. Net insurance premium rose 28.2% YoY to SR334mn in 2011. Net income expanded 51.3% to SR17mn in 2011 over that in 2010 on account of YoY growth in the top line for the year. Consequently, the company's ROE increased to 10.3% in 2011 from 7.3% in 2010. x Recent deveIopments Ìn April 2012, AÌCC received a B++ rating for financial strength and ¨bbb¨ for issuer credit from A.M. Best. Ìn March 2012, Saudi Arabian Monetary Agency (SAMA) approved the issue of the company's Fire and Theft Ìnsurance products. Ìn January 2012, AÌCC obtained approval from SAMA to offer "Collective Life insurance product", and extend provisional approval of 22 insurance products for a period of six months. Ìn December 2011, the Council of Saudi Chambers approved the company's offer to provide Commercial Ìndustrial Chambers' employees with a full medical insurance service. This contract would be reflected in AÌCC's financial statements for 2Q12. Ìn the same month, the company obtained approval from SAMA to market and sell worker's compensation insurance. ÌNSURANCE ~ MAY 2012 ARABÌA ÌNSURANCE ALSO KNOWN AS: AÌCC NOT COVERED Current price (SR) 29.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 34/20 Market cap ($ mn) 159 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (7.2) 2.1 19.7 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 35.1 9.4 12M 19.5 5.2 Reuters code 8160.SE Bloomberg code AÌCC AB http://www.aicc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 47.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 52.1 34.5 P/B (x) 3.9 3.7 3.4 P/S (x) 3.4 2.2 1.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ AÌCC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Arab Holding Co. 19.2 Jordanian Ìnsurance Co. 12.2 Arab Supply and Trading (ASTRA) 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 166 260 334 28.2 - Total Revenues SRmn - 174 274 361 32.1 - Net Ìncome SRmn (27) -14 11 17 51.3 NM Assets SRmn 177 541 833 1,162 39.5 87.3 Equity SRmn 171 154 161 174 7.6 0.6 Ìnvestments SRmn 169 195 143 167 17.1 (0.4) Technical Reserves SRmn - 262 463 836 80.5 - Combined Ratio % - 114.2 101.4 103.0 - - Net Mgn % - (0.1) 0.0 0.0 - - ROE % (15.7) (8.7) 7.3 10.3 - - ROA % (15.1) (3.9) 1.7 1.7 - - Div Payout % - - - - - - EPS SR (1.34) (0.70) 0.57 0.86 51.3 NM BVPS SR 8.54 7.69 8.07 8.69 7.6 0.6 Source: Tadawul, Zawya, Company, NCBC Research 139 EstabIished in AI-Khobar in 2006, Saudi United Cooperative Insurance Company (WaIa'a Insurance) speciaIizes in business risks and government agencies. The company markets products and services under the WALAA brand and operates through its branches in Riyadh, Jeddah and AI- Khobar. x Business brief Wala'a Ìnsurance offers cooperative insurance products for property (fire and allied risks), motor, marine cargo and hull, engineering, medical and miscellaneous accidents insurance. The company earns most revenues from the motor, medical and property insurance segments. x FinanciaIs Ìn 2011, the company's net insurance premium grew 38.6% YoY to SR164.4mn from SR118.6mn in 2010. Consequently, total revenues rose 35.1% YoY to SR180mn from SR133mn the previous year. The company posted a net profit in 2011 compared to a net loss in 2010 primarily led by better underwriting performance across all lines of insurance business due to optimization of operational expenses. x Recent deveIopments Ìn November 2011, Wala'a Ìnsurance announced that it has signed a two- year contract with Al Wafaa Ìnsurance Agency Company. The latter is an insurance agent licensed by Saudi Arabian Monetary Agency and operates through several branches and points of sale across KSA. Ìn December 2011, the company announced the appointment of Mr. Johson Varghese as Chief Executive Officer. ÌNSURANCE ~ MAY 2012 SAUDÌ UNÌTED ALSO KNOWN AS: WALA'A NOT COVERED Current price (SR) 22.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 29/13 Market cap (SR mn) 120 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (9.4) (5.5) 6.1 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 52.7 14.1 12M 29.5 7.9 Reuters code 8060.SE Bloomberg code WALAA AB www.walaa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 66.80 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM 98.5 P/B (x) 2.9 3.0 2.9 P/S (x) 9.6 3.4 2.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 17 22 27 32 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Walaa Ìnsurance (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Ìnternational for General Ìnsurance Company 10.5 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn NA 41.6 118.6 164.4 38.6 NA Total Revenues SRmn NA 47 133 180 35.1 NA Net Ìncome SRmn (15)* (25) (7) 5 NM NM Assets SRmn 187 361 369 472 27.9 36.2 Equity SRmn 181 154 150 154 2.9 (5.1) Ìnvestments SRmn 182 190 156 138 (11.6) (8.9) Technical Reserves SRmn NA 123 163 209 28.8 NA Combined Ratio % NA 175.1 117.6 105.8 - - Net Mgn % NA (53.2) (5.2) 2.5 - - ROE % (8.0) (15.0) (4.6) 3.0 - - ROA % (7.9) (9.2) (1.9) 1.1 - - Div Payout % - - - - - - EPS SR (0.74) (1.25) (0.35) 0.23 NM NM BVPS SR 9.05 7.71 7.51 7.72 2.9 (5.1) Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 18 months 140 GuIf Union Cooperative Insurance Company (GuIf Union) was estabIished by GuIf Union Insurance and Projects Management HoIding Co in August 2007. The company offers Sharia'a compIiant insurance products catering to cIients in Saudi Arabia as weII as customers of GuIf Union Insurance and Risk Management Company. x Business brief Gulf Union is engaged in cooperative insurance and reinsurance activities, excluding protection and savings insurance. The company's product portfolio comprises insurance for property, engineering, marine, liability, motor, individual, health, and other related cooperative insurance activities. Apart from Dammam, Gulf Union operates branches in Jeddah, Khobar and Riyadh. x FinanciaIs Gulf Union's net insurance premium fell 22.0% YoY to SR145mn in 2011. As a result, total revenues declined 22% YoY to SR183mn in 2011 compared to SR234mn in 2010. Net claims incurred increased by SR18mn in 2011. Ìn addition, general and administrative expenses as well as bad debts provision rose. Consequently, the company incurred a net loss of SR63mn in 2011 compared to a profit of SR11mn 2010. x Recent deveIopments Ìn April 2012, the company received approval from Saudi Arabian Monetary Agency (SAMA) for the sale and marketing of its "Life Group Protection Ìnsurance" and "Public Liability Ìnsurance" products. Ìn the same month, Gulf Union announced the appointment of Mr. Omar Bin Abdullah Al Rashed as a member of the Board, replacing Mr. Sulaiman Bin Abdullah Al Zamil. Ìn November 2011, Gulf Union and Services Claims and Risks Company entered into an agreement to settle medical claims of the former's clients. ÌNSURANCE ~ MAY 2012 GULF UNÌON COOPERATÌVE ALSO KNOWN AS: GULF UNÌON NOT COVERED Current price (SR) 21.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/14 Market cap ($ mn) 123 Shares outstanding (mn) 22 Price perform (%) 1M 3M 12M Absolute (9.7) (2.1) 8.0 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 42.5 11.3 12M 27.2 7.3 Reuters code 8120.SE Bloomberg code GULFUNÌ AB www.gulfunion.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 64.24 VALUATION MULTIPLES 09A 10A 11A P/E (x) 30.8 42.4 NM P/B (x) 2.2 2.2 3.1 P/S (x) 2.0 2.0 2.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 14 18 22 26 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Gulf Union (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Gulf Union Ìnsurance Company 23.5 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 176 186 145 (22.0) - Total Revenues SRmn - 229 234 183 (22.0) - Net Ìncome SRmn (20) 15 11 (63) NM NM Assets SRmn 205 872 730 747 2.2 53.9 Equity SRmn 195 206 212 149 (29.7) (8.6) Ìnvestments SRmn 175 183 153 165 8.2 (1.9) Technical Reserves SRmn - 435 367 393 7.2 - Combined Ratio % - 119.5 117.4 166.6 - - Net Mgn % - 6.5 4.7 (34.5) - - ROE % 7.5 5.2 (34.9) - - ROA % (9.7) 2.8 1.4 (8.5) - - Div Payout % - - - - - - EPS SR 0.68 0.50 (2.86) NM NM BVPS SR 8.87 9.34 9.64 6.78 (29.7) (8.6) Source: Tadawul, Zawya, Company, NCBC Research 141 Arabian ShieId Cooperative Insurance Company (Arabian ShieId), headquartered in Riyadh and estabIished in 2007, commenced operations in January 2008. The company, a subsidiary of Bahrain-based Arabian ShieId Insurance Company, is engaged in cooperative insurance and reinsurance activities. x Business brief Arabian Shield provides general insurance products including motor, marine, engineering, property, liability, airplane and accident insurance. Ìt also offers medical insurance to individuals as well as companies. x FinanciaIs Arabian Shield's net insurance premium, accounting for 85.6% of total revenue, grew 32.3% YoY to SR173mn in 2011. Total revenue increased 28.1% YoY to SR202mn. Net income fell 25.8% YoY to SR15.1mn in 2011 mainly due to rising reserves allocated for death accidents and over-all increase in net claims incurred throughout the year. x Recent deveIopments Ìn April 2012, Arabian Shield announced that Arabian Shield Ìnsurance Company (Bahrain), a 30% stakeholder in the company, has ceased its operations in Bahrain. Arabian Shield Ìnsurance Company was suspended from working in Saudi Arabia since 1 January 2009 after selling its portfolio of insurance and all assets related to Arabian Shield Cooperative Ìnsurance (Saudi Arabia). ÌNSURANCE ~ MAY 2012 ARABÌAN SHÌELD ALSO KNOWN AS: ARABÌAN NOT COVERED Current price (SR) 33.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 38/17 Market cap ($mn) 178 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (4.0) (12.8) 57.8 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 22.1 5.9 12M 15.8 4.2 Reuters code 8070.SE Bloomberg code SHÌELD AB www.arabianshield.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 43.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 82.3 44.2 59.7 P/B (x) 3.3 3.0 2.9 P/S (x) 7.0 4.2 3.3 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Arabian Shield (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Arabian Shield Ìnsurance Co. 30.0 Bahrain National Holding Co. 15.0 Yamama Saudi Cement Co. 5.0 Al Obaikan Ìnvestment Group 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 68 131 173 32.3 - Total Revenues SRmn - 95 158 202 28.1 - Net Ìncome SRmn (4) 8 15 11 (25.8) NM Assets SRmn 202 448 456 520 14.2 37.1 Equity SRmn 196 204 219 231 5.1 5.5 Ìnvestments SRmn 202 256 193 172 (10.5) -5.1 Technical Reserves SRmn - 125 149 202 35.8 - Combined Ratio % - 116.6 103.0 106.4 - Net Mgn % - 8.5 9.5 5.5 - - ROE % (1.9) 4.0 7.1 5.0 - - ROA % (1.8) 2.5 3.3 2.3 - - Div Payout % - - - - - - EPS SR (0) 0 1 1 (25.8) NM BVPS SR 10 10 11 12 5.1 5.5 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 19 months 142 Buruj Cooperative Insurance Company (Buruj), a part of Kuwait's GuIf Insurance Group, was estabIished in October 2008 in Riyadh. FormerIy known as Saudi PearI Insurance Co., it was re-estabIished as Buruj Cooperative Insurance Company due to reguIatory changes in KSA's insurance sector. The company was Iisted on the TASI in February 2010. x Business brief Buruj's product portfolio includes various insurance covers such as Motor, Property and Fire, Marine, Engineering, Fidelity and Money, Liability, and other types. The company follows regulations laid by The Cooperative Ìnsurance for cooperative insurance as well as guidelines issued by Saudi Arabian Monetary Agency. x FinanciaIs Buruj reported net insurance premium of SR40mn and a total revenue of SR53mn in 2011. The company reported a net loss of SR18mn during the year. This fall in net loss, compared to the six-month period of 2010, is mainly due to the increase in gross written premiums and also since all the pre- incorporation costs were expensed in the financials of 2010. x Recent deveIopments Ìn March 2012, the company received final sales and marketing approval for its vehicle insurance products and eight other insurance products from Saudi Arabian Monetary Agency (SAMA). Ìn October 2011, the company received final accreditation from the Council of Cooperative Health Ìnsurance, and received a six-month extension on temporary approval from SAMA for 16 insurance products. Ìn August 2011, Buruj received approval from SAMA to sell and market health insurance products. ÌNSURANCE ~ MAY 2012 BURUJ COOPERATÌVE ALSO KNOWN AS: BURUJ NOT COVERED Current price (SR) 55.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 235/24 Market cap ($mn) 191 Shares outstanding (mn) 13 Price perform (%) 1M 3M 12M Absolute NA** (16.6) 73.7 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 69.1 18.4 12M 66.6 17.8 Reuters code 8270.SE Bloomberg code BURUJ AB www.burujinsurance.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM NM P/B (x) - 7.1 8.8 P/S (x) - NM 13.7 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 60 110 160 210 260 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 TASÌ Buruj Cooperative(RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Gulf Ìnsurance Co. KSC 22.5 Yousef Mohammed Abdel Wahab Naghy Co. 5.0 Gulf Medical Co. 5.0 Batterji Ìndustrial Group Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 2 40 1,725 - Total Revenues SRmn - - 3 53 1,707 - Net Ìncome SRmn - - (30) (18) (38) - Assets SRmn - - 138 181 30 - Equity SRmn - - 100 82 (18) - Ìnvestments SRmn - - 100 68 (33) - Technical Reserves SRmn - - 16 67 320 - Combined Ratio % - - 548.1 170.0 - - Net Mgn % - - (1,023.9) (34.9) - - ROE % - - (29.7) (20.1) - - ROA % - - (21.5) (11.5) - - Div Payout % - - - - - - EPS SR - - (2.29) (1.41) (38) - BVPS SR - - 7.71 6.29 (18) - Source: Tadawul, Zawya, Company, NCBC Research; * 2010 figures are for 6 months, **1 month absolute stock price performance is not available since the stock did not trade at the corresponding period 143 Sanad Insurance & Reinsurance Cooperative Company (SANAD), estabIished in 2006, is headquartered in Riyadh. The company provides a range of car, generaI, heaIth, property, and marine insurance as weII as reinsurance services. SANAD aIso pIans to expand its product portfoIio to cover insurance for agricuIture, airIines, ships, petroI, and power. x Business brief SANAD provides fire, travel, medical, motor, property, marine, and engineering insurance products. The company also offers insurance against general accidents. Ìn addition, SANAD provides life insurance products and reinsurance services. x FinanciaIs The company's net insurance premium fell 7.5% YoY to SR171mn in 2011. Total revenues decreased 7.9% YoY to SR181mn in 2011 due to a drop in net insurance premium, which accounts for 94.5% of total revenues. Consequently, SANAD's net loss increased to SR28mn in 2011 compared to SR21mn in the previous year. x Recent deveIopments Ìn January 2012, SANAD announced that Mr. Sultan Bin Mohammed Bin Saleh had resigned as a member of the Board of Directors. On August 20, 2011, the company appointed Mr. Philippe William as Chief Executive Officer in place of Mr. Gram Efnes, who had resigned in July 2011. ÌNSURANCE ~ MAY 2012 SANAD ÌNSURANCE ALSO KNOWN AS: SANAD NOT COVERED Current price (SR) 23.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/13 Market cap ($mn) 125 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute (10.3) (4.9) 16.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 41.1 10.9 12M 24.1 6.4 Reuters code 8090.SE Bloomberg code SANAD AB www.sanad.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 49.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 3.0 3.5 4.4 P/S (x) 5.6 2.4 2.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SANAD (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Khazna Ìnsurance Co. 15.0 Continental Ìnsurance Co. 10.0 Ramat Marketing and Distribution Ltd 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 3 77 185 171 (7.5) 304.5 Total Revenues SRmn 3 83 196 181 (7.9) 296.3 Net Ìncome SRmn (15) (15) (21) (28) 32.7 22.7 Assets SRmn 199 415 370 374 1.0 23.4 Equity SRmn 175 157 135 107 (20.6) (15.1) Ìnvestments SRmn 173 28 36 35 (3.0) (41.4) Technical Reserves SRmn 1 171 193 216 11.7 525.8 Combined Ratio % 369.8 104.8 129.4 128.8 - - Net Mgn % (520.0) (17.5) (10.7) (15.4) - - ROE % (8.3) (8.8) (14.4) (23.1) - - ROA % (7.7) (4.8) (5.4) (7.5) - - Div Payout % - - - - - - EPS SR (0.76) (0.73) (1.05) (1.40) 32.7 22.7 BVPS SR 8.75 7.86 6.74 5.36 (20.6) (15.1) Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2007 for 6 months 144 Wataniya Insurance Company (Wataniya) was Iisted on the Saudi Stock Exchange (TadawuI) in June 2010. The company offers Sharia'a-compIiant non-Iife insurance and reinsurance services in the Kingdom. Wataniya operates through offices in Jeddah, Riyadh and Khobar. x Business brief Wataniya offers a wide range of insurance services in segments such as property, medical, marine, aviation, engineering, fire, general accident, motor and liability insurance. The company capitalizes on its strategic partnerships with New Re Company (part of Munich Re Group) and Saudi Hollandi Bank to sell insurance products. x FinanciaIs Wataniya's revenues grew 336.0% YoY to SR80mn in 2011 from SR18mn in 2010. However, during 2010, the company was operational only from April to December. Revenues for 2011 totaled SR110mn compared to SR21mn for the nine months in 2010. Significant growth in revenues resulted in a net income of SR10mn in 2011 compared to a net loss of SR20mn the previous year. For the 21 months from April 2010 to December 2011, the company recorded pre-corporation expenses of SR1.49mn and provisions of SR4.62mn along with unreported claims of SR7.395mn. x Recent deveIopments Ìn February 2012, Wataniya received an approval from Saudi Arabian Monetary Agency (SAMA) for its Group Personal Accident Ìnsurance and Ìndividual Term Life Ìnsurance products. Ìn January, Standard and Poor's affirmed the company's financial strength with a credit rating of BBB. During the same month, Wataniya appointed Mr. Ìbrahim Al Hussein as temporary Chief Executive Officer; the company also announced that it has earned a contract worth SR8mn from Saudi Cement Company to provide insurance coverage to the latter's assets and property for one year. Ìn December 2011, SAMA approved the company's Ìndividual Personal Accident Ìnsurance product. ÌNSURANCE ~ MAY 2012 WATANÌYA ÌNSURANCE ALSO KNOWN AS WATANÌYA NOT COVERED Current price (SR) 91.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 109/41 Market cap (SR mn) 243 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (4.0) (4.5) 74.2 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 61.3 16.3 12M 55.0 14.7 Reuters code 8300.SE Bloomberg code WATAN AB www.wataniya.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 30.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) - NM 89.6 P/B (x) - 12.1 10.9 P/S (x) - 43.3 8.3 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 60 80 100 120 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Wataniya (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Saudi National Ìnsurance Co. 27.5 Saudi Hollandi Bank 20.0 New Reinsurance Co. Ltd. 10.0 Ìbrahim Al Juffali & Bros. Co. 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - 18 80 336.0 - Total Revenues SRmn - - 21 110 420.7 - Net Ìncome SRmn - - (20) 10 NM - Assets SRmn - - 156 340 117.6 - Equity SRmn - - 75 83 11.3 - Ìnvestments SRmn - - 60 51 (15.7) - Technical Reserves SRmn - - 55 213 286.5 - Combined Ratio % - - 188.1 166.5 - - Net Mgn % - - 97.1 9.3 - - ROE % - - 27.3 12.2 - - ROA % - - 13.1 3.0 - - Div Payout % - - NA NA - - EPS SR - - (2.04) 1.02 NM - BVPS SR - - 7.49 8.34 11.3 - Source: Tadawul, Zawya, Company, NCBC Research * 2010 revenues are for nine months (April to December) 145 Headquartered in AI Khobar, ACE Arabia Cooperative Insurance Company (ACE) is a joint venture between ACE Limited and EI Khereiji Group. The company was estabIished in 2009 and received reguIatory approvaI from Saudi Arabian Monetary Agency (SAMA) to commence operations in January 2010. ACE operates in Saudi Arabia through its offices in AI Khobar, Riyadh, Jeddah and AI Hassa. x Business brief ACE offers insurance products in the property, casualty, financial, personal and health segments to a diverse range of clients in Saudi Arabia. Ìt provides an array of customized insurance products, including health, fire and property, engineering, accidents, liability, car, marine, aviation, energy and collective insurance. x FinanciaIs Ìn 2011, ACE's net insurance premium stood at SR99mn compared to SR190mn for an 18-month period ending December 2010. The company reported total revenues of SR121mn and net income of SR16mn in 2011. Statements for the year 2011 reflect the purchase and transfer of the insurance portfolio related to ACE Arabia Ìnsurance Company and Ìnternational Ìnsurance Company. x Recent deveIopments Ìn March 2012, SAMA extended its temporary approval for the company's 30 insurance products for a period of six months. Ìn January 2012, ACE obtained SAMA approval to market and sell its Comprehensive General Liability Ìnsurance Policy. Ìn the same month, the company received SAMA's consent to transfer portfolios of ACE Arabia Ìnsurance Company (BSC) and Ìnternational Ìnsurance Company (E. C.) to ACE Arabia Cooperative Ìnsurance Company with effect from 1 January 2009; this would reflect in ACE's 2011 financial statements. Ìn October 2011, the company received SAMA's permission to extend the temporary approval of its 13 insurance products for six months. ÌNSURANCE ~ MAY 2012 ACE ARABÌA ALSO KNOWN AS: ACE NOT COVERED Current price (SR) 97.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 102/29 Market cap ($mn) 259 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute 13.1 59.0 153.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 57.8 15.4 12M 41.9 11.2 Reuters code 8240.SE Bloomberg code ACE AB www.ace-mena.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 40.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 28.4 60.7 P/B (x) 10.7 7.6 6.9 P/S (x) - 4.0 8.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 45 65 85 105 125 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Ace Arabia (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) ASÌNA Ìnternational Holding 30.0 General Company for Technological Development 5.0 Wehdan Ìnvestment 5.0 General Company for Ìnvestment 5.0 Middle East Ìnvestment 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Net Ìns. Premium SRmn - - 190* 99 NM - Total Revenues SRmn - - 240* 121 NM - Net Ìncome SRmn - - 34* 16 NM NM Assets SRmn - 100 390 466 19.5 115.6 Equity SRmn - 90 128 141 10.3 24.8 Ìnvestments SRmn - 98 79 80 0.4 (9.6) Technical Reserves SRmn - - 111 139 25.5 - Combined Ratio % - - 98 100 - - Net Mgn % - - 14 13 - - ROE % - (10.6) 31.3 11.9 - - ROA % - (9.5) 13.9 3.7 - - Div Payout % - - - - - - EPS SR - - 3.41 1.60 (53.1) NM BVPS SR - 9.04 12.77 14.09 10.3 24.8 Source: Tadawul, Zawya, Company, NCBC Research * 2010 numbers are for the period of 18 months starting July 2009 to December 2010. 146 Saudi Fransi Cooperative Insurance Company (AIIianz SF) was estabIished in 2007 in Riyadh. The company is a subsidiary of Banque Saudi Fransi and Assurances GeneraIes de France (member of the AIIianz Group). x Business brief Allianz SF offers multiple insurance solutions through two main segments: individual and corporate. Under the individual solutions segment, the company provides Sharia'a-compliant insurance products including individual financial planning (for education, protection and retirement), family income protection, life and disability insurance, and corporate solutions assurance. The corporate solutions division offers fire, general accident, construction/engineering, marine cargo, aviation and employee compensation insurance products. x FinanciaIs After posting net loss for four years, Allianz SF recorded net profit of SR2mn in 2011. This can be mainly attributable to an increase in gross and net insurance premiums. Net insurance premium, which accounted for 92.6% of total revenue in 2011, rose 52.1% YoY. As a result, the company's total revenue grew 54.1% to SR383mn in 2011. Ìts combined ratio declined slightly to 108% in 2011 from 110% in 2010. x Recent deveIopments Ìn April 2012, Allianz SF received approval from Saudi Arabian Monetary Agency (SAMA) for "Civil and Product" insurance product, and banking- related insurance products (effective from January 2011). Ìn December 2011, the company announced the merger of its founding shareholder, Allianz France "AGF" Ìnternational, with Allianz France. Ìn the process of the merger, all assets of Allianz France "AGF" Ìnternational would be transferred to Allianz France. During the same month, Allianz SF obtained final approval from SAMA for ¨Workers' compensation insurance¨ product. The company also received SAMA's extension of provisional approval for 11 insurance products for a period of six months. ÌNSURANCE ~ MAY 2012 ALLÌANZ SAUDÌ FRANSÌ ALSO KNOWN AS: ALLÌANZ SF, ALLÌANZ SAUDÌ FRANSÌ NOT COVERED Current price (SR) 83.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 112/19 Market cap ($mn) 444 Shares outstanding (mn) 20 Price perform (%) 1M 3M 12M Absolute 5.4 77.1 255.8 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 90.7 24.2 12M 39.2 10.5 Reuters code 8040.SE Bloomberg code ALLÌANZ AB www.allianzsf.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 33.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 38.9 10.5 10.5 P/S (x) 11.6 6.7 4.4 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 30 50 70 90 110 130 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ ALLÌANZ SF (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Banque Saudi Fransi 32.5 AGF Ìnternational Co. 16.2 SNÌ Holding Co. 16.2 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 4 127 233 355 52.1 359.1 Total Revenues SRmn 4 144 249 383 54.1 362.1 Net Ìncome SRmn (33) (22) (8) 2 NM NM Assets SRmn 239 443 941 1,075 14.2 65.0 Equity SRmn 66 43 158 158 (0.2) 33.8 Ìnvestments SRmn 72 46 161 163 1.3 31.3 Technical Reserves SRmn 58 156 604 664 10.0 125.4 Combined Ratio % 797.2 128.2 110.2 108.1 (2.0) (48.6) Net Mgn % (862.4) (15.5) (3.4) 0.4 - - ROE % (44.6) (41.2) (8.3) 1.0 - - ROA % (19.5) (6.6) (1.2) 0.2 - - Div Payout % - - - - - - EPS SR (1.7) (1.1) (0.4) 0.1 118.6 NM BVPS SR 3.3 2.1 7.9 7.9 (0.2) 33.8 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 18 Months 147 EstabIished in 2006 in accordance with a RoyaI Decree, Saudi IAIC Cooperative Insurance Company (SaIama) is a Jeddah- based insurance company. The company markets insurance products under the SALAMA brand. SALAMA, a subsidiary of UAE-based IsIamic Arab Insurance Co., provides Sharia'a- compIiant generaI insurance soIutions. x Business brief SALAMA's products are broadly classified into three segments: health, motor, and general insurance. The health insurance segment offers individual and corporate healthcare cover. Motor insurance provides comprehensive and third-party liability insurance cover. The general insurance division offers cover for fire & property, personal accident, marine, engineering, aviation and miscellaneous insurance. x FinanciaIs SALAMA's net insurance premium declined 0.3% to SR132mn in 2011 despite a 57.1% increase in gross written premiums (GWP) to SR218mn in 2011 compared to SR139mn in 2010. The company's total revenue fell 5.8% YoY in 2011. Ìts net income also declined 65.5% YoY due to an increase in provision for unearned premium. Consequently, SALAMA's ROE fell to 2.7% from 8.3% in 2010. x Recent deveIopments Ìn April 2012, SALAMA terminated two-year sales agreement with Al Mayazeen Ìnsurance Agency to sell medical insurance and civil liability insurance. Ìn January 2012, the company received final approval from Saudi Arabian Monetary Agency (SAMA) for Loss of Profit following Machinery Breakdown. This increased its total final approved products to 20. Ìn November 2011, Standard & Poor's raised counterparty credit and insurer financial strength ratings on SALAMA to 'A-' from 'BBB+'. Ìn September 2011, the company obtained SAMA's approval to open 25 point of sale distribution centers across KSA. ÌNSURANCE ~ MAY 2012 SAUDÌ ÌAÌC ALSO KNOWN AS: SAUDÌ SALAMA NOT COVERED Current price (SR) 43.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 56/26 Market cap (SR mn) 115 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (6.9) 1.4 22.9 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 36.9 9.8 12M 19.5 5.2 Reuters code 8050.SE Bloomberg code SALAMA AB www.salama.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.04 Free float 59.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) 36.6 65.3 189.3 P/B (x) 5.7 5.2 5.1 P/S (x) 2.0 2.9 3.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SALAMA (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Arab Ìslamic Ìnsurance Company 30.0 Bin Dawood & Sons Commercial Co. 5.0 Al Sha'er Trade, Ìndustries and Construction 5.0 Cooperative Group Company for Trade & Construction 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 72* 210 133 132 (0.3) 22.5 Total Revenues SRmn 76 * 214 151 142 (5.8) 23.1 Net Ìncome SRmn (38)* 12 7 2 (65.5) NM Assets SRmn 257 255 257 284 10.6 3.4 Equity SRmn 61 76 82 85 3.1 11.7 Ìnvestments SRmn 64 76 71 72 1.2 3.9 Technical Reserves SRmn 134 127 122 151 23.7 4.0 Combined Ratio % 119.5 92.0 106.2 103.5 - - Net Mgn % (50.6) 5.5 4.4 1.6 - - ROE % (53.4) 17.2 8.3 2.7 - - ROA % (20.9) 4.6 2.6 0.8 - - Div Payout % NA NA NA NA - - EPS SR (3.8) 1.2 0.7 0.2 (65.5) NM BVPS SR 6.1 7.6 8.2 8.5 3.1 11.7 Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 19 months 148 AI-AhIia Insurance Company (AI-AhIia) was estabIished by the NationaI Insurance Company of Egypt and severaI Saudi investors in 2007. Headquartered in Riyadh, the company offers Sharia'a-compIiant cooperative insurance and reinsurance services in the Kingdom. x Business brief Al-Ahlia offers a range of general insurance products, including fire insurance, property insurance, marine insurance, motor insurance, money insurance, engineering insurance, medical insurance, medical malpractice insurance, fidelity insurance and liability insurance. x FinanciaIs Al-Ahlia's net insurance premium, which contributes 93% to total revenues, increased 5.2% YoY to SR172mn in 2011. Total revenues grew 7.5% YoY to SR185mn compared to SR172mn in 2010. Net income losses decreased to SR5mn in 2011 from SR11mn in 2010; however, combined ratio increased from 73.8% to 115.5% as operating expenses grew 64.7%. x Recent deveIopments Ìn March 2012, Al-Ahlia announced that Saudi Arabian Monetary Agency (SAMA) has extended its approval for vehicle insurance products for a period of three months (until June 15, 2012) and the group medical insurance product for eight months (until October 31, 2012). Ìn January 2012, the company obtained a renewal permit from SAMA to continue insurance business for a period of three years for its general and health insurance segments. Ìn December 2011, the company received approval from SAMA to start six new branches in Riyadh, Qassim, Jeddah, Al Madinah, Taif and Al- Khobar. Ìn the same month, Al-Ahlia received SAMA's consent on increasing capital base to SR220mn by way of rights issue. Ìn October 2011, the company received an extension of provisional approval for 21 insurance products for a period of six months. ÌNSURANCE ~ MAY 2012 AL-AHLÌA ÌNSURANCE ALSO KNOWN AS: AL-AHLÌA NOT COVERED Current price (SR) 40.7 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 58/27 Market cap ($mn) 109 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (8.9) (2.4) 19.4 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 48.9 13.0 12M 37.0 9.9 Reuters code 8140.SE Bloomberg code ALAHLÌA AB www.alahlia.