MENA-2 WEDNESDAY MORNING ROUND-UP

Egypt
TDA decides to cancel land withdrawals from some developers; to modify prices of allocated land plots Mobinil reports 2Q2011 net loss on new tax regime Trading on Ezz Steel resumes; trading on EZDK remains suspended Delta Sugar reports 2Q2011 earnings of EGP200 million VFE asks NTRA for increased MNP capacity Second Damietta power plant unit to become operational to meet summer demand

Saudi Arabia
Saudi Arabia: private sector credit growth rises to 7.8% Y-o-Y in June Saudi operators sign new MNP agreement Tasnees SPC restarts production unit

Lebanon
Bank of Beirut reports 1% Y-o-Y growth in 1H2011 net profit to USD48.6 million

EFG Hermes Research

Saudi Cable Company (SCC) - 2Q2011 Net Profit Rises Y-o-Y; Adjust Forecast & FV, Upgrade to Buy on Lower Share Price - Company Note 26 July 2011 Zamil Industrial Investment Company (Zamil) - 2Q2011 Earnings In Line; Adjust Forecast & Maintain FV; Reiterate Neutral - Company Note 26 July 2011 Almarai Company - Feed Subsidy Buoys Margins, Revise Estimates and FV; Upgrade to Buy - Company Note 26 July 2011

Agenda
Egypt Thu 28 July >> Sixth of October Development and Investment Company (SODIC) stock split Tue 26 July >> Mobinil 2Q2011 results Saudi Arabia Sat 6 August >> Etihad Atheeb AGM and EGM

Egypt News
TDA decides to cancel land withdrawals from some developers; to modify prices of allocated land plots The Tourism Development Authoritys (TDAs) board of directors (BoD) has decided to continue working with developers that had received preliminary and final approvals for land allocations from the TDA; however, the prices of the lands in question will be set at 25% above those determined by the TDAs BoD in 2008, Al Mal reported. These conditions will apply only to developers that have not begun developing allocated lands due to external conditions. The BoD has also cancelled the decision to withdraw plots from developers that previously received final approval for the allocation of land plots measuring less than 500,000 square metres (sqm) under the same conditions. For integrated developments, however, land plots measuring more than 500,000 sqm will be subject to the same conditions as those measuring less than 500,000 sqm, but the former will be allowed to keep the land that they have already developed at the same prices, while non-developed land will be subject to the new pricing scheme. The BoD, headed by Minister of Tourism Mounir Fakhry Abdel Nour, held its first meeting on 26 July 2011 to discuss the status of land plots that it has withdrawn from developers as well as the complaints that 171 developers had filed, Al Mal reported, citing the Tourism Ministers First Deputy, Hisham Zazou. The BoD will call developers that have not filed complaints with the TDA in order to look into the status of their plots. (Al Mal)

