MENA-2 TUESDAY MORNING ROUND-UP

Egypt

Election preparations to start 18 September Prime Minister taken to hospital; new cabinet delayed Egypt plans first bond sale since revolution Central Bank of Egypt approves Piraeus Bank Egypt sale process TV shows live trial to assuage anger of protests Tumult in Egypt antiquities as Hawass swept aside IDA approves KIMAs new nitrogen fertiliser plant in Aswan

Saudi Arabia

APCO 2Q2011 net profit down 84% Y-o-Y, below forecast Zamil Industrial 2Q2011 net profit drops 24% Y-o-Y, rises 30% Q-o-Q; in line with forecast STC 2Q2011 revenue and earnings beat estimates, EBITDA margin slightly misses Herfy 2Q2011 net profit surges 21% Y-o-Y/Q-o-Q, 9% above estimate on higher top line Jarir announces 2Q2011 DPS of SAR2.0/share Savola 2Q2011 up 11% Y-o-Y on strong sales growth Mobily 2Q2011 net profit grows 17% Q-o-Q, 7% ahead of forecasts Dar Al Arkan and JDURC's Qasr Khozam project halted SIDC reports 2Q2011 net profit of SAR1.8 million Tasnee 2Q2011 earnings include SAR150 million provision

Tunisia

Prime Minister says protesters aim to spread chaos

Morocco

Government says to sell part of telecom stake

EFG Hermes Research

Riyad Bank - 2Q2011 Earnings Bounce on Strong Revenues, Normalising Costs; Maintain Buy - Flash Note 18 July 2011 Saudi Hollandi Bank (SHB) - 2Q2011 Results: Strong Recovery; Maintain Buy - Flash Note 18 July 2011 Bank Aljazira - 2Q2011 Results: Earnings Still Geared to Broking Income; Maintain Sell - Flash Note 18 July 2011 Bank Albilad - 2Q2011 Results: Beat on Strong Revenues, But Profitability Still Weak; Maintain Sell Flash Note 18 July 2011 The Saudi Investment Bank (SAIB) - 2Q2011 Results: Flat Earnings and Loan Growth Trend; Maintaining Buy on Inexpensive Valuations - Flash Note 18 July 2011 Aldrees Petroleum - 2Q2011 Earnings Drop Y-o-Y, In Line; Station Additions to Drive Revenue Growth; Reiterate Buy - Flash Note 18 July 2011 Saudi Electricity Company (SEC) - SEC's 2Q2011 Results in Line; Reiterate FV and Neutral Rating Flash Note 18 July 2011

Agenda
Saudi Arabia Sat 6 August >> Etihad Atheeb AGM and EGM

Egypt News
Election preparations to start 18 September

Preparations for Parliamentary elections will begin on 18 September, and the vote will be overseen by one of the country's top judges, state TV and an army source said on 18 July 2011, citing the ruling military council. "The High Electoral Committee will begin its duties starting on 18 September and will be headed by the president of the appeals court in Cairo," the army source told Reuters. The court's president is Abdel Moez Ibrahim. The source did not say what the election preparations would entail, but earlier this month another army source said that it preparations would begin with the registration of candidates, followed by an official campaign period. (Reuters)

