MENA-2 MONDAY MORNING ROUND-UP

Egypt
SCGC 2Q2011 net income 39% below estimate on higher wages, income tax Eastern Companys BoD approves 4Q2010-2011 sales figure of EGP1,308 million; company plans to amend Philip Morris Agreement for extra revenue Heliopolis Housing reports 2Q2011 net income of EGP25.4 million, down 32% Q-o-Q MCQC 2Q2011 net profit 14% below estimates National Development Bank reports 1H2011 net loss of EGP 338.3 million IFC board approves USD450 million debt and equity investment in OCI Ezz Steel increases ex-mill rebar prices by EGP150/tonne to EGP4,800/tonne in August Egypt Hydrocarbon Company signs USDS454 million deal for ammonium nitrate project

Saudi Arabia
Aramco increases prices of propane and butane for August contracts SIIG establishes Petrochemical Conversion Company Petro Rabighs HOFCC unit brought back online

Agenda
Egypt Wed 10 August >> Orascom Telecom (OT) 2Q2011 results Mon 15 August >> Telecom Egypt (TE) 2Q2011 results (EAS) Tue 16 August >> Telecom Egypt (TE) AGM and EGM Saudi Arabia Sat 6 August >> Etihad Atheeb AGM and EGM

Egypt News
SCGC 2Q2011 net income 39% below estimate on higher wages, income tax Suez Cement Group of Companies (SCGC) [SUCE.CA] has reported consolidated 2Q2011 results showing net income of EGP135 million, down 61% Y-o-Y and 51% Q-o-Q, and missing our estimate by 39%. This miss was mainly driven by: i) higher wages, which jumped over 40% Y-o-Y; and ii) an increase in income tax to 25% (the company applied a 25% tax rate to 2Q2011 earnings, as well as an additional expense for the higher taxes applicable in 1Q2011). SCGC consolidated revenue reached EGP1.33 billion, down 23% Y-o-Y and 6% Q-o-Q, and slightly below our EGP1.36 billion estimate. SCGC market share contracted to c20% in 2Q2011 versus 23% in 1Q2011 and 25% in 2Q2010 given increasing competition mainly from Arabian Cement and the newly-established Sewedy Cement. EBITDA missed estimates by 14%, reaching EGP334 million in 2Q2011, down 49% Y-o-Y and 18% Q-o-Q, implying an EBITDA margin of 25% versus our 28% estimate. This was mostly attributable to the larger-than-estimated rise in wages. (Company Disclosure, Malak Youssef) SCGC: EGP37.87, Rating: Sell, FV: EGP30, MCap: USD1,158 million, SUCE. EY / SUCE.CA Eastern Companys BoD approves 4Q2010-2011 sales figure of EGP1,308 million; company plans to amend Philip Morris Agreement for extra revenue Eastern Companys (EAST.CA) board of directors (BoD) approved 4Q2010-2011 headline figures (unaudited) ending June 2011 at its meeting on 30 July 2011. The company had previously reported 4Q2010-2011 earnings of EGP229 million, which was in line with our estimate of EGP233 million. Revenue came in at EGP1,308 million, up 20% Q-oQ and 5% Y-o-Y, and was 14% ahead of our estimate of EGP1,149 million. We attribute the strong Q-o-Q growth to: i) strong stocking activity by retailers ahead of the implementation of the 10% tax increase (effective starting on