Mobinil reports 2Q2011 net loss on new tax regime Mobinil (EMOB.CA) has reported 2Q2011 results showing that revenue and EBITDA came in line with our estimates, while the bottom line missed our expectations, entering negative territory as it was hit by a one-off tax paid to comply with the new tax regime. The company reported a consolidated net loss of EGP108 million in 2Q2011 versus our net profit estimate of EGP173 million (lowest amongst consensus estimates) and versus Bloomberg consensus of EGP240 million. We understand from management that taxes reported in 2Q2011 included a one-off amount paid on Mobinils accumulated deferred tax liability. The new tax regime implies the payment of 25% of this deferred tax liability account. The remaining amount is the 25% corporate tax rate paid on whole 1H2011 earnings. Despite low quarterly mobile subscriber additions of only 183,000, Mobinil was able to grow its wireless revenue by 7% Q-oQ in 2Q2011 versus quarterly growth for Vodafone Egypt (VFE) of only 4-5% (although VFE reported much higher additions). Wireless revenue and EBITDA were generally in line with our estimates. LinkdotNets top line also surprised positively, growing 25% Q-o-Q, but missed our EBITDA estimate and reported a net loss of EGP6 million for the quarter versus our net income estimate of EGP6 million. Despite the significant upside potential that our current fair value (FV) of EGP172/share offers over the current market price, we do not believe that the share price will perform positively in the short term given the lack of short-term catalysts and increased negative news flows, which has weighed on the stock. (Company Disclosure, Marise Ananian) Mobinil: EGP106.0, Rating: Buy, FV: EGP172.0, MCap: USD1,779 million, EMPN EY / EMOB.CA Trading on Ezz Steel resumes; trading on EZDK remains suspended The Egyptian Exchange (EGX) has allowed the resumption of trading on Ezz Steel (ESRS.CA) during the session of 26 July 2011 after the company submitted a statement to the EGX explaining the delay in publishing financials for 4Q2010/1Q2011. The company explained that the delay was not within its control, and asked for a 10-day extension to prepare its consolidated financials. Ezz Steel explained that the publication of the consolidated financial performance for the group depends on the approval by Al Ezz Dekheilas (EZDKs) [IRAX.CA] board of directors (BoD) of EZDKs results, which the Central Auditing Authority is still reviewing. Trading on EZDK remains suspended as both companies missed the 15-day deadline, announced on 6 July 2011, to report earnings for 4Q2010 and 1Q2011. (Mist, Company Disclosure) Ezz Steel: EGP9.21, Rating: Buy, FV: EGP12.10, MCap: USD840 million, ESRS EY / ESRS.CA EZDK: EGP641.44, Rating: Neutral, FV: EGP693, MCap: USD1,438 million, IRAX EY / IRAX.CA Delta Sugar reports 2Q2011 earnings of EGP200 million Delta Sugar (SUGR.CA) has reported unaudited bottom line figures for 2Q2011. Net profit came in at EGP200 million, up 188% Y-o-Y and 151% Q-o-Q. Net profit for 1H2011 rose 145% Y-o-Y to EGP279 million. No further details were published. (MIST) VFE asks NTRA for increased MNP capacity Vodafone Egypt (VFE) has asked the National Telecommunications Regulatory Authority (NTRA) to increase the capacity of Mobile Number Portability (MNP) as a result of a large number of applications wishing to port from other networks to VFEs, which exceeds current capacity, the companys CEO, Hatem Dowidar, told Al Borsa. Dowidar added that he is set to meet today with the NTRA President, Amr Badawy. (Al Borsa) Second Damietta power plant unit to become operational to meet summer demand The second unit of the Damietta power plant will start operations today, with a capacity of 125 MW, Al Mal Quoted Ministry of Electricity and Power spokesman, Aktham Abo Al Ala, as saying. This comes as part of the governments plan to increase installed capacity by 1500 MW during summer to meet the significantly higher demand. The Damietta power plant is planned to operate at full capacity by mid-August. (Al Mal)

Saudi Arabia News

Saudi Arabia: private sector credit growth rises to 7.8% Y-o-Y in June Private sector credit growth rose to 7.8% Y-o-Y in June, up marginally from 7.7% in May. The data is in line with our forecast of system-wide private sector credit growth of 9.0% in 2011, driven by both a rise in retail and corporate loan demand. M-o-M credit growth was marginally weaker, but remained solid at 1.0% in June, down from 1.1% in May. Historically, new credit growth tends to slow as Saudi Arabia heads into the quieter summer period. Deposits fell 0.6% M-o-M, likely due to decreased demand deposits by the private sector as well as the slower summer months. Government deposits in the banking sector increased in June. Money supply (M2) growth slowed to 15.2% Y-o-Y, likely as a result of a weaker build up in net foreign assets (NFA), which increased 1.9% M-