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 73.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 8.0 10.6 12.5 P/S (x) 24.5 2.4 2.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al-Ahlia (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Ahlia Ìnsurance Co. - Egypt 18.0 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 16 164 172 5.2 NM Total Revenues SRmn - 17 172 185 7.5 NM Net Ìncome SRmn (15) (31) (11) (5) (55.3) (30.7) Assets SRmn 107 182 315 305 (3.1) 41.8 Equity SRmn 83 51 38 33 (15.0) (26.7) Ìnvestments SRmn 101 16 1 41 5,680.7 (25.8) Technical Reserves SRmn - 61 164 167 2.0 NM Combined Ratio % - 277.9 73.8 115.5 - - Net Mgn % NM (186.6) (6.6) (2.8) - - ROE % (16.7) (46.2) (25.5) (14.3) - - ROA % (13.9) (21.4) (4.6) (1.6) - - Div Payout % - - - - - - EPS SR (1.53) (3.10) (1.14) (0.51) (55.3) (30.7) BVPS SR 8.30 5.11 3.84 3.27 (15.0) (26.7) Source: Tadawul, Zawya, Company, NCBC Research * Financials reported for 2008 is for 18 months 149 AIIied Cooperative Insurance Group (ACIG) was incorporated in 2007 through the acquisition of the Saudi Arabian assets and cIient portfoIio of its parent company, ACIG Bahrain. Based in Jeddah, ACIG offers Sharia'a-compIiant insurance and reinsurance products in Saudi Arabia. x Business brief ACÌG offers Ìslamic general insurance products including marine, medical, motor, accident and engineering insurance. The company provides marine cargo and inland transit insurances through the Marine Ìnsurance segment. The Motor Ìnsurance division offers third-party liability protection, personal accident cover (for drivers and passengers) and comprehensive 'own damage' options. The General Ìnsurance segment provides money, fidelity, personal accident, public liability, workmen's compensation and medical malpractice insurance. x FinanciaIs ACÌG's net insurance premium grew over 461% YoY to SR124mn in 2011. Consequently, the company's total revenue increased 432% YoY to SR128mn. Net loss incurred declined to SR2mn from SR20mn in 2010 due to a rise in total insurance revenue and stable general & administrative expenses, which reduced combined ratio to 105% from 198%. x Recent deveIopments Ìn April 2012, ACÌG received approval from Saudi Arabian Monetary Agency (SAMA) to renew its General and Health insurance licenses for a period of three months. Ìn January 2012, the company obtained approval from the Council of Cooperative Health Ìnsurance to renew its insurance license for a three-year period. During the same month, ACÌG received SAMA's extension of provisional approval to market 26 insurance products for a period of six months, and signed a one-year renewable contract with Rowad Ìnsurance Agency to market and sell the company's insurance products in Saudi Arabia. Ìn September 2011, ACÌG received SAMA's consent to offer travel insurance for a period of six months. ÌNSURANCE ~ MAY 2012 ALLÌED CO-OPERATÌVE ALSO KNOWN AS: ACÌG, SAUDÌ ACÌG NOT COVERED Current price (SR) 40.5 Pricing as of 31-03-2012* STOCK DETAILS 52-week range H/L (SR) 51/25 Market cap ($ mn) 108 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (13.8) 1.8 33.7 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 41.5 11.1 12M 27.8 7.4 Reuters code 8150.SE Bloomberg code ACÌG AB www.acig.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 58.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 8.5 14.3 15.5 P/S (x) NM 17.6 3.3 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 TASÌ ACÌG (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Allied Cooperative Ìnsurance Group 20.0 Ìslamic Development Bank 20.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 1 22 124 461.4 - Total Revenues SRmn - 1 24 128 431.6 - Net Ìncome SRmn (23) (24) (20) (2) (91.5) (58.2) Assets SRmn 78 91 142 137 (3.8) 20.6 Equity SRmn 70 50 30 27 (7.5) (27.0) Ìnvestments SRmn 74 48 38 26 (30.9) (29.0) Technical Reserves SRmn - 30 82 95 15.4 - Combined Ratio % - 1,423.5 197.7 104.5 - - Net Mgn % - (2,463.0) (81.6) (1.3) - - ROE % (28.1) (40.3) (49.4) (5.9) - - ROA % (26.4) (28.7) (16.9) (1.2) - - Div Payout % - - - - - - EPS SR (2.28) (2.42) (1.96) (0.17) (91.5) (58.2) BVPS SR 7.02 4.99 2.96 2.74 (7.5) (27.0) Source: Tadawul, Zawya, Company, NCBC Research, * Stock not trading since 31-03-2012 150 EstabIished in 2007, Saudi Arabian Cooperative Insurance Company (SAICO) offers Sharia'a-compIiant insurance services across Saudi Arabia. SAICO is a subsidiary of Bahrain-based Saudi Arabian Cooperative Insurance Company, which hoIds 30% stake in the company. x Business brief SAÌCO provides insurance services in two categories: business and personal. Under business insurance, the company covers liabilities such as fire and property, marine cargo, engineering, aviation, motor vehicle, energy, life, and health. Personal insurance provides insurance for home, car, boat, life, health, and accidents. x FinanciaIs SAÌCO's net insurance premium, which contributed 85.4% of total revenues, increased 48.9% YoY to SR323mn in 2011. Consequently, total revenues grew over 47.4% YoY to SR378mn. The company incurred a net loss of SR8mn during the year, 17.3% lower than net loss in 2010 (SR9mn), mainly due to a rise in the net premium and commission income earned during the year. x Recent deveIopments SAÌCO received Saudi Arabian Monetary Agency's (SAMA) approval to sell its medical malpractices product in April 2012, motor insurance product in March 2012, insurance product for banking operations in January 2012, and glass insurance product in December 2011. The company also received SAMA's approval in December 2011 to renew provisional approval for its 29 insurance products. ÌNSURANCE ~ MAY 2012 SAUDÌ ARABÌAN ALSO KNOWN AS: SAÌCO SAUDÌ NOT COVERED Current price (SR) 44.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 54/25 Market cap ($mn) 119 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (3.2) 8.0 35.8 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 61.6 16.4 12M 40.7 10.9 Reuters code 8100.SE Bloomberg code SAÌCO AB www.saico.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 68.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 5.5 6.2 7.0 P/S (x) 32.2 1.7 1.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SAÌCO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Saudi Arab Ìnsurance Co. 30.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - 12 217 323 48.9 - Total Revenues SRmn - 14 256 378 47.4 - Net Ìncome SRmn (10)* (8) (9) (8) (17.3) (8.3) Assets SRmn 94 204 611 599 (2.0) NM Equity SRmn 90 82 72 64 (10.8) NM Ìnvestments SRmn 91 69 79 66 (16.2) NM Technical Reserves SRmn NA 64 433 441 1.9 NM Combined Ratio % NA 149.4 121.6 118.7 - - Net Mgn % NA (60.3) (3.7) (2.1) - - ROE % (11.0) (9.8) (12.2) (11.4) - - ROA % (10.7) (5.6) (2.3) (1.3) - - Div Payout % - - - - - - EPS SR (1.01) (0.84) (0.94) (0.78) (17.3) (8.3) BVPS SR 8.99 8.15 7.22 6.44 (10.8) (10.5) Source: Tadawul, Zawya, Company, NCBC Research * Financials of 2008 for 17 months 151 In 2007, Saudi Indian Company for Co-operative Insurance (Saudi Indian) was estabIished through a joint venture between New India Assurance Co., Life Insurance Corporation of India (IntI), and Fawaz AbduIaziz AI Hokair and Co. Headquartered in Riyadh, the company provides Iife and generaI insurance services to individuaIs and commerciaI estabIishments. x Business brief Saudi Ìndian's product profile is segregated into two broad categories: life insurance and non-life insurance. The company offers various products related to protection and savings, such as Takaful Ìnsurance, Participating Endowment, Cash Back, Money Back & Protect Lifelong, and Child Benefit plans through the life insurance segment. Under the non-life insurance segment, Saudi Ìndian provides insurance for fire, motor, engineering, health and other miscellaneous products, including personal accident, burglary, money and fidelity guarantee. x FinanciaIs SÌCCÌ's net insurance premium rose 46.2% YoY to SR56mn in 2011. Consequently, the company's total revenues grew 48.3% YoY to SR66mn in 2011. The company's net loss also declined to SR1mn in 2011 compared to SR3mn in 2010, mainly due to a 63% fall in general and administrative expenses of shareholders and a reversal of SR2.1mn in the Director's remuneration in 2011. x Recent deveIopments Ìn April 2012, the company announced the appointment of Mr. S. Ramabhadran as a representative of New Ìndia Assurance Company Ltd, replacing Mr. A.R. Sekar. Ìn February 13, 2012, the company received Saudi Arabian Monetary Agency's approval to change its name from "Saudi Ìndian Company for Co-operative Ìnsurance" to "WAFA for Ìnsurance (Saudi Ìndian Company for Co-operative Ìnsurance)". ÌNSURANCE ~ MAY 2012 SAUDÌ ÌNDÌAN ALSO KNOWN AS: SÌCCÌ, SAUDÌ ÌNDÌAN NOT COVERED Current price (SR) 42.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 68/25 Market cap ($ mn) 112 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (18.0) (7.3) 31.3 Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 3M 47.2 12.6 12M 26.6 7.1 Reuters code 8110.SE Bloomberg code SÌNDÌAN AB www.sicci-ksa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.03 Free float 45.00 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 8.1 8.7 8.2 P/S (x) 10.1 9.4 6.4 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 30 40 50 60 70 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Ìndian (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) New Ìndia Ìnsurance Co. 10.6 Life Ìnsurance Corp of Ìndia 10.2 Life Ìnsurance Corp (Ìnt'l) 10.2 Khaled Abdulaziz Bin Salmah Trading Establishment 5.0 Saleh Saad Al Khariji Establishment 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn 1 38 38 56 46.2 297.0 Total Revenues SRmn 1 42 44 66 48.3 307.8 Net Ìncome SRmn (9) (26) (3) (1) (60.0) (49.7) Assets SRmn 104 183 145 159 9.8 15.3 Equity SRmn 79 52 48 51 6.1 (13.6) Ìnvestments SRmn 68 68 56 56 (0.3) (6.4) Technical Reserves SRmn 13 79 54 74 38.2 77.3 Combined Ratio % 746.4 176.3 119.9 123.2 - - Net Mgn % (893.7) (63.3) (6.2) (1.7) - - ROE % (10.4) (40.2) (5.5) (2.2) - - ROA % (8.7) (18.4) (1.7) (0.7) - - Div Payout % - - - - - - EPS SR (0.87) (2.63) (0.28) (0.11) (60.0) (49.7) BVPS SR 7.91 5.20 4.82 5.11 6.1 (13.6) Source: Tadawul, Zawya, Company, NCBC Research 152 Saudi Enaya Cooperative Insurance Company was estabIished as a speciaIized heaIth insurance company in June 2011 by KhaIed JuffaIi Company and a renowned German partner, nameIy Munich Re (Munich HeaIth). The company was Iisted on the Saudi Arabian Stock Exchange (TadawuI) in February 2012, with a paid-up capitaI of SAR 400 miIIion. x Business brief Saudi Enaya is focused on being a healthcare specialist by offering private medical insurance with affordable quality services and solutions for group as well as individual health risks. Saudi Enaya also provides Council of Cooperative Health Ìnsurance compliant products with varying levels of coverage, and a high level of services and innovations covering insured members. Ìt aims to establish branches across all major regions in the Kingdom of Saudi Arabia as well as outside. x FinanciaIs The company was listed in February 2012 with a paid-up capital of SR400mn. x Recent deveIopments The company received approval from Saudi Arabia's Capital Market Authority (CMA) for its initial public offering of 16 million shares, which represents 40% of the company's share capital, at an offer price of SR10 per share. The subscription period was from December 19, 2011 to December 25, 2011. The company was hence listed within the insurance sector with the ticker 8311 on February 27, 2012. ÌNSURANCE ~ MAY 2012 SAUDÌ ENAYA ALSO KNOWN AS: ENAYA NOT COVERED Current price (SR) 37.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 68/25 Market cap ($mn) 398 Shares outstanding (mn) 40 Price perform (%) 1M 3M 12M Absolute (15.2) - - Market (6.2) 6.2 7.6 Sector (12.0) (3.4) 16.0 Avg daiIy turnover (mn) SR US$ 2M 230.7 61.5 12M - - Reuters code 8311.SE Bloomberg code ENAYA AB www.saudienaya.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 40.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) - - - P/B (x) - - - P/S (x) - - - Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 26 36 46 56 66 76 5,500 6,000 6,500 7,000 7,500 8,000 Feb-12 Mar-12 Apr-12 Apr-12 May-12 TASÌ ENAYA (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Munich Re 15.0 National Company for Health Ìnsurance 5.0 Mohammed and Walid Ahmed Naghi 5.0 Khalid Ahmed Juffali 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Net Ìns. Premium SRmn - - - - - - Total Revenues SRmn - - - - - - Net Ìncome SRmn - - - - - - Assets SRmn - - - - - - Equity SRmn - - - - - - Ìnvestments SRmn - - - - - - Technical Reserves SRmn - - - - - - Combined Ratio % - - - - - - Net Mgn % - - - - - - ROE % - - - - - - ROA % - - - - - - Div Payout % - - - - - - EPS SR - - - - - - BVPS SR - - - - - - Source: Tadawul, Zawya, Company, NCBC Research 153 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Multi-Investment Ticker Company Page No. 4280 Kingdom Holding 157 4080 Assir 158 2190 SISCO 159 2030 SARCO 160 2140 Al Ahsa for Dev. 161 2120 Saudi Advanced 162 4130 Al Baha 163 KSA's multi-investment sector comprises diversified holding groups with investments in a wide range of sectors, including hospitality, real estate, manufacturing, energy, infrastructure, and education. The sector witnessed significantly low activity in 2011. Kingdom Holding Company (Kingdom) remains its largest player, accounting for about 49% of total sector revenue in 2011. Saudi Arabia's multi-investment sector comprises seven listed players, which together accounted for 99% of the total GCC revenue in 2011. Exhibit 96: Revenue of GCC multi-investment, 2009-11 Exhibit 97: Comparison of ROE and P/E of GCC companies, 2011 USD mn % Source: Bloomberg, Tadawul, NCBC Research Revenue in Kuwait and Qatar totaled USD5.6 mn and USD 5.5mn, respectively, in 2011. Source: Bloomberg, Tadawul, NCBC Research Size of the bubble represents market cap., as on March 27, 2012. Kingdom remains the single largest company in KSA's multi-investment sector with a weight of 0.37% in the overall market index, up 600bps YoY. Exhibit 98: Sector details Units as stated Country % weight in index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Kingdom Holding Co. ( KÌNGDOM) 0.37 27.4 2.4 Aseer Trading, Tourism, Mfg., Agri., Real Estate and Contracting Company (ATTMCO) 0.23 4.9 4.3 Saudi Arabian Refineries Co. (SARCO) 0.18 NA 2.8 Al Ahsa Development Co. (AADC) 0.17 0.9 0.2 Saudi Ìndustrial Services Co. (SÌSCO) 0.17 2.8 1.0 Saudi Advanced Ìndustries Co. (SAÌC) 0.12 41.4 1.2 Al Baha for Development & Ìnvestment Co. (ABDÌCO) 0.06 N/M N/M Source: Bloomberg, Tadawul, Company data, NCBC Research The multi-investment sector in KSA continued to slide in 2011 for the fourth consecutive year amid heightened uncertainty in global markets. Sector revenue has declined 46% since 2007. Ìn 2011, total revenue in the sector fell 16% YoY to SR4.8bn, mainly as Kingdom's revenue contracted 30% YoY due to sluggish growth in the hospitality sector. However, the performance of the rest of the sector continued to improve. SÌSCO, with revenue up 41% YoY to SR398.3bn in 2011, emerged as the top gainer in terms of market share. The two other major players, ATTMCO and ABDÌCO, posted average revenue gains of 3.6% over the 0 250 500 750 1,000 1,250 1,500 1,750 0 2 4 6 8 10 12 14 2009 2010 2011 Kuwait Qatar KSA (RHS) 0 1 2 3 4 5 6 0 20 40 60 80 100 R O E ( % ) P/E (x) KSA Qatar MAY 2012 MULTÌ-ÌNVESTMENT Global uncertainty hinders investment activity 155 MULTÌ-ÌNVESTMENT NCB CAPÌTAL MAY 2012 previous year. AADC recorded the sharpest fall in revenue, down 84% to SR15.7mn from its historical high in 2010. Net income in the sector grew a marginal 0.04% YoY. Net income margin improved to 15.9% in 2011 from 13.3% in 2010, mainly as Kingdom's profits rose 52% YoY on lower operating costs and better margins of associate companies. Exhibit 99: Revenue of companies, 2009-11 Exhibit 100: Profitability of companies, 2009-11 SR mn % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research Ìn 2011, the sector's adjusted P/E and P/BV multiples stood at 80.1x and 1.9x compared to 64.9x and 1.8x, respectively, in 2010. ROE in KSA's multi- investment sector averaged 1.7% in 2011 compared to 3.3% the previous year. Exhibit 101: Comparison of P/B and ROE, 2010 Exhibit 102: Comparison of P/B and ROE, 2011 % % Source: Bloomberg, Tadawul, Reuters, NCBC Research Size of the bubble represents market cap. as on March 27, 2012. Source: Bloomberg, Tadawul, Reuters, NCBC Research Size of the bubble represents market cap. as on March 27, 2012. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2009 2010 2011 SÌSCO AADC ATTMCO KÌNGDOM (50) (25) 0 25 50 75 100 2008 2009 2010 2011 KÌNGDOM ATTMCO AADC SAÌC ABDÌCO KÌNGDOM ATTMCO AADC SAÌC SARCO SÌSCO ABDÌCO -2 0 2 4 6 8 10 12 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 R O E ( % ) P/B (x) KÌNGDOM ATTMCO AADC SAÌC SARCO SÌSCO ABDÌCO -2 0 2 4 6 8 10 12 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 R O E ( % ) P/B (x) 156 Kingdom Holding Company, established in 1996, focuses on banking and financial services, real estate, and hotels & hotel management. Headquartered in Riyadh, the company has six 100% owned subsidiaries globally. x Business brief Ìnitially engaged in construction, housing development, and educational projects, Kingdom has increased its stake across sectors in several Saudi Arabian, Middle Eastern and international companies. The company's portfolio includes premium brands such as Apple, Time Warner, Samba, Citigroup, Pepsi, Walt Disney and Hewlett-Packard. Kingdom has invested in the domestic health, education, and social services sectors. The company also operates in the private equity space in Saudi Arabia and in developing markets in the Middle East, Africa, and Asia. x Financials Kingdom's revenues fell 30.3% YoY to SR2,334mn in 2011, due to a change in the accounting method from consolidated to equity. Net income for 2011 grew 5.7% YoY to SR640mnn, driven by the increase in income from investments, sale of real estate, and dividends. x Recent developments Kingdom's board approved the issuance of sukuk worth SR3,750mn at the EGM held in March 2012. Ìn February 2012, the Board of Directors approved the acquisition of a 3.867 mn square meter commercial area (Kingdom Oasis land and project) for SR431mn. The acquisition still awaits the general assembly's approval. Separately, Kingdom's 36% owned subsidiary Trade Center Company (Kingdom Center) acquired a 13,550 square meter commercial area for SR43.8mn. MULTÌ-ÌNVESTMENT~ MAY 2012 KÌNGDOM HOLDÌNG ALSO KNOWN AS: KHC NOT COVERED Current price (SR) 11.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 13/7 Market cap ($ mn) 11,658 Shares outstanding (mn) 3,706 Price perform (%) 1M 3M 12M Absolute (4.8) 5.4 34.9 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 33.2 8.8 12M 15.2 4.1 Reuters code 4280.SE Bloomberg code KÌNGDOM AB www.kingdom.com.sa WEIGHTING & FREE FLOAT (%) TASÌ (free float weight) 0.36 Free float 5.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 108.6 72.3 68.3 P/B (x) 1.8 1.6 1.7 P/S (x) 10.1 13.1 18.7 Div Yield (%) - - 4.2 DPS - - 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 6 8 10 12 14 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Kingdom (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Prince AlWaleed Bin Talal Abdul Aziz Al Saud 95.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 4,771 4,310 3,347 2,334 (30.3) (21.2) EBÌTDA SRmn 977 675 356 294 (17.4) (33.0) Net Ìncome SRmn (29,911) 403 605 640 5.7 NM Assets SRmn 50,715 49,990 42,188 39,690 (5.9) (7.8) Equity SRmn 21,615 24,579 27,081 25,446 (6.0) 5.6 Total Debt SRmn 17,614 14,103 12,060 12,398 2.8 (11.0) Cash & Equiv SRmn 1,893 2,233 1,299 1,267 (2.4) (12.5) EBÌTDA Mgn % 20.5 15.7 10.6 12.6 - - Net Mgn % (627.0) 9.3 18.1 27.4 - - ROE % (82.1) 1.7 2.3 2.4 - - ROA % (46.3) 0.8 1.3 1.6 - - Div Payout % - - - NM - - EPS SR (8.07) 0.11 0.16 0.17 5.7 NM BVPS SR 5.83 6.63 7.31 6.87 (6.0) 5.6 Source: Tadawul, Zawya Company, NCBC Research 157 Established in 1977 and headquartered in Abha (Southwest Saudi Arabia), Aseer Trading, Tourism and Manufacturing Company (Aseer) is an investment holding company with interests in five sectors - food, petrochemicals, real estate, building materials and construction, and financial services. x Business brief Aseer operates in a wide range of businesses and has investments in diverse projects, including agriculture, cement, printing & publishing, and energy. The company is also engaged in travel and tourism and has stakes in resorts and hotels. Aseer's wholly owned subsidiaries include Dallah Ìndustrial Ìnvestment Company, Al Ustool Arabia Real Estate Development Co. Ltd, Al Khawatem Trading & Contracting Co. Ltd., Al Nasrah Ìnternational Real Estate Development Co. Ltd., Al Mawajed Ìnternational Real Estate Development Co., and Al Tilal Regional Ìnvestment Co. The company has six branches, one each in Al Madinah, Riyadh, Wadi Al Dawaser, Jeddah, Hail, and Al Jouf. x Financials Aseer's revenues grew by 3.9% YoY to SR2,004mn in 2011. EBÌTDA declined 16.5% YoY to SR197mn during the period. Net income grew 15.3% YoY to SR98mn in 2011, primarily due to higher investment income. x Recent developments Ìn December 2011, the company's Board of Directors proposed a dividend of SR0.75 per share for the year ended 2011. MULTÌ ÌNVESTMENT ~ MAY 2012 ASEER TRADÌNG ALSO KNOWN AS: ASEER NOT COVERED Current price (SR) 19.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 24/11 Market cap ($ mn) 665 Shares outstanding (mn) 126 Price perform (%) 1M 3M 12M Absolute (9.8) (2.7) 41.1 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 80.8 21.6 12M 37.6 10.0 Reuters code 4080.SE Bloomberg code ATTMCO AB www.aseercorp.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.21 Free float 50.1 VALUATION MULTIPLES 09A 10A 11A P/E (x) 31.3 29.4 25.5 P/B (x) 1.0 1.1 1.1 P/S (x) 1.5 1.3 1.2 Div Yield (%) 3.8 3.8 3.8 DPS 0.8 0.8 0.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Aseer (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Dalat Al Baraka Holding Co 49.9 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,727 1,713 1,928 2,004 3.9 5.1 EBÌTDA SRmn 158 186 236 197 (16.5) 7.7 Net Ìncome SRmn (434) 80 85 98 15.3 NM Assets SRmn 3,309 3,565 3,333 3,402 2.1 0.9 Equity SRmn 2,313 2,416 2,290 2,267 (1.0) (0.7) Total Debt SRmn 246 196 94 194 116.4 (7.6) Cash & Equiv SRmn 254 417 188 297 57.7 5.4 EBÌTDA Mgn % 9.1 10.9 12.2 9.8 - - Net Mgn % (25.1) 4.7 4.4 4.9 - - ROE % (15.3) 3.4 3.6 4.3 - - ROA % (11.8) 2.3 2.5 2.9 - - Div Payout % NM 118.8 111.5 96.7 - - EPS SR (3.43) 0.63 0.67 0.78 15.3 NM BVPS SR 18.32 19.11 18.12 17.94 (1.0) (0.7) Source: Tadawul, Zawya, Company, NCBC Research 158 Established in 1988, Saudi Industrial Services Company (SISCO) undertakes large-scaIe investments in KSA's infrastructure sector on the build-operate-transfer and build- operate-own models. SISCO has business interests in water desalination and distribution, development of industrial estates, free zone ports and support services. x Business brief SÌSCO's affiliate Support Services Operations Co. (97% owned) provides ancillary services, such as building and car maintenance, catering, and gas stations in industrial estates. Saudi Trade & Export Development Co. (76% owned) operates a free zone at Jeddah Ìslamic Seaport on a BOT basis. Kindasa Water Services (60% owned) operates a 14,000 cubic meter/day desalination plant and water distribution network. Ìnternational Water Distribution Co. (50% owned) is engaged in building and operating water distribution networks in the KSA. Red Sea Gateway Terminal Co. (53% owned) provides container handling, stevedoring and cargo services. SA- TALKE (33.3% owned) provides complete logistics solution to the petrochemical industry. x Financials SÌSCO's revenues grew 41.3% YoY to SR398mn in 2011 from SR282mn in 2010. The company's net income jumped 419% YoY during the period to SR11mn from SR2mn, mainly due to increased operating efficiency at Red Sea Gateway Terminals. x Recent developments Ìn March 2012, SÌSCO provided an update on the development of the water distribution project (JV between SÌSCO & Amiantit) in the industrial cities of Riyadh and Qassim. The work on the Ìndustrial City in Riyadh is expected to be completed by the end of 2012, while that on the Qassim Ìndustrial city is expected to be completed by April 2012. . MULTÌ ÌNVESTMENT ~ MAY 2012 SAUDÌ ÌNDUSTRÌAL SERVÌCES ALSO KNOWN AS: SÌSCO NOT COVERED Current price (SR) 17.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 22/11 Market cap ($ mn) 323 Shares outstanding (mn) 68 Price perform (%) 1M 3M 12M Absolute (15.8) 4.7 22.8 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 165.4 44.1 12M 78.9 21.0 Reuters code 2190.SE Bloomberg code SÌSCO AB www.sisco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.17 Free float 85.3 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM 109.6 P/B (x) 1.7 1.7 1.6 P/S (x) 8.7 4.3 3.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 14 18 22 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SÌSCO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Xenei Ìndustrial Co. 14.6 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 135 139 282 398 41.3 43.3 EBÌTDA SRmn 34 34 108 159 46.7 66.6 Net Ìncome SRmn (24) 1 2 11 419.1 NM Assets SRmn 1,893 2,371 2,496 2,532 1.5 10.2 Equity SRmn 722 730 725 736 1.5 0.7 Total Debt SRmn 855 1,232 1,347 1,323 (1.8) 15.7 Cash & Equiv SRmn 718 441 225 220 (2.4) (32.6) EBÌTDA Mgn % 25.4 24.3 38.5 39.9 - - Net Mgn % (17.9) 0.9 0.8 2.8 - - ROE % (4.2) 0.2 0.3 1.5 - - ROA % (1.9) 0.1 0.1 0.4 - - Div Payout % - - - - - - EPS SR (0.36) 0.02 0.03 0.16 419.1 NM BVPS SR 10.61 10.73 10.66 10.82 1.5 0.7 Source: Tadawul, Zawya, Company, NCBC Research 159 Saudi Arabia Refineries Company (SARCO), established in Jeddah in 1959, invests in commercial and industrial projects in and outside Saudi Arabia. The company is principally involved in the purchase, refining, transportation, sale, import and export of crude oil and petroleum products. x Business brief SARCO owns stakes in Arabian Salfonates Company (34%), Arabian Tankers Company (27%), Jeddah Oil Refinery Co (25%), Saudi Ìndustrial Ìnvestment Group (3.33%), Tabuk Cement, and Riyad Bank. SARCO generates income from its stakes in other companies, as well as from capital gains on the sale of its investments. x Financials SARCO has been reporting little to no revenues, as most of its income comes from its investments in associates. Net income declined by 10.9% to SR10.9mn in 2011, due to the decrease in deposits and investments revenues and increase of some items in general and administrative expenses (mainly advertisements). x Recent developments Ìn February 2012, SARCO announced that it is considering raising its stake in Arabian Sulfonate Co. to 50% from 34%. Ìn December 2011, SARCO confirmed the acquisition of 2 companies, Arabian Tankers Company L.L.C. and Arabian Salvonite Co. MULTÌ ÌNVESTMENT ~ MAY 2012 SAUDÌ ARABÌA REFÌNERÌES COMPANY ALSO KNOWN AS: SARCO NOT COVERED Current price (SR) 65.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 89/36 Market cap ($ mn) 263 Shares outstanding (mn) 15 Price perform (%) 1M 3M 12M Absolute (11.4) (9.9) 30.2 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 75.2 20.0 12M 83.0 22.1 Reuters code 2030.SE Bloomberg code SARCO AB www.almasafi.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.16 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 316.0 80.4 90.3 P/B (x) 2.6 2.5 2.8 P/S (x) NM NM NM Div Yield (%) 0.8 0.8 0.8 DPS 0.5 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 45 60 75 90 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SARCO (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Prince Mete'eb Bin Abdul Aziz Al Saud 7.3 Prince Khalid Turki Abdul Aziz Turki Al Saud 5.0 S T d l NCBC R h Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 0 0 0 0 N/M N/M EBÌTDA SRmn (2) (1) (2) (2) N/M N/M Net Ìncome SRmn 8 3 12 11 (10.9) 11.5 Assets SRmn 229 397 411 364 (11.4) 16.8 Equity SRmn 212 385 398 351 (11.8) 18.4 Total Debt SRmn 0 0 0 0 - - Cash & Equiv SRmn 47 31 30 27 (9.7) (17.0) EBÌTDA Mgn % N/M N/M N/M N/M - - Net Mgn % N/M N/M N/M N/M - - ROE % 2.0 1.0 3.1 2.9 - - ROA % 2.7 1.0 3.0 2.8 - - Div Payout % 95.1 240.3 61.1 68.6 - - EPS SR 0.53 0.21 0.82 0.73 (10.9) 11.5 BVPS SR 14.11 25.67 26.57 23.43 (11.8) 18.4 Source: Tadawul, Zawya Company, NCBC Research 160 Al-Ahsa Development Company (AADC) was established in 1993 under the Royal Decree to undertake investment activities in the industrial and service sectors of Saudi Arabia, particularly in the region of Al-Ahsa. AADC has business interests in foods, textiles, and medical services. x Business brief AADC's affiliate Al-Ahsa Medical Services Co. (30% stake) manages a modern 220-bed hospital in the Al-Ahsa region. Al-Ahsa Food Services Co. (50% stake), a JV with Eastern Agriculture Development Co, has the capacity to process 5,000 tons of dates and produces date molasses vinegar, dates, and compressed dates. The company's affiliate Saudi Japanese Textile Co. (100% stake) produces synthetic fiber used in the production of dress materials. Al-Ahsa Recreation and Tourism Co. (17.4% stake) establishes and manages recreational projects. x Financials AADC's revenues declined 83.7% to SR16mn in 2011 from SR98mn in 2010. Net income fell by 99.7% to SR0.1mn in 2011, as profits from its Real estate investment declined by about SR77.5mn. Lower profits from the company's securities investment exerted more pressure on its bottom line. x Recent developments AADC acquired 492,422 shares (worth SR12.8mn) in Takween Advanced Ìndustries in January 2012. This acquisition was in line with the company's strategy of increasing its exposure to the industrial sector. On December 30, 2012, the company's Saudi÷Japanese textile subsidiary signed a Memorandum of Understanding (MoU) with one of Ìndonesia's leading textile fabric manufacturers for restarting the Al-Ahsa textile factory. The company expects to re-open the factory in eight months. AADC's Board of Directors approved the full acquisition of Al-Ahsa Food Ìndustries Company by purchasing Ash-Sharqiyah Development Company's 50% stake for SR8mn. MULTÌ ÌNVESTMENT ~ MAY 2012 AL-AHSA DEVELOPMENT ALSO KNOWN AS: AADC NOT COVERED Current price (SR) 17.