Prime Minister taken to hospital; new cabinet delayed Egyptian Prime Minister Essam Sharaf was taken to hospital because of blood pressure problems on 18 July 2011, thus the swearing in of a much-changed cabinet was delayed. Sharaf, 59, underwent medical tests in a hospital in Cairo after suffering a fall in blood pressure, the state MENA news agency reported. A cabinet source said Sharaf later left the hospital. Sharaf's admittance to hospital occurred after a ceremony to swear in his new cabinet scheduled for 18 July 2011 was delayed until 20 July 2011. It was not immediately clear if it would be delayed further. The cabinet reshuffle was designed to placate protesters demanding deeper political and economic reforms by Egypt's military rulers, who took over when Hosni Mubarak was driven from office in February by a popular uprising. Protestors said the reshuffle, changing half of the cabinet, including the foreign and finance ministers, only partially met their demands. (Reuters) Egypt plans first bond sale since revolution Egypt plans to sell two-year securities next week, ending a six-month drought of bond sales, as yields on its treasury bills (T-bills) have declined from their highest levels seen since 2008. The government aims to raise EGP3 billion (USD500 million) from the auction of the local-currency securities on 25 July 2011, according to Central Bank of Egypt (CBE) data on Bloomberg. The Finance Minister NAME also plans to resume the sale of three-year bonds in the first week of August and will offer two-year floating-rate notes in the same month, according to an issuance schedule posted on the Finance Ministrys website. Egypt has not issued debt with a maturity of more than one year since 18 January 2011, one week before the start of anti-government protests that later ousted President Hosni Mubarak. (Bloomberg) Central Bank of Egypt approves Piraeus Bank Egypt sale process The Central Bank of Egypt (CBE) gave preliminary approval on 18 July 2011 for Standard Chartered to start the due diligence on Piraeus Bank Egypt for a potential acquisition of the latter. According to the CBEs Deputy Governor Hisham Ramez, the CBE is in the process of setting a date for Standard Chartered to start the due diligence on Piraeus Bank Egypt. The deal could boost the balance sheet of the Greek bank in light of the economic downturn currently facing Greece. (Reuters) TV shows live trial to assuage anger of protests Egyptian television showed live images on 18 July 2011 of the trial of one of Hosni Mubarak's ministers, the first such broadcast aimed at placating protesters who have demanded greater transparency in holding the ex-president's allies accountable. The trials of former President Mubaraks associates are regarded as a credibility test for the military council, which took power after his downfall. Different TV shows showed former Information Minister Anas el-Fekky in a white shirt. He appeared briefly before the judge and then returned to a cage in the court where defendants stand. Fekky was detained in February on suspicion of profiteering and wasting public funds. (Reuters) Tumult in Egypt antiquities as Hawass swept aside Egypt is struggling to find a replacement to run its Antiquities Ministry after the flamboyant Zahi Hawass was swept aside in a cabinet reshuffle to eject the old guard. Hawasss initial replacement, Abdel-Fattah al-Banna, came under fire for lacking archaeology credentials for the post. One official at the antiquities department said that many people in the crowd are angry that Hawass had not fulfilled a promise to give workers on contract staff jobs by mid-July. "Thief, thief," crowds yelled at him, according to a video on the website of el-Youm el-Sabaa newspaper. Appointed by Prime Minister Essam Sharaf on 17 July 2011, al-Banna quit a day later. (Reuters) IDA approves KIMAs new nitrogen fertiliser plant in Aswan The Industrial Development Authority (IDA) has approved the construction a new nitrogen fertiliser plant in Aswan by Egyptian Chemical Industries (KIMA). The new project, which is expected to produce 600,000 tpa of urea and 600,000 tpa of ammonium nitrate, was first rejected by the IDA in 2009 given that the government at that time refused to build any new energy-intensive projects. It was then approved by former Minister of Investment Mahmoud Mohieldin, before being rejected again (following the revolution

that began on 25 January 2011) by Engineer Hesham el-Harouni, who was acting IDA Chairman at the time. The current IDA Chairman, Ismail Najdi, has approved the project. KIMA's current production capacity is around 900,000 tons of ammonium nitrate and 7,000 tons of ferrosilicon per year. (Al-Masry alYoum, Zawya)

Saudi Arabia News

APCO 2Q2011 net profit down 84% Y-o-Y, below forecast Arabian Pipes Company (APCO) [2200.SE] has announced preliminary 2Q2011 results. Net profit came in at SAR1.3 million, down 84% Y-o-Y and versus a loss of SAR0.963 million in 1Q2011. Earnings were below our SAR4.5 million forecast. On the operational level, gross profit dropped by 67% Y-o-Y to SAR6.2 million, up from SAR3 million in 1Q2011. Net operating profit came in at SAR0.958 million versus SAR6.1 million in 2Q2010 and a loss of SAR1.4 million in 1Q2011. Net profit in 1H2011 came in at SAR0.365 million versus SAR9.5 million in the same period last year. On the other hand, APCO reported an operational loss of SAR0.466 million in 1H2011 versus an operational income of SAR7.5 million in 1H2010, which is due to lower sales volumes on the back of decreased demand during the period, coupled with higher overhead costs related to Al Jubail and Riyadh plants (the company has not begun the implementation of large contracts secured earlier this year). In early 2011 APCO won a SAR315 million contract to supply large diamtre oil pipes to the UAE; we believe that the of this contract should be felt in 2H2011. We maintain our fair value (FV) of SAR31.9/share and our Neutral Rating as our FV offers 1.5% upside potential over the current share price. APCO has not yet released full financials for 2Q2011. We will provide more details and update our views once full financials are available. (Company Disclosure, Tarek El Shawarby) APCO: SAR31.4, Rating: Neutral, FV: SAR31.9, MCap: USD264 million, APCO AB / 2200.SE Zamil Industrial 2Q2011 net profit drops 24% Y-o-Y, rises 30% Q-o-Q; in line with forecast Arabian Pipes Company (APCO) [2200.SE] has announced preliminary 2Q2011 results. Net profit came in at SAR1.3 million, down 84% Y-o-Y and versus a loss of SAR0.963 million in 1Q2011. Earnings were below our SAR4.5 million forecast. On the operational level, gross profit dropped by 67% Y-o-Y to SAR6.2 million, up from SAR3 million in 1Q2011. Net operating profit came in at SAR0.958 million versus SAR6.1 million in 2Q2010 and a loss of SAR1.4 million in 1Q2011. Net profit in 1H2011 came in at SAR0.365 million versus SAR9.5 million in the same period last year. On the other hand, APCO reported an operational loss of SAR0.466 million in 1H2011 versus an operational income of SAR7.5 million in 1H2010, which is due to lower sales volumes on the back of decreased demand during the period, coupled with higher overhead costs related to Al Jubail and Riyadh plants (the company has not begun the implementation of large contracts secured earlier this year). In early 2011 APCO won a SAR315 million contract to supply large diamtre oil pipes to the UAE; we believe that this contract should be felt in 2H2011. APCO has not yet released full financials for 2Q2011. (Company Disclosure, Tarek El Shawarby)

