MENA-2 THURSDAY MORNING ROUND-UP

Egypt
Telecom Egypt sees call volume quadrupling on new DLD rate NUCA sets prices for land plots offered in public draw at EGP380-EGP580 per sqm EFIC halts Ain Sokhna plant construction until financing is secured Total vehicle sales nearly flat M-o-M in July, down 21% Y-o-Y

Saudi Arabia
Aramco Total USD1 billion sukuk to be issued on 10 September 2011

EFG Hermes Research

Egypt Banking Sector Note - Upgrade CIB, NSGB to Buy; Share Prices Discount Earnings Pressure in 2H2011 - 24 August 2011 Sinai Cement Company (SC) - 2Q2011 Net Income 12% Above Our Estimate; Maintain Forecasts And FV, Upgrade To Neutral On Share Price Drop - Flash Note - 24 August 2011

Agenda
Egypt Sat 27 August >> Al Ezz Dekheila (EZDK) AGM Tue 6 September >> Orascom Construction Industries (OCI) 2Q2011 results Sat 10 September >> Ezz Steel AGM Mon 12 September >> Maridive EGM regarding 1:6 bonus shares

Egypt News
Telecom Egypt sees call volume quadrupling on new DLD rate Telecom Egypt (TE) (ETEL.CA) said that its new unified domestic long distance (DLD) tariff between Egyptian governorates has quadrupled the volume of DLD calls and added 50,000 new subscribers to its base, Al-Ahram daily newspaper reported. TE has introduced a new intra-governorate tariff of EGP0.030/minute as a limited time promotion from July until the end of September in order to maintain its market share against competition from mobile operators. (Al-Ahram, Telecom Paper) Telecom Egypt: EGP14.97, Rating: Buy, FV: EGP19.50, MCap: USD4,288 million, TELE EY / ETEL.CA NUCA sets prices for land plots offered in public draw at EGP380-EGP580 per sqm The New Urban Communities Authority (NUCA) has set a price range for land plots it is planning to offer through a public draw on 25 September 2011 between EGP380 per square metre and EGP580 per square metre. The authority has recently announced plans to offer 6,100 residential plots in 12 new cities that cater to the middle income segment. NUCA aims to offer 100,000 similar plots by 2012, through public draws held once every four months starting in September 2011. Buyers will pay 25% of the land value as a down payment and the remaining amount in four yearly instalments. The authority obliges that lands be developed within five years, and buyers will be allowed to construct a ground floor and up to three floors. (Al Ahram) EFIC halts Ain Sokhna plant construction until financing is secured The Egyptian Financial and Industrial Company (EFIC) [EFIC.CA] has halted construction at its expansion in Ain Sokhna due to funding issues, Al Mal reported, citing Ali Al Sayad, the companys Chairman as saying. The company will resume the 500 ktpa granular single super phosphate (GSSP) project once financing is secured, said Al Sayad, and it is studying alternative methods of funding the project in case the company does not fulfil the requirements for either bank lending or leasing, according to Al Mal. (Al Mal)

Total vehicle sales nearly flat M-o-M in July, down 21% Y-o-Y Egypts total vehicle sales declined 21% Y-o-Y and showed a slow recovery of 2% M-o-M in July to 17,688 vehicles, according to a report by the Automotive Marketing Information Council (AMIC). Passenger car sales dropped 23% Yo-Y, but rose 4% M-o-M to 14,264 cars (81% of total sales). Truck sales rose 5% Y-o-Y and 4% M-o-M to 2,713 vehicles and comprised 15% of total sales. Bus sales fell the sharpest Y-o-Y, -50%, and fell 35% M-o-M to 711 vehicles. Passenger car sales YTD fell 31% Y-o-Y to 77,000. Imported vehicles (56% of total fell) 41% Y-o-Y, while total locally assembled vehicle sales fell 31% Y-o-Y. (AMIC, Al Borsa)

Saudi Arabia News

Aramco Total USD1 billion sukuk to be issued on 10 September 2011 The Saudi Aramco Total Refining and Petrochemical Company (Satorp) has decided to issue its USD1 billion sukuk on 10 September 2011 after Saudi Arabias Capital Market Authority (CMA) approved the issue a few weeks ago. The offering will last 16 days, with the roadshow beginning on 13 September 2011. The sukuk will be offered to financial institutions, mutual funds, insurance companies, pension funds, as well as individuals. (Bloomberg, Argaam)