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 24/9 Market cap ($ mn) 223 Shares outstanding (mn) 49 Price perform (%) 1M 3M 12M Absolute (22.5) (15.0) (40.9) Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 129.3 34.5 12M 69.0 18.4 Reuters code 2140.SE Bloomberg code AADC AB www.ahsa-dev.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 248.6 18.1 NM P/B (x) 2.0 1.7 1.8 P/S (x) 51.4 8.5 52.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 8 13 18 23 28 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al Ahsa for Dev. (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn (21) 16 98 16 (83.7) (192.0) EBÌTDA SRmn - - - - - - Net Ìncome SRmn (56) 3 46.3 0.1 (99.7) (113.4) Assets SRmn 559 571 621 550 (11.5) (0.5) Equity SRmn 397 420 479 469 (2.2) 5.7 Total Debt SRmn 132 126 108 71 (34.1) (18.6) Cash & Equiv SRmn 6 7 16 69 332.7 131.5 EBÌTDA Mgn % NM (23.8) (4.5) (18.8) - - Net Mgn % NM 20.7 47.2 0.6 - - ROE % (12.3) 0.8 10.3 - - - ROA % (8.7) 0.6 7.8 - - - Div Payout % - - - - - - EPS SR (1.15) 0.07 0.94 0.00 (99.7) (113.4) BVPS SR 8.11 8.57 9.78 9.57 (2.2) 5.7 Source: Tadawul, Zawya, Company, NCBC Research 161 Saudi Advanced Industries Co. (SAIC), established in 1987, develops and promotes industrial projects under The Economic Offset Program organized by the Ministry of Defense and Aviation. SAIC encourages firms in the US, the UK and France to collaborate with Saudi companies to establish high-tech plants in diversified industries. x Business brief SAÌC has stakes in Al Obaikan Glass Co. (40.0%), NPS Bahrain for Oil & Gas Services Co. (20.0%), Gulf Salt Co. (11.2%), Al Salam Aircraft Co. (10.0%), Ìndustrialization & Energy Services Co. (3.4%), Arabian Ìndustrial Fibers Co. (0.6%), and Yanbu National Petrochemicals Co. SAÌC enters into contracts with other firms to set up technology-oriented companies. x Financials SAÌC's total operating revenue declined 25.3% YoY to SR10mn in 2011. Net income for the year fell 58.6% YoY to SR4.1mn, due to the increase in General and Administrative expenses and decrease in earnings from investees. x Recent developments SAÌC's Board of Directors approved the appointment of Mr. Saed Al-Shamry as the company's General Manager, effective January 22, 2012, replacing Mr. Mansour Al Yihyan. On October 23, 2011, SAÌC said its 40% owned subsidiary, Obeikan Glass Company, will start commercial operations on November 1, 2011. Ìn reference to the Alliance dated April 26, 2011, SAÌC said the company has registered its 50:50 venture with National Ìndustrialization Company under the name Advanced Polyol Manufacturing Company, with capital of SR140mn. SAÌC was granted a three-year Ìslamic financing facility by Saudi Hollandi Bank to pay for its 50% share of the capital (SR 70mn). MULTÌ-ÌNVESTMENT ~ MAY 2012 SAUDÌ ADVANCED ALSO KNOWN AS: SAÌC NOT COVERED Current price (SR) 23.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/12 Market cap ($ mn) 274 Shares outstanding (mn) 43 Price perform (%) 1M 3M 12M Absolute 1.7 28.0 52.6 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 71.6 19.1 12M 40.2 10.7 Reuters code 2120.SE Bloomberg code SAÌC AB www.saic.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.13 Free float 77.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) 29.6 103.6 250.4 P/B (x) 1.3 1.2 1.2 P/S (x) 25.8 77.3 103.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Advanced (RHS) Source: Bloomeberg TOP 5 SHAREHOLDERS (%) Khalid Saleh Abdul Rahman Al Shethry 23.1 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 25 40 13 10 (25.3) (26.6) EBÌTDA SRmn 20 36 11 5 (55.8) (38.1) Net Ìncome SRmn 18 35 10 4 (58.6) (39.8) Assets SRmn 892 778 834 898 7.7 0.2 Equity SRmn 702 776 832 825 (0.8) 5.5 Total Debt SRmn - - - 70 NA NA Cash & Equiv SRmn 1 19 11 9 (13.1) 89.6 EBÌTDA Mgn % 79.3 90.9 80.4 47.6 - - Net Mgn % 71.3 87.4 74.7 41.4 - - ROE % 2.4 4.7 1.2 0.5 - - ROA % 2.1 4.2 1.2 0.5 - - Div Payout % 120.6 - - - - - EPS SR 0.41 0.81 0.23 0.10 (58.6) (38.8) BVPS SR 16.25 17.96 19.25 19.10 (0.8) 5.5 Source: Tadawul, Zawya Company, NCBC Research 162 Al-Baha Investment & Development Co. (Al-Baha) was established in 1992 to develop and operate projects in Al- Baha province. Engaged in a wide range of industrial, commercial and agricultural activities, the company plans to expand beyond the region. Al-Baha's investments include a 95% stake in Al-Baha Marble & Granite Company. x Business brief Al-Baha is engaged in wholesale and retail trading, as well as in industrial projects, including construction. The company also operates refrigeration stores as well as repair and maintenance workshops, besides developing animal and agricultural products. Ìn addition, Al-Baha owns and reclaims agricultural land for use in new projects. Furthermore, the company constructs, maintains and operates public utilities (including tramways), and develops recreational and tourist facilities, such as parks and tourist villages. x Financials Al-Baha's revenues grew 6% YoY to SR0.16mn in 2011. The company's loss narrowed to SR5.7mn in 2011 from SR6.4mn in 2010. An increase in general and administrative expenses and a decline in the value of assets post revaluation hurt the company in 2011. x Recent developments On December 28, 2011, Al-Baha announced the cancellation of its MoU with Malaysia's PERSPEC PRÌME, citing failure to reach a final agreement. Separately, Al-Baha filed a lawsuit against Al Sateaa Modern General Contracting Company accusing Al Sateaa of refusing to return the SR7mn paid to it by Al-Baha for acquiring a part of Al Sateaa Modern General Contracting Company's assets. Al Sateaa had declined to go ahead with the deal after it rejected the results of the due diligence conducted. MULTÌ-ÌNVESTMENT ~ MAY 2012 AL-BAHA ÌNVESTMENT ALSO KNOWN AS: Al-BAHA NOT COVERED Current price (SR) 20.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 29/12 Market cap ($ mn) 82 Shares outstanding (mn) 15 Price perform (%) 1M 3M 12M Absolute (6.8) (11.3) 28.1 Market (6.2) 6.2 7.6 Sector (10.0) 0.0 35.4 Avg daily turnover (mn) SR US$ 3M 52.5 14.0 12M 45.5 12.1 Reuters code 4130.SE Bloomberg code ABDÌCO AB NA WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.05 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 3.0 3.3 3.5 P/S (x) NM NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Al Baha (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 0.23 0.24 0.15 0.16 6.0 (10.9) EBÌTDA SRmn - - - - - - Net Ìncome SRmn (15) (4.6) (6.4) (5.7) NM NM Assets SRmn 119 128 117 110 (6.1) (2.5) Equity SRmn 105 102 94 88 (6.4) (5.6) Total Debt SRmn - - - - -! - Cash & Equiv SRmn 28 39 23 12 (46.9) (24.5) EBÌTDA Mgn % NM NM NM NM - - Net Mgn % NM NM NM NM - - ROE % (13.1) (4.4) (6.1) (6.6) - - ROA % (11.2) (3.7) (4.9) (5.3) - - Div Payout % - - - - - - EPS SR (1.00) (0.30) (0.40) (0.40) NM NM BVPS SR 6.97 6.79 6.27 5.87 (6.4) (5.6) Source: Tadawul, Zawya, Company, NCBC Research 163 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Industrial-Investment Ticker Company Page No. 1211 MA'ADEN 167 2230 Saudi Chemical 168 2070 SPIMACO 169 1212 Astra Ind 170 1213 AlSorayai Group 171 2150 ZOUJAJ 172 1214 Shaker Group 173 2300 SPM 174 2340 AlAbdullatif 175 1210 BCI 176 2220 Maadaniyah 177 4140 Saudi Export 178 2180 FIPCO 179 1201 Takween 180 The Saudi Arabian industrial investment sector includes companies which operate in various sectors. These include; machinery and equipment, consumer durables, chemicals, industrial textiles, pharmaceuticals, packaging, mining, and paper. The sector's revenues rose 23.1% in 2011 due to the strong performance of Saudi Arabian Mining Co. (Maaden), Al Hassan Ghazi Ìbrahim Shaker Co. (Shaker), and Astra Ìndustrial Group (Astra). KSA's industrial investment sector continued to report strong revenue growth. Revenues have been increasing at a CAGR of 19.3% since 2009. The ROE of KSA's listed players averaged at 13.8% compared to the GCC average of 17.7% in 2011. The sector's adjusted P/E averaged at 24.9x for 2011. Exhibit 103: Revenue of GCC industrial investment companies, 2009-11 Exhibit 104: Comparison of ROE & P/E of GCC companies, 2011 USD mn % Source: Zawya Source: Zawya The industrial investment sector has a large number of private players, and 14 listed companies. Among the listed players, Maaden has the heaviest weight of 1.67% in the TASÌ index in terms of free float, yet its average ROE for 2011 stood at 2.4%, which is regarded low when compared to peer sector companies. Exhibit 105: Sector details Units as stated Country % weight in Index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Arabian Mining Co. (MAADEN) 1.67 27.3 2.4 The Saudi Chemical Co. (SCCO) 0.40 14.3 19.7 Saudi Pharmaceutical Ìndus. & Medical Appliances Corp. (SPÌMACO) 0.39 18.7 6.6 Al Hassan Ghazi Ìbrahim Shaker Co. (SHAKER) 0.20 11.5 31.9 Astra Ìndustrial Group (ASTRA) 0.17 18.0 13.9 Al Sorayai Trading & Ìndustrial Group(ALSORAYA) 0.14 4.0 7.8 Basic Chemical Ìndustries Co. (BCÌ) 0.13 9.2 14.0 The National Co. for Glass Ìndustries (ZOUJAJ) 0.13 68.8 14.8 Saudi Paper Manufacturing Co. (SPM) 0.11 12.0 15.3 Al-Abdullatif Ìndustrial Ìnvestment Co. (ALABDUL) 0.11 11.7 13.0 National Metal Manufacturing & Casting Co. (NMMCC) 0.10 0.9 0.9 Takween Advanced Ìndustries (TAKWEEN)** 0.09 11.0 19.6 Filling & Packing Material Mfg. Co. (FÌPCO) 0.08 7.6 10.8 Saudi Ìndustrial Export Co. (SÌECO) 0.07 2.3 8.0 Source: Bloomberg, Tadawul: Company data ** This company was listed in 2011 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2009 2010 2011 KSA Qatar Kuwait 0 5 10 15 20 25 30 35 40 -10 0 10 20 30 40 50 60 70 R O E ( % ) P/E (x) KSA Qatar Kuwait MAY 2012 ÌNDUSTRÌAL ÌNVESTMENT Higher volumes and prices drive sales 165 ÌNDUSTRÌAL ÌNVESTMENT NCB CAPÌTAL MAY 2012 The sector's revenues increased 23.1% to SR12.9bn in 2011 compared to SR10.5bn in 2010, mainly due to the higher sales volumes and prices of products. Maaden reported the largest growth in revenues, while Al Sorayai Trading & Ìndustrial Group reported a decline in revenues. The sector's net profit grew 26.3% to SR1.9bn in 2011 versus SR1.5bn in 2010, recording a net profit margin of 14.4% in 2011, compared to 14.0% in 2010. Exhibit 106: Revenue of companies, 2009-11 Exhibit 107: Profitability of Maaden relative to sector average SR mn % Source: Tadawul Source: Tadawul The sector's average ROE and P/BV multiples stood at 13.8% and 2.7x, respectively, in 2011 compared to the corresponding figures of 15.8% and 2.9x in 2010. Among the Saudi Arabian peers, SHAKER had the highest ROE of 39.8% in 2011. Exhibit 108: Comparison of P/B and ROE, 2010 Exhibit 109: Comparison of P/B and ROE, 2011 % % Source: Tadawul Source: Tadawul 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2009 2010 2011 SPÌMACO SCCO SPM ALABDUL ASTRA MAADEN AL SORAYAÌ SHAKER Others -20 0 20 40 60 80 2009 2010 2011 Sector Average MAADEN -10 0 10 20 30 40 50 0 3 6 R O E ( % ) P/B (x) ZOUJAJ FÌPCO NMMCC SCCO SPM ALABDUL SÌECO MAADEN BCÌ ASTRA SPÌMACO AL SORAYA SHAKER TAKWEEN -10 0 10 20 30 40 50 0 3 6 R O E ( % ) P/B (x) ZOUJAJ FÌPCO NMMCC SCCO SPM ALABDUL SÌECO MAADEN BCÌ ASTRA SPÌMACO AL SORAYA SHAKER TAKWEEN 166 Established in 1997, Saudi Arabian Mining Company (Ma'aden) expIores and produces metals and non-metal ores. The company owns five operating precious metal extraction mines and several new projects. In July 2008, Ma'aden went public and raised SR9.2bn, reducing the government's holding to 55% from 100%. x Business brief Ma'aden currently has two business lines: gold mining and Maaden Phosphate Company (MPC), which is a SR17bn project to set up a diammonium phosphate (DAP) production facility. MPC is a 70:30 joint venture between Ma'aden and SABÌC. Ma'aden has a total annual production capacity of 440,000 tons of ammonia, 200,000 tons of phosphoric acid, 39,000 tons of caustic calcined magnesia, and 14.2 tons of gold and silver. x Financials Ma'aden's sales for 2011 grew 114.3% YoY to SR1514mn. This is mainly ascribed to the commencement of commercial production of ammonia in October 2011, an increase in the average price of ammonia, and higher sales volume and average realized price per ounce of gold. The company reported a net profit of SR413mn in 2011 compared to a loss of SR9mn in 2010, primarily led by improved margins and lower Zakat provisions. x Recent developments Ìn March 2012, Maaden and Alcoa announced that work to add a new production line to the joint venture aluminum complex at Ras Al-Khair in Saudi Arabia has commenced. With a annual capacity of 100,000 metric tons, the complex would produce sheets for use in the automotive and construction industries; production is expected to commence in 2014. ÌNDUSTRÌAL ÌNVESTMENT ~ MAY 2012 SAUDÌ ARABÌAN MÌNÌNG ALSO KNOWN AS: MAADEN NOT COVERED Current price (SR) 31.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 38/23 Market cap ($ mn) 7,768 Shares outstanding (mn) 925 Price perform (%) 1M 3M 12M Absolute (13.0) 9.4 13.3 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 82.9 22.1 12M 50.7 13.5 Reuters code 1211.SE Bloomberg code MAADEN AB www.maaden.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.60 Free float 33.1 VALUATION MULTIPLES 09A 10A 11A P/E (x) 73.8 - 70.5 P/B (x) 1.6 1.8 1.7 P/S (x) 45.9 41.2 19.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 20 25 30 35 40 TASÌ MA'ADEN (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 50.0 General Organization for Social Ìnsurance 9.4 Public Pension Agency 7.2 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 460 634 707 1,514 114.3 48.7 EBÌTDA SRmn 1 153 181 873 382.5 792.6 Net Ìncome SRmn 203 395 (9) 413 NM 26.7 Assets SRmn 21,358 29,230 34,717 43,574 25.5 26.8 Equity SRmn 16,188 18,365 16,573 16,986 2.5 1.6 Total Debt SRmn 820 8,783 13,517 20,399 50.9 191.9 Cash & Equiv SRmn 4,145 3,371 2,922 5,044 72.6 6.8 EBÌTDA Mgn % 0.3 24.1 25.6 57.6 - - Net Mgn % 44.2 62.2 (1.3) 27.3 - - ROE % 1.9 2.3 (0.1) 2.4 - - ROA % 1.5 1.6 (0.0) 0.9 - - Div Payout % - - - - - - EPS SR 0.22 0.43 (0.01) 0.45 NM 26.7 BVPS SR 17.50 19.85 17.92 18.36 2.5 1.6 Source: Tadawul, Zawya, Company, NCBC Research 167 Saudi Chemical Company (SCC) manufactures and sells explosives and detonators for civil and military use. In 2004, SCC entered the seismic explosives market, serving the oil, and gas exploration sector. The company's subsidiary Saudi International Trading Company (SITCO Pharma) supplies medical and surgical equipment to hospitals and medical centers. x Business brief SCC's products include Prilex (a blasting agent primarily used for underground applications and fissured sedimentary rocks), Kemulex (an emulsion explosive used for underwater blasting and worksites with wet holes), Sanel (a non-electric shock tube used for bench and trench blasting), detonating cords, electric detonators, explosives packing, and blasting machines. x Financials SCC's sales grew 10.7% YoY to SR1,868mn in 2011. EBÌTDA fell 3.8% to SR322mn due to lower profit margin of the detonators segment and high competition in the explosives sector. Net income further decreased 11.8% YoY to SR267mn due to an increase in provisions. x Recent developments On October 9, 2011, the company signed a SR6.3mn contract with Austin Powder Company of Czech Republic to increase the production capacity of non-electric detonators by 50% in the western region factory. The expansion is expected to complete by 2Q12. Ìn June 2011, SÌTCO Pharma renewed its contract with Eli Lilly Pharmaceuticals. According to the terms of the agreement, SÌTCO would act as the sole distributor for Eli Lily products in the Kingdom. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 SAUDÌ CHEMÌCAL ALSO KNOWN AS: SCC NOT COVERED Current price (SR) 41.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 49/36 Market cap ($mn) 696 Shares outstanding (mn) 63 Price perform (%) 1M 3M 12M Absolute 0.5 7.3 (15.0) Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 50.9 13.6 12M 25.0 6.7 Reuters code 2230.SE Bloomberg code SCCO AB www.saudichemical.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.42 Free float 97.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 8.7 8.6 9.8 P/B (x) 2.1 1.9 1.9 P/S (x) 1.6 1.5 1.4 Div Yield (%) 9.7 8.5 4.8 DPS 4.0 3.5 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 35 40 45 50 TASÌ SCC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,537 1,643 1,687 1,868 10.7 6.7 EBÌTDA SRmn 225 298 335 322 (3.8) 12.6 Net Ìncome SRmn 201 301 303 267 (11.8) 10.1 Assets SRmn 2,024 2,382 2,309 2,337 1.2 4.9 Equity SRmn 1,096 1,239 1,353 1,367 1.1 7.6 Total Debt SRmn 119 50 17 134 687.6 4.0 Cash & Equiv SRmn 166 375 122 99 (19.2) (15.8) EBÌTDA Mgn % 14.7 18.1 19.8 17.2 - - Net Mgn % 13.0 18.3 18.0 14.3 - - ROE % 20.1 25.8 23.4 19.7 - - ROA % 10.9 13.7 12.9 11.5 - - Div Payout % - 84.0 73.0 47.3 - - EPS SR 3.17 4.76 4.79 4.23 (11.8) 10.1 BVPS SR 17.34 19.60 21.39 21.62 1.1 7.6 Source: Tadawul, Zawya, Company, NCBC Research 168 Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO) manufactures medicine and medical appliances for local and international markets. Since its establishment in 1986, SPIMACO has augmented its annual production capacity to include 3.5mn liters of liquid medicine, 850mn tablets, and 55mn capsules of cream and ointment, aseptic drops and penicillin. x Business brief SPÌMACO's products include Zimax, Formit, Proton, Famocid 10, Cortimax, Sapofen Plus and Glaze. The company held the largest market share among private players in terms of own products as well as licensors' products in the KSA. SPÌMACO has eight wholly-owned subsidiaries, which help the company to maintain its leadership position in the Saudi Arabian market. x Financials SPÌMACO's revenues increased 8.8% YoY to SR1,129mn in 2011 due to increased production efficiency. EBÌTDA grew 12.5% YoY to SR222mn, while net income increased 19.8% YoY to SR211mn. The increase in profitability was attributable to better sales in the higher margin segments and 34% YoY increase in the cash dividends received from the petrochemical companies in which SPÌMACO has equity investments. x Recent developments On March 25, 2012, the company announced that it had acquired a 48% stake worth SR93mn in Eirgen Pharma Limited, Ìreland. The company also announced that CAD, which is 25% owned by SPÌMACO, would get a loan of SR143mn from Saudi Ìndustrial Development Fund to finance its project of manufacturing raw materials used in the pharmaceutical industry. The project is located in Riyadh and is expected to be completed by mid-2012. ÌNDUSTRÌAL ÌNVESTMENT ~ MAY 2012 SAUDÌ PHARMACEUTÌCAL ALSO KNOWN AS: SPÌMACO NOT COVERED Current price (SR) 44.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 51/37 Market cap ($ mn) 931 Shares outstanding (mn) 78 Price perform (%) 1M 3M 12M Absolute (8.2) 5.5 15.3 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 11.7 3.1 12M 5.7 1.5 Reuters code 2070.SE Bloomberg code SPÌMACO AB www.spimaco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.38 Free float 65.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 22.5 19.8 16.5 P/B (x) 1.6 1.2 1.1 P/S (x) 3.7 3.4 3.1 Div Yield (%) 3.4 3.4 4.5 DPS 1.5 1.5 2.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 35 40 45 50 55 TASÌ SPÌMACO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Arab Company for Drug Ìndustries & Medical Appliances 20.3 Public Pension Authority (PPA) 13.0 Khaled S. A. Al Shetri 5.5 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 872 951 1,038 1,129 8.8 9.0 EBÌTDA SRmn 142 176 197 222 12.5 16.0 Net Ìncome SRmn 128 155 177 211 19.8 18.1 Assets SRmn 1,937 2,722 3,456 3,738 8.2 24.5 Equity SRmn 1,411 2,195 2,957 3,203 8.3 31.4 Total Debt SRmn 40 60 - - NM NM Cash & Equiv SRmn 63 107 347 298 (14.3) 68.1 EBÌTDA Mgn % 16.3 18.5 19.0 19.7 - - Net Mgn % 14.7 16.3 17.0 18.7 - - ROE % 6.0 8.6 6.9 6.9 - - ROA % 4.8 6.6 5.7 5.9 - - Div Payout % 91.7 76.0 66.7 74.2 - - EPS SR 1.64 1.97 2.25 2.70 19.8 18.1 BVPS SR 17.98 27.98 37.70 40.83 8.3 31.4 Source: Tadawul, Zawya, Company, NCBC Research 169 Astra Industrial Group (Astra) operates in the healthcare, chemical, engineering, agricultural and home furnishing industries. The company's subsidiaries are Tabuk Pharmaceutical Manufacturing Co, Astra Polymer Compounding, Astra Industrial Complex Co, and International Building Systems Factory Co. x Business brief Astra's broad product portfolio includes a range of generic and under- licensed pharmaceutical products; additives and compounds used in plastic product production; fertilizers, agricultural pesticides, insecticides and fungicides; and pillows, bed sheets, and mattress pads. The company also constructs metal-based, pre-engineered industrial buildings and steel structures. x Financials Astra reported 23.3% growth in sales to SR1,382mn due to improved performance across segments in 2011. EBÌDTA increased at a lower rate of 4.3% YoY to SR219mn due to higher marketing expenses incurred in new markets. The 4.2% YoY decline in net income can be ascribed mainly to a non-recurring profit of SR29mn recorded last year following the sale of Arabian Company for Comforts & Pillows. x Recent developments On March 12, 2012, Astra announced that its 60% owned subsidiary, Astra Mining Company, would start a calcium carbonate plant worth SR75mn. The plant would be financed partly by Astra Mining's partners and loans from financial institutions. Trial operations at the plant are expected to begin during the second half of 2014. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 ASTRA ÌNDUSTRÌAL ALSO KNOWN AS: AÌG, ASTRA NOT COVERED Current price (SR) 41.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 46/30 Market cap ($mn) 814 Shares outstanding (mn) 74 Price perform (%) 1M 3M 12M Absolute (4.8) 7.0 19.4 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 11.1 2.9 12M 10.4 2.8 Reuters code 1212.SE Bloomberg code ASTRA AB www.astraindustrial.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.17 Free float 33.9 VALUATION MULTIPLES 09A 10A 11A P/E (x) 15.0 11.8 12.3 P/B (x) 2.0 1.8 1.7 P/S (x) 2.9 2.7 2.2 Div Yield (%) 3.0 3.6 4.2 DPS 1.3 1.5 1.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 28 33 38 43 48 TASÌ Astra Ìndust (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Arab Supply and Trading Corporation (ASTRA) 43.8 Mohammed Nejir Saqer Al Utaibi 8.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 991 1,042 1,120 1,382 23.3 11.7 EBÌTDA SRmn 201 204 210 219 4.3 3.0 Net Ìncome SRmn 186 204 259 248 (4.2) 10.1 Assets SRmn 1,743 2,076 2,889 2,963 2.6 19.3 Equity SRmn 1,438 1,562 1,684 1,791 6.3 7.6 Total Debt SRmn 0 0 629 545 (13.4) NM Cash & Equiv SRmn 49 89 188 118.9 (36.9) 34.3 EBÌTDA Mgn % 20.3 19.6 18.8 15.9 - - Net Mgn % 18.8 19.6 23.1 18.0 - - ROE % 16.4 13.6 16.0 14.3 - - ROA % 13.0 10.7 10.4 8.5 - - Div Payout % 20 45 43 52 - - EPS SR 2.51 2.75 3.49 3.35 (4.2) 10.1 BVPS SR 19.40 21.07 22.73 24.16 6.3 7.6 Source: Tadawul, Zawya, Company, NCBC Research 170 Al Sorayai Trading & Industrial Group (Al Sorayai) is a wholesale and retail distributor of carpets, rugs, floorings, furniture, blankets, curtain fabrics and related materials. The company exports products to almost 65 countries, including the US, China, India, Iraq, Russia and Poland. x Business brief Al Soroyai, formerly known as Al Sorayai Carpet Factory Company Ltd, manufactures carpets, rugs, curtains and accessories for the domestic and export markets. Ìt has the capacity to produce 86mn sq. meters of carpets per annum. Al Sorayai derives around 75% of its revenue from the Saudi market and the rest from exports to over 65 countries across the world. Ìn February 2010, the company raised SR243mn through an ÌPO. x Financials Al Soroyai's revenues for 2011 decreased 4% YoY to SR871mn. The decline was mainly due to economic and political instability across the globe. EBÌTDA for 2011 declined 33.6% YoY to SR90mn due to increasing raw material prices, which were not absorbed by sales. The net profit plunged 53.8% YoY to SR35mn. x Recent developments Ìn order to diversify revenues, in December 2011, Al Sorayai announced plans to expand its operations in Saudi Arabia. The company is keen to expand in the real estate sector besides support and logistics. On April 02, 2012, the company announced that it had started a fully-owned branch in Brussels (Belgium), under the name Millennium Weavers. On November 1, 2011, Al Sorayai announced that it had secured a six-year, SR16.6mn loan from the Saudi Ìndustrial Development Fund to expand its carpet factory in Jeddah Ìndustrial City. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 AL SORAYAÌ TRADÌNG ALSO KNOWN AS: AL SOROYAÌ NOT COVERED Current price (SR) 25.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 31/20 Market cap ($ mn) 203 Shares outstanding (mn) 30 Price perform (%) 1M 3M 12M Absolute (11.8) 0.4 3.0 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 43.3 11.6 12M 21.2 5.6 Reuters code 1213.SE Bloomberg code ALSORAYA AB www.al-sorayai.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.13 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 9.5 10.0 21.7 P/B (x) 2.0 1.7 1.7 P/S (x) 0.8 0.8 0.9 Div Yield (%) - 3.9 - DPS - 1.0 - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 20 24 28 32 TASÌ Alsorayai (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Nafei Nasser Abdul Aziz Al Sorayai 9.7 Mohammed Nasser Abdul Aziz Al Sorayai 8.7 Nasser Abdul Aziz Al Sorayai 8.7 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 937 943 907 871 (4.0) (2.4) EBÌTDA SRmn 128 136 135 90 (33.6) (11.0) Net Ìncome SRmn 74 80 76 35 (53.8) (21.9) Assets SRmn 883 945 1,036 1,069 3.2 6.6 Equity SRmn 332 373 444 449 1.2 10.5 Total Debt SRmn 348 342 367 402 9.7 5.0 Cash & Equiv SRmn 10 19 16 11 (33.2) 3.3 EBÌTDA Mgn % 13.6 14.5 14.9 10.3 - - Net Mgn % 7.9 8.5 8.4 4.0 - - ROE % 23.3 22.8 18.6 7.9 - - ROA % 8.7 8.8 7.7 3.3 - - Div Payout % 0.0 0.0 39.5 - - - EPS SR 2.46 2.67 2.53 1.17 (53.8) (21.9) BVPS SR 11.08 12.42 14.79 14.96 1.2 10.5 Source: Tadawul, Zawya, Company, NCBC Research 171 National Company for Glass Industries (Zoujaj) owns glass container factories in Riyadh and Dammam. Zoujaj has a 45% stake in Saudi Guardian International Float Glass and Guardian RAK, and a joint venture with Guardian Industries. These companies manufacture float glass for automotive and construction applications. Zoujaj owns 50% of lighting products manufacturer, Saudi National Lamps & Electrical Co. x Business brief Zoujaj's plants in Riyadh and Dammam produce 92,000 metric tons of glass containers each year for the food and beverage industry. These plants produce 75 types of returnable/non-returnable bottles. Saudi Guardian Ìnternational Float Glass Co manufactures 220,000 meters of float glass per year. Guardian RAK (with a capacity of 700 tons per day) implements a hi- tech glass coating technology to expand its float glass offerings to regional clients. x Financials Ìn 2011, Zoujaj's revenues increased 6.5% YoY to SR118mn. EBÌTDA contracted to 14.6% in 2011 due to lower realization on the average price of glass bottles and increased operating expenses, mainly electricity cost. However, the net income increased 14.2% in 2011, primarily due to better performance by associates in the float glass segment. x Recent developments The company has signed a memorandum of understanding with two companies. Ìt signed a deal with The Eastern Company for Ìndustrial Ìnvestment to acquire its 10% stake in Saudi Guardian Ìnternational Float Glass Company. The other deal is with Zamil Group Holding Company to acquire the latter's 10% stake in Guardian Zoujaj Ìnternational Float Glass Company. ÌNDUSTRÌAL ÌNVESTMENT~MAY 2012 NATÌONAL CO. FOR GLASS ALSO KNOWN AS: ZOUJAJ NOT COVERED Current price (SR) 32.7 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 42/30 Market cap ($ mn) 262 Shares outstanding (mn) 30 Price perform (%) 1M 3M 12M Absolute (18.3) (6.0) (2.1) Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 28.4 7.6 12M 10.8 2.9 Reuters code 2150.SE Bloomberg code ZOUJAJ AB www.zoujaj-glass.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.12 Free float 72.6 VALUATION MULTIPLES 09A 10A 11A P/E (x) 21.5 13.8 12.1 P/B (x) 2.2 1.9 1.7 P/S (x) 8.0 8.9 8.3 Div Yield (%) 1.5 3.8 6.9 DPS 0.5 1.3 2.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 30 34 38 42 TASÌ Zoujaj (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Riyadh M Abdullah Al Humaidan 25.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 109 122 111 118 6.5 2.8 EBÌTDA SRmn 44 65 52 45 (14.6) 0.6 Net Ìncome SRmn 68 46 71 81 14.2 6.2 Assets SRmn 488 509 582 630 8.3 8.9 Equity SRmn 428 455 525 574 9.2 10.2 Total Debt SRmn 25 21 17 12 (29.4) (21.5) Cash & Equiv SRmn 17 26 69 92 33.9 77.3 EBÌTDA Mgn % 40.6 53.1 47.4 38.0 - - Net Mgn % 62.4 37.2 64.1 68.8 - - ROE % 15.5 10.3 14.5 14.8 - - ROA % 13.7 9.1 13.0 13.4 - - Div Payout % 66.5 32.9 52.8 83.2 - - EPS SR 2.26 1.52 2.37 2.70 14.2 6.2 BVPS SR 14.27 15.15 17.50 19.12 9.2 10.2 Source: Tadawul, Zawya, Company, NCBC Research 172 Al Hassan Ghazi Ibrahim Shaker Company (Shaker) imports and wholesales air conditioning products and home appliances. The Shaker Group comprises the parent company and three subsidiaries, and is one of the leading players in its sector in KSA. The company completed its IPO in May 2010. x Business brief Shaker sells, repairs, and maintains air conditioners and home appliances. The company's portfolio comprises over eight brands with nationwide presence and strong market position. Shaker also sells OEM products under its label. Exclusive sales outlets, service and display centers, warehousing facilities and training academies helped the company to expand presence in KSA. Shaker has 25 branches in the Kingdom with showrooms in Jeddah, Al Qassim, Khamis Mushayt, Riyadh and Khobar. x Financials Revenue grew 35.5% YoY to SR1,566mn in 2011. EBÌDTA margin declined to 15.3% from 17.0% in 2010 due to higher operating expenses. Net income rose 24.1% YoY to SR180mn; however, net margin declined to 11.5% during the year primarily due to higher interest expense. x Recent developments On December 07, 2011, Ìbrahim Hussein Shaker Project and Maintenance, the company's fully owned subsidiary, signed two contracts worth SR33.8mn with the Ministry of Education to deliver LG air conditioning chillers to various schools in the Kingdom within four months. On March 31, 2012, to achieve cooperation in the marketing and sales of LG Solar and Lighting LED and PLS products, the company signed a one-year MoU with LG Electronics. ÌNDUSTRÌAL ÌNVESTMENT ~ MAY 2012 AL HASSAN GHAZÌ ÌBRAHÌM SHAKER CO. ALSO KNOWN AS: SHAKER NOT COVERED Current price (SR) 70.