Zamil: SAR30.2, Rating: Neutral, FV: SAR33.24, MCap: USD483 million, ZIIC AB / 2240.SE STC 2Q2011 revenue and earnings beat estimates, EBITDA margin slightly misses Saudi Telecom Company (STC) [7010.SE] has reported 2Q2011 headline figures, which came in ahead of forecasts at both the revenue and the net profit levels, while slightly missing at the EBITDA margin level. This is the first quarter where the Indonesian subsidiary, Axis, has been fully, rather than proportionately, consolidated in STCs financials (after STC increased its effective stake in the operation to 83.8% in April 2011). Total revenue for the quarter came in at SAR13,880 million, up 10% Y-o-Y and 6% Q-o-Q, and 3.8% ahead of our estimate and 4.8% ahead of Reuters consensus. International operations contribution to this quarters top line remained at 34%. The company cited both growth at the local operation level (particularly in broadband, both fixed and mobile) and at the international operations level. Revenue for 1H2011 now represents 50% of our FY2011 revenue forecast, which could imply FY2011 revenue slightly ahead of our forecast given that 2H is traditionally stronger than 1H for the company. We do not believe, however, that this merits an upgrade of our numbers at this stage. The EBITDA margin came in at 36.6%, a slight drop from 1Q2011s 36.8% and below our forecast of 37.3%. Earnings for 2Q2011 recovered to SAR2,256 million, up 43% Q-o-Q. Last quarters earnings were pressured by a SAR355 million FX loss. Still, excluding the one-off, earnings would have grown a solid 17% Q-o-Q. Earnings were 12.5% ahead of our estimates and 12.8% ahead of Reuters consensus. The company has announced a DPS of SAR0.50/share, in line with our forecast. STC has cut DPS to SAR0.50/share from SAR0.75/share since 1Q2011. We forecast a DPS of SAR2.00/share for FY2011, implying a dividend yield of 5.6%.


