Misr Fertilizers Production Co.

(MOPCO) Mai El-Sayed, CFA

Pre-Trading Company Note Senior Equity Analyst
Equities | Fertilizers | Egypt Mai.Elsayed@MubasherFS.com
Wednesday, 7 September 2016

Back in the game, just in time for its huge Not Rated MTR Price Target: EGP39.75
expansions to deliver IFA Fair Value: EGP52.18

• After 18 years since its IPO, MOPCO’s just about to start trading today, 7 September. Shareholder structure (locked vs. available-for-trading shares
• The largest fertilizers producer in Egypt by capacity boasting high profitability amongst
its global peers, thanks in part to the favorable pricing of its feedstock (natural gas).
• Our multiples-based PT is EGP39.75/share, 24% below the IFA’s fair value of
EGP52.18/share.
The listing story: In 1998, MOPCO (MFPC.EGX) had reached a price target (PT) of EGP39.75/share or
offered 35% of its shares at its establishment 24% lower than the IFA fair value. We believe
through an IPO. In March 2016 , MOPCO shares MOPCO is an attractive investment opportunity,
(229.1mn shares with a par value of EGP10 each) provided the market price is below our PT, for the
were listed on EGX. And since the company meets following reasons:
all regulatory requirements related to trading on • Majority owned by government entities, MOPCO
EGX, it was decided that MOPCO shares will start is the largest fertilizers producer in Egypt by
trading on EGX today, 7 September 2016, with no capacity with current expansions allowing the
price limits only in the first trading session. The company to grow its market share further (c.29%).
stock’s opening price will be EGP10/share, but we
believe it will fetch a higher price when it starts • It boasts one of the highest profitability among its
trading. global peers (2015 EBITDA margin of 51.7% vs. a
global peers’ average of 28.5%), thanks to its
IFA’s fair value set at EGP52.18/share, but there is favorable pricing of its feedstock (natural gas).
a lock-up period for founders: To value MOPCO, its
independent financial advisor (IFA) used a • A potential EGP devaluation should provide the Summary KPIs
discounted cash flow sum-of-the-parts model, company with a competitive edge in exports.
EGP mn 2013a 2014a 2015a 2016e* 2017e* 2018e*
coming up with a fair value of EGP52.18/share. This • Against the backdrop of the fertilizers industry’s Revenue 1,589 1,043 617 3,112 3,697 3,953
is more than 4x MOPCO’s par value and its opening high barriers to entry, market demand should be EBITDA 858 503 261 1,827 2,160 2,294
price. Meanwhile, as per EGX listing rules, founding sustained given a growing population and the Net Income 291 37 310 223 576 746
shareholders must maintain 51% of their ownership Egyptian government’s plan to expand arable land Revenue Growth (%) 117.1% -34.3% -40.8% 404.1% 18.8% 6.9%
of the company’s stock which in total should not be by 1.5mn feddans over the coming few years. EBITDA Growth (%) 203.0% -41.3% -48.2% 601.0% 18.2% 6.2%
Net Income Growth (%) 235.7% -87.1% 726.4% -28.0% 158.6% 29.4%
less than 25% of the entire number of shares of the Key risks: We note several risks to keep in mind EBITDA Margin (%) 53.7% 47.9% 41.7% 58.7% 58.4% 58.0%
company. In MOPCO’s case, after Agrium Egyptian when investing in MOPCO: Declining fertilizers’ Net Margin (%) 18.3% 3.6% 50.1% 7.2% 15.6% 18.9%
Holdings’ rejected the listing of the company’s prices. New global capacities coming on stream Net Debt (Cash) 4,836 5,418 7,410 NA NA NA
shares on EGX, the remaining founding over through 2018 with urea capacity increasing EPS (EGP) 1.46 0.19 1.35 0.97 2.52 3.25
shareholders decided to fill in Agrium’s place to 20% over the period to 113mn tons p.a. Any BVPS (EGP) 24.98 25.24 22.30 NA NA NA
meet the above-mentioned criteria. As a result, the surprise increase in feedstock (natural gas) prices DPS (EGP) - 2.30 0.50 NA NA NA
founding shareholders (excluding Agrium) will have will negatively affect MOPCO’s profitability. Natural PER (x) 6.9x 53.2x 7.4x 10.3x 4.0x 3.1x
74.3% of their respective shares locked up for a PBV (x) 0.4x 0.4x 0.4x NA NA NA
gas supply shortage can disrupt production. Any
period up to two years from the first trading date. Dividend Yield (%) 0.0% 23.0% 5.0% NA NA NA
measures taken by the Egyptian government to ban
*All forecasted figures are the result of summing MOPCO’s and ENPC’s forecasted financials from the IFA
Our view — MOPCO’s PT is EGP39.75/share: Using exports to meet local demand. MOPCO is highly
valuation report, using an exchange rate of EGP7.83/USD as per the study.
multiples-based valuation models, we have leveraged (debt-to-equity of 145% in 2015). Source: MOPCO, IFA valuation report