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 80/58 Market cap ($ mn) 653 Shares outstanding (mn) 35 Price perform (%) 1M 3M 12M Absolute (4.1) 12.0 10.7 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 8.7 2.3 12M 6.8 1.8 Reuters code 1214.SE Bloomberg code SHAKER AB www.shaker.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.27 Free float 53.4 VALUATION MULTIPLES 09A 10A 11A P/E (x) 18.5 16.9 13.6 P/B (x) 6.0 5.1 4.3 P/S (x) 2.5 2.1 1.6 Div Yield (%) - 4.3 5.0 DPS - 3.0 3.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 57 62 67 72 77 TASÌ SHAKER (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) A K Al-Muhaidib and Sons Group 12.2 Ìbrahim Abdullah A and Brothers 12.2 Tawazon Arabia Co. for Com Ìnv 10.0 Lamaa Holding 7.4 Al Mutlaq Group Co. 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 918 998 1,156 1,566 35.5 19.5 EBÌTDA SRmn 118 163 197 239 21.3 26.4 Net Ìncome SRmn 103 132 145 180 24.1 20.5 Assets SRmn 739 658 874 1,212 38.7 17.9 Equity SRmn 387 411 485 566 16.7 13.5 Total Debt SRmn 190 123 180 418 132.2 30.1 Cash & Equiv SRmn 54 25 52 61 17.3 4.4 EBÌTDA Mgn % 12.9 16.4 17.0 15.3 - - Net Mgn % 11.2 13.3 12.6 11.5 - - ROE % 33.4 33.2 32.4 34.3 - - ROA % 16.3 19.0 19.0 17.3 - - Div Payout % - - 72.3 68.0 - - EPS SR 2.94 3.78 4.15 5.15 24.1 20.5 BVPS SR 11.06 11.73 13.84 16.16 16.7 13.5 Source: Tadawul, zawya, Company, NCBC Research 173 Saudi Paper Manufacturing Company (SPMC) is among the few integrated paper companies in the MENA region. SPMC produces tissue paper, tissue rolls and other paper products, and also owns recycling operations. x Business brief SPMC has three paper processing plants with a capacity of 125,000 tons of tissue paper, 50,000 tons of converted paper, and 65,000 tons of de-inked paper per year, respectively. The company's wholly owned subsidiary ÷ Saudi Paper Converting Co (SPCC) ÷ converts tissue rolls into branded consumables, which are distributed through the wholesale and retail channels. Saudi Recycling Co (SRC) collects waste paper that serves as feed for SPMC's downstream de-inking plants. Al-Madar Trading Co was set up in the UAE to collect waste paper from international sources. x Financials SPMC's revenue grew 4% YoY to SR836mn in 2011. EBÌTDA margin contracted 18.3% YoY to SR152mn due to an 8.5% YoY increase in production cost during the year. This was due to long halts in production and trial production runs on the fourth line of production of paper that required some technical enhancements. Net income fell 18.1% YoY to SR100mn due to increase in provisions for obsolete inventory. x Recent developments On December 17, 2011, SPMC cancelled its deal with CDG Maroc due to the prevailing uncertainty in the cellulose industry. SPMC appointed Mr. James David Pheebs to the Board of Directors; he replaced Mr. Raed Bin Abdulrahman Bin Abdulaziz Al Meshaal with effect from December 19, 2011. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 SAUDÌ PAPER ALSO KNOWN AS: SPMC, SAUDÌ PAPER GROUP NOT COVERED Current price (SR) 30.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 40/27 Market cap ($ mn) 309 Shares outstanding (mn) 38 Price perform (%) 1M 3M 12M Absolute (11.7) (10.6) (14.4) Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 11.8 3.1 12M 8.1 2.2 Reuters code 2300.SE Bloomberg code SPM AB www.saudipaper.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 50.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 12.3 9.5 11.5 P/B (x) 2.3 1.9 1.8 P/S (x) 2.1 1.4 1.4 Div Yield (%) 3.2 3.9 4.5 DPS 1.0 1.2 1.4 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 25 30 35 40 45 50 TASÌ SPM (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) HH Prince Abdullah Bin Musaed Bin Abdul Aziz Al Saud 50.0 Falcom Financial Services Co. 7.7 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 506 558 804 836 4.0 18.2 EBÌTDA SRmn 126 150 186 152 (18.3) 6.5 Net Ìncome SRmn 84 94 123 100 (18.1) 6.0 Assets SRmn 1,089 1,374 1,502 1,732 15.3 16.7 Equity SRmn 447 511 595 655 10.1 13.6 Total Debt SRmn 556 760 821 989 20.4 21.1 Cash & Equiv SRmn 21 37 36 67 84.7 47.2 EBÌTDA Mgn % 24.9 26.9 23.2 18.2 - - Net Mgn % 16.7 16.9 15.3 12.0 - - ROE % 20.4 19.6 22.2 16.1 - - ROA % 9.8 7.6 8.5 6.2 - - Div Payout % 35.5 39.9 36.7 52.3 - - EPS SR 2.25 2.51 3.27 2.68 (18.1) 6.0 BVPS SR 11.92 13.62 15.86 17.47 10.1 13.6 Source: Tadawul, zawya, Company, NCBC Research 174 Established in 1981, Al-Abdullatif Industrial Investment Company (Al Abdullatif) ranks among the largest carpet manufacturers in the Middle East and Africa region. The company has fully integrated operations, from fiber extrusion to finishing. Its affiliates are ADFA Blanket Co., Eastern Textile Co., National Spinning Co., Shahd Paper Tubes, and Nadeen Arabian Color Co. x Business brief Al Abdullatif manufactures three kinds of carpets: tufted, woven and non- woven, primarily made from synthetic fibers. The company exports these carpets to more than 25 countries. The color pigment division provides various shades required to make carpets and blankets. The paper tube segment offers paper tubes of different sizes and thicknesses for winding carpets and yarn. Al Abdullatif has the capacity to produce 1.5mn blankets and 100mn sq. meters of carpets per annum. x Financials Al Abdullatif's revenues grew 17.4% YoY to SR1,337mn in 2011. EBÌDTA remained constant at SR268mn due to high operational cost and administrative expenses. The net profit increased 2.3% YoY to SR156mn in 2011, mainly due to profits from invested entities. x Recent developments Al Abdullatif announced the appointment of external auditors for the year 2012, and the distribution of 15% cash dividend (or SR1.5 per share) for the year ended December 31, 2011. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 AL ABDULLATÌF ÌNDUSTRÌAL ALSO KNOWN AS: AÌÌC NOT COVERED Current price (SR) 27.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/24 Market cap ($ mn) 596 Shares outstanding (mn) 81 Price perform (%) 1M 3M 12M Absolute (4.8) (0.4) 1.5 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 13.3 3.5 12M 8.6 2.3 Reuters code 2340.SE Bloomberg code ALABDUL AB www.carpets.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.11 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 13.3 14.7 14.3 P/B (x) 1.6 2.0 1.9 P/S (x) 2.2 2.0 1.7 Div Yield (%) 12.7 9.1 5.5 DPS 3.5 2.5 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 22 26 30 34 38 TASÌ AlAbdullatif (RHS) a Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdul Latif Holding Group 60.0 Omar Sulaiman Saleh Al Abdul Latif 6.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,139 996 1,139 1,337 17.4 5.5 EBÌTDA SRmn 282 282 268 268 0.0 (1.7) Net Ìncome SRmn 201 169 152 156 2.3 (8.2) Assets SRmn 1,534 1,596 1,509 1,680 11.3 3.1 Equity SRmn 1,215 1,383 1,130 1,204 6.6 (0.3) Total Debt SRmn 217 112 258 327 27.0 14.6 Cash & Equiv SRmn 35 229 71 48 (32.2) 11.4 EBÌTDA Mgn % 24.8 28.3 23.5 20.1 - - Net Mgn % 17.7 16.9 13.4 11.7 - - ROE % 17.3 13.0 12.1 13.4 - - ROA % 14.1 10.8 9.8 9.8 - - Div Payout % - 168.7 133.3 78.1 - - EPS SR 2.48 2.07 1.88 1.92 2.3 (8.2) BVPS SR 14.95 17.03 13.90 14.82 6.6 (0.3) Source: Tadawul, Zawya, Company, NCBC Research 175 Ìn Basic Chemical Industries (BCI), incorporated in 1973, produces and sells chemicals through its subsidiaries, which include Saudi Water Treatment (100% stake), National Adhesive (47% stake), Basic Chemicals National (100% Stake), Chemical Marketing and Distribution (99% stake), OKAZ Chemical Marketing and Distribution Co. (100% stake), and Arabian Polyol. x Business brief BCÌ produces a variety of chemicals such as liquefied chlorine gas, hydrochloric acid, caustic soda, polyurethane (polyol), adhesives, calcium chloride, water treatment chemicals, laundry and janitorial products. The company's plant, located in the First Ìndustrial Zone in Dammam City, has an annual production capacity of 71,560 mt of gases. The company has a polyurethane plant (10,826 mtpa), a chemical plant (154,428 mtpa), an adhesives plant (18,328 mtpa), and a sulfuric acid plant (31,242 mtpa). x Financials BCÌ's revenue grew 18.2% YoY to SR643mn in 2011. EBÌTDA increased 6.1% YoY to SR123mn. Net income decreased 10.4% YoY to SR59mn in 2011. The decrease is due to higher operating expenses and increased share of minority interest in profits compared to the previous year. x Recent developments On November 12, BCÌ announced that it had resumed operations at its Chlorine Gas Unit from November 2, 2011. Operations at the unit were ceased after civil defense requested the company to ensure that all safety measures were in place. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 BASÌC CHEMÌCAL ÌNDUSTRÌES ALSO KNOWN AS: BCÌ NOT COVERED Current price (SR) 31.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 43/22 Market cap ($ mn) 228 Shares outstanding (mn) 28 Price perform (%) 1M 3M 12M Absolute (11.4) (1.6) 10.7 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 31.9 8.5 12M 11.9 3.2 Reuters code 1210.SE Bloomberg code BCÌ AB www.bci.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.11 Free float 77.9 VALUATION MULTIPLES 09A 10A 11A P/E (x) 13.7 12.9 14.4 P/B (x) 2.4 2.2 2.0 P/S (x) 1.7 1.6 1.3 Div Yield (%) 3.2 3.2 3.2 DPS 1.0 1.0 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 20 25 30 35 40 45 TASÌ BCÌ (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Ali Al Abdullah Al Tamimi Co. 22.0 Abdul Aziz M Abdul Aziz Almoaibed 9.2 Abdullah M Abdul Aziz Almoaibed 7.6 Mohammed & Abdul Rahman Al Saad Al Buwardi Co. 7.0 Noor Muhana Abdul Aziz Almoaibed 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 494 509 544 643 18.2 5.7 EBÌTDA SRmn 95 112 116 123 6.1 2.0 Net Ìncome SRmn 40 63 66 59 (10.4) (3.6) Assets SRmn 531 570 619 690 11.4 3.7 Equity SRmn 305 354 393 425 8.1 2.6 Total Debt SRmn 93 60 21 5 (75.9) (37.8) Cash & Equiv SRmn 35 114 150 196 31.0 9.4 EBÌTDA Mgn % 19.3 22.0 21.3 19.1 - - Net Mgn % 8.0 12.3 12.2 9.2 - - ROE % 13.4 19.0 17.7 14.5 - - ROA % 7.6 11.4 11.1 9.1 - - Div Payout % 34.7 43.9 41.5 46.4 - - EPS SR 1.44 2.28 2.41 2.16 (10.4) (3.6) BVPS SR 11.08 12.88 14.29 15.45 8.1 2.6 Source: Tadawul, Zawya, Company, NCBC Research 176 National Metal Mfg & Casting (Maadaniyah) is the largest manufacturer of steel wire and other wire products in Saudi Arabia. The company has two plants - a plant in Jubail Industrial City and a plant in Dammam. The plants are equipped with modern machinery for wire drawing, stranding, galvanizing, and manufacturing fasteners. Maadaniyah's brands include Aslak, Mahawer and Masabik. x Business brief Maadaniyah has the capacity to produce 22,000 tons of castings, 12,000 units of axles and 100,000 tons of steel wires each year. The company specializes in the manufacture of low relaxation PC strands, high/low- galvanized steel, carbon wires & strands, mattress spring wires, fasteners, welding wires, and steel nails. These products are used in various sectors such as construction, appliances, electrical cable, building systems and steel fabrication. x Financials Maadaniyah's revenue increased 13.7% YoY to SR361.mn in 2011. EBÌTDA fell 33% YoY to SR25mn due to higher raw material cost. Net income decreased 81% YoY to SR3mn due to high research expenses on exploring new investment opportunities. x Recent developments On March 14, 2012, the CMA Board approved Maadaniyah'srequest to increase its capital from SR255.5mn to SR281.1mn by issuing one bonus share for every 10 existing shares owned by the shareholders. This would be funded by transferring SR12.6mn from the statutory reserve account and SR12.8mn from retained earnings account to the company's capital. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 NATÌONAL METAL ALSO KNOWN AS: NATMETAL, MAADANÌYAH NOT COVERED Current price (SR) 29.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 39/18 Market cap ($ mn) 223 Shares outstanding (mn) 28.1 Price perform (%) 1M 3M 12M Absolute (11.2) (7.4) 10.4 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 55.6 14.8 12M 42.2 11.2 Reuters code 2220.SE Bloomberg code NMMCC AB www.maadaniyah.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.09 Free float 64.5 VALUATION MULTIPLES 09A 10A 11A P/E (x) 53.9 50.1 262.8 P/B (x) 2.4 2.4 2.4 P/S (x) 2.6 2.6 2.3 Div Yield (%) 1.4 - - DPS 0.4 - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 15 20 25 30 35 40 TASÌ Maadaniyah (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) National Manufacturing Company 35.4 Ahmad S. M. Al Aseeri 7.4 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 500 319 318 361 13.7 (10.3) EBÌTDA SRmn 64 38 38 25 (33.0) (26.6) Net Ìncome SRmn 40 16 17 3 (80.9) (57.0) Assets SRmn 544 483 517 525 1.7 (1.2) Equity SRmn 340 345 349 352 0.9 1.1 Total Debt SRmn 80 73 109 75 (31.4) (2.4) Cash & Equiv SRmn 13 35 12 12 4.8 (3.5) EBÌTDA Mgn % 12.9 11.9 11.9 7.0 - - Net Mgn % 8.0 4.9 5.3 0.9 - - ROE % 12.2 4.5 4.8 0.9 - - ROA % 8.1 3.0 3.3 0.6 - - Div Payout % 28.9 74.8 - - - - EPS SR 1.43 0.55 0.59 0.11 (80.9) (57.0) BVPS SR 12.09 12.26 12.40 12.51 0.9 1.1 Source: Tadawul, Zawya, Company, NCBC Research 177 Saudi Industrial Export Co. (SIEC) exports, imports and distributes agricultural goods, industrial products and bulk commodities. SIEC, which operates through its associates across the globe, has exported over 10 million tons of products to more than 40 markets. The company's key trading markets include Europe, Asia, and Africa. x Business brief SÌEC trades in bulk food products (including rice, maize, sugar and edible oils); fertilizers, minerals, chemicals and petrochemicals; iron, steel and other metals; and air conditioners, trucks and cables. The company offers various services to its suppliers and customers, including guaranteed payments, arms-length marketing, financing, and logistics for land and sea transport. SÌEC is investing in distribution channels and warehousing facilities to reach more manufacturers and customers. x Financials SÌEC's revenues grew 114.4% YoY to 400mn in 2011 due to higher sales volumes. EBÌDTA grew 204.2% YoY to SR8.8mn during the year, mainly due to robust increase in profit margin from the sale of raw materials for fertilizers in the Chinese market. Net income rose to SR9.2mn in 2011 from SR3.0mn the previous year, mainly due to an increase in other income from the transfer of shipping provisions. x Recent developments The company appointed Mr. Suleiman Bin Abdul Mohsen Uwayd as General Manager as of May 1, 2011. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 SAUDÌ ÌNDUSTRÌAL EXPORT ALSO KNOWN AS: SADÌRAT, SÌEC NOT COVERED Current price (SR) 44.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 51/21 Market cap ($ mn) 127 Shares outstanding (mn) 11 Price perform (%) 1M 3M 12M Absolute (3.1) 19.1 50.9 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 60.0 16.0 12M 40.3 10.7 Reuters code 4140.SE Bloomberg code SÌECO AB www.siec.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.08 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) - 159.1 51.6 P/B (x) 4.7 4.5 4.1 P/S (x) 4.7 2.6 1.2 Div Yield (%) - - 1.1 DPS - - 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 20 26 32 38 44 50 TASÌ SÌECO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Ìbrahim Oudah Abdullah Al - Oudah 5.9 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 709 101 187 400 114.4 (17.4) EBÌTDA SRmn 22 (3) 3 9 204.2 (25.8) Net Ìncome SRmn 14 (6) 3 9 208.2 (13.5) Assets SRmn 147 128 121 151 24.7 0.8 Equity SRmn 119 103 107 116 8.3 (0.8) Total Debt SRmn - - - - NM NM Cash & Equiv SRmn 98 85 26 17 (36.1) (44.6) EBÌTDA Mgn % 3.0 (2.5) 1.5 2.2 - - Net Mgn % 2.0 (5.5) 1.6 2.3 - - ROE % 11.9 (5.0) 2.9 8.3 - - ROA % 9.2 (4.0) 2.4 6.8 - - Div Payout % 75.6 - - 58.4 - - EPS SR 1.32 (0.51) 0.28 0.86 208.2) (13.5) BVPS SR 11.02 9.50 9.92 10.74 8.3 (0.8) Source: Tadawul, Zawya, Company, NCBC Research 178 Filling & Packing Materials Manufacturing Company (FIPCO) produces bags and other woven polypropylene packaging products for industriaI and agricuIturaI use. The company's production facilities located in Riyadh cover an area of 75,000 sq. meters. FIPCO manufactures over 2mn jumbo bags annually. x Business brief FÌPCO's products include jumbo bags with capacities ranging from 500 to 2,000 kg; container liners used in dry cargo shipping; and sling bags in varying sizes. The company also produces leno bags for packing fresh vegetables and fruits; cable fillers for electric cable manufacturers; fabrics for fire retardants; tents and lumber protection; strapping bands used for boxes; and agriculture and baler twines for greenhouses and grass baling. x Financials FÌPCO's revenue jumped 20.6% to SR206mn in 2011. EBÌTDA fell 15.6% to SR26mn due to an increase in wages and salaries. Furthermore, low priced, long-term contracts and increased raw material prices exerted downward pressure on profitability. Net income for the year fell 27.3% to SR16mn. x Recent developments Ìn October 2011, the company signed a seven-year loan agreement with Saudi Ìndustrial Development Fund for SR8.4mn. The loan would be utilized for the expansion of a bag plant worth SR17.5mn. The company plans to fund the rest through internal accruals. ÌNDUSTRÌAL ÌNVESTMENT ~MAY 2012 FÌLLÌNG AND PACKÌNG ALSO KNOWN AS: FÌPCO NOT COVERED Current price (SR) 40.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 53/26 Market cap ($ mn) 125 Shares outstanding (mn) 12 Price perform (%) 1M 3M 12M Absolute (10.5) (2.2) 28.7 Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 71.5 19.1 12M 53.7 14.3 Reuters code 2180.SE Bloomberg code FÌPCO AB www.fipco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.08 Free float 85.3 VALUATION MULTIPLES 09A 10A 11A P/E (x) 23.7 21.7 29.8 P/B (x) 3.7 3.2 3.1 P/S (x) 3.4 2.7 2.3 Div Yield (%) - 2.5 2.5 DPS - 1.0 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 20 30 40 50 60 TASÌ FÌPCO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 20010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 178 138 171 206 20.6 5.0 EBÌTDA SRmn 25 26 31 26 (15.6) 1.6 Net Ìncome SRmn 18 20 22 16 (27.3) (3.6) Assets SRmn 139 167 188 200 6.4 13.0 Equity SRmn 96 126 147 150 2.3 15.9 Total Debt SRmn 11 17 16 22 39.0 24.7 Cash & Equiv SRmn 18 13 15 23 53.2 8.0 EBÌTDA Mgn % 13.9 18.8 18.0 12.6 - - Net Mgn % 9.9 14.3 12.7 7.6 - - ROE % 18.8 17.8 15.8 10.6 - - ROA % 13.5 12.9 12.2 8.1 - - Div Payout % 0.0 0.0 53.2 73.1 - - EPS SR 1.52 1.72 1.88 1.37 (27.3) (3.6) BVPS SR 8.38 10.99 12.76 13.05 2.3 15.9 Source: Tadawul, Zawya, Company, NCBC Research 179 Takween Advanced Industries Co. (TAKWEEN), formerly Al- Othman Plastic Products Co., was established in 1993. The company specializes in the production of high quality packaging for the diary and beverage industries in Saudi Arabia and the Middle East. In early 2010, TAKWEEN acquired Advanced Fabrics (SAAF), a non-woven fabrics manufacturer, and Ultrapak, a PET preforms manufacturer. The company went public in January 2012 with an IPO of 9mn shares, accounting for 30% of the total shares outstanding. x Business brief TAKWEEN has three business segments: Plastic Packaging, PET Preforms and Non-woven Fabrics. Plastic Packaging includes polystyrene sheets, thermoformed polystyrene and high density polyethylene (HDPE) used mainly in the dairy, food and beverage industries. Preforms are polymers sold to bottlers for producing bottles. Non-woven Fabrics includes spunbond, meltblown and composite fabrics, which are used in hygiene products, industrial and medical applications. x Financials The company's net sales for 2011 grew 14% YoY to SR694mn. EBÌTDA margin declined to 19.6% from 21.6% in 2010 due to higher cost of goods sold. Net profit increased 8.2% YoY to SR76mn during the year; however, net margin declined marginally to 11.0% from 11.6% in 2010. x Recent developments On March 06, 2012, TAKWEEN announced a cash dividend of 13.5%, or SR1.35 per share, for 2011. ÌNDUSTRÌAL ÌNVESTMENT ~ MAY 2012 TAKWEEN ADVANCED ÌNDUSTRÌES ALSO KNOWN AS: TAKWEEN NOT COVERED Current price (SR) 52.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 68/49 Market cap ($ mn) 416 Shares outstanding (mn) 30 Price perform (%) 1M 3M 12M Absolute (16.8) (6.3) - Market (6.2) 6.2 7.6 Sector (9.8) 5.9 7.5 Avg daily turnover (mn) SR US$ 3M 132.2 35.2 12M - - Reuters code 1201.SE Bloomberg code TAKWEEN AB www.takweenai.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.08 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 69.8 22.2 20.5 P/B (x) 12.3 4.5 4.0 P/S (x) 11.8 2.6 2.2 Div Yield (%) - - 2.6 DPS - - 1.4 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 48 53 58 63 68 5,500 6,000 6,500 7,000 7,500 8,000 Feb-12 Mar-12 Apr-12 May-12 TASÌ Takween (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al-Othman Holding 50.8 Saleh Abdulaziz Al Rajhi and Partners 13.9 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (09-11) Revenues SRmn - 132 609 694 14.0 129.4 EBÌTDA SRmn - 27 131 136 3.4 125.9 Net Ìncome SRmn - 22 70 76 8.2 84.6 Assets SRmn - 280 729 807 10.7 69.8 Equity SRmn - 127 343 389 13.4 75.2 Total Debt SRmn - 121 283 291 3.1 55.0 Cash & Equiv SRmn - 3 21 41 94.0 284.7 EBÌTDA Mgn % - 20.2 21.6 19.6 - - Net Mgn % - 17.0 11.6 11.0 - - ROE % - - 30.0 20.8 - - ROA % - - 14.0 9.9 - - Div Payout % - NA NA 53.2) - - EPS SR - 0.75 2.35 2.54 8.2 84.6 BVPS SR - 4.23 11.44 12.98 13.4 75.2 Source: Tadawul, Zawya, Company, NCBC Research 180 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Building & Construction Ticker Company Page No. 1320 SSP 185 2040 Saudi Ceramics 186 2160 Amiantit 187 2240 Zamil Ind 188 1310 MMG 189 2320 Al Babtain 190 2110 Saudi Cables 191 2200 Arabian Pipes 192 1330 Abdullah A M Al Khodari Sons Co 193 2130 SIDC 194 2090 National Gypsum 195 4230 Red Sea Housing 196 2360 SVCP 197 2370 MESC 198 1301 United Wire Factories 199 Saudi Arabia is the biggest construction market in the MENA region. The Kingdom's construction sector recovered significantly after a slowdown in 2010. This was primarily due to the expansionary government policies, a growing population, and a resilient economy. Despite many challenges such as increased competition and price wars, we believe construction companies performed well in 2011. The residential construction market in Saudi Arabia strengthened in 2011 as the focus shifted to affordable housing. Several new affordable housing projects, including the government's aim to build 500,000 housing units,have been initiated to address the strong supply gap in low-income housing units. Meanwhile, the commercial construction segment has recovered due to low interest rates, high liquidity and a growing economy. The Saudi Arabian government continued to invest heavily on infrastructure to promote employment and diversify the economy. Currently, four new economic cities are being developed in Saudi Arabia which, we believe, would benefit construction related companies. The Tadawul-listed companies under the building & construction sector recorded a strong performance in 2011, with revenues increasing significantly compared to 2010. However, the sector's ROE stood at 3.0% in 2011, which we believe is regarded low when compared to the GCC peer average of 12.2%. Exhibit 110: Revenues of GCC building & construction companies, 2009-11 Exhibit 111: Comparison of ROE and P/E of GCC companies, 2011 USD mn % Source: Zawya, Tadawul, NCBC Research Source: Zawya, Tadawul, NCBC Research The building & construction sector in Saudi Arabia is relatively diversified with the presence of 15 listed companies. These companies in total account for 2.5% of the TASÌ's weight in terms of free float. Saudi Ceramic Co, and Saudi Arabian Amiantit Co, with a weight of 0.35% each, have the largest weight on the index. 0 1000 2000 3000 4000 5000 6000 2009 2010 2011 KSA UAE Kuwait Oman 0 8 16 24 32 0% 3% 6% 9% 12% 15% 18% P / E ROE % KSA UAE Kuwait Oman MAY 2012 BUÌLDÌNG & CONSTRUCTÌON Strong outlook ÷ Focus on residential construction 182 BUÌLDÌNG & CONSTRUCTÌON NCB CAPÌTAL MAY 2012 Exhibit 112: Sector details Units as stated Country % weight in Index as on 28 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Ceramic Co 0.35 19.0 21.5 Saudi Arabian Amiantit Co 0.35 4.2 9.1 Zamil Ìndustrial Ìnvestment Co 0.24 3.3 11.8 AL-Babtain Power & Telecommunication Co 0.22 7.6 12.6 Saudi Ìndustrial Development Co 0.20 8.4 7.0 Saudi Cable Company 0.19 0.1 0.4 Mohammad Al Mojil Group 0.16 (45.4) (92.3) Arabian Pipes Company 0.15 (2.5) (0.9) Abdullah A.M. Al-Khodari Sons Co 0.11 13.3 25.3 Middle East Specialized Cables Co 0.10 (10.5) (39.4) National Gypsum Company 0.10 27.5 6.5 Saudi Steel Pipe Company 0.10 9.6 7.4 Saudi Vitrified Clay Pipes Co 0.09 31.6 34.2 Red Sea Housing 0.07 10.0 10.8 United Wire Factories Company 0.07 12.5 30.3 Source: Bloomberg, Tadawul: Company data The sector's performance improved YoY. Revenues increased approximately 21% to USD5.7bn in 2011 from USD4.7bn in 2010. However, the sector's net profit fell to USD275mn in 2011 from USD311mn in 2010. Mohammed Al Mojil, which recorded a significant loss of USD256mn in 2011, has been excluded from the 2011 figure for fair comparison. Exhibit 113: Revenues of companies, 2009-11 Exhibit 114: Profitability of SSP relative to sector average (2009-11) SR mn % Source: Zawya, Tadawul, NCBC Research Source: Zawya, Tadawul, NCBC Research The sector's P/E and P/BV multiples stood at 21.6x and 2.8x, respectively, in 2011, versus 15.8x and 2.6x, respectively, in 2010. Saudi Vitrified Clay Pipe Company recorded the highest ROE of 34.2%, while Mohammed Al Mojil Group reported the lowest ROE of -92.3% during the same period. 0 3000 6000 9000 12000 15000 18000 2009 2010 2011 Amiantit Zamil Specialized Cabl es Saudi Cable Co. Al babtain Mohamed Al Mojil Saudi Steel Pipe 0% 4% 8% 12% 16% 20% 24% 2009 2010 2011 Sector Average Saudi Steel Pipe 183 BUÌLDÌNG & CONSTRUCTÌON NCB CAPÌTAL MAY 2012 Exhibit 115: Comparison of P/B and ROE, 2010 Exhibit 116: Comparison of P/B and ROE, 2011 % % Source: Zawya, Tadawul, NCBC Research Source: Zawya, Tadawul, NCBC Research We believe the outlook for the KSA's building & construction market is positive. The total value of contracts awarded is expected to increase at a CAGR of 20% to USD43.8bn by 2013 from USD36.5bn in 2011. The introduction of the new mortgage law (currently under the King's consideration) is expected to drive the demand for housing facilities. Ìn 2010, the Kingdom committed to spend about USD400bn on large infrastructure projects over the next five years. Additionally, the USD82bn homebuilding fund by the government is expected to provide an opportunity for the building & construction companies. NCBC Recommendations in the Sector We are covering Saudi Steel Pipes (SSP) in the buildings & construction sector. We are currently neutral on the stock. Exhibit 117: Coverage stocks details Stock Current Rating PT (SR) Comments Saudi Steel Pipes (1320.SE) Neutral 30.1 Ìncreasing demand for construction projects and higher sales volume from the small diameter segment (that yield higher margins) would drive revenues. However, limited demand for medium diameter segment and pressure on its margins remain a key concern. We believe that positive factors have already been priced in the current valuation, leaving limited upside potential from current levels. Source: NCBC Research Saudi Ceramics Amiantit Zamil Specialized Cables Gypsum Saudi Vitrified Saudi Cable Co. Arabian pipes Al babtain Redsea SÌDC Mohamed Al Mojil Saudi Steel Pipe Al-Khodari Sons Co United wire -27% -18% -9% 0% 9% 18% 27% 36% 45% 54% -0.5 0.5 1.5 2.5 3.5 4.5 5.5 Saudi Ceramics Amiantit Zamil Specialized Cables Gypsum Saudi Vitrified Saudi Cable Co. Arabian pipes Al babtain Redsea SÌDC Mohamed Al Mojil Saudi Steel Pipe Al-Khodari Sons Co United wire -108% -93% -78% -63% -48% -33% -18% -3% 12% 27% 42% 0.0 1.0 2.0 3.0 4.0 5.0 184 Saudi SteeI Pipe Company (SSP), estabIished in 1980, manufactures weIded steeI pipes, gaIvanized and non- gaIvanized pipes, carbon steeI tubes and anguIar tubes. The company seIIs products in the domestic market and exports to nearIy 20 countries. x Business brief SSP manufactures black and galvanized pipes in small and medium diameter sizes, and caters to the construction, real estate, and oil & gas markets. The small diameter production capacity is 80,000 tons per year, while that of medium diameter is 160,000 tons per year. The company is also expanding in the large diameter pipes market through a 35% stake in an under- construction plant in Jubail. The plant would have a capacity of 200,000 tons per year, and is scheduled to commence in 2012. x FinanciaIs Revenues grew 6.1% to SR621mn in 2011 from SR593mn in 2010 due to higher sales volumes. The total quantity delivered has increased 8.0% YoY to 142 thousand tons. The adjusted net income declined 21.9% YoY to SR50mn in 2011 due to an increase in raw material costs and low margin on sales. We expect net profit to increase significantly YOY in 2012 due to a non-recurring expense, which the company recorded in 2011 as well as the increase in the company's financing costs. x Recent deveIopments On April 9, 2012, the company announced that it signed a SR75mn contract to purchase welded pipe production machines for its new factory in Damman's second industrial city with Suithe (Germany) and Mayer Research Group (Ìtaly). On February 9, 2012, the company received a SR36mn purchase order to provide GS Engineering & Construction Company (South Korea) with ERW pipes to be used in Kuwait Oil Company's project in Wara, which would be delivered during 3Q12. The company also said that the raw materials to be used would be provided by Saudi Basic Ìndustries by the end of 1Q12. CONSTRUCTÌON ~MAY 2012 SAUDÌ STEEL PÌPES ALSO KNOWN AS: SSP NEUTRAL Current price (SR) 24.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 32/20 Market cap ($ mn) 337 Shares outstanding (mn) 51 Price perform (%) 1M 3M 12M Absolute (14.1) (6.3) (6.3) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 19.0 5.1 12M 10.5 2.8 Reuters code 1320.SE Bloomberg code SSP AB www.sspipe.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.09 Free float 43.6 VALUATION MULTIPLES 10A 11A 12E P/E (x) 19.7 25.2 16.2 P/B (x) 1.6 1.6 1.6 P/S (x) 2.1 2.0 1.5 Div Yield (%) 6.0 6.0 5.2 DPS 1.5 1.5 1.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 22 24 26 28 30 32 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SSP (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Rabiah and Nassar Group 40.0 Hugh Steel Company Ltd 16.3 Abdulla Ìbrahim Al Khareef Sons Co. 8.8 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 593 629 837 1,000 6.1 19.0 EBÌTDA SRmn 98 88 132 170 (10.6) 20.0 Adjusted Net Ìncome^ SRmn 64 50 78 110 (21.9) 19.8 Assets SRmn 929 959 1,017 1,071 3.2 4.9 Equity SRmn 781 780 794 828 (0.1) 2.0 Total Debt SRmn 29 64 48 41 118.1 11.8 Cash & Equiv SRmn 38 93 105 48 147.2 8.5 EBÌTDA Mgn % 16.6 14.0 15.8 17.0 - - Net Mgn % 10.8 7.9 9.3 11.0 - - ROE % 8.1 6.4 9.9 13.6 - - ROA % 6.7 5.3 7.9 10.5 - - Div Payout % 119.5 153.0 85.0 69.5 - - EPS SR 1.25 0.98 1.53 2.16 (21.9) 19.8 BVPS SR 15.31 15.29 15.57 16.24 (0.1) 2.0 Source: Tadawul, Zawya Company, NCBC Research ^ SSP reports net income before deducing Zakat and taxes. We present the adjusted net income here (after deducting Zakat and taxes). 