Overall, this looks like a good set of results, although we do not expect a significant impact on the share price performance. We currently have a Neutral rating on the stock as our fair value (FV) of SAR41.4/share implies 15% upside potential. The stock is currently trading at an estimated 2011 P/E of 9.9x, which is at a premium to Mobily (7020.SE), our top pick amongst Saudi telecoms. Mobily currently trades at an estimated 2011 P/E of 8.0x. (Company Disclosure, Nadine Ghobrial) STC: SAR35.9, Rating: Neutral, FV: SAR41.4, MCap: USD19,147 million, STC AB / 7010.SE Herfy 2Q2011 net profit surges 21% Y-o-Y/Q-o-Q, 9% above estimate on higher top line Herfy Food Services (Herfy) [6002.SE] has reported its preliminary 2Q2011 figures highlighted by net profit growth of 21%, both Y-o-Y and Q-o-Q, to SAR39.4 million, mainly driven by a strong top line. Revenue grew 28% Y-o-Y and 18% Q-o-Q to SAR188 million, 11% higher than our estimate. Revenue growth was driven by: i) strong store additions in 2010 (20 stores) and 1H2011 (seven stores, four in 2Q2011) and; ii) the country-wide salary increases and bonuses, which lead to higher store traffic, in our view. Operating profit for the quarter was SAR39.7 million, rising 24% Y-o-Y, with the margin coming in at 21.1%. Operating profit was 10% ahead of our estimate, with the margin coming in on par with our expectation. We had expected new store additions and higher consumer spending to impact 2Q2011 results. However, 2Q2011 net profit beat our SAR36.3 million forecast by 9% on the top line miss. On a separate note, the ex-dividend date for the previously-announced SAR1.5/share cash dividend for 1H2011 and 1:9 bonus share issue (one bonus share for every nine held) will be the day following the EGM (scheduled for 1 August 2011). (Tadawul, Nada Amin, Wafaa Baddour, Khaled Sadek) Herfy: SAR83.50, Rating: Neutral, FV: SAR88.0, MCap: USD601 million, HERFY AB / 6002.SE Jarir announces 2Q2011 DPS of SAR2.0/share Jarir Marketing Companys (Jarirs) (4190.SE) board of directors (BoD) has agreed to distribute a cash dividend for 2Q2011 of SAR2.0/share, or SAR80 million in total cash dividends, with the ex-dividend date set for 2 August 2011. This is in line with our expectation. Our FY2011 SAR9.1 DPS implies a dividend yield of 5.4% based on the closing price on 18 July 2011. (Tadawul, Nada Amin) Jarir: SAR168.0, Rating: Neutral, FV: SAR181.5, MCap: USD1,792 million, JARIR AB / 4190.SE Savola 2Q2011 up 11% Y-o-Y on strong sales growth Savola 2Q2012 net profit came in at SAR230.7 million, up 11% Y-o-Y and 40% Q-o-Q, in line with our forecast. Revenue was SAR6.3 billion, up 30% Y-o-Y and 12% Q-o-Q, and 11% ahead of our expectation. Sales rose as Savola increased its market share in the food and retail segments, the company noted. Gross profit (costs include depreciation) came in at SAR963 million, up 36% Y-o-Y, with the margin widening to 15.3% from 14.6% in 2Q2010. Operating profit (including share of profit from associates) was SAR423 million, up 41% Y-o-Y. Net profit for 1H2011 was SAR396 million versus SAR601 in 1H2010, which included a SAR196 million one-off gain from the sale of Herfy shares (as part of Herfy's IPO). Savola has announced a SAR0.25/share cash dividend for 2Q2011, with the ex-dividend date set for 26 July 2011. The company has set its net profit target for 3Q2011 (before one-offs) at SAR300 million and has also maintained its full year target of SAR1 billion. (Tadawul, Nada Amin, Wafaa Baddour) Savola: SAR25.9, Rating: Buy, FV: SAR35.0, MCap: USD3,453 million, SAVOLA AB / 2050.SE Mobily 2Q2011 net profit grows 17% Q-o-Q, 7% ahead of forecasts Etihad Etisalat (Mobily) [7020.SE] has reported 2Q2011 results, showing another strong quarter, particularly at the revenue and earnings levels, although the margin was slightly below forecasts. Revenue came in at SAR5.1 billion, up 14% Q-o-Q, 11% ahead our estimates and 12% ahead of Reuters consensus. The company attributed the revenue growth to an increase in minutes of use (MOU), data traffic and sale of smart phones. Data revenue now represents 20% of total revenue for 1H2011 (versus 17% in 1H2010). EBITDA came in at SAR1.8 billion, implying a margin of 34.3% versus our 36.4% forecast and down from the 1Q2011s 35.2%. The company reported a net profit for 2Q2011 of SAR1.2 billion, up 29% Y-o-Y and 17% Q-o-Q, 7% ahead of our estimate of SAR1,089 million. Mobily has indicated that its board of directors (BoD) will meet on 21 July 2011 to determine the dividend that will be distributed for 1H2011. We forecast a DPS of SAR1/share for 1H2011 and SAR2.00/share for 2H2011, implying a dividend yield of 5.7% (for both?). We believe that this is a very good set of results and should create a rally in the stock, particularly with the dividend announcement expected on 21 July 2011. The stock is trading at attractive multiples (estimated 2011 P/E of 8.0x and 2011 EV/EBITDA of 5.2x). We currently have a Buy