Page 1 For more information on MubasherTrade, please visit our website at www.MubasherTrade.com or contact us at
Research@MubasherTrade.com. Please read the important disclosure and disclaimer at the end of this document.
Misr Fertilizers Production Co. (MOPCO)| Egypt| Pre-Trading Company Note
Wednesday, 7 September 2016

Corporate Profile
Misr Fertilizers Production Company “MOPCO” was founded in
July 1998 inside Damietta’s free zone in northern Egypt. The
company was originally set to operate in the petroleum sector
but later on expanded its activity to include fertilizers production.
In 2009, MOPCO started fertilizers production in its production
train “MOPCO 3” with an annual capacity of 635,000 tons of urea
and 396,000 tons of ammonia.
Historical background
ENPC (formerly E-Agrium): In 2006, E-Agrium was established as
a joint venture (JV) between Canada’s Agrium, the Egyptian
Petrochemicals Holding Company (ECHEM), the Egyptian Gases
Holding Company (EGAS), the Egyptian Natural Gases Holding
Company (GASCO), and Arab Petroleum Investment (Apicorp) to
establish and operate a fertilizers complex with two production
trains 1 and 2. By August 2008, E-Agrium was acquired by
MOPCO through a share swap. The deal resulted in MOPCO
owning 100% of E-Agrium (which was renamed to ENPC), while
Agrium received a 26% stake in MOPCO. According to the deal, all
applicable contracts for the engineering, procurement and
construction for the two additional urea trains as well as the gas
supply agreement, off-take marketing agreements and various
other commitments were retained in relation to the second and
third production trains. In 2016, MOPCO started the commercial
operations of ENPC’s two production trains “1 and 2” with an
annual capacity of 1.26mn tons of urea and 788,000 tons of
ammonia. This brought total annual capacity of MOPCO’s
facilities to 1.9mn tons of urea and 1.2mn tons of ammonia.
Spinning off the petroleum business: In 2011, the EGM of
MOPCO had approved splitting the company into two separate
entities: MOPCO Damietta for Fertilizers Production and Suez
Petroleum Services Company (SUPSC) in Suez for petroleum
services and trading of petroleum products.
Environmental issues: Since its establishment, MOPCO’s factory
has been confronted by neighboring residents for concerns over
pollution. Protests against the factory heightened in 2008 and
also delayed the establishment of E-Agrium facilities 1 and 2,
prompting MOPCO to enter into an agreement with E-Agrium’s
shareholders to acquire their stake in E-Agrium in the
aforementioned share swap deal. In 2011, then-Egypt’s Prime
Minister Mr. Essam Sharaf issued a decision to shut down
operations in the disputed MOPCO 3 in Damietta after an
outrage of protests claiming that the factory’s operating
production line does not adhere to environmental regulation and
pollutes the Nile River. In January 2013, Mansoura Administrative
Court revoked the resolution that was released by the Cabinet
for suspending expansions in MOPCO 1 and 2, ruling that
construction shall be resumed. The court also revoked the
decision made by the Governor of Damietta and decided to
resume operation of MOPCO 3.
In 2014, MOPCO’s lenders decided to resume the facility they
provided to MOPCO for expansions on MOPCO 1 and 2. Total
bank financing for the expansion plan amounted to USD1.05bn,
while total investment cost reached USD1.9bn. During May 2016,
MOPCO launched the commercial operations of MOPCO 1 and 2.