o-M in June. NFA rose 16.4% Y-o-Y, largely driven by higher oil revenue. With inflation not being driven by monetary factors, we expect bench mark interest rates to remain on hold in 2011 and into 2012. (SAMA, Monica Malik) Saudi operators sign new MNP agreement Saudi Arabias three mobile operators, Saudi Telecom Company (STC) [7010.SE], Mobily (7020.SE) and Zain Saudi Arabia (Zain KSA) [7030.SE], signed on 26 July 2011 a commercial Mobile Number Portability (MNP) agreement with a new format that aims to include Zain KSA in the service. The new agreement seeks to both simplify the process and address the issues that subscribers have faced while porting their numbers under the old MNP agreement. The new agreement identifies four reasons for refusing to port a certain number (i.e., unidentical IDs, unpaid bills, porting when less than two months have passed since acquiring a number or porting, or the number is deactivated) and affirms that operators should not refuse porting numbers without a valid reason. Saudi Arabia introduced MNP, which allows subscribers to migrate from one operator to another while maintaining the same number (both prefix and suffix), on 8 July 2006. (Argaam) STC: SAR35.8, Rating: Neutral, FV: SAR41.4, MCap: USD19,093 million, STC AB / 7010.SE Mobily: SAR54.75, Rating: Buy, FV: SAR65.9, MCap: USD10,220 million, EEC AB / 7020.SE Zain KSA: SAR6.65, Rating: Neutral, FV: SAR7.78, MCap: USD2,483 million, ZAINKSA AB / 7030.SE Tasnees SPC restarts production unit The Saudi Polyolefins Company (SPC), a 75%-owned subsidiary of the National Industrialization Company (Tasnee) [2060.SE], has restarted one of its production units that was shut down last week, according to a company source, reported ICIS. The exact reason for the shut down, and which production unit was shut down, was not mentioned. According to the source, however, the effect of the shutdown on production and sales for 3Q2011 will be negligible. (Argaam, ICIS)

Lebanon News
Bank of Beirut reports 1% Y-o-Y growth in 1H2011 net profit to USD48.6 million Bank of Beirut has reported USD48.6 million in 1H2011 net profit, up 1% Y-o-Y. The acquisition of an 85% stake in Beirut-Hellenic has grown the banks assets to USD9 billion as at end-1H2011, while customer deposits reached USD7 billion. Loans in 1H2011 grew to USD3.2 billion, while equity soared to USD826 million. Bank of Beirut is in the process of closing the issue of USD135 million in preferred shares to increase the banks capital to USD1 billion. (The Daily Star)

EFG Hermes Research

Saudi Cable Company (SCC) - 2Q2011 Net Profit Rises Y-o-Y; Adjust Forecast & FV, Upgrade to Buy on Lower Share Price - Company Note 26 July 2011 Net Profit Up Y-o-Y on Higher Sales and Margins: SCC 2Q2011 net profit came in at SAR23 million versus a net loss of SAR25 million in 2Q2010 and our SAR16 million forecast. The increase in earnings was driven by higher sales and improved margins. Revenue in 2Q2011 came in at SAR771 million, up 60% Y-o-Y and is 3% lower than our forecast. Gross profit came in at SAR60 million versus SAR14 million in 2Q2011, while net operating profit came in at SAR18 million versus a loss of SAR28 million in 2Q2010. Gross margin improved to 7.6% in 2Q2011 versus 4.3% in 2Q2010 and 7.1% in 1Q2011, suggesting a products mix with more high-voltage cables as SCC secured several contracts in late 2010. FY2011 Forecast Changes: Raise Investment Income Estimate: We raise our FY2011 investment income estimate from Midal Cables by 11% to SAR102 million. We have also made minor adjustments to our revenue and cost assumptions. The change in our assumptions results in a 22% increase in 2011 net profit to SAR83 million. We maintain our forecasts beyond 2011. We expect a continuous increase in SCCs margins and profitability per tonne on the back of a strong recovery in utilisation rates and sales volumes given that the Saudi Electricity Company (SEC) plans to enhance transmission networks to improve load factor. Increase Fair Value by 4%; Upgrade to Buy on Weakening Share Price: Following the changes to our forecasts, our fair value (FV) increases to SAR16.76/share, implying 24% upside potential to the current share price. We upgrade our rating to Buy from Neutral on a weakening share price, which has dropped 8% over the last two weeks and 13% since our initiation of coverage on 9 June 2011. We believe that the drop in the share price was affected by the slump in the Saudi market as a whole, which came on the back of recent instability in Egypt and Syria, coupled with a low activity season. The stock could trade positively on news flow regarding contracts and earnings

