MENA-2 WEDNESDAY MORNING ROUND-UP

 
 
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Egypt  
Egypt signs first FDI contract since revolution  
Heliopolis Housing to offer 16 villas in New Heliopolis City for sale  
Mobinil to compensate customers for network outage  
BLOM Bank Egypt to grow its loan portfolio to EGP 3 billion by end-2011  
CBE grants Housing and Development Bank licence to buy, sell land  
 
Saudi Arabia  
Saudi Cables to distribute SAR0.75/share cash dividend  
Ma’aden releases tender for steam host facility at alumina refinery  
 
Kuwait  
Zain Iraq revenue to grow 17% Y-o-Y in 2011, says CEO
Wataniya Palestine to invest USD300 million over the coming 3-4 years, CEO says  
 
EFG Hermes Research  
Methanol Chemicals Company (Chemanol) - Attractive Methanol Integration, But Overstretched
Valuation; Initiate With Sell - Initiation of Coverage Note 08 June 2011  
EIPICO - 1Q2011 Net Profit Beats Forecast, Lifted Y-o-Y by Strong Operating Margins; Reiterate Buy -
Flash Note 07 June 2011  
 
Agenda  
 
Egypt  
Thu 23 June >> Talaat Moustafa Group (TMG) ex-div date for 50.3 million bonus shares  
 
Saudi Arabia  
Sat 25 June >> Zain Saudi Arabia AGM  
Wed 29 June >> Dar Al Arkan AGM and EGM  
 
Egypt News  
Egypt signs first FDI contract since revolution  
Prime Minister Essam Sharaf witnessed the signing of the first foreign direct investment (FDI) contract in
Egypt following the revolution that began on 25 January 2011. The contract was signed between IEG and
Czech's PEGAZ; the Chairman of PEGAZ and the Minister of Trade and Industry attended the signing. The
contract, considered as the Czech Republic’s first investments in Egypt, aims to establish a factory for
non-woven cloth on an area of 42,000 square metres (sqm) in the industrial zone in 6th October City, and
would create 20,000 jobs. The company will start its initial investments, valued at USD200 million, while
total investment costs over the coming few years are expected to be USD3.5 billion. PEGAZ is considered
the second largest company in Europe in terms of production volume in non-woven cloth (50,000 tonnes
annually). (Egypt Cabinet)  
 
Heliopolis Housing to offer 16 villas in New Heliopolis City for sale  
Heliopolis Housing and Development Company (Heliopolis Housing) [HELI.CA] plans to offer 16 villas in
New Heliopolis City for sale. The villa land areas measure 381-494 square metres (sqm), with a BuA of
c356 sqm. These units will be offered as at 12 June 2011. Full cash payments will receive a 5% discount,
while installment payments will be offered over five years with 40% paid over the first year and the
remaining 60% to be paid in eight installments over the next four years. (Al Ahram)  
 
Heliopolis Housing: EGP19.55, Rating: Buy, FV: EGP38, MCap: USD366 million, HELI EY / HELI.CA  
 
Mobinil to compensate customers for network outage  
Mobinil (EMOB.CA) will compensate its customers for a five-hour network disruption on 1 June 2011,
according to an advertisement in Al Ahram on 7 June 2011. In the advertisement, Mobinil apologised for
the outage and promised to grant customers a day in June without billing based on average daily usage.
Mobinil will also give prepaid subscribers a 50% discount on outgoing calls to Mobinil lines on 8 June 2011.
(Al Ahram Portal)  
 
Mobinil: EGP141.34, Rating: Buy, FV: EGP172.0, MCap USD2,379 million, EMPN EY / EMOB.CA  
 
BLOM Bank Egypt to grow its loan portfolio to EGP 3 billion by end-2011  
BLOM Bank Egypt, a subsidiary of BLOM Lebanon (BLOM.BY), is looking to increase its loan portfolio by
EGP400 million to reach EGP3 billion by end-2011, according to Tarek Metwaly, Head of Treasury. The
bank’s loan portfolio stood at EGP2.6 billion in March 2011 . The bank also plans to grow its syndicated
lending exposure by EGP900 million by the end of the year, down from the bank’s pre-political turmoil
target of EGP1.2 billion. (Al Mal)  
 
BLOM Bank: USD8.89, Rating: Buy, FV: USD12.8, Mcap: USD2,134 million, BLBD LB / BLOM.BY  
 
CBE grants Housing and Development Bank licence to buy, sell land  
The Central Bank of Egypt (CBE) has granted the Housing and Development Bank (HDBK.CA) a licence to
buy and sell land, Al Alam Al Youm reported. The licence also gives the bank the right to develop lands
before selling them, which will allow the bank to develop residential projects. (Al Alam Al Youm)  
 