Current shareholder structure Milestones

1998
Established as a
2008
company operating
in the petroleum Share swap
2009
sector. agreement with
Canada’s Agrium to Started production
2011
acquire E-Agrium in MOPCO 3 with an
(ENPC). annual capacity of The company split 2014-2016
635,000 tons of urea into two separate
and 396,000 tons of entities: MOPCO 2014:
ammonia. and SUPSC.
Resumption of
construction work in
MOPCO 1 and 2.
2016:
Commercial
operation of
MOPCO 1 and 2.

Source: MOPCO Source: MOPCO, MubasherTrade Research

Page 2 For more information on MubasherTrade, please visit our website at www.MubasherTrade.com or contact us at
Research@MubasherTrade.com. Please read the important disclosure and disclaimer at the end of this document.
Misr Fertilizers Production Co. (MOPCO)| Egypt| Pre-Trading Company Note
Wednesday, 7 September 2016

Valuation & Recommendation

Valuation models: We used two different relative c.USD940. Based on MPOCO’s urea capacity (including Relative valuation | EV/ton
valuation models to value MOPCO: P/E and EV/ton. ENPC’s capacity), we reached a fair value of
EGP38.15/share. Capacity
EV (mn USD) EV/ton
1. P/E – FV of EGP41.35/share: (mn tons)
We valued MOPCO based on a global peers’ median Our PT is EGP39.75/share based on equal weights: Country Company name
forward P/E (2017) of 16.4x and 2017e net income We note that we set our PT as the simple average of Egypt Abou Kir Fertilizers & Chemica 1,299 1.70 $764
(IFA forecasts). The IFA valuation report forecast 2017 both valuation methods. This resulted in a PT of Netherlands OCI NV 11,135 3.23 $3,447
stand-alone MOPCO’s and ENPC’s net income at EGP39.75/share, which is incidentally 24% below IFA
Saudi Arabia Saudi Arabian Fertilizer Co 8,845 3.40 $2,602
EGP458.7mn EGP117.7mn, respectively. Consolidating valuation report fair value of EGP52.18/share. Also,
United States Terra Nitrogen Co LP 1,792 1.90 $943
both figures resulted in an EPS of EGP2.52 for 2017. At the IFA valuation implies an EV/ton of c.USD1,135,
16.4x 2017e earnings, we value MOPCO at some 20% above global peers’ median. Global Peers' Average $1,939
EGP41.35/share. Global Peers' Median $943
Method FV (EGP/sh.) Weight
Egypt Misr Fertilizers Production Co 1,064 1.90 $560
2. EV/ton – FV of EGP38.15/share : P/E 2017 41.35 50% Source: Bloomberg, MubasherTrade Research
Since MOPCO produces only nitrogen fertilizers, we
used a universe of global nitrogen fertilizer producers. EV/ton 38.15 50%
The median EV/ton for MOPCO’s global peers was
Weighted average 39.75