23 June 2011) that was announced earlier; and ii) an increase in production and consumption post-political unrest that was witnessed in 3Q2010-2011, which resulted in some disruption to Easterns operations. We will provide further details once the full audited financial statements are released. Additionally, Eastern announced that it plans to amend its production agreement with Philip Moris and Al Mansour International Distribution Company. The change relates to the manufacturing fee for cigarettes (per quantity of sticks), will be retroactively applied, and will effectively raise the companys sales for this year by EGP50 million. Additionally, Philip Morris will carry the cost of spare parts for machinery, saving Eastern nearly EGP12 million. (Company Disclosure, Al Youm al Sabe, Khaled Sadek, Wafaa Baddour) Eastern: EGP106.0, Rating: Buy, FV: EGP129.0, MCap: USD891 million, EAST EY / EAST.CA Heliopolis Housing reports 2Q2011 net income of EGP25.4 million, down 32% Q-o-Q Heliopolis Housing and Development Company (Heliopolis Housing) [HELI.CA] has reported a net profit of EGP25.4 million in 2Q2011 (FY4Q2010-2011), down 32% Q-o-Q. This brings net income for FY2010-2011 to EGP142 million, down 6% Y-o-Y. Revenues for FY2010-2011 reached EGP333 million, down 18% Y-o-Y. (Company Disclosure, Argaam) Heliopolis Housing: EGP17.51, Rating: Buy, FV: EGP38.00, MCap: USD327 million, HELI EY / HELI.CA MCQC 2Q2011 net profit 14% below estimates Misr Cement Qena Company (MCQC) [MCQE.CA] has announced that 2Q2011 net income declined 12% Y-o-Y, but rose 4% Q-o-Q, to EGP92.1 million. The earnings figure was 14% below our estimate of EGP107 million. Full financials have not yet been released, however, we estimate that the earnings miss might be due to lower-thanestimated selling prices and/or higher-than-estimated wages. The companys local sales volumes reached c492,000 tonnes in 2Q2011, up 15% Q-o-Q and 5% Y-o-Y, mainly on: i) slightly improved demand, which rose 11% Q-o-Q and 1% Y-o-Y; and ii) slightly improved market share of 3.93% in 2Q2011 (versus 3.77% in both 2Q2010 and 1Q2011). We highlight that the company is currently enjoying a tax holiday until 2012. Our model includes a 25% income tax starting in 2013. We reiterate our Sell rating for the company as our fair value (FV) of EGP60/share implies 40% downside potential. We will provide more detailed analysis as soon as full financials are published. (Company Disclosure, Malak Youssef) MCQC: EGP100.5, Rating: Sell, FV: EGP60, MCap: USD507 million, MCQE. EY / MCQE.CA National Development Bank reports 1H2011 net loss of EGP 338.3 million National Development Bank (NDB), the Egyptian associate of Abu Dhabi Islamic Bank (ADIB) [ADIB.AD], has reported a net loss of EGP338.3 million for 1H2011, compared to a net loss of EGP213.1 million during the same period last year. NDB has been reporting net losses since 2006 on large loan loss provisioning charges. ADIB and Emirates International Investment, ADIBs parent company, bought a majority stake in NDB in 2007. (Bloomberg) ADIB: AED3.25, Rating: Buy, FV: AED3.75, MCap: USD2,094 million, ADIB UH / ADIB.AD IFC board approves USD450 million debt and equity investment in OCI Orascom Construction Industries (OCI) [OCIC.CA] announced on 31 July 2011 that the International Finance Corporation (IFC), a member of the World Bank Group, has received board approval for a USD450 million debt and equity investment package for OCI. The IFC will provide OCI with a USD200 million loan for Egyptian Fertilizer Company, will help mobilise an additional USD200 million from other lenders, and will make a USD50 million equity investment in the company. This investment is expected to create more than 2,500 jobs across the region. According to OCI, the share buyback programmes announced in June and July will help facilitate the IFCs purchase of OCI shares. (Company Disclosure) OCI: EGP261.3, Rating: Neutral, FV: EGP265, MCap: USD9,086 million, OCIC EY / OCIC.CA Ezz Steel increases ex-mill rebar prices by EGP150/tonne to EGP4,800/tonne in August Ezz Steel (ESRS.CA) announced on 1 August 2011 that it is increasing its ex-mill prices for long steel in August by EGP150/tonne M-o-M to EGP4,800/tonne (before sales tax), after having fixed them in July. This price increase brings the 3Q2011 average (based on July and August prices) to EGP4,725/tonne (before tax), 3% above our estimated EGP4,600/tonne. Because of Al Ezz Dekheilas (EZDKs) [IRAX.CA] high operating leverage, were current prices maintained until the year-end, the EPS impact would be significant (a more than 35% increase compared to our current estimate of EGP0.14/share), but would still be down c60% Y-o-Y. Based on these prices, we expect that EZDK (DRI-based) will generate a gross margin on long steel of c17% (compared to an estimated 18% in 2010 and 22% in 2009), while ESR/ERM (scrap-based) will see a gross margin of around 6% (higher than the c3% gross

