MENA-1 WEDNESDAY MORNING ROUND-UP

UAE
Emaar Properties 2Q2011 results: revenues a notch ahead, but net income lower on more associate losses FGB raises USD650 million with five-year bond Abu Dhabis nominal GDP grows by 15.9% in 2010 Shuaa Capital allows GCC nationals to constitute majority of its board Mashreqs 2Q2011 net profit up 32.2% Y-o-Y National Marine Dredging Company reports AED205.2 million in 1H2011 net income

Kuwait
Kuwait Finance House and Al-Muthann travel insurance product doing well Loans and investment in bonds grow by 0.3% in 1H2011

Oman
Oman International Bank says case against Bank Dhofar pending

EFG Hermes Research

Emirates NBD (ENBD) - 2Q2011 Results: Provisions Continue to Weigh on Earnings; Maintain Neutral - Flash Note - 26 July 2011 Commercial Bank of Dubai (CBD) - Earnings Trend Uninspiring; Reiterate Neutral on Weak Short-Term Growth - Flash Note - 26 July 2011 Etisalat - 2Q2011 Results: Weak on UAE Operation, Again, and One-Off Provision - Flash Note - 26 July 2011

Agenda
Qatar Wed 27 July >> Dlala Holding Company 2Q2011 results Wed 27 July >> Commercial Bank of Qatar (CBQ) 2Q2011 results Thu 28 July >> Qatar Industrial Manufacturing Company 2Q2011 results Thu 28 July >> Qatar National Bank 1H2011 press conference Thu 28 July >> Al Khalij Holding Company 2Q2011 results Sun 31 July >> Qatar Oman Investment Company 2Q2011 results Sun 31 July >> Medicare Group 2Q2011 results Sun 31 July >> Qatar Oman Investment Company 2Q2011 results Mon 1 August >> The National Leasing Holding Company 1H2011 press conference Mon 1 August >> Aamal Company 2Q2011 results Tue 2 August >> Masraf Al Rayan 2Q2011 results Wed 3 August >> Qatar National Cement Company 2Q2011 results Wed 3 August >> Aamal Company press conference Tue 9 August >> Masraf Al Rayan press conference Tue 9 August >> Qatar Electricity & Water Company (QEWC) 2Q2011 results Sun 14 August >> Qtel 2Q2011 results Sun 14 August >> Doha Insurance 2Q2011 results

UAE News
Emaar Properties 2Q2011 results: revenues a notch ahead, but net income lower on more associate losses Emaar Properties (EMAR.DU) reported its 2Q2011 results, showing revenues of AED2,032 million, 8% above our forecast (6% ahead of the consensus), and net income of AED250 million, 13% below our expectations (16% below the consensus). Emaars results above the operating line were positive. The slightly better top line is likely attributable to better-than-expected recurring