185 Riyadh-based Saudi Ceramic Company (SCC) manufactures and markets ceramic waII and fIoor tiIes, ceramic road markers, sanitary ware, and eIectric water heaters. The company, estabIished in 1977, has five offices in Saudi Arabia and one in Dubai. x Business brief SCC has continually enhanced its production capacity to meet the growing demand for ceramics and related products. The company's manufacturing units in Riyadh Ìndustrial City are spread over 1 million square meters and comprise four tile factories, one sanitary ware factory, two Frit plants, and two electric water heater factories. The company's product offerings encompass tiles (porcelain, ceramic and decorated), squaring and chamfering units, sanitary ware, electric water heaters, and ceramic road markers. x FinanciaIs SCC's revenues grew 13.1% YoY to SR1,221mn in 2011. This was mainly due to increased production, as a new plant started manufacturing and made an entry into new markets in the KSA and abroad. EBÌTDA for the year increased 11.8% YoY to SR371mn, while net income rose 5.2% YoY to SR232mn. x Recent deveIopments On April 09, 2012, the Board at EGM approved an increase in share capital from SR250mn to SR375mn, distributing bonus shares in the ratio of 1:2. On February 26, 2012, the company announced that it had signed a six- months memorandum of understanding with Future Ceramic and Porcelain Company to evaluate the possibility of a merger between the two companies. On February13, 2012, the Board approved the addition of a new ceramic tile production line with a capacity of 4 million square meters. The plant is expected to be completed by the start of 2013 with a total cost of SR22.5mn. On completion, the total annual production capacity of the company's tile plants is expected to reach 64 million square meters. CONSTRUCTÌON ~ MAY 2012 SAUDÌ CERAMÌC ALSO KNOWN AS: SCC NOT COVERED Current price (SR) 91.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 109/86 Market cap ($mn) 912 Shares outstanding (mn) 38 Price perform (%) 1M 3M 12M Absolute (13.8) (2.9) (0.8) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 17.1 4.6 12M 11.2 3.0 Reuters code 2040.SE Bloomberg code SCERCO AB www.saudiceramics.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.36 Free float 62.9 VALUATION MULTIPLES 09A 10A 11A P/E (x) 17.4 15.5 14.7 P/B (x) 4.0 3.4 3.0 P/S (x) 3.6 3.2 2.8 Div Yield (%) 2.2 2.6 2.6 DPS 2.0 2.3 2.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 85 90 95 100 105 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Ceramic (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) General Organization for Social Ìnsurance (GOSÌ) 15.9 Saleh Abdul Aziz Saleh Al Rajhi 14.3 Falcom Financial Services Co. 6.8 Public Ìnvestment Fund 5.4 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 857 958 1080 1221 13.1 12.5 EBÌTDA SRmn 264 282 332 371 11.8 12.0 Net Ìncome SRmn 178 197 221 232 5.2 9.3 Assets SRmn 1,565 1778 1935 2269 17.3 13.2 Equity SRmn 724 859 1004 1147 14.2 16.6 Total Debt SRmn 650 688 761 809 6.3 7.5 Cash & Equiv SRmn 25 36 39 64 64.7 36.4 EBÌTDA Mgn % 30.8 29.5 30.8 30.4 - - Net Mgn % 20.8 20.6 20.4 19.0 - - ROE % 26.6 24.9 23.7 21.6 - - ROA % 12.5 11.8 11.9 11.0 - - Div Payout % 35.1 38.0 39.7 37.7 - - EPS SR 4.74 5.26 5.88 6.19 5.2 9.3 BVPS SR 19.31 22.90 26.77 30.58 14.2 16.6 Source: Tadawul, Zawya, Company, NCBC Research 186 Please refer to the last page for important disclaimer www.ncbc.com Saudi Arabian Amiantit Company (SAAC) was estabIished in 1968 to manufacture pipes for the IocaI market. The company's core business activities incIude the manufacture and saIe of pipe systems; ownership and saIes of pipe technoIogies, water management consuItancy, and engineering services; and manufacture and suppIy of poIymer products. x Business brief SAAC has 30 pipe system manufacturing plants, six technology companies, four material suppliers, and eight supply and engineering subsidiaries. The company serves the worldwide municipal, civil engineering, industrial, energy and agricultural markets; thus, it supports global infrastructure development through an extensive sales and service network in more than 70 countries. x FinanciaIs SAAC's revenues increased 15.8% YoY in 2011 to SR3,563mn mainly due to the increase in productivity. EBÌTDA margins for 2011 declined to 13.6% from 17.0% in 2010. Net income dropped 8.4% YoY to SR151mn in 2011 due to lower selling prices amid increased competition. x Recent deveIopments On March6, 2012, the company announced the start of a trial of water delivery and sanitation services in the Ìndustrial City in Riyadh during 1Q12, and it expects to start the commercial operations by the end of 2012. Furthermore, the company expects to start providing these services in the Ìndustrial City at Al-Qassim in April 2012. The company, through its fully-owned subsidiary (AmiWater), has entered into a 49:51 joint venture with PWT (Germany) to establish a new company, PWT Limited (Saudi Arabia), with a capital of SR5mn. The latter would establish, operate and maintain water treatment plants. CONSTRUCTÌON ~ MAY 2012 AMÌANTÌT COMPANY ALSO KNOWN AS AMÌANTÌT GROUP, SAAC NOT COVERED Current price (SR) 18.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 22/14 Market cap ($mn) 554 Shares outstanding (mn) 116 Price perform (%) 1M 3M 12M Absolute (13.7) (3.0) (2.7) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 61.4 164 12M 28.9 7.7 Reuters code 2160.SE Bloomberg code SAAC AB www.amiantit.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.34 Free float 98.2 VALUATION MULTIPLES 09A 10A 11A P/E (x) 10.3 12.6 13.7 P/B (x) 1.3 1.2 1.3 P/S (x) 0.6 0.7 0.6 Div Yield (%) 5.6 8.3 6.9 DPS 1.0 1.5 1.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 13 15 17 19 21 23 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Amiantit (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Mawarid Ìnvestment Co Ltd 9.8 Prince Khalid bin Abdullah bin Abdul Rahman Al Saud 7.4 Abdullah Saleh Abdullah AL Bassam 5.8 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 4,026 3,293 3,077 3,563 15.8 (4.0) EBÌTDA SRmn 827 827 523 484 (7.5) (16.4) Net Ìncome SRmn 235 202 165 151 (8.4) (13.7) Assets SRmn 4,504 4,056 4,071 4,407 8.3 (0.7) Equity SRmn 1,487 1,652 1,684 1,635 (2.9) 3.2 Total Debt SRmn 1,609 1,072 1,020 1,446 41.9 (3.5) Cash & Equiv SRmn 329 425 242 391 61.7 5.9 EBÌTDA Mgn % 20.5 25.1 17.0 13.6 - - Net Mgn % 5.8 6.1 5.36 4.25 - - ROE % 16.8 12.9 9.9 9.1 - - ROA % 5.5 4.7 4.1 3.6 - - Div Payout % 24.5 57.0 104.9 95.5 - - EPS SR 2.04 1.75 1.43 1.31 (8.4) (13.7) BVPS SR 12.87 14.30 14.58 14.16 (2.9) 3.2 Source: Tadawul, Zawya, Company, NCBC Research 187 ZamiI IndustriaI Investment Co. (ZIIC), estabIished in 1998 and headquartered in Dammam, is a manufacturing and fabrication group serving the construction industry. It mainIy operates in the steeI, HVAC, gIass, insuIation and concrete sectors. x Business brief ZÌÌC has manufacturing plants and offices in 55 countries; it exports products to over 90 markets globally. The company offers products such as air conditioning, pre-engineered steel buildings, process equipment, transmission towers, processed architectural glass, and other solutions to the global construction industry. Ìt operates through Zamil Air Conditioners (ZAC), Zamil Steel Ìnds (ZSÌ), Zamil Glass Ìndustries (ZGÌ), and Arabian Fiberglass Ìnsulation Co. Ltd (AFÌCO). x FinanciaIs ZÌÌC's revenues grew 17.7% YoY to SR4,728mn due to an increase in production volumes. EBÌTDA margin declined to 8.8% in 2011 compared to 10.4% in 2010 mainly due to ongoing competition and pressure on steel prices. Net profit fell 27.0% to SR154mn; other income declined and financial expenses increased. x Recent deveIopments On February15, 2012, Rabiah-Nassar and Zamil Concrete Ìndustries, the company's 50% owned subsidiary, signed a SR245mn contract with Saudi Oger to manufacture and supply precast villas for the Saudi Arabian National Guard Housing project. The project is expected to be completed by 3Q13. On September27 , 2011, Zamil New Delhi Ìnfrastructure Private Limited, the company's 51% owned subsidiary, was awarded a SR256.8mn contract by PLG Photovoltaic Limited to establish a 20-megawatt solar plant for the latter, which would have a positive impact on the company's financial statements in 1H12. CONSTRUCTÌON ~ MAY 2012 ZAMÌL ÌNDUSTRÌAL ALSO KNOWN AS: ZÌÌC NOT COVERED Current price (SR) 29.8 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/25 Market cap ($ mn) 477 Shares outstanding (mn) 60 Price perform (%) 1M 3M 12M Absolute (7.5) (1.0) (8.6) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 12.9 3.5 12M 11.7 3.1 Reuters code 2240.SE Bloomberg code ZÌÌC AB www.zamilindustrial.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.22 Free float 75.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 7.8 8.5 11.6 P/B (x) 1.5 1.4 1.3 P/S (x) 0.4 0.4 0.4 Div Yield (%) 5.0 5.0 5.0 DPS 1.5 1.5 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 27 29 31 33 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ ZÌÌC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Zamil Group Holding Co. 19.9 Public Pension Authority (PPA) 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 4,550 4,204 4,018 4,728 17.7 1.3 EBÌTDA SRmn 454 441 419 418 (0.1) (2.7) Net Ìncome SRmn 225 230 211 154 (27.0) (11.9) Assets SRmn 5,370 4,663 4,907 6,213 26.6 5.0 Equity SRmn 1,028 1,195 1,289 1,350 4.7 9.5 Total Debt SRmn 2,860 2,039 2,206 3,165 43.5 3.4 Cash & Equiv SRmn 201 354 296 286 (3.5) 12.4 EBÌTDA Mgn % 10.0 10.5 10.4 8.8 - - Net Mgn % 4.9 5.5 5.3 3.3 - - ROE % 23.4 20.7 68.0 46.7 - - ROA % 4.8 4.6 17.6 11.1 - - Div Payout % 40.0 39.1 42.6 58.4 - - EPS SR 3.75 3.84 3.52 2.57 (27.0) (11.9) BVPS SR 17.14 19.92 21.48 22.49 4.7 9.5 Source: Tadawul, Zawya, Company, NCBC Research 188 Mohammad AI MojiI Group (MMG) provides construction services in the GuIf region. The company has undertaken projects mainIy in the oiI, gas and petrochemicaI industries. MMG aIso offers mechanicaI, eIectricaI, civiI, structuraI and maintenance services. x Business brief MMG is engaged in various construction and engineering projects, including onshore services such as civil and structural work, and mechanical and electrical services. Ìt also conducts offshore activities, especially in marine projects, with the help of various marine vessels. The company owns heavy machinery, including testing and calibration facilities, and provides equipment services such as technical and maintenance services for turnkey projects. Besides this, it offers services in steel fabrication. x FinanciaIs Revenue for 2011 increased 22.1% to SR2,113mn compared to SR1,731mn in 2010. MMG reported a net loss of SR959mn in 2011 against a loss of SR179mn in 2010 due to an increase in direct costs in excess of approved budgets for certain ongoing projects. x Recent deveIopments MMG announced on April 4, 2012, that it received the delivery of three vessels for its fleet in the Marine Services Department. These vessels would be used to provide marine support to floating oil & gas platforms of Aramco. Ìn December 2011, the company signed a 5-year, SR315mn contract with Aramco to provide marine support for offshore hook-up, upgrade, modification, installation, and commissioning of floating platforms. On November 30, 2011, MMG canceled a joint venture planned in May 2010 with Al Rushaid Petroleum Ìnvestment Co., a Saudi oilfield-support company. On November16, 2011, the BOD of MMG met and approved the appointment of Mr. Ìbrahim Zada as the company's new President and Chief Executive Officer as a replacement to Mr. Ìbrahim Al Shuweir. Ìn June 2011, the company signed a SR746mn letter of intent with South Korea's SK Engineering & Construction Co to carry out construction work on the Wasit gas development project. CONSTRUCTÌON ~ MAY 2012 MOHAMMAD AL MOJÌL ALSO KNOWN AS: MMG NOT COVERED Current price (SR) 14.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 26/14 Market cap ($ mn) 495 Shares outstanding (mn) 125 Price perform (%) 1M 3M 12M Absolute (3.9 (27.2) (38.1) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 85.8 22.2 12M 40.9 10.9 Reuters code 1310.SE Bloomberg code MMG AB www.almojilgroup.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 46.2 VALUATION MULTIPLES 09A 10A 11A P/E (x) 46.0 NM NM P/B (x) 1.0 1.2 3.6 P/S (x) 0.8 1.1 0.9 Div Yield (%) 5.0 5.0 - DPS 0.8 0.8 - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 12 17 22 27 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ MMG (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mohammed Hamad Abdul Karim Al Moajil 50.0 Adel Mohammed Hamad Al Moajil 5.3 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (09-11) Revenues SRmn 3,345 2,216 1,731 2,113 22.1 (2.4) EBÌTDA SRmn 850 386 249 (318) NM NM Net Ìncome SRmn 666 40 (179) (959) NM NM Assets SRmn 3,669 3,073 2,944 3,150 7.0 1.2 Equity SRmn 1,902 1,840 1,566 513 (67.2) (47.2) Total Debt SRmn 0 450 515 1,369 165.8 74.4 Cash & Equiv SRmn 86 41 46 236 411.8 138.8 EBÌTDA Mgn % 25.4 17.4 14.4 (15.0) - - Net Mgn % 19.9 1.8 (10.4) (45.4) - - ROE % 41.7 2.2 (10.5) (92.3) - - ROA % 22.6 1.2 (6.0) (31.5) - - Div Payout % 18.8 232.5 NM - - - EPS SR 5.33 0.32 (1.44) (7.68) NM NM BVPS SR 15.22 14.72 12.53 4.11 (67.2) (47.2) Source: Tadawul, Zawya, Company, NCBC Research, * 2008 Financials are for 14 months 189 AI-Babtain Power and TeIecommunication Company (AI- Babtain) provides outdoor Iighting, transmission and distribution (T&D), and testing station services to the power sector. The company aIso designs, manufactures and instaIIs steeI towers for the teIecommunications sector. x Business brief Al-Babtain's T&D portfolio comprises transmission towers of up to 500 kV, monopoles up to 230 kV, and distribution poles up to 33 kV. The company's subsidiary, Al-Babtain LeBLANC Telecommunication (100% stake), is a joint venture with LeBLANC that provides engineering, manufacturing and installation services for communication towers of various types in Saudi Arabia, neighboring Arab countries, and North African nations. Also, Al- Babtain for Operation and Maintenance, a 100% subsidiary of the company, operates in the petrochemical, oil & gas, cement, industrial, and commercial segments of structural steel, thus providing engineering and manufacturing solutions for varied applications. x FinanciaIs Despite a higher sales volume, in 2011, revenues increased marginally by 3.8% YoY to SR1,005mn due to lower selling prices amid increased competition. EBÌTDA fell 25.1% to SR117mn mainly due to increased prices of raw material. However, this was marginally offset by measures taken by the company to reduce the cost of production. The net income for 2011 decreased 1.9% YoY to SR77mn. x Recent deveIopments On February20, 2012, the company announced the acquisition of shares worth USD6.1mn in Qatar Engineering and Construction Company, making its total stake USD13.6mn (9.7%). On February 01, 2012, Al-Babtain announced that it won the bid (USD9.6mn) to fully acquire Petitjean SAS, a French company that designs, manufactures and distributes outdoor lightning and power transmission systems. This acquisition is expected to contribute 20% in revenues and 2% to net income from the third year. CONSTRUCTÌON ~ MAY 2012 AL BABTAÌN POWER ALSO KNOWN AS: AL-BABTAÌN NOT COVERED Current price (SR) 26.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 34/20 Market cap ($mn) 297 Shares outstanding (mn) 43 Price perform (%) 1M 3M 12M Absolute (6.1) (0.4) (10.3) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 23.4 6.2 12M 16.3 4.3 Reuters code 2320.SE Bloomberg code ALBABTAÌ AB www.al-babtain.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.18 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 10.2 14.2 14.5 P/B (x) 1.9 1.8 1.8 P/S (x) 1.0 1.1 1.1 Div Yield (%) 5.7 5.7 5.7 DPS 1.5 1.5 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 19 24 29 34 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ AL Babtain (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,013 1,123 968 1,005 3.8 (0.3) EBÌTDA SRmn 210 192 156 117 (25.1) (17.7) Net Ìncome SRmn 131 109 78 77 (1.9) (16.3) Assets SRmn 1,416 1,138 1,290 1,458 13.1 1.0 Equity SRmn 498 581 603 609 1.0 6.9 Total Debt SRmn 602 291 452 594 31.5 (0.4) Cash & Equiv SRmn 68 51 39 68 73.5 (0.2) EBÌTDA Mgn % 20.7 17.1 16.1 11.6 - - Net Mgn % 12.9 9.7 8.1 7.6 - - ROE % 28.4 20.3 13.2 12.7 - - ROA % 10.9 8.6 6.5 5.6 - - Div Payout % 32.4 58.3 81.4 82.9 - - EPS SR 3.08 2.57 1.84 1.81 (1.9) (16.3) BVPS SR 11.73 13.66 14.18 14.33 1.0 6.9 Source: Tadawul, Zawya, Company, NCBC Research 190 EstabIished in 1975, Saudi CabIe Company (SCC) is headquartered in Jeddah, Saudi Arabia. SCC manufactures and seIIs cabIes and reIated products. Besides Saudi Arabia, the company has operations in Lebanon, the US, Turkey, and Bahrain. x Business brief SCC manufactures and markets low, medium and high voltage wires as well as cables; building wires; insulated power cables; telecommunication cables; various conductors used for transmission and distribution; copper and aluminum rods; and polyvinyl chloride. The company also provides turnkey project services for power and telecom projects, including systems design, installation, engineering, and testing. x FinanciaIs Revenues for 2011 grew 72.3% YoY to SR3.2bn. EBÌTDA margins grew to 2.0% in 2011 compared to a loss of SR40mn in 2010. The company reported a net profit of SR5mn in 2011 compared to a net loss of SR88mn in 2010. As per the company, the growth in revenue and profit was attributed to improved market conditions and better operational performance in the core cable business. x Recent deveIopments On March14, 2012, the company announced that it has been awarded a USD24mn contract to supply high voltage cables to Comptoir Algérien du Matériel Electrique et Gazier (Algeria). The cables are to be delivered in 18 months starting October 2012; the effect for the same would be reflected in 4Q12 financial statements. The company won a SR109mn contract from Solar Electric Power Company to supply the latter with high voltage cables to be delivered between October 2012 and June 2013. The effect of the contract would be reflected in 4Q12 financial statements. CONSTRUCTÌON ~ MAY 2012 SAUDÌ CABLE COMPANY ALSO KNOWN AS SCC, SCC GROUP NOT COVERED Current price (SR) 18.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 23/11 Market cap ($ mn) 367 Shares outstanding (mn) 76 Price perform (%) 1M 3M 12M Absolute (18.3) 0.8 17.9 Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 142.1 37.9 12M 59.4 15.8 Reuters code 2110.SE Bloomberg code SCACO AB www.saudicable.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.19 Free float 81.3 VALUATION MULTIPLES 09A 10A 11A P/E (x) 13.2 NM NM P/B (x) 1.1 1.1 1.3 P/S (x) 0.6 0.7 0.4 Div Yield (%) 4.1 4.1 - DPS 0.8 0.8 - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Saudi Cable (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Xenel Ìndustrial Co. 16.6 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 3,503 2,458 1,857 3,200 72.3 (3.0) EBÌTDA SRmn 463 243 (40) 64 NM (48.3) Net Ìncome SRmn 212 104 (88) 5 NM (71.1) Assets SRmn 3,420 3,339 3,643 4,107 12.8 6.3 Equity SRmn 1,050 1,309 1,200 1,021 (14.9) (0.9) Total Debt SRmn 1,546 1,367 1,817 2,236 23.0 13.1 Cash & Equiv SRmn 122 109 124 93 (24.8) (8.4) EBÌTDA Mgn % 13.2 9.9 (2.1) 2.0 - - Net Mgn % 6.1 4.2 (4.7) 0.2 - - ROE % 21.0 8.9 (7.0) 0.5 - - ROA % 6.9 3.1 (2.5) 0.1 - - Div Payout % 26.9 54.6 NM - - - EPS SR 2.79 1.37 (1.16) 0.07 NM) (71.1) BVPS SR 13.82 17.23 15.78 13.44 (14.9) (0.9) Source: Tadawul, Zawya, Company, NCBC Research 191 Arabian Pipes Company (APC) is the Iargest manufacturer of medium-sized High Frequency WeIded (HFW) steeI pipes in the MiddIe East. The company manufactures anti-corrosion coated HFW pipes for the oiI & gas, petrochemicaI, agricuIturaI, and construction industries. EstabIished in 1991, APC has a manufacturing faciIity in Riyadh. x Business brief APC's product line includes line-pipe applications (for long distance oil & gas transportation), structural applications (for construction), general purpose applications (industrial water and irrigation), standard pressure applications, and casting applications. APC's total production capacity is 460,000 tons of steel pipes per annum. Ìt also has a 100% ownership in Arabian Yadong Coating Company. x FinanciaIs APC's 2011 revenues increased 7.4% YoY to SR275mn. EBÌTDA margins rose to 18.1% YoY from 13.0%. However, APC reported a net loss of SR7mn in 2011 against a net loss of SR4mn in 2010 due to higher fixed expenses (mainly interest expenses, which increased by SR9.6mn compared to last year) and the decline in investment income. x Recent deveIopments On January29, 2012, the company announced that the Capital Market Authority approved the distribution of 26.98% bonus shares, increasing capital to SR400mn after the issue. Ìn June 2011, the company announced that it has signed a three-year, SR500mn contract to produce and supply six-inch welded longitudinal steel pipes to Petroleum Development Oman (Oman). Earlier, in January 2011, the company acquired the remaining 50% stake in Arabian Yadong Coating Company from Yadong Anti-Corrosion Co. Ltd. for SR9.6mn. CONSTRUCTÌON ~ MAY 2012 ARABÌAN PÌPES ALSO KNOWN AS: AC, APC, ANABÌB NOT COVERED Current price (SR) 31.5 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 40/24 Market cap ($ mn) 265 Shares outstanding (mn) 32 Price perform (%) 1M 3M 12M Absolute (6.5) (6.0) (9.5) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 32.8 8.8 12M 24.6 6.6 Reuters code 2200.SE Bloomberg code APCO AB www.arabian-pipes.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 85.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) 39.6 NM NM P/B (x) 1.3 1.4 1.4 P/S (x) 2.3 3.9 3.6 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 22 27 32 37 42 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ APC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdul Qader Al Mohaidib & Sons Co. 13.8 Saleh Abdulaziz Babaker & Sons Co 7.3 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 817 439 256 275 7.4 (30.5) EBÌTDA SRmn 160 91 33 50 49.5 (32.3) Net Ìncome SRmn 117 25 (4) (7) 90.8 (138.5) Assets SRmn 1,635 1,393 1,306 1,377 5.4 (5.6) Equity SRmn 712 737 733 727 (0.9) 0.7 Total Debt SRmn 883 625 515 537 4.4 (15.2) Cash & Equiv SRmn 19 34 21 7 (67.0) (28.6) EBÌTDA Mgn % 19.5 20.7 13.0 18.1 - - Net Mgn % 14.4 5.7 (1.4) (2.4) - - ROE % 17.3 3.5 (0.5) (0.9) - - ROA % 7.5 1.7 (0.3) (0.5) - - Div Payout % - - - - - - EPS SR 3.72 0.80 (0.11) (0.21) 90.8 (138.5) BVPS SR 22.60 23.39 23.28 23.07 (0.9) 0.7 Source: Tadawul, Zawya, Company, NCBC Research 192 ABDULLAH A.M. AL-KHODARI SONS CO. (AAMAK) is a major contractor and infrastructure deveIoper in the region. Headquartered in AI-Khobar, AAMAK executes projects in Saudi Arabia and neighboring countries in the MiddIe East. x Business brief AAMAK mainly deals in the construction of industrial, civil, residential and commercial buildings, roads, and building infrastructure as well as operations and maintenance of municipal areas and institutional sectors. The company implements general contracting projects, including civil construction, railways, oil & gas pipelines, water & waste water treatment, electrical works and heavy steel metal fabrication. Ìt also operates and maintains plants and facilities, foundations, landscaping, sand stabilizations, and other related earth works. x FinanciaIs AAMAK's sales grew 10.8% YoY to SR1,189mn in 2011. EBÌTDA margins declined to 25.0% in 2011 compared to 32.7% in 2010 mainly due to an increase in manpower cost. Net income decreased 27.4% to SR158mn in 2011 compared to SR218mn in 2010 due to a fall in trading segment profits and higher selling & marketing expenditure. x Recent deveIopments Ìn March 2012, the company announced that it signed a 36-month contract for SR26.8mn with the Ministry of Higher Education for construction of the Faculty of Engineering for Men (phase 2). Ìn March 2012, the company signed a contract with the Ministry of Water and Electricity for SR34.8mn, which is expected to affect the company's financial statements in 2Q12. Ìn March 2012, AAMAK announced the signing of the Ìslamic Credit Facilities Agreement amounting to SR968mn for renewal of existing and new credit facilities with SAMBA Financial Group. CONSTRUCTÌON ~MAY 2012 ABDULLAH A.M. AL-KHODARÌ SONS CO. ALSO KNOWN AS: AAMAK NOT COVERED Current price (SR) 50.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 74/48 Market cap ($ mn) 569 Shares outstanding (mn) 42.5 Price perform (%) 1M 3M 12M Absolute (9.5) (4.7) (28.5) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 13.3 3.6 12M 12.7 3.4 Reuters code 1330.SE Bloomberg code ALKHODAR.AB www.alkhodari.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.11 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 9.8 9.8 13.5 P/B (x) 4.2 3.6 3.2 P/S (x) 2.0 2.0 1.8 Div Yield (%) - 4.6 3.0 DPS - 2.3 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 45 50 55 60 65 70 75 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ ALKHODAR (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdullah A M Al Khodari Sons Ìnvestment Holding Company 60.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,159 1,048 1,074 1,189 10.8 0.9 EBÌTDA SRmn 419 361 351 297 (15.4) (10.8) Net Ìncome SRmn 240 217 218 158 (27.4) (12.9) Assets SRmn 1,340 1,450 1,826 2,353 28.8 20.6 Equity SRmn 348 506 588 660 12.2 23.8 Total Debt SRmn 642 659 756 939 24.2 13.5 Cash & Equiv SRmn 33 33 71 79 11.0 33.1 EBÌTDA Mgn % 36.1 34.4 32.7 25.0 - - Net Mgn % 20.7 20.7 20.3 13.3 - - ROE % 72.1 50.8 39.8 25.3 - - ROA % 18.5 15.6 13.3 7.6 - - Div Payout % - - 44.9 40.3 - - EPS SR 5.64 5.11 5.13 3.72 (27.4) (12.9) BVPS SR 8.18 11.91 13.84 15.53 12.2 23.8 Source: Tadawul, Zawya, Company, NCBC Research 193 Saudi IndustriaI DeveIopment Company (SIDC), estabIished in 1992, invests in the industriaI sector of the KSA. The company manufactures and distributes ceramics such as bathtubs, sanitary ware and tiIes, home furnishing, and mattresses. Over the years, SIDC has diversified its investments to cover spring mattresses and poIyester fibers. x Business brief SÌDC operates through its affiliates. Saudi Ceramic Plant (in which SÌDC holds 100% stake) in the Yanbu Ìndustrial City produces ceramic sanitary ware (annual capacity of 800,000 units) as well as acrylic bathtubs and shower trays (annual capacity of 120,000 units). Arabian Spring and Sponge Mattresses Mfg. Co. (50% stake), formerly known as Sleep High, is a leading manufacturer of spring mattresses. x FinanciaIs SÌDC's revenues grew 21.1% YoY to SR281mn in 2011. EBÌTDA increased 80% YoY to SR35mn. However, the company reported net income of SR23mn, a 75.3% decline compared to 2010. This was mainly attributable to a gain recorded in 2010 reflecting the sale of its investment in Yansab, which was not present in 2011. x Recent deveIopments On April08, 2012, the company's Board approved raising its subsidiary SÌDC Commercial Ìnvestment Co's capital to SR10mn from SR1mn. The capital raise would be undertaken by transferring the company's outstanding debt to the subsidiary's capital. On April04, 2012, the company announced that the court had rejected the lawsuit filed against the company by the former partners in Sleep High Saudi Arabia and Egypt. CONSTRUCTÌON ~ MAY 2012 SAUDÌ ÌNDUSTRÌAL ALSO KNOWN AS: SÌDC NOT COVERED Current price (SR) 19.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 33/12 Market cap ($mn) 206 Shares outstanding (mn) 40 Price perform (%) 1M 3M 12M Absolute (26.1) (16.2) 28.1 Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 121.3 32.3 12M 57.8 15.4 Reuters code 2130.SE Bloomberg code SÌDC AB www.sidc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.13 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 8.1 33.0 P/B (x) 2.7 2.5 2.2 P/S (x) 3.5 3.3 2.8 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 7 12 17 22 27 32 37 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SÌDC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 250 222 232 281 21.1 3.9 EBÌTDA SRmn 18 15 20 35 80.3 24.6 Net Ìncome SRmn (6) (3) 95 23 (75.3) NM Assets SRmn 480 504 495 458 (7.3) (1.5) Equity SRmn 234 291 311 347 11.5 14.0 Total Debt SRmn 112 105 61 56 (8.2) (20.6) Cash & Equiv SRmn 23 10 47 86 82.3 54.4 EBÌTDA Mgn % 7.3 6.9 8.5 12.6 - - Net Mgn % (2.2) (1.6) 41.0 8.4 - - ROE % (1.9) (1.3) 126.4 28.5 - - ROA % (1.0) (0.7) 76.2 19.7 - - Div Payout % - - - - - - EPS SR (0.14) (0.09) 2.38 0.59 (75.3) NM BVPS SR 5.86 7.27 7.78 8.67 11.5 14.0 Source: Tadawul, Zawya, Company, NCBC Research 194 NationaI Gypsum Company, headquartered in Riyadh, speciaIizes in the production of gypsum pIasters, pIaster boards, and Iaminated gypsum tiIes. NationaI Gypsum's manufacturing pIants are Iocated in Riyadh and Yanbu, whiIe its branches are situated at Jeddah and Dammam. The company exports its products worIdwide. NationaI Gypsum hoIds a 33.3% stake in its subsidiary, Qatar Saudi Gypsum Company. x Business brief National Gypsum has an annual production capacity of 450,000 tons of gypsum plaster; 12mn square meters of plaster board; 48,000 tons of spray gypsum and fixing plaster; 0.5mn square meters of gypsum ceiling tiles; and 30,000 tons of gypsum powder. x FinanciaIs The company's sales declined 30.2%YoY to SR108mn in 2011. However, EBÌTDA margin remained flat at 49% in 2011 compared to the last year. Net profit fell 43.6% YoY to SR30mn in 2011. The company has attributed the decline in revenue and net income to increased competition. x Recent deveIopments On April 01, 2012, the company announced that the AGM approved the distribution of 12% cash dividends (SR1.2 per share) for 2011. CONSTRUCTÌON ~ MAY 2012 NATÌONAL GYPSUM COMPANY ALSO KNOWN AS NGC, GYPSUM NOT COVERED Current price (SR) 30.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 38/26 Market cap ($mn) 253 Shares outstanding (mn) 32 Price perform (%) 1M 3M 12M Absolute (10.4) (14.0) (4.5) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 15.8 4.2 12M 7.3 1.9 Reuters code 2090.SE Bloomberg code NGCO AB www.gypsco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.08 Free float 52.