Saudi Arabia News  
 
Saudi Cables to distribute SAR0.75/share cash dividend  
Saudi Cables Company (SCC) (2110.SE) shareholders have approved the distribution of a SAR0.75/share
cash dividend, recommended by the company’s board of director’s (BoD’s), during the AGM on 7 June
2011. This implies a dividend yield of 4.9% based on the closing price on 7 June 2011. The cash dividend
will be distributed over two equal tranches; the first is due to be paid on June 2011 and the second on
December 2011. The ex-dividend date is today. (Tadawul)  
 
Ma’aden releases tender for steam host facility at alumina refinery  
The Saudi Arabian Mining Company (Ma’aden) [1211.SE] has released a tender for the engineering,
procurement and construction (EPC) contract for its steam host facility, which will be a part of the
alumina refinery. The company has invited four companies to bid on the project, which is expected cost
USD80 million-100 million (SAR300 million-375 million). More tenders related to the alumina refinery are
expected to be released in the coming months, according to a source familiar with the project. (MEED)  
 
Kuwait News  
 
Zain Iraq revenue to grow 17% Y-o-Y in 2011, says CEO
Zain Iraq’s CEO, Emad Makiya, expects the company’s revenue to grow 17% Y-o-Y in 2011 to USD1.75
billion, only 3% above our USD1.70 billion estimate. Zain Iraq will focus more on increasing average
revenue per user (ARPU) - rather than increasing subscribers market share - to reach its projected
revenue for the year, said Makiya. The fine of USD262 million imposed on the operator by the Iraqi
Communication and Media Commission in January 2011 for issuing 5 million SIM cards without prior
approval is likely to be cancelled within a few months, stated Makiya. The company expects to spend
USD500 million this year on network infrastructure. Makiya also stated that the company hopes to secure
a 3G licence sometime this year. Zain Iraq, 72%-owned by Zain Group (ZAIN.KW), is one of the Group’s
important assets, contributing 15% to our fair value (FV) of KWD0.92/share for Zain Group. (Zawya Dow
Jones, Marise Ananian)
Zain: KWD1.02, Rating: Sell, FV: KWD0.92, MCap: USD14,562 million, ZAIN KK / TELE.KW

Wataniya Palestine to invest USD300 million over the coming 3-4 years, CEO says
Wataniya Palestine, Palestine’s second mobile telecom operator and a subsidiary of Kuwait’s Wataniya
Telecom (NMTC.KW), plans to spend USD300 million over the next 3-4 years in order to expand its
network and increase subscribers, Zawya Dow Jones quoted the company's CEO, Bassam Hannoun, as
saying. "We have invested so far USD300 million and we are planning to invest another USD300 million in
the upcoming 3-4 years," he said. Wataniya floated 15% of its shares in a public offering that raised
USD50.3 million in November 2010. "We are still a young company. We anticipate growth in the
contribution of Qtel Group (QTEL.QA). Our revenue is around 2% of the Qtel group. We anticipate to push
it to close to 4-5% in the three years coming. That is considering of course the growth of Qtel itself," said
Hannoun. Wataniya Palestine has the only 3G licence in Palestine, however, it plans to launch 3G services
once the political situation there improves. (Zawya Dow Jones)

Wataniya Telecom: KWD1.92, Rating: Neutral, FV: KWD2.25, MCap: USD3,564 million, NMTC KK /
NMTC.KW
Qtel: QAR150.7, Rating: Buy, FV: QAR174.5, MCap: USD6,072 million, QTEL QD / QTEL.QA
 
EFG Hermes Research  
 
Methanol Chemicals Company (Chemanol) - Attractive Methanol Integration, But Overstretched
Valuation; Initiate With Sell - Initiation of Coverage Note 08 June 2011  
FV of SAR12/Share Implies 16% Downside Potential; Initiate with Sell: The Methanol Chemicals Company
(Chemanol) is a fully integrated methanol derivatives producer based in Saudi Arabia. The company
primarily focuses on the production of formaldehyde and its derivatives. Our estimated fair value (FV) for
Chemanol of SAR12/share implies 16% downside potential to the current market price and hence we
initiate coverage on the company with a Sell rating. Our forecasts and valuations account for an expected
rise in gas prices in 2012.  
 