Relative valuation | P/E

EBITDA Margin PER EV/EBITDA Net Debt/EBITDA

Country Company name 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017

Canada Potash Corp of Saskatchewan In 42.9% 41.4% 35.0% 38.9% 18.8x 11.2x 34.0x 25.6x 10.9x 7.1x 13.6x 11.3x 1.3x 1.6x 3.0x 2.5x
Canada Agrium Inc 10.6% 14.4% 12.5% 13.1% 18.1x 12.7x 19.1x 16.9x 10.5x 8.1x 10.8x 9.9x 2.5x 2.3x 2.8x 2.5x
United States Mosaic Co/The 22.8% 22.7% 15.5% 17.9% 15.3x 10.2x 55.9x 28.0x 8.9x 6.1x 12.0x 10.0x 0.7x 1.3x 2.6x 2.3x
United States CF Industries Holdings Inc 58.2% 38.8% 31.4% 33.2% 13.6x 10.6x 23.2x 22.3x 6.0x 9.1x 10.2x 9.0x 0.9x 3.2x 2.9x 2.2x
Norway Yara International ASA 15.8% 19.5% 16.6% 15.8% 12.1x 13.0x 12.4x 12.0x 7.2x 5.6x 5.7x 5.8x 0.8x 0.6x 1.0x 1.2x
Israel Israel Chemicals Ltd 20.5% 27.8% 19.1% 19.9% 19.8x 10.2x 13.5x 11.9x 9.5x 5.7x 8.8x 8.0x 2.1x 2.2x 3.0x 2.8x
Netherlands OCI NV 19.5% 11.2% 31.8% 33.9% 16.9x n/a 21.5x 13.9x 22.5x 40.8x 11.0x 8.4x 8.0x 17.4x 5.4x 3.7x
United States Terra Nitrogen Co LP 60.7% 58.9% n/a n/a 8.1x 9.3x n/a n/a 4.6x 5.2x n/a n/a -0.3x -0.3x n/a n/a
China Stanley Agricultural Group Co 10.4% 10.7% 10.7% 11.8% 22.5x 30.4x 20.1x 16.2x 17.6x 25.7x 17.4x 13.1x -1.4x 0.4x n/a n/a
Egypt Abou Kir Fertilizers & Chemica 31.5% 29.7% n/a n/a 10.1x 15.2x n/a n/a 10.0x 10.9x n/a n/a -2.7x -2.1x n/a n/a
Russia Acron PJSC 33.4% 36.8% 35.9% 35.0% 16.6x 10.3x 5.3x 5.3x 6.0x 5.8x 5.1x 4.8x 2.1x 1.2x 1.3x 0.9x
Pakistan Engro Corp Ltd/Pakistan 16.4% 23.5% 25.3% 22.8% 14.9x 10.6x 11.9x 10.9x 5.9x 4.9x 5.4x 6.0x 1.5x 1.1x 1.0x 2.0x
China Shindoo Chemical Industry Co L 15.4% 14.5% n/a n/a 50.7x 69.6x 45.8x 24.8x 12.3x 23.1x n/a n/a 4.0x 3.8x n/a n/a
China China BlueChemical Ltd 25.0% 20.6% 12.6% 17.5% 110.1x 9.8x 42.5x 10.3x 3.1x 2.8x 3.8x 2.5x -1.1x -1.4x -3.0x -2.3x
Taiwan Taiwan Fertilizer Co Ltd 13.3% 17.7% 7.7% 6.3% 17.8x 17.4x 27.5x 30.0x 24.3x 9.1x 23.3x 26.1x 0.9x -4.5x -9.6x -10.8x
Saudi Arabia Saudi Arabian Fertilizer Co 74.6% 68.1% 54.3% 57.2% 14.8x 16.1x 19.7x 16.7x 13.6x 13.4x 16.0x 13.6x -0.5x -0.7x -0.6x -0.6x
Egypt Misr Fertilizers Production Co 52.9% 51.7% n/a n/a n/a 7.4x n/a n/a n/a 29.5x n/a n/a 9.5x 22.4x n/a n/a

Global Peers' Average 29.4% 28.5% 23.7% 24.9% 23.8x 17.1x 25.2x 17.5x 10.8x 11.5x 11.0x 9.9x 1.2x 1.6x 0.8x 0.5x
Global Peers' Median 21.6% 23.1% 19.1% 19.9% 16.8x 11.2x 20.8x 16.4x 9.8x 7.6x 10.8x 9.0x 0.9x 1.2x 1.9x 2.1x
Source: Bloomberg,