turnaround, in our view. Our FV is highly sensitive to our long-term estimates for utilisation rates, copper prices and margins. We maintain our dividend per share of SAR0.75, implying a 5.5% dividend yield for 2011. (Tarek ElShawarby) Zamil Industrial Investment Company (Zamil) - 2Q2011 Earnings In Line; Adjust Forecast & Maintain FV; Reiterate Neutral - Company Note 26 July 2011 Net Profit Down Y-o-Y on Higher Finance Costs and Minority Interest: Zamil 2Q2011 net profit declined 24% Y-o-Y, but rose 30% Q-o-Q, to SAR48 million, coming in line with our SAR49 million forecast. The drop in net profit was driven by a 48% Y-o-Y increase in finance costs to SAR21 million and higher minority interest, which more than doubled to SAR18 million on the back of the consolidation of Rabiah-Nassar & Zamil Concrete Industries Company and Gulf Insulation Company to Al Zamil in January 2011. Net debt to equity increased to 1.9x in 2Q11 versus 1.6x in 1Q11. Revenue Rises Y-o-Y in All Segments; Margins Decline Slightly: Revenue increased 23% Y-o-Y to SAR1.3 billion in all segments and came in 19% above our forecast. On the operational level, gross profit increased 16% Y-o-Y and 27% Q-o-Q to SAR281 million, while net operating profit came in at SAR83.5 million, up 6% Y-o-Y and 40% Q-o-Q. Gross margin decreased to 21.2% in 2Q2011 versus 22.5% in 2Q2010 and 22.8% in 1Q2011, mainly driven by the air conditioning segment. FY2011 Forecast Changes: Increase Revenues, Decrease Margins: We raise our FY2011 revenue estimate by 9% to SAR4.6 billion and lower our gross margin assumption to 23% from 24.5% previously. Our net profit estimate remains unchanged as higher revenue was offset by lower margins. We maintain our forecasts beyond 2011. We forecast a gradual recovery in margins for the steel segment as demand improves. We believe that profitability in the steel segment is a key factor in Zamils profitability. Maintain Fair Value of SAR33.24/Share; Reiterate Neutral: We maintain our fair value (FV), implying 13% upside potential to the current share price, and thus reiterate our Neutral rating. Zamils board of directors (BoD) has announced the distribution of a SAR0.75/share dividend for 1H2011, the same as in 1H2010, suggesting a FY2011 dividend of SAR1.5/share, in line with our forecast, and implying a 2011 dividend yield of 5%. We believe that Zamils high net debt to equity ratio would limit dividend distribution potential at the current payout ratio of 45%. (Tarek El-Shawarby) Almarai Company - Feed Subsidy Buoys Margins, Revise Estimates and FV; Upgrade to Buy - Company Note 26 July 2011 Raise FV by 4% to SAR107.5/Share on Announced Increased Feed Subsidy: We adjust our forecasts for Almarai following an announcement by the Saudi Government on 21 July 2011 to raise feed subsidies by 50%. We: i) leave 2011 estimates unchanged as Almarai has already purchased this years feed requirements, ii) raise our 2012 EBITDA margin by c40 bps to 25.8% on SAR40-50 million in additional subsidies, which leads to a net profit growth estimate of 17% versus 14% previously, and iii) increase our terminal EBITDA by c30bps to 25.3% to reflect increased margin protection. We assume a decline in terminal EBITDA margin from 2011 levels to reflect a change in the sales mix as well as a more sustainable margin level, in our view. Almarais share price has declined 18% YTD, has underperformed the TASI (-3%) and already prices in weak 1Q2011 and 2Q2011 results as well as margin protection concerns, in our view. Our changes raise our fair value (FV) to SAR107.5/share offering 18% upside potential. Accordingly, we upgrade our rating to Buy from Neutral. Government Curbs Food Inflation, Balances Producers and Consumers: Higher feed subsidies are expected to positively impact food producers (dairy, poultry and meat), reducing their cost pressures. This comes after the government restricted price increases for some food items as part of its plan to curb food price inflation. In July 2011, cost pressures (feed indicators up 90% Y-o-Y) prompted Almarai, amongst other dairy producers, to raise the price of its 2 litre milk and laban (drinkable yoghurt) products SKUs to SAR8 from SAR7. However, the government quickly reversed this increase and added dairy to its list of controlled strategic products. Lingering Concerns: Capex Plan, IDJ JV, Passing on Some Cost Pressures: We remain concerned about: i) Almarais poultry capex plan (SAR4 billion), further stressing Almarais cash flow and leverage , ii) the lack of returns from IDJ (joint venture with PepsiCo), and iii) Almarais constrained ability to raise prices to pass on inflationary pressures (including packaging and other dairy commodities) despite their reduction post-feed subsidy increase. (Nada Amin, Wafaa Baddour)
[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 companys 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 appropriate to their needs. No part of this document may be reproduced without the written permission of EFG Hermes.