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) 10.7 18.1 32.1 P/B (x) 1.7 2.1 2.1 P/S (x) 4.7 6.2 8.8 Div Yield (%) 8.3 6.7 4.0 DPS 2.5 2.0 1.2 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 30 35 40 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Gypsum (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Manafa Ìnvestment & Real Estate Development Co. 34.5 Theneyan Fahd Theneyan Al Theneyan 10.3 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 260 203 154 108 (30.2) (25.5) EBÌTDA SRmn 133 104 76 53 (30.4) (26.6) Net Ìncome SRmn 112 89 53 30 (43.6) (35.9) Assets SRmn 602 629 596 553 (7.2) (2.8) Equity SRmn 539 555 462 453 (2.1) (5.6) Total Debt SRmn 39 49 44 38 (13.7) (1.1) Cash & Equiv SRmn 82 106 86 63 (27.2) (8.6) EBÌTDA Mgn % 51.3 51.5 49.2 49.0 - - Net Mgn % 43.2 43.7 34.1 27.5 - - ROE % 21.1 16.2 10.3 6.5 - - ROA % 18.7 14.4 8.6 5.2 - - Div Payout % 70.5 89.4 120.6 128.4 - - EPS SR 3.55 2.80 1.66 0.93 (43.6) (35.9) BVPS SR 17.01 17.53 14.60 14.30 (2.1) (5.6) Source: Tadawul, Zawya, Company, NCBC Research 195 Red Sea Housing Services Company was estabIished in Jeddah in 1967. The company's objective was to repIicate the American manufactured housing modeI in Saudi Arabia. Red Sea Housing Iater diversified into manufacturing and property management, setting up its first manufacturing faciIity in 1983. The company manufactures, seIIs and Ieases aII types of moduIar buiIdings. x Business brief Red Sea Housing has three manufacturing facilities - in Dubai, Jubail, and Accra (Ghana). The company has an annual production capacity of 770,000 square meters of prefabricated buildings per year. Red Sea Housing serves all types of housing requirements: commercial and residential, temporary and permanent. Red Sea Housing offers special services to oil & gas and mining companies; the company's markets comprise Africa, the Middle East, Asia and South America. x FinanciaIs Red Sea's revenues grew 4.1% YoY to SR776mn in 2011. EBÌTDA margins declined to 18.6% in 2011 from 21.9% a year ago due to higher installation and materials cost incurred this year. However, net profit rose 27.6% YoY to SR78mn in 2011 due to 84.8% increase in rental income and absence of any provisions for litigations, which had reduced net income last year. x Recent deveIopments On January 2012, the company announced the distribution of one bonus share for every three shares held as well as the increase of the share capital to SR400mn from SR300mn. The Board also recommended the distribution of SR1.00 per share as cash dividends for 2011. Ìn August 2011, the company announced a delay in opening its new factory in Libya, which was earlier planned to start in 2H11. The total cost of the factory is estimated to be SR61mn, which would increase the company's production capacity by 37.5% per year. CONSTRUCTÌON ~ MAY 2012 RED SEA HOUSÌNG ALSO KNOWN AS: RSH, RED SEA NOT COVERED Current price (SR) 32.3 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 44/29 Market cap ($mn) 344 Shares outstanding (mn) 40 Price perform (%) 1M 3M 12M Absolute (18.7) (4.9) (22.7) Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 28.5 7.6 12M 16.4 4.4 Reuters code 4230.SE Bloomberg code REDSEA AB www.rsh.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 10.5 21.2 16.6 P/B (x) 1.9 1.9 1.7 P/S (x) 1.5 1.7 1.7 Div Yield (%) 4.6 2.3 2.3 DPS 1.5 0.8 0.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 27 32 37 42 47 5,000 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Red Sea (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Dabbagh Holding Co. 51.0 Mumtaz Foods Co. 5.0 The National Scientific Company LTD 5.0 Tejariah for Marketing Services and Agencies 5.0 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,139 852 745 776 4.1 (12.0) EBÌTDA SRmn 279 178 163 144 (11.5) (19.7) Net Ìncome SRmn 214 124 61 78 27.6 (28.6) Assets SRmn 1,003 921 1,004 1,281 27.6 8.5 Equity SRmn 682 696 694 742 6.9 2.9 Total Debt SRmn 99 102 106 342 221.9 51.3 Cash & Equiv SRmn 120 47 62 97 58.4 (6.7) EBÌTDA Mgn % 24.5 20.9 21.9 18.6 - - Net Mgn % 18.8 14.5 8.2 10.0 - - ROE % 35.4 17.9 8.8 10.9 - - ROA % 24.1 12.8 6.3 6.8 - - Div Payout % 49.1 48.6 49.2 38.5 - - EPS SR 5.35 3.09 1.53 1.95 27.6 (28.6) BVPS SR 17.04 17.40 17.35 18.55 6.9 2.9 Source: Tadawul, Zawya, Company, NCBC Research 196 Saudi Vitrified CIay Pipes Company (SVCP), estabIished in 1977 and headquartered in Riyadh, manufactures vitrified cIay pipes and fittings as weII as jacking pipes. The company's annuaI production capacity is 185,000 tons of cIay pipes and fittings per year. AIong with the IocaI Saudi Arabian market, SVCP has a presence in internationaI markets, incIuding Arab countries, the Far East, and Europe. x Business brief SVCP manufactures vitrified clay pipes (ranging from 100÷1200mm) and jacking pipes (150÷1000mm). These pipes are used in domestic and industrial sewage systems as well as for storm water disposal. The main features of these pipes are strength, durability, and resistance to chemicals contained in sewage and drainage water. The company has a state of the art facility in Riyadh with an annual production capacity of 185,000 tons. x FinanciaIs SVCP's revenues for 2010 grew by 6.9% YoY to SR261mn on account of increased production due to efficiency gains in production. EBÌTDA increased 8.0% to SR107mn. Net income increased 10.8% to SR80mn in 2011 from SR72mn in 2010 due to lower operating expense and financial charges. x Recent deveIopments On February 20, 2012, the company announced that it had extended the memorandum of understanding it had signed with Arabian Company for Water Pipe Ìndustry (Acwapipe) to fully acquire the latter's stake through a share swap deal for a six-month period. CONSTRUCTÌON ~ MAY 2012 SAUDÌ VÌTRÌFÌED ALSO KNOWN AS: SAUDÌ VÌTRÌFÌED, SVCP NOT COVERED Current price (SR) 73.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 82/53 Market cap ($ mn) 292 Shares outstanding (mn) 15 Price perform (%) 1M 3M 12M Absolute (1.4) 18.2 30.9 Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 5.3 1.4 12M 4.3 1.1 Reuters code 2360.SE Bloomberg code SVCP AB www.svcp-sa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 56.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 28.1 15.2 13.7 P/B (x) 5.1 4.3 4.8 P/S (x) 4.9 4.5 4.2 Div Yield (%) 3.1 4.1 6.8 DPS 2.3 3.0 5.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 40 50 60 70 80 90 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SVCP (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdul Latif Al Essa Co. 15.6 Prince Faisal Abdul Aziz Faisal Al Saud 15.0 Saad Saud Ìbrahim Al Sayari 13.3 Al Riyadh Ìnvestment Co. 5.4 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 258 225 245 261 6.9 0.5 EBÌTDA SRmn 53 68 99 107 8.0 26.3 Net Ìncome SRmn 46 39 72 80 10.8 19.8 Assets SRmn 450 478 463 482 4.2 2.3 Equity SRmn 211 217 254 229 (9.9) 2.7 Total Debt SRmn 156 206 167 186 11.5 6.1 Cash & Equiv SRmn 15 45 36 58 62.1 56.2 EBÌTDA Mgn % 20.5 30.1 40.3 40.8 - - Net Mgn % 18.0 17.3 29.4 30.5 - - ROE % 22.8 18.2 122.3 132.0 - - ROA % 11.9 8.4 61.2 67.5 - - Div Payout % 72.7 86.5 62.5 94.1 - - EPS SR 3.09 2.60 4.80 5.32 10.8 19.8 BVPS SR 14.09 14.44 16.95 15.26 (9.9) 2.7 Source: Tadawul, Zawya, Company, NCBC Research 197 MiddIe East SpeciaIized CabIes Co. (MESC) began as a IocaI manufacturer in Riyadh in 1993. In 2003, MESC acquired Jordan New CabIe Company, and in 2007, it entered into a joint venture with Fujikura Company to expand its product range to Iow and medium voItage power cabIes. x Business brief MESC's products (categorized into instrumentation and process control cables) are used in indoor, outdoor and control room applications; system cables (data and telephone cables), and power cables (used in applications requiring greater electrical or electromagnetic protection). The company also markets specialized cables for harsh environment applications, such as those in the hydrocarbon industry. MESC has an annual production capacity of about 30,500 tons of copper and 9,000 tons of aluminum cables. Besides regional operations, MESC has a presence in 14 countries. x FinanciaIs MESC's revenues increased 10.8% YoY to SR1,139mn in 2011. EBÌTDA fell 35.0% YoY to SR40mn. MESC incurred a net loss of SR120mn in 2011 compared to a net loss of SR95mn in 2010 due to increased competition, especially in power cables. Also, a charge amounting to SR70.5mn for impairment of goodwill, related to MESC's investment in Jordan, exerted pressure on the bottom line. x Recent deveIopments On March13, 2012, the MESC Board approved the allocation of MESC Saudi's 4.68% stake in MESC Jordan to the latter's employees. As a result, MESC Saudi's stake would decline to 49%. The Board also approved of increasing the capital of MESC Ras Al Khaimah from AED20mn to AED50mn by capitalizing AED30mn of the loan provided by MESC Saudi. CONSTRUCTÌON ~ MAY 2012 ME SPECÌALÌZED CABLE ALSO KNOWN AS: MESC NOT COVERED Current price 20.6 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 25/12 Market cap ($mn) 219 Shares outstanding (mn) 40 Price perform (%) 1M 3M 12M Absolute (4.4) 11.7 15.1 Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 75.7 20.2 12M 39.7 10.6 Reuters code 2370.SE Bloomberg code MESC AB www.mesccables.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.10 Free float 73.4 VALUATION MULTIPLES 09A 10A 11A P/E (x) 16.0 NM NM P/B (x) 1.3 1.9 2.9 P/S (x) 0.8 0.8 0.7 Div Yield (%) 4.9 - - DPS 1.0 - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 11 14 17 20 23 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ MESC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Abdul Aziz Mohammed Sulaiman Al Namlah 26.6 Mansour A. M. Kaaki 6.3 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,308 1,034 1,029 1,139 10.8 (4.5) EBÌTDA SRmn 245 152 61 40 (35.0) (45.5) Net Ìncome SRmn 88 51 (95) (120) NM (210.8) Assets SRmn 1,615 1,710 1,417 1,382 (2.5) (5.1) Equity SRmn 507 635 436 279 (36.1) (18.0) Total Debt SRmn 836 780 809 896 10.7 2.3 Cash & Equiv SRmn 54 35 40 26 (35.3) (21.8) EBÌTDA Mgn % 18.7 14.7 5.9 3.5 - - Net Mgn % 6.8 5.0 (9.2) (10.5) - - ROE % 18.8 9.0 (17.7) (33.6) - - ROA % 6.2 3.1 (6.1) (8.6) - - Div Payout % 54.3 78.0 - - - - EPS SR 2.21 1.28 (2.37) (3.00) NM (210.8) BVPS SR 12.66 15.88 10.91 6.97 (36.1) (18.0) Source: Tadawul, Zawya, Company, NCBC Research 198 United Wire Factories Company ("ASLAK") was estabIished as a Iimited IiabiIity company in 1990. In 2006, a group of companies and estabIishments that had extensive experience in wire manufacturing were merged in one new company, "ASLAK", thus enabIing the new company to own eight factories distributed across the Kingdom of Saudi Arabia. The company was Iater transformed into a pubIic joint stock company in 2011 and Iisted on the TadawuI Exchange on August 21, 2011. x Business brief ASLAK deals with the manufacture and distribution of steel rebars, bailing wires, barbed wires, clothes hangers, steel nails, wire mesh, fences and other related products. Ìt has an annual production capacity of 17,145 tons of steel; 10,879 tons of steel nails; 9,230 tons of barbed wires; 9,000 tons of clothes hangers; and 1,642 tons of galvanized wires. Ìt also has the capacity to produce 15,000 tons of steel rebars per month. x FinanciaIs ASLAK's revenues increased 49.9% YoY to SR855mn in 2011. EBÌTDA margins declined to 14.2% in 2011 compared to 24.3% in 2010, primarily due to the increase in raw material prices. The company reported an 8.9% YoY decline in net profit to SR98mn in 2011. x Recent deveIopments On March28, 2012, the company announced dividend of SR1.00 per share for the second half of 2011, making the full-year dividend for 2011 SR1.75 per share. CONSTRUCTÌON ~ MAY 2012 UNÌTED WÌRE FACTORÌES COMPANY ALSO KNOWN AS: ASLAK NOT COVERED Current price (SR) 42.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 54/34 Market cap ($ mn) 364 Shares outstanding (mn) 32.5 Price perform (%) 1M 3M 12M Absolute (12.5 (8.3) - Market (6.2) 6.2 7.6 Sector (11.8) (4.8) (5.5) Avg daiIy turnover (mn) SR US$ 3M 69.3 18.5 12M 56.6 15.1 Reuters code 1301.SE Bloomberg code ASLAK AB www.unitedwires.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.07 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 15.7 12.6 13.9 P/B (x) 4.9 4.2 3.6 P/S (x) 3.3 2.4 1.6 Div Yield (%) - - 4.2 DPS - - 1.8 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 30 35 40 45 50 55 5,500 6,000 6,500 7,000 7,500 8,000 Aug-11 Nov-11 Feb-12 May-12 TASÌ United Wire (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mohammed Rashid Mohamed Rashid. 11.5 Khaled Saad Abdulrahman Alkanhal 9.0 Source: Tadawul, NCBC Research Company financiaIs 2008* 2009 2010 2011 YoY (%) CAGR (%) (09-11) Revenues SRmn 455 417 571 855 49.9 43.2 EBÌTDA SRmn 106 113 139 121 (12.6) 3.7 Net Ìncome SRmn 69 87 108 98 (8.9) 6.4 Assets SRmn 300 303 384 418 8.7 17.5 Equity SRmn 258 280 329 378 15.1 16.3 Total Debt SRmn 2 2 - - - NM Cash & Equiv SRmn 69 35 74 79 7.8 50.2 EBÌTDA Mgn % 23.3 27.0 24.3 14.2 - - Net Mgn % 15.3 20.9 18.9 11.5 - - ROE % 26.9 31.1 32.8 26.0 - - ROA % 23.1 28.7 28.1 23.5 - - Div Payout % - - - 57.8 - - EPS SR 2.14 2.68 3.32 3.03 (8.9) 6.4 BVPS SR 7.94 8.61 10.11 11.64 15.1 16.3 Source: Tadawul, Zawya, Company, NCBC Research , * Financial for 2008 are for 10 months 199 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Real Estate Ticker Company Page No. 4090 Taiba 203 4300 Dar Al Arkan 204 4020 Al Akaria 205 4310 KEC Madinah 206 4250 Jabal Omar 207 4100 Makkah 208 4220 Emaar E .C 209 4150 Arriyadh Dev 210 The Saudi real estate sector is likely to continue benefiting from a large and young population (expected to grow 2.3% annually until 2020), rising number of households, expansion in business activity and religious tourism in the medium term. Ìn addition, a high proportion of nationals in the Kingdom's population (69% of the total population in 2010), vis-à-vis other GCC countries, is a key factor driving demand for real estate. Saudi Arabia's population aggregated 27.3mn in 2010, representing around 63% of the total GCC population. The Population has been growing 2.7% per year over the past 20 years which is one of the fastest growth rates in the world. Exhibit 118: Saudi population is the largest in GCC Exhibit 119: Saudi population by age group Thousand (person)÷2010 July data Saudis only (2010 data) Source: UN, NCBC Research Source: UN, NCBC Research Residential sector The supply-demand mismatch in the housing sector widened although growth in young population and a decline in average household size continue to drive demand. Saudi Arabia would require an additional 973,000 units over 2010÷15E and a total of 2.1mn units over the coming decade (215,000 units per year). However, we believe affordability and lack of access to mortgage credit are the primary roadblocks impacting demand for housing. Office sector Office rental rates in KSA remained relatively stable in 2011. However, as the over supplied market moves towards more competitive pricing, demand could potentially increase for high-quality projects in the medium term. Ìn addition, based on the business volume in Saudi Arabia, the nature of demand and the current and forthcoming supply of office space, we expect a decline in occupancy rates across major cities. This could exert downward pressure on office rentals. Retail sector Retail spending, which drives demand for retail spaces, remained strong in 2011 due to population growth and higher household consumption. Ìn Saudi Arabia, supply of retail space is still very low and rental prices are comparatively lower compared to other major cities in GCC. Demand for retail space is expected to increase in tandem with household consumption, which is expected to grow 6÷ 7% per annum over the next few years. 0 5000 10000 15000 20000 25000 30000 Saudi Arabia UAE Oman Kuwait Qatar Bahrain - 2 000 - 1 000 0 1 000 2 000 0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80+ 85-89 95-99 Female Male MAY 2012 REAL ESTATE Growth potential tied to demographics 201 REAL ESTATE NCB CAPÌTAL MAY 2012 Hospitality sector The number of visitors to a particular geographical area is the key driver for the hospitality sector. The hotel industry in KSA is classified into Riyadh, Khobar, Makkah and Madinah, which attract higher number of international and GCC travelers (for business or pilgrimage). On the other hand, Jeddah is frequented by Saudi nationals for leisure or business and, hence, is more dependent on the local economy. Given the expected growth in tourist arrivals, the hospitality sector remains a significant opportunity for investors. The sector's revenue declined 6.3% YoY to SR5bn in 2011 due to a slowdown in construction activity. Dar Al Arkan remained the largest player, accounting for 66% of the sector's total revenues during the same year. Emaar's revenues rose fourfold to SR407.7mn in 2011. Saudi Real Estate Company (revenues fell 38.8% YoY) recorded the sharpest fall. The combined revenues of other smaller players, including Makkah, Arriyadh and KEC, increased of 44% YoY to SR636.8mn during the year. Overall, the sector's net income grew to SR1.8bn in 2011 from SR1.3bn in 2010, amid lower operating and maintenance costs. Exhibit 120: Revenues of companies, 2009-11 Exhibit 121: Profitability of companies relative to the sector average, 2009- 2011 SR mn % Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research NCBC Recommendation We remain fairly optimistic about the Saudi real estate sector's prospects in the long term. The residential sub-sector is expected to report fastest growth in the near-term, while the office sub-sector is likely to witness an oversupply. However, fundamental drivers, including favorable demographics, increase in business activity and religious tourism, remain intact. We are currently covering three stocks in the real estate sector: Dar Al Arkan, Taiba and Al Akaria. Exhibit 122: Coverage stocks details Stock Current Rating PT (SR) Comments Dar Al Arkan (4300.SE) Neutral 10.8 Dar Al Arkan is currently developing a number of capital-intensive projects; however, banks and financial institutions could be reluctant to lend to the company due to allegations of a crisis on its website. Furthermore, investors' perception, which has been impacted by weak earnings and lack of transparency over the last few years, could improve if management provides further insight into its land bank. The stock outperformed the TASÌ index, reflecting the limited upside potential. Taiba (4090.SE) Overweight 27.6 With a portfolio of prime assets, expected revenue growth and improvement in margins, we believe Taiba's fundamentals, including its status as one of the holiest cities for Muslims, makes the stock an attractive play in the hospitality sector. Al-Akaria (4020.SE) Neutral 27.3 Good earnings visibility, future growth potential and a large land bank are positives; however, these are partially offset by a low ROE and risk of excess office supply in Riyadh. Source: NCBC Research 0 1,000 2,000 3,000 4,000 5,000 6,000 2009 2010 2011 Others Dar Alarkan Taiba Al Akaria 0% 10% 20% 30% 40% 50% 60% 2009 2010 2011 Sector Average Saudi Real Estate Taiba Dar Alarkan 202 Taiba HoIding Co (Taiba), estabIished in September 1988, is based in Madinah, home of the second HoIy Mosque in IsIam. The company transformed to a hoIding company in 2007 and transferred most of its assets to its subsidiaries. It currentIy owns and manages reaI estate properties, hoteIs and resorts mainIy through its subsidiaries, and is geographicaIIy concentrated in Madinah and its surrounding cities. x Business brief Taiba primarily focuses on the real estate sector; it is a major developer in the central area surrounding the Holy Prophet's mosque. Taiba's subsidiaries and associate companies include ARAC and Al Aqeeq. All real estate functions are run by Al Aqeeq, the real estate arm, and include real estate development, property sales, rent, contracting and maintenance. The second-largest revenue source is ARAC, the tourism arm, which owns and operates properties and resorts in Madinah, Yanbu, Al Ula and Makkah (under development). x FinanciaIs Revenues grew 59.0% YoY to SR394mn for 2011, driven by higher occupancy rates due to the increased number of Hajj pilgrims. EBÌTDA rose 137.5% to SR247mn YoY due to improved operational efficiency, gains from compensation for a plot of land in Al Madinah city, and proceeds from the sale of Taiba's share of land in Jeddah city. The net income grew 157.1% YoY to SR237mn in 2011. x Recent deveIopments On March 18, 2012, Taiba announced that it had filed a lawsuit to appeal against the compensation value of the land located in the Markaziah area in Al Madinah. Ìn February 2012, the company announced a cash dividend of SR0.25 per share for 1Q12. REAL ESTATE DEVELOPMENT~MAY 2012 TAÌBA HOLDÌNG ALSO KNOWN AS: TAÌBA OVERWEIGHT Current price (SR) 23.7 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 26/16 Market cap (SR mn) 946 Shares outstanding (mn) 150 Price perform (%) 1M 3M 12M Absolute (2.9) 17.7 38.7 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 10.2 2.7 12M 5.8 1.6 Reuters code 4090.SE Bloomberg code TÌRECO AB www.taiba.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.41 Free float 68.99 VALUATION MULTIPLES 10A 11A 12E P/E (x) 38.5 15.0 10.8 P/B (x) 1.2 1.2 1.1 P/S (x) 14.3 9.0 6.3 Div Yield (%) 4.2 4.2 4.2 DPS 1.0 1.0 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 17 19 21 23 25 27 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Taiba (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Masek Holding Company 16.6 Mohammed Salah Hamza Sairafi 7.2 General Organization for Social Ìnsurance (GOSÌ) 6.9 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 248 394 559 463 59.0 23.2 EBÌTDA SRmn 104 247 370 268 137.5 37.1 Net Ìncome SRmn 92 237 329 223 157.1 34.3 Assets SRmn 3,610 3,558 3,865 3,949 (1.4) 3.0 Equity SRmn 2,862 2,915 3,093 3,164 1.9 3.4 Total Debt SRmn 2 1 - - (50) NM Cash & Equiv SRmn 295 52 152 150 (82.4) (20.2) EBÌTDA Mgn % 42.0 62.7 66.2 57.9 - - Net Mgn % 37.2 60.1 58.9 48.2 - - ROE % 3.3 8.2 11.0 7.1 - - ROA % 2.6 6.6 8.9 5.7 - - Div Payout % 162.9 63.4 45.6 67.3 - - EPS SR 0.61 1.58 2.19 1.49 157.1 34.3 BVPS SR 19.08 19.43 22.62 21.09 1.9 3.4 Source: Tadawul, Zawya, Company, NCBC Research 203 Saudi ReaI Estate (AKARIA) was estabIished in Riyadh in 1976. At present, it generates aII of its revenues from Riyadh. Despite the good earnings visibiIity, future growth potentiaI and a Iarge Iand bank, which are positives for the company, we remain concerned over the Iow ROE as weII as the considerabIe increase in capex estimates. x Business brief AKARÌA is one of the pioneers in shopping center construction in the GCC. Ìt also develops housing and office complexes. Ìn addition, the company partners with international hotel chain operators to develop industrial/science parks and hotels. AKARÌA's principal investment holdings include a 25% stake in Saudi Company for Al Muaiqliah Commercial Center, 15% stake in United Glass Company, and 10% stake in Dar Al Tamleek Company. x FinanciaIs Sales declined 38.8% YoY to SR265mn in 2011 due to a significant drop in land sales compared to 2010. Net income fell 18.3% YoY to SR150mn; however, net margin improved from 42.4% in 2010 to 56.6% in 2011. This was due to higher occupancy rates at the Plaza complex and other properties. x Recent deveIopments On April 1, 2012, Saudi Real Estate approved the distribution of 5% cash dividends for the 2H11, making the full-year dividend SR1.00 per share. On March 5, 2012, the BOD approved the commencement of the first phase of infrastructure development for the Al Akaria Village project (size 2.1 million square meter) in Banban, Saudi Arabia. REAL ESTATE DEVELOPMENT~ MAY 2012 SAUDÌ REAL ESTATE ALSO KNOWN AS: REAL ESTATE, AKARÌA NEUTRAL Current price (SR) 27.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 32/22 Market cap (SR mn) 870 Shares outstanding (mn) 120 Price perform (%) 1M 3M 12M Absolute (1.8) 5.0 13.1 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 34.9 9.3 12M 12.8 3.4 Reuters code 4020.SE Bloomberg code SRECO AB www.al-akaria.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.17 Free float 30.64 VALUATION MULTIPLES 10A 11A 12E P/E (x) 17.8 21.8 24.5 P/B (x) 1.0 1.0 1.0 P/S (x) 7.6 12.3 13.0 Div Yield (%) 4.6 3.7 3.9 DPS 1.3 1.0 1.1 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Real Estate (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 64.5 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 432 265 251 282 (38.8) (13.3) EBÌTDA SRmn 267 187 162 181 (30.0) (12.2) Net Ìncome SRmn 183 150 133 152 (18.3) (6.0) Assets SRmn 3,480 3,397 3,501 3,507 (2.4) 0.3 Equity SRmn 3,203 3,174 3,120 3,145 (0.9) (0.6) Total Debt SRmn - - 142 101 - - Cash & Equiv SRmn 159 54 25 28 (66.2) (43.9) EBÌTDA Mgn % 61.8 70.7 64.5 64.2 - - Net Mgn % 42.4 56.6 53.0 53.9 - - ROE % 5.8 4.7 4.2 4.9 - - ROA % 5.5 4.4 3.9 4.3 - - Div Payout % 81.9 80.2 94.7 59.2 - - EPS SR 1.53 1.25 1.11 1.27 (18.3) (6.0) BVPS SR 26.69 26.45 26.00 26.21 (0.9) (0.6) Source: Tadawul, Zawya, Company, NCBC Research 204 EstabIished in 1994, Dar AI Arkan is one of the Iargest reaI estate deveIopers in Saudi Arabia. The company's main activities incIude purchase of reaI estate and Iand, and construction of both commerciaI and residentiaI properties. The company has four whoIIy-owned subsidiaries: Dar AI Arkan Investment Co., Dar AI Arkan Projects Co., Dar AI Arkan Properties Co., and Dar AI Arkan Sukuk Co. x Business brief Dar Al Arkan has a long history of developing residential projects across the Kingdom. Historically, these developments have been small, ranging from tens to a few hundred units, mainly in Riyadh. However, since 2007, the company has focused on developing large scale master planned communities. These include Shams Alriyadh, Al Qasr, and Al-Tilal. Dar Al Arkan also offers pre-sales, after-sales, and funding services to customers. Ìn December 2007, the company established Saudi Home Loans Company worth SR2bn that complements its core business and provides Shariah- compliant home loans. x FinanciaIs Revenues fell 20.0% to SR3.3bn in 2011 from SR4.1bn in 2010 due to lower revenue from land sales. Net profit declined 25.3% YoY to SR1.1bn in 2011 due to increased political instability across the Middle East region and disrupted land sales during the year. x Recent deveIopments On March 09, 2012, Standard & Poor's lowered Dar Al Arkan's rating to B+ from BB-, and kept it on CreditWatch as the agency believes the company faces refinancing risk. The company has to repay SR4.4bn of debt in 2012. REAL ESTATE DEVELOPMENT~ MAY 2012 DAR AL ARKAN ALSO KNOWN AS: DAAR, DAR AL ARKAN NEUTRAL Current price (SR) 11.7 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 14/6 Market cap ($ mn) 3,354 Shares outstanding (mn) 1,080 Price perform (%) 1M 3M 12M Absolute (9.7) 34.7 28.7 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 651.5 173.7 12M 224.7 59.9 Reuters code 4300.SE Bloomberg code ALARKAN AB www.alarkan.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.27 T Free float 60.86 F VALUATION MULTIPLES 10A 11A 12E P/E (x) 8.6 11.6 11.0 P/B (x) 0.9 0.8 0.8 P/S (x) 3.0 3.8 3.3 Div Yield (%) 8.5 - - DPS 1.0 - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5 7 9 11 13 15 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Dar Al Arkan (RHS) Source:Bloomberg TOP 5 SHAREHOLDERS (%) Khalid Abdullah Shelash Al Shelash 9.1 Yousef Abdullah Shelash Al Shelash 7.7 Hadhlool Saleh Mohammed Al Hadhlool 6.2 Majed Abdul Rahman Abdul Aziz Al Qassim 5.3 Source: Tadawul, NCBC Research Company financiaIs 2010 2011 2012E 2013E YoY (%) CAGR (%) (10-13E) Revenues SRmn 4,142 3,313 3,820 4,235 (20.0) 0.7 EBÌTDA SRmn 1,658 1,278 1,484 1,411 (22.9) (5.2) Net Ìncome SRmn 1,456 1,088 1,147 1,135 (25.3) (8.0) Assets SRmn 23,349 24,101 22,980 21,436 3.2 (2.8) Equity SRmn 14,500 15,588 15,862 16,769 7.5 5.0 Total Debt SRmn 7,813 7,448 6,035 3,607 (4.7) (22.7) Cash & Equiv SRmn 1,189 2,506 382 423 110.8 (29.1) EBÌTDA Mgn % 40.0 38.6 38.8 33.3 - - Net Mgn % 35.1 32.8 30.0 26.8 - - ROE % 10.2 7.2 7.3 7.0 - - ROA % 6.2 4.6 4.9 5.1 - - Div Payout % 74.2 - - - - - EPS SR 1.35 1.01 1.06 1.05 (25.3) (8.0) BVPS SR 13.43 14.43 14.69 15.53 7.5 5.0 Source: Tadawul, Zawya, Company, NCBC Research 205 KnowIedge Economic City Company was estabIished in August 2010 with a capitaI of SR3.4bn. Headquartered in Jeddah, the company is mainIy engaged in managing the deveIopment of the KnowIedge Economic City (KEC) project at AI Madinah AI Munawarah with an investment of SR30bn. x Business brief KEC Madinah is responsible for developing a sustainable knowledge-based city and a central business district alongside residential projects in Madinah. The project comprises 30,000 residential units; 1,200 shops and retail outlets; a high-speed rail terminal; and a business district comprising companies from the education, information and communication technology, health, hospitality and tourism sectors. The company would also undertake investments in a variety of real estate assets and provide a range of real estate-related services. x FinanciaIs KEC Madinah reported revenues of SR94mn for 2011 with an EBÌTDA of SR22mn and a net loss of SR9mn. The company reported a net loss of SR155mn during the first 17 months of operations as it failed to cover initial set up costs given the fact that majority of the company's projects are still under development. x Recent deveIopments Ìn April 1, 2012, KEC Madinah announced the sale of a 20,276 sq. mtr land to the Ìnternational Medical Center for a total value of SR 22.8mn, yielding a profit of SR14mn. On December 27, 2012, the company signed a SR631.3mn agreement to acquire Savola's 80% stake in Al-Mujamaat United Company for real estate. REAL ESTATE DEVELOPMENT~ MAY 2012 KNOWLEDGE ECONOMÌC CÌTY ALSO KNOWN AS: KEC MADÌNAH NOT COVERED Current price (SR) 20.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 22/7 Market cap ($ mn) 1,841 Shares outstanding (mn) 339 Price perform (%) 1M 3M 12M Absolute 1.2 70.3 143.7 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 262.5 70.0 12M 111.6 29.8 Reuters code 4310.SE Bloomberg code KEC AB www.madinahkec.