Page 3 For more information on MubasherTrade, please visit our website at www.MubasherTrade.com or contact us at
Research@MubasherTrade.com. Please read the important disclosure and disclaimer at the end of this document.
Misr Fertilizers Production Co. (MOPCO)| Egypt| Pre-Trading Company Note
Wednesday, 7 September 2016

Financial Summary
Balance Sheet (EGPmn) Per-Share Data
FY End: December 2013a 2014a 2015a 2013a 2014a 2015a

Current Assets Price 10.00 10.00 10.00

Cash & Cash Equivalent 514 313 415 # Shares (WA,in mn) 199.2 199.2 229.1
Accounts & Notes Receivable 1 - 1 EPS 1.46 0.19 1.35
Other Current Assets 477 411 429 DPS - 2.30 0.50
Total Current Assets 993 725 845 BVPS 24.98 25.24 22.30
Fixed Assets (net) 1,702 1,594 1,490
Other Non-Current Assets 8,971 9,836 12,319 Valuation Indicators
Net Intangibles - - - 2013a 2014a 2015a
Total Assets 11,667 12,155 14,654
PER (x) 6.9x 53.2x 7.4x
Liabilities & Equity PBV (x) 0.4x 0.4x 0.4x
Short-Term Debt - - - EV/Sales (x) 4.3x 7.1x 15.7x
Current Portion of LT Debt 650 367 1,600 EV/EBITDA 8.0x 14.7x 37.2x
Accounts Payable 65 69 53 Dividend Payout Ratio 0.0% 1223.5% 37.0%
Other Current Liabilities 1,140 1,145 1,658 Dividend Yield 0.0% 23.0% 5.0%
Total Current Liabilities 1,855 1,580 3,312
Long-Term Debt 4,499 5,215 5,948 Profitability & Growth Ratios
Other Non-Current Liabilities 337 332 285 2013a 2014a 2015a
Total Liabilities 6,691 7,127 9,545
Minority Interest 0.0 0 0 Revenue Growth 117.1% -34.3% -40.8%
Total Equity 4,976 5,028 5,109 EBITDA Growth 203.0% -41.3% -48.2%
Total Liabilities & Equity 11,667 12,155 14,654 Net Income Growth -235.7% -87.1% 726.4%
EBITDA Margin 54.0% 48.2% 42.2%
Income Statement (EGPmn) Net Margin 18.3% 3.6% 50.1%
2013a 2014a 2015a ROAE 6.1% 0.7% 6.1%
Total Revenue 1,589 1,043 617 ROAA 2.5% 0.3% 2.3%
COGS 584 396 186
GP 1,004 647 431 Liquidity & Solvency Multiples
Other operating (exp.)/ Inc. 147 144 170 2013a 2014a 2015a
EBITDA 858 503 261
D&A, Others (130) (129) (124) Net Debt/(Cash) 4,836 5,418 7,410
Net finance exp., taxes (576) (192) (20) Net Debt/Equity 97.2% 107.8% 145.0%
NP Before XO & MI 152 182 116 Net debt to EBITDA 5.6x 10.8x 28.4x
XO & Minority Interest 139 (145) 194 Debt to Assets 0.44x 0.46x 0.52x
Net Income 291 37 310 Current ratio 0.5x 0.5x 0.3x

Cash Flow Statement (EGPmn) Estimates of FV study

2013a 2014a 2015a 2016e 2017e 2018e
Revenues 3,112 3,697 3,953
Cash from Operating 882 427 481 MubasherTrade Research vs. Consensus NA NA NA
Cash from Investing (865) (971) (2,244) Net Income 223 576 746
Cash from Financing (36) 394 1,738 MubasherTrade Research vs. Consensus NA NA NA
Net Change in Cash (20) (150) (25) Fwd PER (x), Last Price 10.28 3.97 3.07
Fwd PER (x), Price Target 40.87 15.80 12.21
Capex (869) (885) (2,506)