EFG Hermes Research

Egypt Banking Sector Note - Upgrade CIB, NSGB to Buy; Share Prices Discount Earnings Pressure in 2H2011 - 24 August 2011 Upgrade NSGB, CIB to Buy; Earnings Pressure in 2H2011 Priced In: We lower slightly our earnings forecasts for CIB, NSGB and CAE mainly as a result of higher tax charges following the governments approval of an increase in the tax rate to 25% from the flat rate of 20% previously. Our provisioning forecasts remain broadly unchanged and assume that NPL formation will increase significantly in 2H2011 following a very resilient 1H2011, where NPL ratios remained broadly unchanged. We believe that current multiples for NSGB and CIB discount significant credit quality deterioration over the remainder of 2011, as well as a soft recovery in loans growth rates in 2012. We upgrade our ratings for NSGB and CIB to Buy, with our fair value (FV) estimates implying 24% and 21% upside potential, respectively. NSGBs 2011 P/BV is currently at a 18% discount to CIB and therefore we believe that NSGB presents a better buying opportunity at current levels. We remain Neutral on CAE. 2Q2011 Results: Provisioning Rises Y-o-Y, Revenue Returns Strong: We believe that overall Egyptian banks reported fairly solid sets of 2Q2011 results, given Egypts weak macro-economic backdrop. Provisioning increased Yo-Y, mainly driven by prudent provisioning, but revenue generation was little affected by political instability, with revenue returns remaining broadly unchanged Y-o-Y. ROAE fell by 400 bps on average due to higher cost of risk, but levels remained high at an average of 22% for CIB, NSGB and CAE. Common positive surprises were mainly at the provisioning level, which suggests that our FY2011 forecasts are slightly conservative. Expect No Strong Re-Rating in Short Term; Attractive Entry Point at Current Levels: We believe that Egyptian banks are not poised for a strong re-rating in the short term as the timing for a pickup in economic activity remains uncertain. However, we remain convinced that the potential for Egypts economy to increase its financial leverage (loans-to-GDP ratio is now at a 10-year low) provides meaningful asset growth opportunities for the banking sector. Our assumptions are conservative, however, and continue to assume credit growth below inflation growth rates, a consistent trend in Egypt over the past five years at least. (Elena Sanchez-Cabezudo, Mohamed El Hefny) Sinai Cement Company (SC) - 2Q2011 Net Income 12% Above Our Estimate; Maintain Forecasts And FV, Upgrade To Neutral On Share Price Drop - Flash Note - 24 August 2011 Net Income 12% Above Estimate On Higher Non-Operating Income: Sinai Cement Company (SC) reported 2Q2011 results, showing net income of EGP153 million, 12% above our estimate of EGP137 million on higher-than-expected interest income; 2Q2011 net income was down 27% Y-o-Y due to a decline of 6% in volumes and 12% in prices on both demand slowdown and higher competition in the local market. However, net income rose 31% Q-o-Q, driven mainly by a 17% Q-o-Q recovery in volumes, as well as higher non-operating income. Operational Results Slightly Below Estimates On Lower Prices: SCs 2Q2011 revenue came in at EGP371 million (down 17% Y-o-Y and up 11% Q-o-Q), 4% below our estimate of EGP388 million on lower-than-expected prices, which dropped 12% Y-o-Y and 5% Q-o-Q to EGP400/tonne due to higher competition, especially from the earlierthan-expected commencement of a nearby armed forces plant that sold cement at relatively low prices (cEGP370/tonne). The EBITDA margin in 2Q2011 reached 41% (flat Q-o-Q) versus 2Q2010s 51% and our estimate of 40%. The companys profitability continued to be pressured by mazote usage following the successive explosions at the natural gas pipeline in Sinai.

Maintain Forecasts And FV; Upgrade To Neutral On Share Price Drop: We maintain our fair value (FV) of EGP35/share for SC and our 2011 estimates, including revenue of EGP1.3 billion (down 18% Y-o-Y) and net income of EGP519 million (down 43% Y-o-Y). However, we upgrade our rating to Neutral from Sell following a 16% drop in share price since 21 July 2011. Our FV is only 8% below the current market price. We believe that the drop reflects the companys risks, including: i) slowdown in local demand, coupled with ii) higher competition from new entrants, leading to iii) both lower market share and selling prices, in addition to iv) rising costs on higher mazote usage (EGP30-40/tonne of cement more expensive than natural gas). (Malak Youssef, Ahmed Gad)
[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.