rating on the stock as our fair value (FV) of SAR65.9/share implies 24% upside potential. Mobily is our top pick in the MENA region telecom coverage universe. (Company Disclosure, Nadine Ghobrial) Mobily: SAR53.0, Rating: Buy, FV: SAR65.9, MCap: USD9,893 million, EEC AB / 7020.SE Dar Al Arkan and JDURC's Qasr Khozam project halted Dar Al Arkan (4300.SE) and Jeddah Development and Urban Regeneration Company's (JDURC's) Qasr Khozam project has been halted as the contractor that had won the contract has not been able to execute the project due to financial problems, Zawya Dow Jones reported, citing Al-Bilad daily. The contractor will lose SAR250 million that it had paid to the Jeddah municipality as a fee for investing in strategic places in the area, including Khozam Palace, a swimming pool and several public parks. The contractor did not have sufficient funds for basic infrastructure costs and was unable to compensate landowners living in the area to be developed. The name of the contractor has not been disclosed, but the source revealed that a new consortium of companies is expected to take over the project and resume construction in August. The project is located in Jeddah and it is planned to rejuvenate the city of Jeddah. (Zawya Dow Jones) Dar Al Arkan: SAR7.4, Rating: Buy, FV: SAR16.8, MCap: USD2,131 million, ALARKAN / 4300.SE SIDC reports 2Q2011 net profit of SAR1.8 million Saudi Industrial Development Company (SIDC)[2130.SE] has reported preliminary 2Q2011 net profit of SAR1.8 million, plunging from SAR101 in 2Q2010 (which included a cSAR100 million one-off gain from selling an investment in Yansab [2290.SE]), but rising from SAR1.6 million in 1Q2011. Gross profit came in at SAR18.5 million, up 28% Y-o-Y, while operating profit came in at SAR6.1 million, tripling Y-o-Y. Net profit for 1H2011 was SAR3.4 million, falling from 1H2010s exceptional SAR101million. Gross profit for the same period was SAR34 million, up 29% Y-o-Y, while operating profit stood at SAR10.6 million, up from SAR4.1 million in 1H2010. (Tadawul) Tasnee 2Q2011 earnings include SAR150 million provision The National Industrialization Company (Tasnee) [2060.SE] released full 2Q2011 financials on 17 July 2011, which included a SAR150 million provision for 2Q2011. According to the financials, the provision was charged to Tasnees 66%-owned subsidiary, Cristal Global, due to costs associated with taking apart production units, relocating them, and putting them back together. Tasnees share in the provision stood at SAR100 million, implying that net income would have been SAR694.2 million without the provision versus the actual reported net income of SAR594.2 million. (Argaam)

Tunisia News
Prime Minister says protesters aim to spread chaos Tunisia's Prime Minister Beji Caid Sebsi on 18 July 2011 accused protesters that held a wave of demonstrations over the weekend of plotting to destabilise the country, six months after the revolution. One man was killed at a demonstration on the same day, when soldiers fired into the air to bring the crowd under control. It was the first reported death in a number of violent protests that have hit Tunis and other cities since 15 July 2011. Prime Minister Sebsi has said that the protests were intended to spread chaos and derail plans for an election on 23 October 2011 that will choose an assembly charged with drawing up a new constitution. "There is an orchestrated plan to upset the stability of the country," he said in a televised address. "Elections will be held as scheduled on 23 October 2011 despite everything," he said, adding "I appeal to all political parties and citizens to defend the country." The government later said that it had ordered an overnight curfew on the town starting on 18 July 2011. The rioting is the starkest sign to date of the friction between Tunisia's secular establishment and Islamists who have been growing more assertive since the country's autocratic leader was ousted in a revolution six months ago. (Reuters)

Morocco News
Government says to sell part of telecom stake The Moroccan government will sell part of its 30% stake in Maroc Telecom given that a spending push to calm street protests has eroded its public finances and raised concern over its ability to fund key projects. A source familiar with the plan told Reuters on 15 July 2011 that the government had revived plans to sell part of its stake. The Ministry of Finance and Economy said on 18 July 2011 that it will sell up

to 7% of Maroc Telecom's capital, or 61.53 million shares. French Vivendi holds a 53% stake in the firm, the country's biggest telecom company. The ministry did not say when the transaction would be completed, but market sources in Casablanca said that it would be before end-4Q2011. The stake is worth MAD8.86 billion (USD1.1 billion), based on Maroc Telecom's closing stock price on 15 July 2011. (Reuters)