Source: Company data, FV study a = Actual; e = Estimate

Page 4 For more information on MubasherTrade, please visit our website at www.MubasherTrade.com or contact us at
Research@MubasherTrade.com. Please read the important disclosure and disclaimer at the end of this document.
Misr Fertilizers Production Co. (MOPCO)| Egypt| Pre-Trading Company Note
Wednesday, 7 September 2016

Business Model
Capacities: MOPCO operates three production facilities in Damietta’s free zone. Market structure of urea producers in Egypt Revenues (EGPmn)
MOPCO 3 is the oldest facility which started operation in 2009 and has an annual
capacity of 635,000 tons of urea and 396,000 tons of ammonia. MOPCO 1 and 2, Helwan
the production facilities of its subsidiary ENPC, started commercial production in Fertilizers
May 2016 with an annual capacity 1.26mn tons of urea and 788,000 tons of 10% Mopco
Alex Fert
ammonia. Total annual capacities of the three facilities amount to 1.9mn tons of 10% 29%
urea and 1.2mn tons of ammonia, placing MOPCO as the largest fertilizers
producer in Egypt with a 29% market share.
Delta
Production and sales strategy: Current products offered by MOPCO include urea Fertilizers
and ammonia fertilizers, with the majority of the production of the latter utilized 10%
as an intermediary in the production of urea fertilizers. MOPCO generates
revenues from the sale of urea and ammonia to local and international markets.
For urea, the company supplies a certain portion of its production to the Egyptian
Ministry of Agriculture based on pre-determined subsidized prices. The remaining Abu Qir Egyptian
portion of urea is split between local sales at free market prices and exports Fertilizers Fertilizers
based on international prices. For ammonia, most of the production is directed to 18% 23%
the production of urea, while the surplus quantities are sold in the local market at
free market prices. Source: MOPCO Source: MOPCO

ENPC has entered into an off-take agreement with Canada’s Agrium to export
c.90% of its urea production, while the remaining 10% will be directed to the local
market, along side the surplus ammonia quantities.
Financial performance: Over the past four years, the company’s performance has EBITDA (EGPmn) Net Income (EGPmn)
been affected by several external factors that hindered profitability. In 2012, the
production stoppage due the environmental concerns led to losses, where the EBITDA EBITDA Margin Net profit NPM
company registered very low utilization rates. Performance returned to normal 84%
1,000 60% 500 100%
levels in 2013 and 2014 before dipping again in 2015 due to the shortage in 900 858 404
400 80%
natural gas supplies. During 2015, revenues dropped 41% YoY to EGP617mn, and 800 48% 48% 50% 291 310
54% 300 57%
EBITDA declined 48% YoY, implying a lower EBITDA margin of 42% vs. 48% in 700 42%
40%
60%
39% 200 50%
2014. Net income however, jumped 8 times to EGP310mn on the back of forex 600 503 128 40%
gains amounting to EGP305mn. 500 30% 100 37
400 20%
283 -
261 20%
H1 2016 witnessed the launch of MOPCO 1 and 2: Revenues of H1 2016 ended 300 233
(100)
2012a 2013a 2014a 2015e H1 2015e H1 2016e 0%
200
June more than doubled to EGP482mn, mainly due to the start of production of 10%
-29%
18% 4% -20%
100 (200)
MOPCO 1 and 2 as well as the stabilization of gas supplies. EBITDA jumped to -
0
0% (214)
0% (300) -40%
EGP233mn vs. EGP0.1mn in H1 2015, implying an EBITDA margin of 48% vs. 2012a 2013a 2014a 2015e H1 2015e H1 2016e
almost 0% in the comparable period a year ago. Meanwhile, net income grew
216% YoY to EGP404mn. Excluding the FX gain impact, MOPCO reported an Source: MOPCO Source: MOPCO
adjusted net income of EGP106mn in H1 2016 vs. an adjusted net loss of
EGP81mn in the year-ago period.