income streams, in our view. We note that we had expected a slightly weaker contribution from hotels due to seasonality (and an exceptional 1Q2011); however, Emaar noted that it has maintained the performance seen in 1Q2011. SG&A (incl. dep.) amounted to AED398 million and was 7% below our expectations; however, the pressure on the bottom line occurs below the operating line, with associate losses coming in at AED75 million versus our expectation of a loss of AED17 million. A AED172 million write-off related to Dubai Bank was booked in 2Q2011 and was accounted for in our forecasts. Overall, Emaars operational business continues to outperform, namely the recurring income businesses. Pressure on earnings in 2Q2011 has stemmed from associates (EMGF, possibly Amlak). We reiterate our Buy rating on Emaar following this set of results, with our current fair value (FV) providing significant upside potential. We continue to like Emaars underlying business, despite continuing (albeit decreasing) shocks to earnings below the operating line. We will provide more details on the results once full financials are out, and we will look out for further progress on the refinancing of short-term debt, an issue we have highlighted as a cause for concern earlier. As expected, Emaar continued the delivery of remaining units within Burj Khalifa, while also focusing on the delivery of commercial space within the Boulevard Plaza. Emaar also commenced the handover of villas within UAQ Marina, in line with our expectations. We note these deliveries are for a small phase within the development (c280 villas). Gross margins of 48% were in line with expectations and are down from 52% in 1Q2011. Emaar indicated foot fall across its malls reaching 12.7 million in 2Q2011 and hotel occupancy averaging 85% in 1H2011. We highlight that we had anticipated weaker recurring income streams in 2Q2011, namely from hospitality, in light of seasonality and the expected short-term boost from traffic bolstered by the regional unrest witnessed in 1Q2011. Emaar indicated that it had maintained similar levels of performance seen in 1Q2011; this is likely a factor leading to the slightly higher-than-expected top line, in our view. (Company Disclosure, Jad Abbas) Emaar: AED2.88, Rating: Buy, FV: AED5.15, MCap: USD4,777 million, EMAAR UH / EMAR.DU FGB raises USD650 million with five-year bond First Gulf Bank (FGB) [FGB.AD] raised USD650 million from the sale of a five-year sukuk on 26 July 2011. The sukuk was priced at 200 basis points above five-year mid-swaps, offering a coupon of 3.797%, two sources involved with the deal said. The issue was oversubscribed, attracting USD3.8 billion. (Reuters) First Gulf Bank: AED17.05, Rating: Buy, FV: AED24.30, MCap: USD6,388 million, FGB UH / FGB.AD Abu Dhabis nominal GDP grows by 15.9% in 2010 Abu Dhabis nominal GDP increased 15.9% in 2010, according to data from the Statistics Centre Abu Dhabi. Nominal GDP increased to USD168.9 billion in 2010 from USD148.9 billion in 2009, supported by higher oil prices and growth in the non-oil sectors. The economy of Abu Dhabi has overcome the impact of the financial crisis, boosting the confidence of firms and consumers, according to the Statistics Centre Abu Dhabi in its 2011 statistical yearbook. We believe that the growth would have largely been driven by higher oil prices, although there would have been some growth in non-oil sectors. (Reuters, Monica Malik) Shuaa Capital allows GCC nationals to constitute majority of its board Shuaa Capital (SHUA.DU) said that shareholders approved changes to its by-laws, allowing GCC nationals to constitute the majority of its board members. Previously, UAE nationals were required to make up the majority of the board. (Bloomberg) Mashreqs 2Q2011 net profit up 32.2% Y-o-Y Mashreq Bank (MASB.DU) reported a net profit of AED294.5 million in 2Q2011 compared to a net profit of AED222.9 million in 2Q2010. Allowances for impairments went down to AED312 million in 2Q2011 from AED408 million in 2Q2010. Interest income came in at AED791.5 million compared to AED1,023 million. Customer deposits as at 30 June 2011 were AED48.2 billion, up from AED 46.8 billion as at 31 December 2010, an increase of 3.1%. Loans and advances as at 30 June 2011 totalled AED38.1 billion compared to AED41.2 billion as at 31 December 2010, a decrease of 8.1%. (Company Disclosure) National Marine Dredging Company reports AED205.2 million in 1H2011 net income The National Marine Dredging Company (NMDC.AD) reported AED1,110 million in revenue in 1H2011, up 17% Y-o-Y, and net income of AED205.2 million, down 31% Y-o-Y. NMDC booked AED38.1 million in provisions against the impairment of receivables in 1H2011. Total assets stood at AED3,400 million, with shareholders equity of AED2.495 million. (Company Disclosure)

Kuwait News
Kuwait Finance House and Al-Muthann travel insurance product doing well

According to the Deputy Banking Cards Manager at Kuwait Finance House (KFH) [KFIN.KW] Salem Al-Dowesian, the Takaful insurance products, which KFH offers to its clients in collaboration with Al-Muthann Insurance Company, are witnessing high demand. He said that many customers seek travel insurance, which covers overseas risks and is Sharia-compliant. (Al Watan) Kuwait Finance House: KWD0.90, Rating: Neutral, FV: KWD1.14, MCap: USD8,963 million, KFIN KK / KFIN.KW Loans and investment in bonds grow by 0.3% in 1H2011 Loans to private sector and investments in bonds in Kuwait grew by 0.3% in 1H2011, after a 1.9% increase in 2010, according to data from the Central Bank of Kuwait. (Bloomberg)

Oman News
Oman International Bank says case against Bank Dhofar pending Oman International Bank (OIB) [OIB.OM] said that the case filed against Bank Dhofar (BDOF.OM) and Ali Redha Group is still pending with the primary execution court. The decision referred to by Bank Dhofar is not the final decision and does not cancel OIBs rights to the shares mortgaged in favour of OIB, OIB said in the statement to the Muscat bourse today. The final decisions in favour of OIB cannot be objected to by any legal procedure, the statement added. (Bloomberg) Bank Dhofar: OMR0.60, Rating: Sell, FV: OMR0.40, MCap: USD1,434 million, BKDB OM / BDOF.OM