EFG Hermes Research

Riyad Bank - 2Q2011 Earnings Bounce on Strong Revenues, Normalising Costs; Maintain Buy - Flash Note 18 July 2011 Earnings Rise 13% Q-o-Q, Ahead of Our Expectations: Riyad Bank reported 2Q2011 earnings of SAR836 million (EPS: SAR0.56), 12.8% higher Q-o-Q and 12% above our estimate of SAR746 million. A strongerthan-expected recovery in revenues primarily drove the earnings surprise. Operating costs appear to have normalised, while provisioning costs remained stable on a Q-o-Q basis. We maintain our Buy rating on Riyad, as our fair value (FV) implies 22% upside potential. Revenues Surprise on Better Spreads, Non-Interest Income: Riyads total revenues increased 2.8% Q-o-Q to SAR1,570 million, almost 6% ahead of our estimate. Net interest income rose 8.4% Q-o-Q, which, in our view, was largely driven by an improvement in net interest spreads. The decline in deposits is likely to have led to lower funding costs, leading to an improvement in net interest spreads. Non-interest income, though 7% lower Q-o-Q, was broadly flat on a Y-o-Y basis, and 9% ahead of our estimate. Operating Costs Normalise; Provisioning Costs Stable: After a spike in 1Q2011, operating costs are estimated to have declined by 8.5% Q-o-Q in 2Q2011, in line with our expectations. Provisioning costs were broadly stable on a Q-o-Q basis, and at an annualised rate of 59 bps are 32% below 2010s 86 bps. Loans Grow 1.1% Q-o-Q; Deposits 0.6% Lower Q-o-Q: Riyads net loans grew 1.1% Q-o-Q to SAR110.6 billion. However, growth was slower than the 3.1% Q-o-Q growth reported in 1Q2011. Deposits declined marginally, 0.6% lower Q-o-Q, after strong growth in 1Q2011. We believe that deposit growth in 1Q2011 was supported by employee bonus payments, which were made towards the end of 1Q2011. Riyads balance sheet, however, remains liquid, with the banks loans-to-deposits ratio at 84%. (Murad Ansari) Saudi Hollandi Bank (SHB) - 2Q2011 Results: Strong Recovery; Maintain Buy - Flash Note 18 July 2011 2Q2011 Earnings Rise 20% Q-o-Q, Ahead of Our Estimate: Saudi Hollandi Banks (SHB) 2Q2011 earnings rose sharply, rising 19.6% Q-o-Q to SAR263 million (EPS: SAR0.80). Earnings were 11% ahead of our estimate of SAR237 million. Net interest spreads were marginally lower on a Q-o-Q basis; however, revenues were supported by higher non-interest income and a decline in operating and provisioning costs. We maintain our Buy rating on SHB, as our unchanged fair value (FV) of SAR35.00/share implies 18% upside potential. Net Interest Spreads Contract; Non-Interest Income Higher: SHBs revenues grew 2.1% Q-o-Q, mainly due to stronger non-interest income. We estimate that fee and investment income is likely to have driven the improvement in non-interest income. Net interest spreads are estimated to have softened on a Q-o-Q basis in 2Q2011. SHBs net interest spreads rose c8bps Q-o-Q in 1Q2011 after the bank shed its low-margin loans. Normalising Operating and Provisioning Costs: We estimate that operating costs declined 8.0% Q-o-Q after a surge in 1Q2011 on one-off employee bonuses. On the other hand, asset quality indicators appear to be healthy, supporting a steady decline in provisioning costs. We continue to see earnings getting support in 2011 from strong operating cost and credit quality control. Loans up 6.0% Q-o-Q; Deposits Grow 3.0% Q-o-Q: After contracting in 1Q2011, net loans grew sharply in 2Q2011, rising 6.0% Q-o-Q. We believe that the banks continued focus on improving its presence in the mid-market and consumer segment is beginning to pay off and leading to a loan growth recovery. Deposits, which declined along with net loans in 1Q2011, also recovered strongly, rising 3.1% Q-o-Q in 2Q2011. (Murad Ansari) Bank Aljazira - 2Q2011 Results: Earnings Still Geared to Broking Income; Maintain Sell - Flash Note 18 July 2011 2Q2011 Earnings Rise 4.4% Q-o-Q, Beat on Stronger Non-Interest Income: Bank Aljazira (Aljazira) has announced 2Q2011 earnings of SAR65 million (EPS: SAR0.22), strongly ahead of our estimate. The beat was driven by stronger-than-expected non-interest income, which was likely driven by higher broking income, in our view. Net interest income growth was weak, however, despite strong growth in loans. The