Page 5 For more information on MubasherTrade, please visit our website at www.MubasherTrade.com or contact us at
Research@MubasherTrade.com. Please read the important disclosure and disclaimer at the end of this document.
Disclosure Appendix

Important Disclosures
METHODOLOGY: We strive to search for the best businesses that trade at the lowest valuation levels as measured by an issuer’s intrinsic value on a per-share basis. In doing so, we follow both top-
down and bottom-up approaches. Under the top-down approach, we attempt to study the most important quantitative and qualitative factors that we believe can affect a security's value, including
macroeconomic, sector-specific, and company-specific factors. Under the bottom-up approach, we focus on the analysis of individual stocks by running our proprietary scoring model, including
valuation, financial performance, sentiment, trading, risk, and value creation.
COUNTRY MACRO RATINGS: We analyze the four main sectors of a country’s macroeconomics, then we assign , , and  star for low risk, Low Risk, and high risk, respectively. We use
different weights for each economic sector: (a) Real Sector (30% weight), (b) Monetary Sector (10% weight), (c) Fiscal Sector (25% weight), (d) External Sector (15% weight), and (e) Credit Rating and
Outlook (20%).
STOCK MARKET RATINGS: We compare our year-end price targets for the subject market index on a total-return basis versus our calculated required rate of return (RRR). Taking into account our
Country Macro Rating, we set the “Neutral” borderline (below which is “Underweight”) as 20% of RRR for  Country Macro Rating, 40% of RRR for  Country Macro Rating, and 60% of RRR for
 Country Macro Rating. That said, our index price targets are based on the average of two models. Model (1): Estimated index levels based on consensus price targets of all index constituents. Stocks
with no price targets are valued at market price. Model (2): Estimated index levels based on our expected re-pricing (whether re-rating, de-rating, or unchanged rating) of the forward price-earnings
ratio (PER) of each index in addition to consensus earnings growth for the forward year.
SECTOR RATINGS: On the sectors level, we focus on six major sectors, namely (1) Consumer and Health Care, (2) Financials, (3) Industrials, Energy, & Utilities, (4) Materials, (5) Real Estate, and (6)
Telecom Services & IT. To assess each sector, we use the SWOT analysis to list the strengths, weaknesses, opportunities, and threats in each country. We then translate our qualitative SWOT analysis
into a quantitative model to evaluate all six sectors across countries. Each of the measures we used, although mostly subjective, is assigned a score as either +1 (high impact), 0 (medium impact), or -1
(low impact). At a later stage, when assigning the final rating – Overweight, Neutral, or Underweight – for each sector in each country, we realize that sometimes it is unfair to assign equal weights for
the sub-sectors in each major sector assessed. Hence, some of the sub-sectors are given different weights for their significant profile in each country. Additionally, the final rating for each sector in each
specific country is assigned based on a relative calculation comparing this sector to all other sectors in this country.
SECURITY INVESTMENT RATINGS: We combine intrinsic value, relative valuation, and market sentiment into a single
rating. Our three-pronged methodology involves (1) discounted cash flows “DCF” valuation model(s), (2) relative If Risk Rating
valuation metrics, and (3) overall sentiment. Whenever possible we attempt to apply all three aspects on the issuers or Total Return
Low Moderate High
securities under review. In certain cases where we do not have our own financial and valuation models, we attempt to is …
(1) (2) (3)
scan the market for other analysts’ value estimates and ratings (i.e. consensus view) on average. We compliment this
with relative valuation and sentiment drivers, such as positive/neutral/negative news flows. For all issuers/securities Buy
covered, we have three investment ratings (Buy, Hold, or Sell), comparing the security’s expected total return (including Higher than RRR Higher than RRR Higher than RRR
(B)
both price performance and expected cash dividend) over a 12-month period versus its Required Rate of Return “RRR”