margin seen in 2010 and versus 8% in 2009). We question whether this price increase will be absorbed by the market given weak demand due to seasonality and to slowing construction activity during the month of Ramadan, which will exacerbate the already-slack demand since the beginning of the year. We think that the effect of higher prices will be largely offset by decreased sales volumes, and we believe that a correction in prices in the coming months is possible if raw material prices maintain their current trend (scrap prices remained almost flat M-o-M in July). (Al Mal, Rita Guindy) Ezz Steel: EGP9.23, Rating: Buy, FV: EGP12.10, MCap: USD843 million, ESRS EY / ESRS.CA EZDK: EGP641.44, Rating: Neutral, FV: EGP693, MCap: USD1,438 million, IRAX EY / IRAX.CA With paid-up capital of USD150 million (LE900 million), the Egyptian Hydrocarbon Company (EHC) was established on 31 July 2011 by the General Authority for Investment and Free Zones (GAFI) as the first private sector industrial project to be implemented in the country at international prices and with no subsidies. The project, whose investments include an EGP2.7 billion (cUSD454 million) petrochemical complex, is the first major industrial deal to close in Egypt after the January 25 Revolution, and is a prelude for more ventures, said Basil El-Baz, CEO and Chairman of Carbon Holdings. The project is a joint investment between Egyptian, Kuwaiti, and Saudi shareholders, and will produce ammonium nitrate and nitric acid in the North West Suez Gulf Zone. A number of local Egyptian banks have helped finance the venture, including Ahli United Bank (AUB) [AUBK.KW], Banque Misr, and Commercial International Bank (CIB) [COMI.CA]. No further details have been disclosed. (Daily News Egypt, Ahram Online) CIB: EGP27.02, Rating: Neutral, FV: EGP31.90, MCap: USD2,680 million, CMIB EY / COMI.CA

Saudi Arabia News

Aramco increases prices of propane and butane for August contracts According to a source close to the company, Aramco has increased the price of propane by USD20/tonne M-o-M to USD835/tonne and the price of butane by USD30/tonne M-o-M to USD885/tonne for August 2011 contracts. Aramcos propane and butane price is used as a bench mark for pricing liquid petroleum gas (LPG) that is sold in the Middle East. (Argaam) SIIG establishes Petrochemical Conversion Company The Saudi Industrial Investment Company (SIIG) [2250.SE] has announced that it has established a new company, Petrochemical Conversion Company (PCC), with a paid in capital of SAR150 million. PCC is a joint venture (JV) with the Arabian Chevron Phillips Petrochemical Company, a subsidiary of SIIG. The company is expected to develop several new conversion projects, including the first ever nylon 6,6 plant in Saudi Arabia. The total investment in these conversion projects is expected to be around SAR2 billion; operations are scheduled to begin in 2013. (Tadawul, Argaam) Petro Rabighs HOFCC unit brought back online The Rabigh Refining and Petrochemical Company (Petro Rabigh) [2380.SE] has announced that the high olefins fluidised catalytic cracking unit (HOFCC) has been restarted. As such, the entire complex has now been brought back online from the maintenance turnaround. The company expects the complex to return to full operational capacity by 15 August 2011. (Tadawul, Argaam)
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