results for 2Q2011, while strong, further reaffirm our view that Aljaziras revenues remain geared to broking income. On the other hand, strong balance sheet growth has yet to translate into any meaningful recovery in core banking income. We maintain our Sell rating on the stock as our unchanged fair value (FV) of SAR16.00/shares implies 16% downside potential. Non-Interest Income Soars 25% Q-o-Q, Spreads Remain Pressured: Aljaziras total revenues grew 11.5% Qo-Q, ahead of our estimate. Non-interest income grew strongly, on higher broking commissions, in our view. Traded value at the Tadawaul stock exchange in 2Q2011 was on average 20% higher Q-o-Q, which should have driven strong growth in broking income for Aljazira. However, this further goes to show the strong gearing of Aljaziras revenues to the broking business. Net interest income, although up 4.8% Q-oQ, was weak when viewed in light of an almost 11% Q-o-Q growth in net loans, suggesting that net interest spreads remain pressured. Loans Grow 11%% Q-o-Q, Deposits Broadly Stable: Aljazira has reported the strongest loan growth amongst Saudi banks in 2Q2011, with net loans rising 10.5% Q-o-Q. We believe that incremental growth has largely come from consumer lending, which has been Aljaziras focus area over the last year. Aljaziras deposits grew 1.1% Q-o-Q, with the banks branch expansion likely leading to consistent growth in deposits, in our opinion. (Murad Ansari) Bank Albilad - 2Q2011 Results: Beat on Strong Revenues, But Profitability Still Weak; Maintain Sell Flash Note 18 July 2011 Earnings Rise 47% Q-o-Q, Ahead of Our Expectations: Bank Albilads (Albilad) 2Q2011 earnings rose 47.3% Q-o-Q to SAR82 million (EPS: SAR0.27). Earnings were significantly ahead of our expectations and recovered on higher revenues and normalising operating costs. The companys 2Q2011 results are encouraging; however, profitability levels are weak to justify current valuations, in our view. On an annualised basis, 2Q2011 earnings translate into a 2011 ROAE of 7%. At the current price, Albilads valuations appear rich to us, with the stock trading at an estimated 2011 P/BV of 1.6x. We maintain our Sell rating on Albilad, as our fair value (FV) of SAR16.00/share implies 13% downside potential. Revenues up 9.6% Q-o-Q; Growth Accelerating: Albilads 2Q2011 revenues rose 9.6% Q-o-Q, supported by a recovery in net interest income and non-interest income. We estimate that the 8.2% Q-o-Q rise in net interest income was mainly supported by loan growth, while net interest spreads also appear to have edged up marginally. Non-interest income maintained a steady uptrend, growing 11.1% Q-o-Q. We estimate that non-interest income growth was driven by higher fee and forex income. Loan Growth Picks up; Deposits Decline: Loan growth momentum strengthened in 2Q2011, with net loans rising 3.1% Q-o-Q, above the 2.7% Q-o-Q growth seen in 1Q2011. We believe that Albilad is making steady market share gains in the mid-market and consumer segments, which are driving steady loan growth. Albilads deposits, however, declined 1.2% Q-o-Q, as the bank is likely to have shed deposits to improve net interest spreads. Albilads balance sheet remains liquid, with the loans-to-deposits ratio at 75% in 2Q2011. (Murad Ansari) The Saudi Investment Bank (SAIB) - 2Q2011 Results: Flat Earnings and Loan Growth Trend; Maintaining Buy on Inexpensive Valuations - Flash Note 18 July 2011 2Q2011 Earnings Flat Q-o-Q, in line with Our Expectations: The Saudi Investment Banks (SAIB) 2Q2011 earnings of SAR208 million (EPS: SAR0.38) were flat on a Q-o-Q basis, and marginally below our estimate of SAR216 million. We await the release of detailed results to analyse operating and provisioning cost trends. However, we believe that operating costs are likely to have normalised after the bank reported relatively high operating costs in 1Q2011. We see downside risks to our 2011 earnings estimates for SAIB, as loan growth remains sluggish. We will review our earnings estimates for SAIB once detailed accounts are released. However, SAIBs valuation continues to look inexpensive to us, with the stock trading at an estimate 2011 P/BV of 1.0x. We maintain our Buy rating on SAIB, with our fair value (FV) of SAR23.70/share implying 28% upside potential. Non-Interest Income Drives 2.5% Q-o-Q Revenue Growth; Spread Improve: SAIBs total revenues grew 2.5% Q-o-Q to SAR425 million, broadly in line with our expectations. With net loans remaining broadly flat Q-oQ, the 1.8% Q-o-Q increase in net interest income suggests that net interest spreads edged up marginally in 2Q2011. Non-interest income growth, however, was stronger, 4.9% Q-o-Q, and likely to have been driven by higher fee income. We also expect broking income to be up Q-o-Q on the back of healthy trading volumes in 2Q2011 at the Saudi Stock Exchange (Tadawul).