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.35 Free float 30.06 VALUATION MULTIPLES 08A 09A 10A P/E (x) - NM NM P/B (x) - 2.1 2.1 P/S (x) - NM 73.5 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5 10 15 20 25 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Knowledge Eco(RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) King Abdullah bin Abdul Aziz Foundation 29.4 Knowledge Economic City 24.4 Savola Group 6.4 Source: Tadawul NCBC Research Company financiaIs 2008 2009 2010* 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn - - 0 94 - - EBÌTDA SRmn - - (16) 22 - - Net Ìncome SRmn - - (146) (9) - - Assets SRmn - - 3,267 3,286 0.6 - Equity SRmn - - 3,218 3,225 0.2 - Total Debt SRmn - - - - NA - Cash & Equiv SRmn - - 2,031 1,828 -10.0 - EBÌTDA Mgn % - - NM 23.7 - - Net Mgn % - - NM NM - - ROE % - - (4.5) (0.3) - - ROA % - - (4.5) (0.3) - - Div Payout % - - - - - - EPS SR - - (0.43) (0..03) NM - BVPS SR - - 9.48 9.50 0.2 - Source: Tadawul, Zawya, Company, NCBC Research *2010 financials are for 5-month period 206 JabaI Omar DeveIopment Company (JabaI Omar) is engaged in reaI estate deveIopment in the JabaI Omar area. In cooperation with IocaI and internationaI subcontractors, the company purchases, buiIds, deveIops, manages rent, and Ieases and seIIs Iand and properties. JabaI Omar's headquarters are Iocated in Mecca, and was estabIished in October 2006. x Business brief Jabal Omar builds residential towers, hotels, commercial centers, and roads and parking facilities for pilgrims visiting Mecca. The company's major venture Jabal Omar project (also known as the Western Gate Road Development) is scheduled for completion in 2016. The project is a mixed- use multi-phase project spanning across 2.5 million square meter of development area located around the Grand Mosque of Makkah. The first phase of the project is expected to be completed in early 2013 and will comprise construction of 10 hotels, 86 villas and residential units. The second phase will be completed by 2014. x FinanciaIs Jabal Omar did not record sales in 2011 as its projects were still under the development phase. The company continued to incur a net loss (SR37mn) due to lack of operating income and a rise in general & administrative expenses for development of projects. x Recent deveIopments On March 25, 2012, Jabal Omar signed a 24-month contract worth SR1.5bn with Azmeel Contracting and Saudi Arabian Baytur to complete the second phase of the Jabal Omar Project. The project would be financed through a rights issue. On December 3, 2011, the company signed a loan agreement worth SR3bn with the Ministry of Finance to fund the twin towers and a shopping mall project. The loan would be repaid in eight years and has a two-year grace period. REAL ESTATE DEVELOPMENT~ MAY 2012 JABAL OMAR DEVELOPMENT COMPANY ALSO KNOWN AS: JABAL OMAR , JODC NOT COVERED Current price (SR) 19.9 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 23/11 Market cap (SR mn) 4,918 Shares outstanding (mn) 929 Price perform (%) 1M 3M 12M Absolute 5.0 46.0 38.4 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 189.3 50.5 12M 75.6 20.2 Reuters code 4250.SE Bloomberg code JOMAR AB www.jabalomar.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 1.70 T Free float 54.34 F VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM NM P/B (x) 2.8 2.8 2.0 P/S (x) NM NM NM Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 15 20 25 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Jabal Omar (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Jabal Omar Establishment 21.2 General Organization for Social Ìnsurance (GOSÌ) 9.8 Makkah Construction & Development Co. 9.9 Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn - - - - NM - EBÌTDA SRmn (21) (26) (35) (35) NM) NM Net Ìncome SRmn (53) (23) (37) (37) NM NM Assets SRmn 6,704 6,879 7,607 10,167 (33.6) 14.9 Equity SRmn 6,661 6,638 6,601 9,069 (37.4) 10.8 Total Debt SRmn - - 318 741 (132.7) NM Cash & Equiv SRmn 946 27 101 1,269 (1156.0) 10.3 EBÌTDA Mgn % NM NM NM NM - - Net Mgn % NM NM NM NM - - ROE % (0.79) (0.35) (0.56) (0.47) - - ROA % (0.78) (0.34) (0.51) (0.41) - - Div Payout % - - - - - - EPS SR (0.06) (0.02) (0.04) (0.04) 0.7 NM BVPS SR 7.17 7.14 7.10 9.76 37.4 10.8 Source: Tadawul, Zawya, Company, NCBC Research 207 Makkah Construction & DeveIopment Co. (MCDC) was estabIished in 1989 to deveIop areas around the HoIy Mosque in Makkah. The company is engaged in the redeveIopment of the HoIy Haram area. MCDC commenced a residentiaI and commerciaI compIex, incIuding the JabaI Omar and JabaI Khandama projects. x Business brief MCDC is involved in real estate (investment, construction and development), property management and hotel management. The company holds 100% stake in Makkah Hilton & Towers (the 1,400-room hotel) and Makkah Shopping Center (a three-storied 451 unit shopping center). MCDC also holds 25% stake in Takief Company. Ìn 2006, MCDC was a founding member of the Jabal Omar Development Company (9.1% stake) that was established with a capital of SR5bn. The Jabal Omar project is spread across an area of 230,000 sq mtrs and includes hotels, commercial centers and prayer facilities for over 200,000 people. x FinanciaIs MCDC's revenues grew 12.6% YoY to SR389mn in 2012, mainly driven by higher occupancy rates in residential hotels. Net income rose 13.8% YoY to SR323mn in the same period, primarily due to higher average room rates realized in the Hajj season and increased rental incomes from shops. x Recent deveIopments On August 17, 2011, MCDC approved the distribution of SR1.5 per share cash dividend for the year ending March 31, 2011. REAL ESTATE DEVELOPMENT ~ MAY 2012 MAKKAH CONSTRUCTÌON ALSO KNOWN AS: MCDC NOT COVERED Current price (SR) 38.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 40/30 Market cap ($ mn) 1,674 Shares outstanding (mn) 165 Price perform (%) 1M 3M 12M Absolute (0.5) 6.7 20.2 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 6.9 1.9 12M 4.5 1.2 Reuters code 4100.SE Bloomberg code MCDCO AB www.mcdc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.74 Free float 72.68 VALUATION MULTIPLES 10A 11A 12A P/E (x) 29.4 22.1 19.4 P/B (x) 1.7 1.8 1.5 P/S (x) 22.5 18.2 16.1 Div Yield (%) 3.9 3.9 - DPS 1.5 1.5 - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 25 30 35 40 45 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Makkah (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Saudi Bin Laden Group 10.9 Mohammed Salah Hamza Sairafi 12.2 Source: Tadawul, NCBC Research Company financiaIs* 2009 2010 2011 2012 YoY (%) CAGR (%) (09-12) Revenues SRmn 291 279 346 389 12.6 10.2 EBÌTDA SRmn 261 251 317 355 12.1 10.8 Net Ìncome SRmn 222 213 284 323 13.8 13.3 Assets SRmn 4,124 4,170 3,884 4,280 10.2 1.2 Equity SRmn 3,959 3,750 3,442 4,080 18.5 1.01 Total Debt SRmn - - - - - - Cash & Equiv SRmn 189 131 309 318 3.1 19.0 EBÌTDA Mgn % 89.8 90.2 91.5 91.1 - - Net Mgn % 76.3 76.6 82.1 82.9 - - ROE % 5.4 5.5 7.9 8.6 - - ROA % 5.1 5.1 7.0 7.9 - - Div Payout % 111.4 115.9 87.1 - - - EPS SR 1.35 1.29 1.72 1.96 13.8 13.3 BVPS SR 24.02 22.75 20.89 24.75 18.5 1.0 Source: Tadawul, Zawya, Company, NCBC Research, *Year ending is 31 st March 208 209 In 2006, Emaar Economic City (Emaar EC), managed by Emaar Properties, was set up as a joint stock company to develop the SR188bn King Abdullah Economic City (KAEC). KAEC is part of the government’s initiatives to diversify the economy and establish new economic, educational, and technology hubs.  Business brief KAEC, the single largest private sector-led project in the GCC region (168 million square meters), has six key components: a seaport, an industrial zone, a residential district, a financial island, an educational zone and a waterside zone. This mega project is expected to generate about 1-2mn job opportunities with the residential district expected to house around 2mn people.  Financials Emaar EC’s revenues grew 348.4% YoY to SR408mn in 2011 due to a land sale. The company reported a net profit of SR83mn in 2011 versus a net loss of SR584mn in 2010.  Recent developments In January 2012, the company sold 500,000 square meters of land in KAEC’s Industrial Valley to Tamer Group, a leading healthcare and consumer goods firm based in Jeddah. REAL ESTATE DEVELOPMENT MAY 2012 EMAAR THE ECONOMIC CITY ALSO KNOWN AS EEC, EMAAR EC NOT COVERED Current price (SR) 12.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 14/6 Market cap (SR mn) 2,742 Shares outstanding (mn) 850 Price perform (%) 1M 3M 12M Absolute (8.0) 40.7 69.2 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daily turnover (mn) SR US$ 3M 417.1 111.2 12M 164.0 43.7 Reuters code 4220.SE Bloomberg code EMAAR AB www.kingabdullahcity.com WEIGHTING & FREEFLOAT (%) TASI (free float weight) 0.51 Free float 30.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM NM 124.5 P/B (x) 1.3 1.4 1.4 P/S (x) 39.5 113.1 25.2 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5 7 9 11 13 15 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASI Emaar E .C (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Modern Daim Real Estate 20.0 ME Royal Capital Co. 9.4 Emaar Middle East 5.8 MI Holding Compnay 5.8 ME Strategic Investments 5.8 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 102 261 91 408 348.4 58.9 EBITDA SRmn (375) (214) (249) 170 NM NM Net Income SRmn (292) (309) (584) 83 NM NM Assets SRmn 9,532 9,305 8,877 13,746 54.8 13.0 Equity SRmn 8,191 7,882 7,298 7,380 1.1 (3.4) Total Debt SRmn 0 0 0 5,062 NM NM Cash & Equiv SRmn 2,219 864 339 1,710 404.0 (8.3) EBITDA Mgn % NM NM NM 41.7 - - Net Mgn % NM NM NM 20.3 - - ROE % (3.5) (3.8) (7.7) 1.1 - - ROA % (3.2) (3.3) (6.4) 0.7 - - Div Payout % - - - - - - EPS SR (0.34) (0.36) (0.69) 0.10 NM NM BVPS SR 9.64 9.27 8.59 8.68 1.1 (3.4) Source: Tadawul, Zawya, Company, NCBC Research Arriyadh DeveIopment Company was estabIished in 1994 and is engaged in the construction of commerciaI, office and residentiaI buiIdings and compIexes. The company aIso deveIops pubIic parks, tourist compounds and parking Iots. x Business brief Arriyadh is engaged in residential projects such as Sunrise Cities, and commercial projects such as Attameer Trading Center, Arriyadh Transportation Center, Technical Service City, Riyadh Hills, and Riyadh Car Auction (for sale of used cars). The company is also engaged in the development of market areas such as Batiha Meat & Vegetable Market, Riyadh Wholesale & Retail Market, and Riyadh Vegetable & Fruits Market. x FinanciaIs Arriyadh's revenues increased 20.0% YoY to SR197mn in 2011 due to revenue growth in the operation & lease segment, and a marked improvement in operational efficiency and marketing strategy of all projects. Net income increased 34.7% YoY to SR130mn. Net margins expanded to 66.1% in 2011 compared to 2010. x Recent deveIopments Arriyadh awarded a SR60mn contract to a local company to develop a cooling and freezing plant on its land in Riyadh. The plant is expected to generate SR15mn rental income annually. Additionally, Ìn March 2012, Arriyadh's board approved distribution of 12.5%, or SR1.25 per share, as cash dividends for 2011. REAL ESTATE DEVELOPMENT ~ MAY 2012 ARRÌYADH DEVELOPMENT ALSO KNOWN AS: ARRÌYADH, ARDCO NOT COVERED Current price (SR) 23.2 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 27/13 Market cap ($ mn) 619 Shares outstanding (mn) 100 Price perform (%) 1M 3M 12M Absolute (8.7) 12.3 55.2 Market (6.2) 6.2 7.6 Sector (2.6) 31.1 40.0 Avg daiIy turnover (mn) SR US$ 3M 40.1 10.7 12M 26.9 7.2 Reuters code 4150.SE Bloomberg code ADCO AB www.ardco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.35 Free float 89.83 VALUATION MULTIPLES 09A 10A 11A P/E (x) 25.0 24.0 17.8 P/B (x) 1.6 1.6 1.5 P/S (x) 14.9 14.2 11.8 Div Yield (%) 3.2 4.3 5.4 DPS 0.8 1.0 1.3 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 11 16 21 26 31 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Arriyadh Development (RHS) SOURCE: BLOOMBERG TOP 5 SHAREHOLDERS (%) Development & Ìnvestment Ser Co. 10.20. Emar Arabian Shield for Ìnvst Co. 9.60. Adyaar Holding Co 5.30. Source: Tadawul, NCBC Research Company financiaIs 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 140 155 163 197 20.8 12.0 EBÌTDA SRmn 94 110 118 150 27.6 16.9 Net Ìncome SRmn 79 93 97 130 34.7 18.0 Assets SRmn 1,593 1,589 1,644 1,667 1.4 1.5 Equity SRmn 1,404 1,422 1,468 1,497 1.9 2.2 Total Debt SRmn - - - - NA NA Cash & Equiv SRmn 163 8 17 27 65.6 (44.8) EBÌTDA Mgn % 67.0 70.6 72.3 76.3 - - Net Mgn % 56.4 59.6 59.3 66.1 - - ROE % 5.7 6.6 6.7 8.8 - - ROA % 5.0 5.8 6.0 7.9 - - Div Payout % 63.2 80.9 103.5 96.0 - - EPS SR 0.79 0.93 0.97 1.30 34.7 18.0 BVPS SR 14.04 14.22 14.68 14.97 1.9 2.2 Source: Tadawul, Zawya, Company, NCBC Research 210 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Transport Ticker Company Page No. 4030 NSCSA 214 4040 SAPTCO 215 4260 Budget Saudi 216 4110 Mubarrad 217 The Saudi transport sector continued to consolidate in 2011, reporting a gradual recovery. However, continued uncertainty about global economic recovery negatively impacted trade flows and cargo volumes. Nonetheless, the government's commitment toward building a robust transport infrastructure supported the recovery in the sector. The government increased its prospective spending on transport and communication by 40% YoY (or 5.1% of the total spending earmarked in the 2012 budget). The sector also benefits from the strong potential of religious tourism as well as growing demand from the non-oil sector amid the government's increasing focus on diversification. Growth in the transport sector remained relatively flat compared to other GCC countries in 2011. Nonetheless, the sector's ROE stood at 11.2%, higher than the GCC average of 9.7%, during the same period. Exhibit 123: Revenues of GCC transport companies, 2009-11 Exhibit 124: Comparison of ROE and P/E of GCC companies, 2011 USD mn % Source: Bloomberg, NCBC Research; Source: Tadawul, Bloomberg, NCBC Research. Size of the bubble represents market cap., as on March 28, 2012 The transport sector has a large number of private players, with just four listed companies. Among the listed entities, National Shipping Co. of Saudi Arabia (NSCSA) commands the largest share, accounting for around 58% of the sector's revenues in 2011. The sector constituted 1.09% of the total weight in the Tadawul index (as of March 28, 2012). Among listed entities, NSCSA holds the highest weight (0.58%) in the index. Exhibit 125: Sector details Units as stated Country % weight in Index as on 25 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 National Shipping Co. of Saudi Arabia (NSCSA) 0.58 14.5 8.2 Saudi Public Transport Co ( SAPTCO) 0.30 8.1 3.5 Saudi Transport and Ìnvestment Co. (MUBARRAD) 0.13 (283.4) (4.0) United Ìnternational Transportation Co.Ltd. (BUDGET) 0.09 17.3 21.9 Source: Bloomberg, Tadawul: Company data 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2009 2010 2011 KSA UAE Kuwait Oman Qatar -2.0 1.0 4.0 7.0 10.0 13.0 16.0 19.0 0.0 5.0 10.0 15.0 20.0 25.0 R O E ( % ) P/E (x) KSA UAE Kuwait Oman Qatar MAY 2012 TRANSPORT Sector normalizes amid weak global economic activity 212 TRANSPORT NCB CAPÌTAL MAY 2012 The sector's revenues rose only 2.2% YoY to SR3.4bn in 2011, primarily due to a substantial decrease in volumes and selling prices by the end of the year. The sector's two biggest players exhibited mixed performances in 2011 - NSCSA's revenues fell 3% YoY, while SAPTCO recorded a sharp increase of 8.5% YoY. Saudi transport and investment Company (MUBARRAD), the smallest player in the sector, recorded the steepest decline in revenues (down 6.5% YoY) in 2011. The sector's profitability dipped 39.5% YoY as the shortage of skilled labor and inherent inflation increased expenses. SAPTCO recorded the highest growth in net profit (up 30.5% YoY) in 2011, while MUBARRAD reported over tenfold decrease in profits. Exhibit 126: Revenue of companies, 2009-2011 Exhibit 127: NSCSA's profitability relative to the sector avg SR mn % Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research. The sector's P/E and P/BV multiples stood at 22.1x and 2.7x in 2011, respectively (24.0x and 2.6x in the previous year). The transport sector's average ROE stood at 11.2% in 2011. United Ìnternational Transport Company Limited reported the highest ROE of 23.2% during the same year. Exhibit 128: Comparison of P/B and RoE, 2010 Exhibit 129: Comparison of P/B and RoE, 2011 % % Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research Although the outlook for the sector remains mixed, a prospective increase in expansion projects and infrastructure development activities across industries could support the local freight industry. The Kingdom continues to witness a steady supply of projects. Ìn December 2011, the Ministry of Transport and UNDP signed an agreement to develop a transport system in Saudi Arabia; the project was approved for five years (2012÷16). Also, work on Jeddah's new King Abdulaziz Airport, six other airport upgrades and 4,200 km of new roads are in progress. Ìn addition, under the 2012 budget, the government raised the municipal spending (largely on traffic infrastructure upgrades) by 19% to 4.2% of the overall proposed spending for 2012. 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2009 2010 2011 MUBARRAD NSCSA SAPTCO BUDGET -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 2009 2010 2011 Average NSCSA BUDGET SAPTCO NSCSA MUBARRAD -10 -5 0 5 10 15 20 25 0.0 1.0 2.0 3.0 4.0 5.0 6.0 R O E ( % ) P/B(x) BUDGET SAPTCO NSCSA MUBARRAD BUDGET SAPTCO NSCSA -5 0 5 10 15 20 25 30 0 1 2 3 4 5 6 R O E ( % ) P/B(x) BUDGET SAPTCO NSCSA MUBARRAD 213 Established in 1979, The National Shipping Company of Saudi Arabia (NSCSA) provides marine transport services primarily to oil & gas and chemical sectors. NSCSA offers liner (general cargo), ship management, and container storage and repair services. x Business brief NSCSA operates a fleet of 34 ships (17 oil tankers, 13 chemical tankers and four general cargos). The company is likely to add up to 16 chemical carriers to its existing fleet by 2012. NSCSA operates chemical tankers through National Chemical Carriers (NCC), its 80% owned subsidiary. Along with transportation, the company offers ship management services for its own vessels and other shipping companies through its wholly owned subsidiary, Mideast Ship Management. x Financials NSCSA's sales declined 3% YoY to SR1,991mn in 2011 as three very large crude carrier (VLCC) time charter contracts owned by NSCSA expired during the year. The company's EBÌDTA fell 38.2% to SR433mn and net income decreased 30.6% to SR288mn mainly due to rising cost of vessel bunkers. x Recent developments NSCSA and Germany-based RWE Supply & Trading decided to terminate a three-year contract (expiring on April 24, 2013) on April 21, 2012. RWE agreed to pay a compensation of SR23.2mn, which would be reflected in 2Q12. On March 21, 2012, the company signed a contract with QATALUM, an aluminum company, to transport aluminum shipments from Qatar to the US for one year. The estimated value of the contract is SR50.6mn TRANSPORT ~ MAY 2012 NATÌONAL SHÌPPÌNG COMPANY ALSO KNOWN AS: NSCSA NOT COVERED Current price (SR) 17.1 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 19/11 Market cap ($ mn) 1,436 Shares outstanding (mn) 315 Price perform (%) 1M 3M 12M Absolute (0.6) 17.5 14.4 Market (6.2) 6.2 7.6 Sector (3.1) 22.8 41.6 Avg daily turnover (mn) SR US$ 3M 138.2 36.8 12M 55.8 14.9 Reuters code 4030.SE Bloomberg code NSCSA AB www.nscsa.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.59 Free float 65.9 VALUATION MULTIPLES 09A 10A 11A P/E (x) 14.6 13.0 18.7 P/B (x) 1.1 1.1 1.1 P/S (x) 3.2 2.6 2.7 Div Yield (%) 5.8 5.8 2.9 DPS 1.0 1.0 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 10 12 14 16 18 20 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Shipping (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 28.1 Source: Tadawul, NCBC Research COMPANY FINANCIALS YoY CAGR(%) 2008 2009 2010 2011 (%) (08-11) Revenues SRmn 2,595 1,672 2,053 1,991 (3.0) (0.1) EBÌTDA SRmn 1,180 634 701 433 (38.2) (0.3) Net Ìncome SRmn 750 369 415 288 (30.6) (0.3) Assets SRmn 9,819 10,339 9,966 10,623 6.6 0.0 Equity SRmn 5,090 4,987 5,089 5,063 (0.5) (0.0) Total Debt SRmn 4,007 4,763 4,143 4,815 16.2 0.1 Cash & Equiv SRmn 1,059 762 1,086 385 (64.5) (0.3) EBÌTDA Mgn % 45.5 37.9 34.1 21.7 - - Net Mgn % 28.9 22.1 20.2 14.5 - - ROE % 15.4 7.3 8.2 5.7 - - ROA % 8.5 3.7 4.1 2.8 - - Div Payout % 63.0 85.3 75.9 54.7 - - EPS SR 2.38 1.17 1.32 0.91 (30.6) (0.3) BVPS SR 16.16 15.83 16.16 16.07 (0.5) (0.0) Source: Tadawul, Zawya, Company, NCBC Research 214 Saudi Public Transport Company (SAPTCO) provides bus transport services for domestic and international travel to neighboring countries such as Egypt, Syria, Jordan, Kuwait, Qatar, the UAE, Bahrain, Yemen, Sudan, and Lebanon. Headquartered in Riyadh, the company has about 161 local and international agents. x Business brief SAPTCO has a fleet of around 3,200 buses, 300 trucks, 5000 cars and 300 trailers. Ìts operations connect nearly 600 cities, towns and villages across the Kingdom. The company provides intra-city and inter-city transport services across Saudi Arabia, and international transport services to 10 neighboring countries. SAPTCO also offers contract and charter transportation services to schools, colleges and other groups. Furthermore, it provides special transport services to Mecca and Medina during Hajj and Umrah seasons. The company also offers premium services between Makkah and Madinah, Riyadh and Al Khobar, and to Bahrain; SAPTCO is planning to expand these routes. Additionally, the company provides advertising space on its buses. x Financials SAPTCO's revenue increased 8.6% YoY to SR810mn in 2011 from SR746mn in 2010.The growth was mainly due to an increase in performance during Ramadan and Hajj seasons. Net income rose significantly to SR65mn in 2011 from SR50mn in the previous fiscal year on higher operational performance. x Recent developments SAPTCO acquired 150 Travico Mercedes buses (2012 Model) for SR176.3mn in three batches during September 2011 to February 2012. Out of these, the last batch of 50 buses was received in February 2012 for SR58.8mn; the effect of the same would be reflected in 1Q12. TRANSPORT ~ MAY 2012 SAUDÌ PUBLÌC TRANSPORT COMPANY ALSO KNOWN AS: SAPTCO NOT COVERED Current price (SR) 15.9 Pricing as on 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 19/7 Market cap ($mn) 530 Shares outstanding (mn) 125 Price perform (%) 1M 3M 12M Absolute (7.3) 51.4 92.7 Market (6.2) 6.2 7.6 Sector (3.1) 22.8 41.6 Avg daily turnover (mn) SR US$ 3M 111.4 29.7 12M 57.3 15.3 Reuters code 4040.SE Bloomberg code SAPTCO AB www.saptco.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.28 Free float 83.6 VALUATION MULTIPLES 09A 10A 11A P/E (x) 62.2 39.7 30.6 P/B (x) 1.4 1.4 1.4 P/S (x) 2.6 2.7 2.5 Div Yield (%) - 3.1 3.1 DPS - 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 5 10 15 20 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SAPTCO (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Public Ìnvestment Fund 15.7 Suleiman Saleh Suleiman Alamri 5.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 766 752 746 810 8.6 1.9 EBÌTDA SRmn 181 160 200 216 8.0 6.1 Net Ìncome SRmn 30 32 50 65 29.8 29.3 Assets SRmn 1,788 1,815 1,794 1,923 7.2 2.5 Equity SRmn 1,414 1,387 1,446 1,448 0.2 0.8 Total Debt SRmn 63 108 51 132 159.4 27.9 Cash & Equiv SRmn 410 311 390 201 (48.5) (21.2) EBÌTDA Mgn % 23.6 21.3 26.8 26.7 - - Net Mgn % 3.9 4.2 6.7 8.0 - - ROE % 2.1 2.3 3.5 4.5 - - ROA % 1.6 1.8 2.8 3.5 - - Div Payout % 207.7 - 124.8 96.2 - - EPS SR 0.24 0.26 0.40 0.52 29.8 29.3 BVPS SR 11.31 11.10 11.56 11.58 0.2 0.8 Source: Tadawul, Zawya, Company, NCBC Research 215 United International Transportation Co. (Budget Saudi) is the largest car rental company in the MENA region. It is a franchisee of Budget International and operates more than 19,361 vehicles, including luxury, 4x4, full-size, intermediate, compact, and economy cars. x Business brief Budget Saudi provides various services such as short-term and long-term car rentals, chauffeur-driven cars, the CorpRate Program (a corporate client- oriented service with preferential rates and value additions such as faster reservations and flexible billing) and Budget Express (loyalty program for members). The company also offers Hajj & Umrah services for visitors and pilgrims, Lodge and Drive (accommodation along with car rental), Premier Limousine Service (chauffeur-driven luxury vehicles) and automotive maintenance (maintenance facilities, including satellite workshops). Budget Saudi also sells used cars. x Financials The company's sales grew 14.2% YoY to SR583mn in 2011 due to a rise in short- and long-term leasing revenues. EBÌTDA too rose 15.6% YoY to SR377mn during the year compared to SR326mn last year. Net income for 2011 expanded 6.5% YoY mainly due to higher revenue from rentals (long and short term) and gain from car sales compared to last year. x Recent developments On March 31, 2012, Budget Saudi extended the Memorandum of Understanding (MoU) with Tranzlease Holdings (Ìndia) to acquire a 32.5% stake in the latter; the MoU was extended by two months, and would end on May 31, 2012. On January 29, 2012, the CMA approved Budget Saudi's request to increase its capital from SR188mn to SR244mn through the issue of one bonus share for every three shares owned by the shareholders. Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 473 484 511 583 14.2 7.3 EBÌTDA SRmn 319 324 326 377 15.6 5.7 Net Ìncome SRmn 84 86 95 101 6.2 6.3 Assets SRmn 729 761 834 1,002 20.1 11.2 Equity SRmn 356 406 464 517 11.5 13.3 Total Debt SRmn 247 224 271 313 15.6 8.1 Cash & Equiv SRmn 10 28 11 27 151.3 39.2 EBÌTDA Mgn % 67.5 66.9 63.9 64.7 - - Net Mgn % 17.8 17.7 18.6 17.3 - - ROE % 25.5 22.5 21.8 20.5 - - ROA % 11.9 11.5 11.9 11.0 - - Div Payout % 38.2 42.7 43.4 45.4 - - EPS SR 3.44 3.52 3.89 4.13 6.2 6.3 BVPS SR 14.58 16.65 19.01 21.19 11.5 13.3 Source: Tadawul, Zawya, Company, NCBC Research TRANSPORT ~MAY 2012 UNÌTED ÌNTERNATÌONAL ALSO KNOWN AS: BUDGET SAUDÌ, UNÌTRANS, UÌTC NOT COVERED Current price (SR) 42.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 52/30 Market cap ($ mn) 276 Shares outstanding (mn) 24 Price perform (%) 1M 3M 12M Absolute (16.3) 2.8 10.8 Market (6.2) 6.2 7.6 Sector (3.1) 22.8 41.6 Avg daily turnover (mn) SR US$ 3M 12.9 3.4 12M 11.7 3.1 Reuters code 4260.SE Bloomberg code BUDGET AB www.budgetsaudi.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.08 Free float 47.8 VALUATION MULTIPLES 09A 10A 11A P/E (x) 12.1 10.9 10.3 P/B (x) 2.5 2.2 2.0 P/S (x) 2.1 2.0 1.8 Div Yield (%) 3.5 4.1 4.4 DPS 1.5 1.7 1.9 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 29 34 39 44 49 54 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Budget Saudi (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Al Zahid Holding Group 37.7 Abdul Elah Abdullah Mahmood Ali Zahid 11.6 Mohammed Abdullah Mahmood Zahid 9.2 Source: Tadawul, NCBC Research 216 Saudi Transport and Investment Company (Mubarrad) runs a land transport business across Saudi Arabia and other GCC countries. It also deals in the purchase and sale of land, construction, and management and operation of buildings. x Business brief Mubarrad owns a fleet of more than 1,165 vehicles (including truck heads, reefer trailers, reefer trucks, flat trucks for dry transport and trailers for bulk transport) for carrying all types of general and industrial cargo. The company provides services such as handling, warehousing, and delivery of goods and materials within the Kingdom by road, air or sea. Mubarrad also operates Express Parcel Services across Saudi Arabia. Ìn addition, the company constructs, manages and leases cold stores and trailers. x Financials Mubarrad's revenue stood at SR42mn in 2011, down 7.1% compared to 2010. Net loss for 2011 increased significantly to SR120mn compared to a loss of SR6.7mn in 2010. This was mainly due to recognition of losses amounting to SR104.5mn from investment securities available for sale. x Recent developments On February 18, 2012, Mubarrad announced the receipt of 27 new trucks; the impact of this would reflect in the business operations in 2Q12. TRANSPORT ~ MAY 2012 MUBARRAD ALSO KNOWN AS: NOT COVERED Current price(SR) 52.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (S) 62/12 Market cap ($ mn) 250 Shares outstanding (mn) 18 Price perform (%) 1M 3M 12M Absolute 4.0 15.6 234.4 Market (6.2) 6.2 7.6 Sector (3.1) 22.8 41.6 Avg daily turnover (mn) SR US$ 3M 44.0 11.7 12M 33.5 8.9 Reuters code 4110.SE Bloomberg code SLTCO AB www.mubarrad.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.16 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) 180.2 NM NM P/B (x) 5.6 5.8 6.5 P/S (x) 18.0 20.7 22.3 Div Yield (%) - - - DPS - - - Source: Bloomberg SHARE PRICE PERFORMANCE 5 20 35 50 65 80 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Mubarrad (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 49 52 45 42 (7.1) (4.8) EBÌTDA SRmn 16 17 14 4 (72.3) (37.4) Net Ìncome SRmn 11 5 (7) (120) NM NM Assets SRmn 225 217 197 177 (10.5) (7.8) Equity SRmn 166 169 162 145 (10.2) (4.5) Total Debt SRmn 32 19 6 0 NM NM Cash & Equiv SRmn 6 12 20 4 (77.8) (11.6) EBÌTDA Mgn % 31.8 32.0 30.3 0.1 - - Net Mgn % 22.9 10.0 (14.8) (2.9) - - ROE % 6.3 3.1 (4.1) (78.3) - - ROA % 5.0 2.3 (3.2) (64.2) - - Div Payout % 0.0 0.0 0.0 0.0 - - EPS SR 0.62 0.29 (0.37) (6.67) NM NM BVPS SR 9.24 9.36 8.97 8.06 (10.2) (4.5) Source: Tadawul, Zawya, Company, NCBC Research 217 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Media & Publishing Ticker Company Page No. 4210 SRMG 221 4070 Tihama 222 4270 SPPC 223 The media and publishing sector displayed poor performance in 2011, after recording a strong recovery in 2010. Advertising and educational publishing businesses were resilient, while the traditional print business continued to decline as the industry witnessed a structural shift toward digital media. An improvement in the economy is likely to drive growth, with newer mediums, such as Ìnternet and mobile, gaining additional attention. KSA dominates the media and publishing sector in GCC÷revenue in KSA accounted for 84% of the total GCC revenue in 2011. Ìn the Kingdom, the sector's revenues were flat in 2011, after rising 12.1% YoY in 2010. The sector traded at an adjusted P/E multiple of 36.6x, which is the highest among GCC peers. Exhibit 130: Revenue of GCC print/media, 2009-11 Exhibit 131: Comparison of ROE & P/E of GCC companies, 2011 USD mn % Source: Zawya Source: Zawya The media and publishing sector in Saudi Arabia comprises three listed companies, which collectively account for just 0.46% of the TASÌ. Among these, SRMG has the highest weight of 0.19% in the index. Exhibit 132: Sector details Units as stated Country % weight in Index as of 28 Mar2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Research And Marketing Group (SRMG) 0.19 8.8 7.4 Tihama Advertising & Public Relations Co. (Tihama) 0.14 5.9 3.3 Saudi Printing & Packaging Co. (SPPC) 0.13 8.3 4.4 Source: Zawya Revenue from KSA's media and publishing sector increased a marginal 0.2% YoY to SR1.6bn in 2011. SRMG's revenue rose 3.5% to SR1.1bn led by higher demand for advertising and educational publication. The company, being the largest player, led revenue growth in the industry. SRMG's net income grew 17.6% to SR94.8mn led by lower input costs and gains from a stake sale in Ìntigral, a media firm. Since 2009, the company's net income has been rising steadily, even as other players have reported flat or declining margins. Other players, SPCC and Tihama, reported a decline in 2011 revenue (0.4% and 0 100 200 300 400 500 2009 2010 2011 KSA Kuwait Bahrain (30) (20) (10) 0 10 20 30 0 25 50 75 100 R O E ( % ) P/E (x) KSA Kuwait Bahrain MAY 2012 MEDÌA & PUBLÌSHÌNG Shift toward digital media to drive growth 219 MEDÌA & PUBLÌSHÌNG NCB CAPÌTAL MAY 2012 19.3%, respectively). The average net income margin in the sector stood at 7.7%, while SRMG led with 8.8%. This is mainly attributed to the company's success in containing operating costs. Exhibit 133: Revenue of companies, 2009-11 Exhibit 134: Profitability of SRMG relative to sector average SR mn % Source: Tadawul Source: Tadawul Ìn 2011, the sector's adjusted P/E and average P/BV stood at 36.6x and 2.9x compared to 39.0x and 2.8x, respectively, in 2010. The sector's average ROE contracted to 5.1% in 2011 from 7.8% in 2010, mainly as Tihama's ROE declined to 3.3% from 12.6% in 2010. Exhibit 135: Comparison of P/B and ROE, 2010 Exhibit 136: Comparison of P/B and ROE, 2011 % % Source: Tadawul, Bloomberg Source: Tadawul, Bloomberg 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2009 2010 2011 SRMG SPPC Tihama -1 1 3 5 7 9 11 13 15 2009 2010 2011 Sector average SRMG SRMG SPPC Tihama 0 2 4 6 8 10 12 14 16 0.0 1.0 2.0 3.0 4.0 5.0 6.0 R O E ( % ) P/B (x) SRMG SPPC Tihama 0 1 2 3 4 5 6 7 8 9 10 0.0 1.0 2.0 3.0 4.0 5.0 6.0 R O E ( % ) P/B (x) 220 Riyadh-based Saudi Research and Marketing Group (SRMG), established in 1988, is a leading publishing group. Its subsidiaries include Saudi Research and Publishing Company, Saudi Distribution Company, Saudi Specialized Publishing Company (SSPC), and Al Khaleejiah Advertising and Public Relations Company. x Business brief SRMG is engaged in four key activities ÷ publishing (undertakes research and marketing), advertising (mainly deals with production and marketing of audiovisual media), printing (prints newspapers, magazines, books and journals in various languages) and distribution. x Financials SRMG's revenues grew 1.1% to SR1,080mn in 2011 due to higher revenue from advertising (up 5.6% YoY) and education (up 39.1% YoY). EBÌTDA margin expanded to 15.1% compared to 13.8% last year. Net income increased to SR100mn in 2011 compared to SR87mn the year before. This was primarily owing to capital gains from the sale of the group's share in Ìntigral investment, which amounted to SR13.5mn. x Recent developments Ìn December 2011, SRMG announced that it would sell its full stake (20%) in Ìntigral investment to Saudi Telecom Company for a total value of SR90mn. MEDÌA ~ MAY 2012 SAUDÌ RESEARCH AND MARKETÌNG GROUP ALSO KNOW AS: SRMG NOT COVERED Current price (SR) 26.