EFG Hermes Research

Emirates NBD (ENBD) - 2Q2011 Results: Provisions Continue to Weigh on Earnings; Maintain Neutral - Flash Note - 26 July 2011 Earnings Miss on High Provisions; Our Full-Year Forecast Now Optimistic: Emirates NBD (ENBD) reported a 2Q2011 profit of AED744 million (EPS: AED0.12), 86% higher Y-o-Y and up from a 1Q2011 loss of AED417 million (pre-gain on sale of stake in Network International). Earnings, however, fell short of our AED1,115 million estimate , as we were expecting a relatively sharp decline in provisions following the de-risking of the balance sheet in 1Q2011. We will likely revisit our earnings forecasts for ENBD, as our full-year provisioning estimates now appear optimistic. We maintain our Neutral rating on the stock, as our fair value (FV) of AED4.60/share currently offers only 11% upside potential. Credit Costs High on Portfolio Provisions Build-up; NPLs Decline: Credit costs remained high in 2Q2010, with ENBD taking provisions of AED920 million (annualised provision charge of 190 bps) in 2Q2011. The bank built up its portfolio provisions reserve to provide a buffer against potentially unfavourable restructuring terms on exposure to some corporate accounts. The banks portfolio provisions reserve as at the end of 2Q2011 was at 2.4% of credit risk-weighted assets, well above the central banks guideline of 1.5%. ENBDs NPL ratio (including Dubai World and Dubai Holding) decreased by 110 bps to 9.3%, as a previously impaired corporate loan was restructured on commercial terms and was subsequently removed from NPLs. Revenues Grow on Higher Spreads & One-Off Gains; Loan Growth Sluggish: Net interest income in 2Q2011 were strong, rising 5.0% Q-o-Q driven by a 15 bps Q-o-Q improvement in net interest spreads. Non-interest income grew 34.2% Q-o-Q on one-off gains of AED160 million related to the exchange of debt issued to bond holders and higher investment gains. Fee and commission income declined by only 2.5% Q-o-Q and appears to have been resilient despite new retail banking regulations. ENBDs loan growth, however, continues to be sluggish unlike Abu Dhabi peers NBAD and FGB that have reported solid loan growth in 2Q2011. ENBDs net loans were broadly unchanged Q-o-Q at AED193 billion, as Islamic financing declined by 7.6% Q-o-Q. (Murad Ansari, Shabbir Malik) Commercial Bank of Dubai (CBD) - Earnings Trend Uninspiring; Reiterate Neutral on Weak Short-Term Growth - Flash Note - 26 July 2011 Earnings Flat on Weak Revenue Growth; Maintain FV, Neutral Rating: Commercial Bank of Dubai (CBD) has reported a net profit of AED260 million (EPS: AED0.13) for 2Q2011, coming in relatively flat both Y-o-Y and Q-o-Q. Marginal revenue growth in 2Q2011 was offset by higher operating and credit costs. Earnings beat our estimate of AED220 million, however, on lower-than-expected provisions. We maintain our Neutral rating on CBD as our fair value (FV) of AED3.30/share implies only 9.6% upside potential. The lack of a catalyst and weak short-term growth prospects constrain the stocks re-rating potential, in our view. Net Interest Spreads Widen; Loan Book Contracts: Net interest income was relatively flat Q-o-Q at AED339 million, as the effect of wider net interest spreads was offset by a contraction in the loan book. Net interest spreads widened by an estimated 12 bps Qo-Q to 3.30%, as EIBOR rates eased and the bank shed high-cost deposits, in our view. CBDs loan book shrank by 7.1% Y-o-Y and 4.7% Q-o-Q to AED26 billion, as loans to the Trade and Small Businesses segment declined by almost AED1 billion Q-o-Q. The loans-to-deposits ratio increased to 93% from 89% in 1Q2011, as deposits (ex-Ministry of Finance deposits) declined 9.1% Q-o-Q to AED26.3 billion.

NPL Ratio Trends up Mainly on a Lower Loan Base: We estimate that the NPL ratio increased 60 bps Q-o-Q to 5.9% in 2Q2011, as gross loans declined by 4.7% Q-o-Q. Gross incremental NPL formation in 2Q2011 remained relatively unchanged Q-o-Q at AED110 million; however, gross loans declined by AED1.2 billion Q-o-Q, resulting in a sharp increase in the NPL ratio. Credit costs rose by only 6% Q-o-Q to AED64 million, which kept the NPL coverage broadly unchanged at 88.5% in 2Q2011. (Murad Ansari, Shabbir Malik) Etisalat - 2Q2011 Results: Weak on UAE Operation, Again, and One-Off Provision - Flash Note - 26 July 2011 Results Miss on UAE Weakness and One-Offs: Etisalat 2Q2011 results disappointed, mainly on weakness at the level of the UAE operation, which is still the main revenue generator for Etisalat and the largest contributor to our fair value (FV) with 76%. The consolidated top line was 3% weaker than expected on continued weakness in the UAE, which was one of the reasons behind the EBITDA margin missing our estimate by 370 bps. Earnings missed our estimate by 12%, declining 12% Q-o-Q. EBITDA included a one-off provision of AED318 million on Etisalat Misr; if we exclude it, EBITDA would have missed our estimate by only 2%, with an in-line margin at 50.5%, while earnings would have missed by only 4%. UAE Remains under Pressure from Competition: Internet and data segments in the UAE operation have been growing, but not fast enough to cushion the decline in voice, which continues to be under pressure from competition. Management sees elasticity in the internet and data segments, which could generate more value for Etisalat if prices are reduced this year based on a release by the TRA. Management believes that the restructuring and cost reduction, which the company is currently undertaking, will protect margins going forward, given that it could mitigate the effect of the decline in the voice segment. Royalty Reduction Unlikely in Near Term; Reiterate Neutral Rating: Following our conversation with management, we believe that the reduction of the 50% federal royalty charge for Etisalat is unlikely in the near term, although there are some signs of progress, such as the government engaging an adviser on the matter. For now we maintain our Neutral rating on Etisalat, as our unchanged fair value (FV) of AED12.54/share implies limited upside potential. (Omar Maher, Marise Ananian)
[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.