Cost Advantage Intact, But Prices Remain Muted: Chemanol enjoys one of the lowest cost methanol
production costs globally at approximately USD80/tonne. Despite the low cost production, Chemanol's
margins are pressured due to a weak price environment. Prices for the majority of Chemanol’s products,
used primarily in the construction sector, have remained muted due to lacklustre construction demand.
We expect the sector to show a recovery in the short- to medium term, but we remain sceptical about
Chemanol maintaining high margins in the long-term due to the large oversupply situation in the
formaldehyde market.  
 
Short Term Cash Flows Unsupportive, Refinancing To Ease Pressure: We estimate Chemanol’s net
debt/EBITDA at 4.7x in 2011 and 3.8x in 2012. The company’s operational cash flow is currently capped
by relatively weak derivative prices, in our view. The recent refinancing agreement signed by Chemanol
should help ease any short-term liquidity pressure until derivative prices begin to recover in the next few
years.  
 
High Valuation Multiples Unjustified, In Our View: Chemanol trades at an estimated P/E of 31.1x and
EV/EBITDA of 12.1x in 2011, an unjustified premium to the peer average. We believe that this implies
that the market is grossly overestimating Chemanol’s earnings potential. We estimate Chemanol’s average
2011-2013 ROE at 6%, which compares negatively with our estimated cost of equity of 12.5% and the
company’s current estimated trading P/BV of 1.2x. (Yousef Husseini, Ahmed Shams El Din)  
 
EIPICO - 1Q2011 Net Profit Beats Forecast, Lifted Y-o-Y by Strong Operating Margins; Reiterate Buy -
Flash Note 07 June 2011  
Net Profit Up 6% Y-o-Y; Maintain 2011 Forecasts Pending 2Q2011 Trends: Net profit proved resilient at
EGP99 million, despite events that began on 25 January, rising 6% Y-o-Y, 19% Q-o-Q and coming in 21%
above our estimate. The improvement in net profit is on the back of Y-o-Y expansion in the operating
margin, and stronger revenue and other income Q-o-Q. Our FY2011 EGP348 million net profit forecast
calls for 2% Y-o-Y growth, which is slightly conservative, in our view. We, however, highlight that a
stronger-than-expected upward revision in wages and salaries effective 2Q2011 and the booking of
additional costs related to the new factory under construction pose downside risks to our forecast. We
maintain our 2011 forecasts and reiterate our Buy rating as our fair value (FV) of EGP44.3/share implies
15% upside potential.  
 
Operating Margin Expansion Supports Bottom Line Growth vs. 1Q2010: Revenue inched up 1% Y-o-Y and
22% Q-o-Q to EGP306 million, with exports contributing 21% versus 20% in 1Q2010. EBITDA rose 3% Y-o-Y to
EGP129 million, while the EBITDA margin expanded by 100bps to 42.2% after a 200bps widening in the
gross margin to 58.2% more than offset a 100bps rise in SG&A-to-Sales to 16.0%. A decline in depreciation
and amortisation expense boosted the operating profit margin to 38.8% during the quarter, up 200bps Y-o-
Y. Non-operating items (net interest income, provisions and net sundry income) were roughly unchanged
Y-o-Y, but rose Q-o-Q mainly on the back of the recurring EGP9 million dividends typically booked every
1Q since 2009, and which management had indicated comes from its ampoules subsidiary, EIACO.  
 
Net Profit Beats Forecast on Stronger Operations, Lower Expenses: EBITDA in 1Q2011 beat our forecast by
8%, driven by an 8% positive surprise in revenue. The EBITDA margin was roughly in line with expectation.
We had factored in a larger disruption impact on revenue in light of the popular uprising in Egypt that
began on 25 January 2011. Depreciation and amortisation expense, net interest income and sundry
income collectively positively surprised, more than offsetting a higher-than-forecasted provision expense.
(Nada Amin, Nour Farrag)  
 
[Note – EFG Hermes is not responsible for the accuracy of news items taken from other media.]  
__________________________________________________________________________________________________
_______________  
Our investment recommendations take into account both risk and expected return. We base our fair value estimate on a
fundamental analysis of the company’s future prospects, after having taken perceived risk into consideration. We have
conducted extensive research to arrive at our investment recommendations and fair value estimates for the company or
companies mentioned in this report. Although the information in this report has been obtained from sources that EFG
Hermes believes to be reliable, we do not guarantee its accuracy, and such information may be condensed or incomplete.
Readers should understand that financial projections, fair value estimates and statements regarding future prospects may
not be realized. All opinions and estimates included in this report constitute our judgment as of this date and are subject
to change without notice. This research report is prepared for general circulation and is intended for general information
purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. It is not
tailored to the specific investment objectives, financial situation or needs of any specific person that may receive this
report. We strongly advise potential investors to seek financial guidance when determining whether an investment is
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