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 30/16 Market cap ($ mn) 555 Shares outstanding (mn) 80 Price perform (%) 1M 3M 12M Absolute 10.4 21.2 38.7 Market (6.2) 6.2 7.6 Sector 3.9 24.0 78.9 Avg daily turnover (mn) SR US$ 3M 11.3 3.0 12M 5.3 1.4 Reuters code 4210.SE Bloomberg code RESEARCH AB www.srmg.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.21 Free float 60.45 VALUATION MULTIPLES 09A 10A 11A P/E (x) 45.9 23.9 20.8 P/B (x) 1.6 1.6 1.6 P/S (x) 2.1 1.9 1.9 Div Yield (%) 1.9 3.8 3.8 DPS 0.5 1.0 1.0 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SRMG (RHS) Source: Reuters TOP 5 SHAREHOLDERS (%) Kingdom Holding Company 29.9 HH Prince Faisal Bin Ahmad Bin Salman Al Saud 6.8 Mohammed Hussain Ali Al Amudy 5.6 GOSÌ 5.2 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 1,342 969 1,068 1,080 1.1 (7.0) EBÌTDA SRmn 306 109 147 163 10.9 (18.9) Net Ìncome SRmn 224 45 87 100 14.8 (23.6) Assets SRmn 2,259 2,153 2,131 2,221 4.2 (0.6) Equity SRmn 1,376 1,264 1,304 1,284 (1.5) (2.3) Total Debt SRmn 221 286 211 354 68.1 17.0 Cash & Equiv SRmn 141 66 61 93 53.2 (12.9) EBÌTDA Mgn % 22.8 11.3 13.8 15.1 - - Net Mgn % 16.7 4.7 8.2 9.3 - - ROE % 16.2 3.4 6.8 7.7 - - ROA % 10.1 2.1 4.1 4.6 - - Div Payout % 71.3 88.2 91.8 80.0 - - EPS SR 2.81 0.57 1.09 1.25 14.8 (23.6) BVPS SR 17.20 15.79 16.30 16.05 (1.5) (2.3) Source: Tadawul, Zawya, Company, NCBC Research 221 Tihama Advertising & Public Relations Co., established in 1983, operates the Egyptian Satellite Channel, Al-Hayat newspaper and Kolness magazine. The company operates through its subsidiaries - Tihama Distribution Company, United Journalists, Star Media Co., Saudi Signs Supply Co., Intermarkets Riyadh, and Ad Art Medyan. x Business brief Tihama has three business segments: Media (comprises newspapers, magazines, outdoor advertising and a satellite television channel), Public Relations (includes press files and promotional information services) and Other Services (video production and distribution of Arabic and American films in the Middle East). The company also runs a network of bookstores. Tihama operates in Cairo, Dubai, London and Paris. x Financials Tihama's revenue fell 20.8% YoY in 9M12 to SR122mn. Net income for the same period declined 80% YoY to SR4mn mainly due to increase in rent expenses of the Cause Way compared to last year and drop in profitability of an associate company. x Recent developments On March 05, 2012, Tihama announced liquidating its subsidiary (Saudi Signs Supply Co.) due to losses, which exceed the shareholders' rights. On February 11, 2012, the company announced the sale of a 2,100-square meter parcel of land in Bawadi District, Jeddah for a total value of SR7.35mn, and at a profit of SR5.81mn. On December 7, 2011, Tihama signed a 5-year, SR102mn agreement with New Look Publicity & Advertising Agency to rent all the advertising sites on 120 Sky Ball websites. MEDÌA ~ MAY 2012 TÌHAMA ADVERTÌSÌNG ALSO KNOWN AS: TÌHAMA NOT COVERED Current price (SR) 82.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 92/35 Market cap ($ mn) 328 Shares outstanding (mn) 15 Price perform (%) 1M 3M 12M Absolute 1.5 42.6 126.5 Market (6.2) 6.2 7.6 Sector 3.9 24.0 78.9 Avg daily turnover (mn) SR US$ 3M 50.4 13.4 12M 37.4 10.0 Reuters code 4070.SE Bloomberg code TAPRCO AB www.tihama.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.16 Free float 80.65 VALUATION MULTIPLES 10A 11A TTM P/E (x) 175.7 52.0 111.8 P/B (x) 5.4 4.9 5.4 P/S (x) 10.4 11.1 7.6 Div Yield (%) - 1.8 - DPS - 1.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 20 40 60 80 100 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Tihama (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Bader Fahad Ìbrahim Al Dawood 19.3 Source: Tadawul, NCBC Research Company financials FY09 FY10 FY11 9M12 YoY (%) CAGR (%) (09-11) Revenues SRmn 142 118 111 122 (20.8) (11.5) EBÌTDA SRmn 21 3 6 (1) (110.0) (46.3) Net Ìncome SRmn 30 7 24 4 (80.0) (11.3) Assets SRmn 339 324 314 352 (8.3) (3.8) Equity SRmn 239 227 249 226 (9.6) 2.1 Total Debt SRmn - - - 12 - Cash & Equiv SRmn 84 44 20 13 67.5 (50.7) EBÌTDA Mgn % 14.7 2.5 5.4 (0.6) - - Net Mgn % 21.2 5.9 21.3 3.3 - - ROE % 13.0 3.0 9.9 1.7 - - ROA % 8.9 2.1 7.4 1.1 - - Div Payout % 59.8 - 95.0 - - - EPS SR 2.01 0.47 1.58 0.27 (80.0) (11.3) BVPS SR 15.93 15.13 16.60 15.07 (9.6) 2.1 Source: Tadawul, Zawya, Company, NCBC Research, Year-ending March 31 222 Saudi Printing and Packaging Company (SPPC), formerly Madina Printing and Publishing Company, was established in 1963. SPPC undertakes various commercial and package printing as well as production activities. The company has five printing houses, and a production area spread across 1.0mn sq meters. x Business brief SPPC offers integrated print production solutions right from pre-press designing and printing to post-printing binding and packaging. The company has a capacity of 5,000 magazine copies/hour, 150,000 newspaper copies/hour, book printing capacity of 6,500 copies/hour and 10,000 sheets/hour. SPPC also has exclusive printing rights for its parent company and Saudi Research and Publishing Company. Ìts publications include Sayidaty, Arrajol, Al Eqtisadiah, Almajalla and Arab News. x Financials SPPC's revenue declined 0.4% YoY to SR401mn in 2011. However, EBÌTDA for the same period grew 9.0% YoY to SR62mn. Net income increased 2.9% YoY to SR36mn in 2011 compared to SR35mn in 2010. This was mainly ascribed to the initiatives taken by the management to reduce expenses and increase profitability. x Recent developments Ìn March 2012, SPPC announced that it has signed a Memorandum of Understanding to acquire a majority interest in Emirates National Factory for Plastic Ìndustries LLC. The company further indicated that it intends to finance this deal through internal accruals and external Ìslamic financing resources. MEDÌA ~ MAY 2012 SAUDÌ PRÌNTÌNG AND PACKAGÌNG COMPANY ALSO KNOWN AS: SPPC NOT COVERED Current price (SR) 29.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 35/11 Market cap ($ mn) 464 Shares outstanding (mn) 60 Price perform (%) 1M 3M 12M Absolute (2.0) 10.7 120.5 Market (6.2) 6.2 7.6 Sector 3.9 24.0 78.9 Avg daily turnover (mn) SR US$ 3M 16.8 4.5 12M 15.4 4.1 Reuters code 4270.SE Bloomberg code SPPC AB www.sppc.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.14 Free float 47.50 VALUATION MULTIPLES 09A 10A 11A P/E (x) 26.8 49.7 48.3 P/B (x) 2.3 2.3 2.3 P/S (x) 4.9 4.3 4.3 Div Yield (%) - 1.7 1.7 DPS - 0.5 0.5 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 8 13 18 23 28 33 38 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ SPPC (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Saudi Research and Marketing Grp 42.0 Ìntellectual Holding Company for Advertising and Publicity 10.5 Saudi Research and Publishing Co 7.0 Scientific Works Holding Company 7.0 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 465 357 402 401 (0.4) (4.8) EBÌTDA SRmn 126 57 62 68 9.0 (18.5) Net Ìncome SRmn 151 65 35 36 2.9 (37.9) Assets SRmn 1,068 1,021 970 1,056 8.9 (0.4) Equity SRmn 792 765 750 755 0.7 (1.6) Total Debt SRmn 198 181 116 219 89.5 3.4 Cash & Equiv SRmn 16 19 13 27 105.3 17.9 EBÌTDA Mgn % 27.0 16.0 15.5 17.0 - - Net Mgn % 32.4 18.2 8.7 9.0 - - ROE % 20.2 8.4 4.6 4.8 - - ROA % 15.6 6.2 3.5 3.6 - - Div Payout % 59.8 - 85.7 83.3 - - EPS SR 2.51 1.08 0.58 0.60 2.9 (37.9) BVPS SR 13.20 12.75 12.50 12.58 0.7 (1.6) Source: Tadawul, Zawya, Company, NCBC Research 223 SAUDI FACTBOOK - 2012 NCB CAPITAL MAY 2012 Hotel & Tourism Ticker Company Page No. 4010 SHARCO 227 4170 Shams 228 After a sharp fall in 2010, revenues from the hotels & tourism sector grew strongly in 2011. Average occupancy rose to 59.3% during Jan-Aug 2011. Average revenue per available room also increased 19.1% YoY, driven by domestic and international tourist arrivals. Ìn the coming years, Saudi Arabia is expected to witness the addition of considerable hotel room capacity, especially in religious tourism destinations such as Makkah and Medina, which will likely aid the sector's growth. The hotels & tourism sector's average ROE stood at 6.7%, slightly below the GCC average of 7.1%. However, stocks were trading at a higher P/B multiple of 3.6x compared to the GCC average 1.9x. Exhibit 137: Revenues of hotel and tourism companies in GCC, 2009-11 Exhibit 138: Comparison of ROE & P/B of GCC companies, 2011 USD mn % Source: Zawya Source: Zawya The hotels & tourism sector comprises Saudi Hotels & Resort Areas Co (SHARCO) and Tourism Enterprises Co. (TECO); both companies account for 0.3% of the TASÌ. Exhibit 139: Sector details Units as stated Country % weight in Index as on 25 Mar 2012 NIM (%), 2011 Avg. RoE (%), 2011 Saudi Hotels & Resort Areas Co (SHARCO) 0.24 41.2 9.1 Tourism Enterprises Co. (TECO) 0.06 17.6 4.3 Source: Zawya The sector's revenues grew 33.7% to SR389.6mn in 2011 from SR291.3mn in 2010. The rise was led by SHARCO, which posted a revenue growth of 34.6% YoY in 2011 after a sharp fall in 2010. This increase was driven by higher revenues from all properties as well as gains from the sale of its building in Olya and commencement of Al-Muthar, a compound residence in Riyadh. SHARCO reported a net profit of SR153.4mn, up 25% YoY. TECO's revenues rose 18.3% YoY to SR17.6mn in 2011. The company's net profit doubled over the previous year to SR3.1bn driven by an improvement in operational efficiency. 0 100 200 300 400 500 2009 2010 2011 Kuwait Oman Bahrain UAE KSA KSA Kuwait Bahrain UAE Oman (5) 0 5 10 15 20 25 (1) 0 1 2 3 4 5 R O E ( % ) P/B (x) KSA Kuwait Bahrain UAE Oman MAY 2012 HOTELS & TOURÌSM Capacity additions to drive growth 225 HOTELS & TOURÌSM NCB CAPÌTAL MAY 2012 Exhibit 140: Revenue of companies, 2009-2011 Exhibit 141: Profitability of companies, 2009-2011 SR mn % Source: Zawya Source: Zawya For 2011, SHARCO's ROE and P/B multiple stood at 9.1% and 1.76x, respectively, compared to 7.5% and 1.81x in 2010. TECO's ROE stood at 4.3% (2.2% in 2010). Despite a lower ROE vis-à-vis SHARCO, TECO's P/B multiple stood at 5.3x for 2011. Exhibit 142: Comparison of P/B and ROE, 2010 Exhibit 143: Comparison of P/B and ROE, 2011 % % Source: Zawya Source: Zawya TECO had higher average trading volumes as well as price volatility compared to SHARCO in 2011. Exhibit 144: Avg. daily volumes, Jan11 - Dec11 Exhibit 145: Share price movement, Jan11 - Dec11 SR mn Prices rebased to 100 on 1 st Jan-11 Source: Zawya Source: Zawya 0 200 400 600 800 2009 2010 2011 SHARCO TECO -30 -10 10 30 50 70 2009 2010 2011 SHARCO TECO SHARCO TECO 0 1 2 3 4 5 6 7 8 9 10 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 R O E ( % ) P/B (x) SHARCO TECO 0 2 4 6 8 10 12 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 R O E ( % ) P/B (x) 4 34 0 5 10 15 20 25 30 35 40 SHARCO TECO 50 75 100 125 150 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 SHARCO TECO 226 Riyadh-based Saudi Hotels & Resorts Areas Co. (SHARCO), founded in 1979, owns and operates several resorts and hotels independently and through its subsidiaries Al Khaleej Resorts Co. Ltd., Riyadh Hotels Co. Ltd., Makkah Hotels Co. Ltd., Al Nakheel Touristic Area Co. Ltd., Tabuk Hotels Co. Ltd., and Madina Hotels Co. Ltd. Business brief SHARCO is engaged in travel and tourism activities as well as construction, ownership, investment and management of hotels, real estate, resorts and entertainment centers. The company mainly operates through its subsidiaries: Al Khaleej Resorts Company, and Riyadh Hotels and Entertainment Company. The company reports revenues under four business lines: hospitality, real estate, resorts, and entertainment. x Financials SHARCO's revenues increased 32.4% to SR372mn in 2011 compared to SR281mn in 2010. Net income grew 24.7% to SR153.4mn during the year from SR122.7mn in 2010. The company's performance improved primarily due to the gain which it received from selling a building in Olya. This was in addition to the commencement of operations in Al-Mather compound residence in Riyadh. x Recent developments SHARCO increased its capital by 44.9% to SR1bn (from SR690.1mn) by issuing 31mn new shares. Additionally, the company announced that Mr. Badr Bin Hammoud Al Badr would replace Mr. Abdulaziz Bin Saleh Al Anbar as Chief Executive Officer (CEO), this became effective on January 1, 2012. HOTEL & TOURÌSM ~ MAY 2012 SAUDÌ HOTELS ALSO KNOWN AS: SHARCO NOT COVERED Current price (SR) 27.4 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 31/18 Market cap ($ mn) 730 Shares outstanding (mn) 100 Price perform (%) 1M 3M 12M Absolute (6.5) 9.1 36.5 Market (6.2) 6.2 7.6 Sector (8.7) 6.6 33.9 Avg daily turnover (mn) SR US$ 3M 13.8 3.7 12M 7.8 2.1 Reuters code 4010.SE Bloomberg code SHARCO AB www.saudi-hotels.com.sa WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.22 Free float 51.81 VALUATION MULTIPLES 09A 10A 11A P/E (x) 7.6 22.3 17.9 P/B (x) 1.7 1.6 1.6 P/S (x) 3.7 9.8 7.4 Div Yield (%) 5.5 5.5 4.4 DPS 1.5 1.5 1.2 Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Aug-11 Nov-11 Feb-12 May-12 TASÌ Hotels (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Mohammed Ìbrahim Mohammed Al Essa 26.3 Public Ìnvestment Fund 16.6 General Organization for Social Ìnsurance (GOSÌ) 6.5 Source: Tadawul, NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 294 733 281 372 32.4 8.2 EBÌTDA SRmn 141 398 145 174 19.7 7.2 Net Ìncome SRmn 123 381 123 153 24.7 7.5 Assets SRmn 1,953 1,839 1,885 1,962 4.1 0.2 Equity SRmn 1,348 1,625 1,663 1,707 2.7 8.2 Total Debt SRmn 53 50 45 40 (10.1) (8.7) Cash & Equiv SRmn 26 33 38 48 25.3 22.4 EBÌTDA Mgn % 48.1 54.3 51.7 46.8 - - Net Mgn % 41.9 51.9 43.7 41.1 - - ROE % 11.3 25.6 7.5 9.1 - - ROA % 7.1 20.1 6.6 8.0 - - Div Payout % 97.5 39.4 122.2 78.4 - - EPS SR 1.2 3.8 1.2 1.5 24.7 7.5 BVPS SR 13.5 16.2 16.6 17.1 2.7 8.2 Source: Tadawul, Zawya, Company, NCBC Research 227 Tourism Enterprise Co. (TECO) was established in 1991 to construct and manage tourist projects. Headquartered in Dammam, Saudi Arabia, the company primarily focuses on the ownership and management of the Palm Beach Resort. TECO offers sports and recreational activities, conference facilities, cabanas and suites. x Business brief Palm Beach Resort, which stretches up to 1,300 meters, includes 165 chalets, and more than 100 suites and cabanas overlooking the Arabian Gulf. Sports. The recreational facilities include a sports club with a swimming pool for ladies; sports and fitness center for men; football, tennis, basketball and squash courts; sauna and steam bath facility; and catering services such as coffee shops. The Resort offers event facilities such as conference rooms for up to 120 guests in addition to business lunches and cocktails. x Financials TECO's revenues grew 18.2% YoY to SR17.6mn in 2011. This could be attributed to the better than expected occupancy rates as well as higher rental income during the year. The company posted a net profit of SR3.3mn in 2011 compared to SR1.9mn in 2010. TECO's net margin stood at 18.8% versus 12.7% in 2010. x Recent developments Ìn December 2011, TECO announced the acquisition of a new building in Al- Khobar area for a consideration of SR15mn. HOTEL & TOURÌSM ~ MAY 2012 TOURÌSM ENTERPRÌSE CO. ALSO KNOWN AS: SHAMS NOT COVERED Current price (SR) 33.0 Pricing as of 09-05-2012 STOCK DETAILS 52-week range H/L (SR) 46/18 Market cap ($ mn) 89 Shares outstanding (mn) 10 Price perform (%) 1M 3M 12M Absolute (16.5) (2.1) 24.5 Market (6.2) 6.2 7.6 Sector (8.7) 6.6 33.91 Avg daily turnover (mn) SR US$ 3M 61.9 16.5 12M 44.7 11.9 Reuters code 4170.SE Bloomberg code TECO AB www.palmbeach-resort.com WEIGHTING & FREEFLOAT (%) TASÌ (free float weight) 0.06 Free float 100.0 VALUATION MULTIPLES 09A 10A 11A P/E (x) NM 209.3 101.5 P/B (x) 4.8 4.7 4.5 P/S (x) 24.2 22.5 19.0 Div Yield (%) - - - DPS - - - Source: NCBC Research estimates SHARE PRICE PERFORMANCE 15 20 25 30 35 40 45 5,500 6,000 6,500 7,000 7,500 8,000 May-11 Sep-11 Jan-12 May-12 TASÌ Shams (RHS) Source: Bloomberg TOP 5 SHAREHOLDERS (%) Source: Tadawul, NCBC Research Source: Tadawul NCBC Research Company financials 2008 2009 2010 2011 YoY (%) CAGR (%) (08-11) Revenues SRmn 14.7 13.9 14.9 17.6 18.2 6.2 EBÌTDA SRmn 4.3 0.9 6.2 8.0 29.7 22.8 Net Ìncome SRmn 0.2 (3.4) 1.6 3.3 106.3 164.7 Assets SRmn 78.5 74.0 75.3 82.6 9.6 1.7 Equity SRmn 72.6 69.2 71.0 74.2 4.5 0.7 Total Debt SRmn - - - - - - Cash & Equiv SRmn 3.6 4.6 19.2 13.8 (28.1) 57.2 EBÌTDA Mgn % 29.4 6.3 41.5 45.5 - - Net Mgn % 1.2 (24.5) 10.7 18.8 - - ROE % 0.2 (4.8) 2.3 4.5 - - ROA % 0.2 (4.5) 2.1 4.2 - - Div Payout % - - - - - - EPS SR 0.0 (0.3) 0.2 0.3 106.3 164.7 BVPS SR 7.2 6.8 7.0 7.3 2.5 0.7 Source: Tadawul, Zawya, Company, NCBC Research 228 SAUDÌ FACTBOOK - 2012 NCB CAPÌTAL MAY 2012 Appendix Saudi equities fact sheet ÷ performance and valuation Exhibit 146: Performance and valuation Exchg Close T/O Mkt cap FF Price change TTM (%) Valuation (x) Div yld code Company name (SR) (SR mn) (SR mn) Wt (%) % last %YTD ROE ROA P/E-TTM PBV# 11 (%) Banking/Financial 1120 Al Rajhi 74.3 72.7 111,375 10.0 (1.3) 6.8 23.4 3.6 15.1 3.4 4.4 1090 SAMBA 48.2 9.5 43,380 3.7 (1.4) 3.4 16.1 2.3 10.1 1.5 3.4 1050 Saudi Fransi 36.8 1.9 33,268 3.1 (0.5) 9.3 15.5 2.2 11.4 1.7 1.5 1010 RÌBL 24.2 8.2 36,225 2.9 (0.2) 3.6 10.6 1.8 11.5 1.2 5.4 1150 Al Ìnma Bank 13.0 487.7 19,500 2.3 (4.1) 39.0 2.7 1.4 45.2 1.2 - 1080 Arab National 29.6 2.1 25,160 2.1 - 7.6 13.6 1.9 11.6 1.5 3.4 1060 SABB 35.0 5.5 35,000 2.0 - 14.6 17.9 2.2 12.1 2.0 1.4 1140 Al Bilad 27.2 19.8 8,160 1.1 (0.4) 37.0 10.0 1.3 25.0 2.4 - 1020 BJAZ 25.5 11.7 7,650 0.9 (0.4) 50.4 5.6 0.7 29.5 1.6 2.0 1030 Saudi Ìnvestment 17.0 2.9 9,350 0.9 (2.9) 5.3 8.5 1.4 13.2 1.1 - 1040 Saudi Hollandi 27.6 0.2 10,954 0.5 (1.4) 11.5 14.7 1.8 10.8 1.5 3.0 Petrochemicals 2010 SABÌC 96.5 359.1 289,500 10.7 (1.8) 0.3 22.6 9.0 9.9 2.1 5.2 2060 Ìndustrialization 33.1 34.9 22,141 3.3 (1.5) (1.2) 24.1 6.5 9.1 2.0 3.8 2020 SAFCO 179.8 23.5 44,938 2.7 (1.4) 2.1 53.6 46.4 10.9 5.5 7.2 2350 Saudi Kayan 16.5 88.5 24,750 2.5 (1.8) (5.2) (1.6) (0.6) nm 1.6 - 2290 YANSAB 48.7 43.1 27,394 1.8 (0.8) 10.7 35.6 13.8 8.6 2.6 - 2250 SÌÌG 23.3 17.3 10,485 1.6 (2.3) 22.6 9.1 2.1 19.8 1.8 4.3 2310 Sipchem 20.0 28.7 7,315 1.1 (1.5) 1.3 13.4 5.3 10.4 1.3 6.3 2260 Sahara Petrochemical 15.4 15.1 6,757 1.0 (1.9) (0.6) 9.7 5.5 16.4 1.3 - 2330 APPC 26.0 34.1 4,264 0.7 (2.6) 5.4 26.7 15.2 8.3 2.1 6.6 2380 Petro Rabigh 21.1 20.9 18,484 0.5 (2.1) (9.2) 0.8 0.1 - 2.3 - 2210 Nama Chemicals 19.6 247.5 2,513 0.4 (2.3) 96.5 (4.8) (3.0) nm 1.6 - 2002 Petrochem 24.0 4.3 11,496 0.3 (2.2) 16.8 (1.4) (0.3) nm 2.5 - 2001 Chemanol 16.7 51.6 2,014 0.3 (2.1) 38.0 4.8 2.3 28.7 1.4 - 2170 Alujain 18.1 25.7 1,249 0.2 (3.0) 3.4 (1.8) (0.3) nm 2.2 - Cement 3030 Saudi Cement 87.0 14.1 13,311 1.9 (1.1) 20.8 25.0 18.1 16.0 4.1 7.5 3020 Yamamah Cement 47.5 17.1 9,619 1.4 (1.2) 1.8 22.6 19.8 13.0 2.8 5.6 3060 Yanbu Cement 77.5 5.4 8,138 1.1 (2.2) 13.1 19.7 12.2 15.4 2.9 3.2 3050 Southern Cement 98.5 1.4 13,790 1.0 1.5 14.5 34.9 30.8 15.4 5.2 6.3 3010 Arab Cement 56.0 9.8 4,480 0.7 (0.4) 24.7 15.8 9.5 10.9 1.6 5.4 3040 Qassim Cement 76.5 4.5 6,885 0.6 (1.6) 5.2 29.0 26.7 12.5 3.5 7.5 3080 Eastern Cement 52.3 4.3 4,494 0.5 (2.3) (5.9) 17.0 15.5 12.3 2.1 6.7 3091 Al Jouf Cement 17.8 40.3 2,308 0.4 (3.0) 17.5 6.0 4.5 29.4 1.7 - 3090 Tabuk Cement 24.7 1.1 2,223 0.4 (0.8) 9.5 12.5 10.8 16.2 2.0 5.7 3002 Najran Cement 21.5 1,045.7 2,621 0.2 (4.9) 115.0 18.6 12.2 11.2 2.1 - 3001 Hail Cement 20.1 34.7 1,968 0.2 (3.4) 31.4 (4.3) (4.0) nm 2.1 - Retail 4190 Jarir 150.5 21.2 9,030 1.5 (1.0) 8.1 60.2 32.5 17.6 10.0 4.7 4240 AlHokair 80.3 3.7 5,618 0.5 (3.3) 24.4 31.1 17.5 13.5 3.9 2.5 4002 Mouwasat 49.6 50.2 2,480 0.2 0.8 5.2 23.8 15.8 16.8 3.7 3.0 4001 Al Othaim 84.5 0.5 1,901 0.2 (1.7) (15.5) 30.6 9.5 12.7 3.6 - 4200 Aldrees 33.3 16.2 999 0.2 (1.2) (9.2) 22.0 11.4 11.0 2.3 5.0 4050 SASCO 18.9 29.7 848 0.1 (5.7) 18.2 7.3 6.0 22.5 1.6 2.7 4180 Fitaihi Group 16.8 45.1 921 0.1 1.2 37.0 (6.3) (5.9) nm 1.5 - 4003 United Electronics 86.8 7.6 2,082 0.1 1.8 12.3 38.4 17.4 17.5 5.5 2.9 4290 Alkhaleej Trng 35.6 4.6 890 0.0 (0.6) (2.2) 18.9 10.6 16.4 2.9 1.1 4160 Thim'ar 28.5 19.9 285 0.0 1.1 14.9 17.3 9.8 46.3 7.4 43.9 Energy & Utilities 5110 Saudi Electricity 13.2 41.0 54,791 1.6 - (5.4) 4.3 1.1 24.7 1.1 5.3 2080 GASCO 22.0 3.0 1,650 0.2 - 14.6 11.3 8.2 13.5 1.5 4.5 Agriculture/food 2050 Savola Group 34.9 14.8 17,450 2.2 - 21.6 16.3 6.3 14.5 2.3 3.7 2280 Almarai 68.0 47.7 27,200 1.9 (2.2) 19.5 20.2 9.2 20.9 4.0 1.9 6020 Qassim Agriculture 24.2 26.8 1,210 0.2 (3.0) 8.5 (4.5) (3.2) nm 3.3 - Source: Tadawul, NCBC Research Note: YTD ÷ indicates change in price from close at end of 2011 or the issue price during the ÌPO if listed in this year; # - based on latest available book value 229 SAUDÌ FACTBOOK - 2012 NCB CAPÌTAL MAY 2012 Exhibit 146: Performance and valuation Exchg Close T/O Mkt cap FF Price change TTM (%) Valuation (x) Div yld code Company name (SR) (SR mn) (SR mn) Wt (%) % last %YTD ROE ROA P/E-TTM PBV# 10 (%) 6010 NADEC 28.9 4.2 1,734 0.2 (2.0) (3.0) 9.0 3.9 19.0 1.6 2.6 2270 SADAFCO 55.8 6.7 1,812 0.2 (2.2) 20.7 19.9 13.9 12.6 2.4 - 6090 Jazan Development 18.7 27.3 935 0.2 (3.1) (41.0) (12.1) (10.3) nm 1.8 - 6070 Jouff Agriculture 35.8 6.5 895 0.1 (2.7) (2.5) 14.7 12.9 10.5 1.5 5.6 6002 Herfy Foods 86.0 1.4 2,580 0.1 (2.5) 0.6 35.8 27.0 17.6 5.9 3.5 4061 Anaam Holding 67.0 53.8 730 0.1 (5.3) (2.9) 9.3 5.0 60.7 5.4 - 6050 Saudi Fisheries 30.9 18.3 1,654 0.1 (3.4) (12.0) (8.4) (6.1) nm 4.0 - 6001 Halwani Bros 40.5 1.9 1,157 0.1 (1.5) (26.0) 15.4 12.0 14.4 2.2 4.9 2100 Food Products Co. 28.4 15.1 568 0.1 (0.7) 0.7 5.3 4.9 53.9 2.8 - 6040 Tabuk Agriculture 28.1 6.5 562 0.1 (3.1) (14.8) 8.8 7.6 17.0 1.5 1.8 6060 Sharqiya Dev Co. 49.1 35.2 368 0.1 (4.7) (39.9) (12.2) (9.0) nm 5.2 - Telecom/IT 7020 Etihad Etisalat 65.3 43.0 45,675 4.5 (2.2) 24.3 29.9 14.3 9.0 2.5 5.0 7010 STC 40.3 26.7 80,600 2.2 (1.5) 19.2 16.7 6.9 10.5 1.7 5.0 7030 Zain KSA 8.5 318.3 11,900 1.0 (4.0) 53.2 (36.9) (7.0) nm 2.8 - 7050 SÌTC 27.2 - 2,720 0.2 - 71.6 - - - - - 7040 Atheeb Telecom 16.7 210.9 668 0.0 (5.4) 115.5 (85.2) (5.0) nm 9.9 - Insurance 8010 Tawuniya 49.4 3.3 3,705 0.3 (0.8) (4.5) 23.0 5.9 8.4 1.8 7.1 8030 MEDGULF 29.2 17.9 2,336 0.1 (4.3) 4.3 21.4 6.1 9.7 2.0 6.8 8020 Malath Ìnsurance 21.0 42.8 630 0.1 (7.9) 24.3 5.2 1.4 44.7 2.2 - 8040 ALLÌANZ SF 86.5 65.0 1,730 0.1 5.5 215.7 0.9 0.1 - 10.9 - 8200 Saudi Re 13.3 77.3 1,330 0.1 (5.0) 37.8 (3.6) (2.8) nm 1.4 - 8311 Enaya Co-op Ìns 34.1 31.3 1,364 0.1 (4.7) 241.0 - - - - - 8290 Solidarity 21.8 36.4 1,210 0.1 (3.8) (4.6) - - nm 2.6 - 8080 SABB Takaful 32.0 32.6 1,088 0.1 (4.8) 4.2 3.1 1.0 - 3.3 - 8130 ATC 58.8 10.6 979 0.1 (2.1) (1.7) (4.8) (1.2) nm 7.2 - 8310 AMANA Ìnsurance 29.7 16.8 950 0.1 (3.6) (13.2) - - nm 3.7 - 8240 ACE Arabia 94.0 4.7 940 0.1 - 69.4 (3.4) (3.1) nm 11.4 - 8210 BUPA Arabia 22.0 8.2 880 0.1 (4.1) (1.6) 8.3 2.5 20.8 1.7 - 8220 Weqaya Takaful 38.4 54.1 768 0.1 (4.5) 20.0 (30.6) (19.4) nm 6.6 - 8230 ARCCÌ 50.8 13.0 1,015 0.1 (4.7) (3.8) (26.0) (5.2) nm 9.3 - 8160 AÌCC 26.9 16.8 538 0.1 (2.2) 19.8 10.9 2.5 31.1 3.1 - 8090 SANAD 21.9 14.6 438 0.0 (3.5) 0.2 (23.1) (7.5) nm 4.1 - 8060 Walaa Ìnsurance 21.0 16.0 419 0.0 (2.6) 15.4 3.0 1.1 91.5 2.7 - 8140 Al-Ahlia 36.9 17.1 369 0.0 (6.1) 6.0 (13.2) (1.7) nm 11.3 - 8260 Gulf General 35.2 19.3 704 0.0 (2.2) (13.9) (44.5) (15.2) nm 5.3 - 8100 SAÌCO 41.2 23.5 412 0.0 (6.4) 2.7 (11.4) (1.3) nm 6.4 - 8170 Trade Union 23.1 14.4 576 0.0 (4.0) 11.9 8.6 2.7 23.5 2.0 - 8190 U C A 34.4 11.3 688 0.0 (3.6) 12.8 16.6 4.0 13.6 2.2 - 8120 Gulf Union 19.3 10.7 424 0.0 (6.1) 12.6 (34.8) (8.5) nm 2.8 - 8180 Sagr Ìnsurance 24.3 14.3 486 0.0 (3.2) 1.7 13.4 5.8 15.2 1.9 - 8250 AXA-Cooperative 32.4 12.4 648 0.0 (1.2) (11.2) (12.1) (4.0) nm 3.8 - 8270 Buruj Ìnsurance 49.3 35.1 641 0.0 (4.3) (16.4) (20.1) (11.5) nm 7.8 - 8070 Arabian Shield 29.5 28.5 590 0.0 (9.8) 42.5 5.0 2.3 52.8 2.6 - 8280 Al Alamiya 42.0 20.5 840 0.0 (5.6) (0.7) (0.0) (0.0) nm 5.0 - 8300 Wataniya Ìnsurance 82.5 19.4 825 0.0 (2.9) 9.3 12.8 4.1 81.2 9.9 - 8150 ACÌG 40.5 - 405 0.0 - 1.8 (5.9) (1.2) nm 14.8 - 8050 Saudi Salama 38.5 13.7 385 0.0 (5.2) 6.1 2.6 0.8 - 4.5 - 8110 Saudi Ìndian 38.6 28.3 386 0.0 (3.0) 0.5 (7.7) (2.0) nm 7.9 - Multi Investment 4280 Kingdom Holding 11.5 6.5 42,618 0.4 (2.5) 29.9 2.4 1.6 66.6 1.7 4.3 4080 Assir 18.6 38.7 2,351 0.2 (1.6) 19.2 4.3 2.9 23.8 1.0 4.0 2190 SÌSCO 16.5 84.3 1,122 0.2 (3.5) 24.5 1.5 0.4 - 1.5 - 2030 SARCO 61.3 13.5 919 0.2 (5.0) (22.7) 2.8 2.7 87.3 2.6 0.8 2140 Al Ahsa for Dev. 16.1 40.8 786 0.1 (3.9) 23.0 0.2 0.2 - 1.7 - 2120 Saudi Advanced 20.9 68.4 903 0.1 (8.5) 37.0 1.2 1.1 92.2 1.1 - 4130 Al Baha 20.3 53.4 304 0.1 1.3 15.7 (10.0) (8.0) nm 3.6 - Industrial Inv 1211 MA'ADEN 30.6 19.5 28,305 1.6 (1.3) 20.9 2.5 1.1 68.5 1.7 - 2230 Saudi Chemical 40.0 29.2 2,530 0.4 (2.4) 1.8 19.7 11.5 9.5 1.9 5.0 2070 SPÌMACO 43.1 2.3 3,381 0.4 (1.8) 6.9 6.9 5.9 16.0 1.1 4.6 Source: Tadawul, NCBC Research Note: YTD ÷ indicates change in price from close at end of 2011 or the issue price during the ÌPO if listed in this year; # - based on latest available book value 230 SAUDÌ FACTBOOK - 2012 NCB CAPÌTAL MAY 2012 Exhibit 146: Performance and valuation Exchg Close T/O Mkt cap FF Price change TTM (%) Valuation (x) Div yld code Company name (SR) (SR mn) (SR mn) Wt (%) % last %YTD ROE ROA P/E-TTM PBV# 10 (%) 1214 Shaker Group 68.3 1.6 2,389 0.3 (2.5) 11.4 39.9 17.4 13.3 5.0 5.1 1212 Astra Ìnd 39.5 7.9 2,928 0.2 (3.2) 12.2 14.4 8.6 11.7 1.6 4.4 1213 AlSorayai Group 24.6 8.3 737 0.1 (2.6) 4.0 8.7 3.7 19.1 1.6 - 2150 ZOUJAJ 30.0 9.5 900 0.1 (3.8) (16.0) 14.8 13.4 11.1 1.6 7.5 2340 AlAbdullatif 26.8 2.3 2,178 0.1 (2.2) 0.8 13.4 9.8 13.9 1.8 5.6 1210 BCÌ 29.0 6.2 798 0.1 (3.3) 4.7 14.4 8.9 13.6 1.9 3.4 2300 SPM 29.9 3.3 1,121 0.1 (1.3) (8.6) 16.8 6.5 10.7 1.7 4.7 4140 Saudi Export 43.3 35.5 468 0.1 (2.0) 12.5 8.6 7.1 48.7 4.0 1.2 1201 Takween Adv Ìnds 49.8 24.4 1,494 0.1 0.8 91.5 20.8 9.9 19.6 3.8 2.7 2220 Maadaniyah 26.5 22.7 677 0.1 (5.0) (23.0) 0.9 0.6 - 1.9 - 2180 FÌPCO 38.0 12.0 437 0.1 (2.8) (24.0) 10.8 8.3 27.2 2.9 2.6 Construction 2040 Saudi Ceramics 90.3 4.8 3,384 0.4 (0.8) (9.1) 21.6 11.1 14.6 3.0 2.6 2160 Amiantit 17.0 27.6 1,958 0.3 (4.0) 5.3 9.1 3.6 13.0 1.2 7.4 2240 Zamil Ìnd 28.6 8.7 1,716 0.2 (0.7) (2.1) 11.7 2.8 11.1 1.3 5.2 2110 Saudi Cables 17.4 82.6 1,322 0.2 (2.5) 24.7 0.5 0.1 - 1.3 - 2320 Al Babtain 25.1 3.0 1,070 0.2 - (0.8) 12.2 5.4 14.5 1.8 6.0 2200 Arabian Pipes 30.3 5.6 954 0.1 (2.9) (18.8) (0.8) (0.4) nm 1.3 - 1310 MMG 14.2 30.4 1,769 0.1 (2.7) (41.8) (92.2) (31.5) nm 3.4 - 2130 SÌDC 18.3 87.1 732 0.1 (5.2) 30.2 - - 29.5 2.1 - 1330 Al-Khodari 37.4 7.9 1,987 0.1 (2.1) (13.0) 25.3 7.6 12.6 3.0 3.2 2360 SVCP 68.3 1.9 1,024 0.1 (2.5) 0.4 34.3 17.5 12.4 4.5 7.3 2370 MESC 19.0 49.2 760 0.1 (6.2) 17.3 (38.5) (8.3) nm 3.1 - 1320 SSP 23.8 3.6 1,211 0.1 (1.0) (18.7) 7.4 6.4 20.1 1.5 6.3 2090 National Gypsum 28.2 2.4 893 0.1 (3.1) 1.1 6.4 5.1 30.3 2.0 4.3 1301 Aslak 39.1 18.3 1,271 0.1 (3.2) (8.4) 30.5 26.9 11.8 3.4 4.5 4230 Red Sea Housing 31.7 11.6 1,268 0.1 (2.2) (3.3) 10.7 6.8 16.4 1.7 3.2 Real Estate 4250 Jabal Omar 19.4 141.1 17,984 1.7 0.3 59.3 (0.5) (0.4) nm 2.0 - 4300 Dar Al Arkan 11.0 810.1 11,826 1.2 (3.9) 51.0 7.4 4.6 10.9 0.8 - 4100 Makkah 38.0 2.9 6,263 0.8 - 8.6 8.4 7.9 20.4 1.8 - 4220 Emaar E .C 11.2 217.5 9,478 0.5 (3.9) 51.7 1.1 0.7 - 1.3 - 4090 Taiba 22.8 5.2 3,413 0.4 (2.8) 18.2 8.1 6.5 14.4 1.1 4.4 4150 Arriyadh Dev 22.5 16.3 2,250 0.3 (2.0) (0.7) 8.8 7.9 17.3 1.5 5.6 4310 KEC Madinah 19.2 88.3 6,515 0.3 (4.7) 74.5 (0.3) (0.3) nm 2.0 - 4020 Al Akaria 27.2 9.0 3,264 0.2 (1.8) 3.8 4.7 4.4 21.8 1.0 3.7 Transport 4030 NSCSA 16.6 32.2 5,213 0.6 (1.2) 36.2 5.7 2.8 18.1 1.0 3.0 4040 SAPTCO 15.0 32.8 1,875 0.3 (3.5) 63.9 4.5 3.5 28.7 1.3 3.3 4110 Mubarrad 50.8 35.9 914 0.2 (1.9) 27.5 (79.9) (65.7) nm 6.3 - 4260 Budget Saudi 40.5 7.9 988 0.1 (2.4) 7.5 20.6 11.0 9.8 1.9 4.6 Media & Publishing 4210 SRMG 25.4 22.2 2,032 0.2 (5.2) 30.6 7.8 4.6 20.3 1.6 3.9 4070 Tihama 81.0 18.9 1,215 0.2 (0.3) 9.5 3.4 2.4 - 5.4 - 4270 SPPC 31.0 26.6 1,860 0.1 1.3 59.0 4.6 3.5 51.7 2.5 1.6 Hotel & Tourism 4010 SHARCO 27.1 2.7 2,710 0.2 (3.2) 20.4 9.1 8.0 17.6 1.6 3.8 4170 Shams 32.1 21 326 0.1 (4.5) 7.4 4.3 3.9 - 4.4 - Source: Tadawul, NCBC Research Note: YTD ÷ indicates change in price from close at end of 2011 or the issue price during the ÌPO if listed in this year; # - based on latest available book value 231 SAUDÌ FACTBOOK - 2012 NCB CAPÌTAL MAY 2012 Kindly send all mailing list requests to [email protected] NCBC Research website Brokerage website Corporate website http://research.ncbc.com www.alahlitadawul.com www.alahlibrokerage.com www.ncbc.com NCBC Investment Ratings OVERWEÌGHT: Target price represents expected returns in excess of 15% in the next 12 months NEUTRAL: Target price represents expected returns between -10% and +15% in the next 12 months UNDERWEÌGHT: Target price represents a fall in share price exceeding 10% in the next 12 months PRÌCE TARGET: Analysts set share price targets for individual companies based on a 12 month horizon. 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