Loans Flat Q-o-Q; Deposits Lower: SAIBs net loans declined marginally, 0.5% Q-o-Q lower, in 2Q2011 to SAR30.6 billion. SAIBs loan growth has been sluggish over the last four quarters and is likely to fall short of our full-year 2011 loan growth estimate of 11%. Deposits declined 5.0% Q-o-Q to SAR36.1 billion, with the bank likely shedding deposits to protect net interest spreads. SAIB also shed some of its investments in 2Q2011. The banks investment book contracted c5.0% Q-o-Q in 2Q2011, which was broadly in line with the decline in deposits. (Murad Ansari) Aldrees Petroleum - 2Q2011 Earnings Drop Y-o-Y, In Line; Station Additions to Drive Revenue Growth; Reiterate Buy - Flash Note 18 July 2011 Net Profit Slips Y-o-Y, But Increases Q-o-Q; Revenue Rises Y-o-Y: Aldrees Petroleum 2Q2011 net profit came in at SAR24.6 million, down 8% Y-o-Y, but up 11.6% Q-o-Q, in line with our SAR24.5 million forecast. Revenue rose 14% Y-o-Y to SAR430 million, 2% above our forecast, which we believe was driven by station additions in 2010. On the operational level, gross profit decreased 2% Y-o-Y, but rose 14% Q-o-Q to SAR43.1 million, while net operating profit came in at SAR26.6 million, down 8.6% Y-o-Y, but up 15% Q-oQ. Transportation Segment to Continue to Drag Margins, Earnings Down: The gross margin dropped to 10% in 2Q2011 versus 11.7% in 2Q2010. The drop in margins and earnings was entirely driven by decreased activity in the transportation segment, mainly the transportation of barley, which is a high margin business, as we had expected. The transportation business is witnessing some margin pressures, which began in 4Q10, due to decreased activity during the Pilgrimage season, and which has continued into 1Q2011 and 2Q2011. Maintain Fair Value of SAR52.8/Share; Reiterate Buy: We maintain our fair value (FV) of SAR52.8/share and our Buy Rating on the stock as our FV offers 18% upside potential to the current share price. We maintain our forecast assumptions; we expect a decrease in FY2011 margins entirely from the transportation segment and expect growth in revenues to be mainly driven by the petroleum segment on the back of station additions and improving consumer spending, and hence higher throughput. We note that Aldrees added 60 new stations in 2010 and expects to add 38 stations in 2011. (Tarek El-Shawarby) Saudi Electricity Company (SEC) - SEC's 2Q2011 Results in Line; Reiterate FV and Neutral Rating Flash Note 18 July 2011 Reiterate FV of SAR13.20 and Neutral Rating: Saudi Electricity Companys results were overall in line with our forecasts, with no surprises in 2Q2011. The results underpin our full-year 2011 estimates, which call for revenues of SAR31,501 million and net income of SAR3,223 million. We reiterate our fair value (FV) of SAR13.20/share and our Neutral rating. The Saudi governments recent decision to extend to SEC a SAR51.1 billion 25-year interest-free loan is positive and should help the company meet its medium-term capex requirements. Meanwhile, SECs intensive capital expenditure programme, highly leveraged balance sheet, and lack of short-term catalysts act as overhangs for the stock, in our view. We continue to view SEC as a dividend play, currently yielding 5.2%. 2Q2011 Revenues in Line: SECs 2Q2011 revenues came in at SAR8,348 million, up 13% Y-o-Y and 57% Q-oQ, and in line with our SAR8,316 million estimate. While the Y-o-Y growth in the utilitys top line is attributable to the increase in non-residential tariffs (effective 1 July 2010) and to new capacity additions, the Q-o-Q growth is due to the impact of seasonality, with the second quarter being traditionally the second strongest quarter following the peak third quarter. Net Income Slightly Lower than Expected: Gross profit of SAR3,735 million came in 7% stronger than expected due to COGS coming in 4% weaker than forecasted. Net operating profit of SAR1,237 million was, nevertheless, in line with our expectations, given higher SG&A and depreciation expenses in 2Q2011. A weaker-than-expected other income line meant that net income of SAR1,335 million, up 25% Y-o-Y, was only 2% below our SAR1,359 million estimate. (Abid Riaz, Nadine Hassouna)
[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. EFG Hermes (main office), Building No. B129, Phase 3, Smart Village km 28 Cairo Alexandria Road, Egypt tel.: +20 2 3535 6140 | Fax: +20 2 3537 0939 EFG Hermes (UAE office), Level 6, The Gate, West Wing, DIFC Dubai - UAE tel +971 4 363 4000 | fax +971 4 362 1170 EFG Hermes (Saudi office), Kingdom Tower, 54th floor, Riyadh - Saudi Arabia tel +9661 211 0046 | fax +9661 211 0049 EFG Hermes (Qatar office) Al-Fardan Towers, Office Tower, 7th floor, West Bay, Doha - Qatar tel +974 409 3888 | fax +974 421 3499 Website: www.efg-hermes.com Bloomberg: EFGH | Reuters pages: EFGS .HRMS .EFGI .HFISMCAP .HFIDOM