Investment Rating
as calculated using the Capital Asset Pricing Model “CAPM” and adjusted for the Risk Rating we attach to each security. Hold Between RRR Between RRR Between RRR
Our price targets are subjective and are estimates of the analysts where the securities covered will trade within the (H) and 20% of RRR and 40% of RRR and 60% of RRR
next 12 months. Price targets can be derived from earnings-based valuation models (e.g. Discounted Cash Flow “DCF”),
asset-based valuation models (e.g. Net Asset Value “NAV”), relative valuation multiples (e.g. PER, PBV, EV/EBITDA, etc.), Sell Lower than 20% Lower than 40% Lower than 60%
or a combination of them. In case we do not have our own valuation model, we use a weighted average of market (S) of RRR of RRR of RRR
consensus price targets and ratings. We review the investment ratings periodically or as the situation necessitates.
We have decided not to publish a rating on the
Not Rated
SECURITY RISK RATINGS: We assess the risk profile of each issuer/security covered and assign one of three risk ratings stock due to certain circumstances related to the
(NR)
(High, Moderate, or Low). The risk rating is weighted to reflect different aspects specific to (1) the sector, (2) the issuer, company (i.e. special situations).
(3) the security under review, and (4) volatility versus the market (as measure by beta) and versus the security’s average
Not Covered We do not currently cover this stock or we are
annualized standard deviation. We review the risk ratings at least annually or as the situation necessitates.
(NC) restricted from coverage for regulatory reasons.
Other Disclosures
MFS does not have any proprietary holding in any securities. Only as a nominee, MFS holds shares on behalf of its
clients through Omnibus accounts. MFS is not currently a market maker for any listed securities.
Analyst Certification
I (we), Mai El-Sayed, Senior Equity Analyst, employed with Mubasher International, a company under the National Technology Group of Saudi Arabia being a shareholder of Mubasher Financial
Services BSC (c) as author(s) to this report, hereby certify that all the views expressed in this research report accurately reflect my (our) views about the subject issuer(s) or security(ies). I (we) also
certify that no part of my (our) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or view(s) expressed in this report. Also, I (we) certify that neither myself
(ourselves) nor any of my (our) close relatives hold or trade into the subject securities.

Head of Research Certification

I, Amr Hussein Elalfy, Global Head of Research of Mubasher Financial Services BSC (c) confirm that I have vetted the information, and all the views expressed by the Analyst in this research report
about the subject issuer(s) or security(ies). I also certify that the author(s) of this report, has (have) not received any compensation directly related to the contents of the Report.

Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Mubasher Financial Services BSC (c) (‘MFS’) has based
this document on information obtained from sources it believes to be reliable but which it has not independently verified; MFS makes no guarantee, representation or warranty and accepts no
responsibility or liability as to its accuracy or completeness. The opinions contained within the document are based upon publicly available information at the time of publication and are subject to
change without notice. This document is not intended for all recipients and may not be suitable for all investors. Securities described in this document are not available for sale in all jurisdictions or to
certain category of investors. The document is not substitution for independent judgment by any recipient who should evaluate investment risks. Additionally, investors must regard this document as
providing stand-alone analysis and should not expect continuing analysis or additional documents relating to the issuers and/or securities mentioned herein. Past performance is not necessarily a
guide to future performance. Forward-looking statements are not predictions and may be subject to change without notice. The value of any investment or income may go down as well as up and you
may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may
have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognized market, it may be difficult for investors to sell their investments or to
obtain reliable information about its value or the extent of the risk to which it is exposed. References to ratings/recommendations are for informational purposes only and do not imply that MFS
adopts, supports or confirms in any way the ratings/recommendations, opinions or conclusions of the analysts. This document is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law, regulation or which
would subject MFS or its affiliates to any registration or licensing requirements within such jurisdiction. MFS accepts no liability for any direct, indirect, or consequential damages or losses incurred by
third parties including its clients from any use of this document or its contents.

Copyright
Copyright © 2016, Mubasher Financial Services BSC (MFS), ALL RIGHTS RESERVED. No part or excerpt of this document may be redistributed, reproduced, stored in a retrieval system, or transmitted,
on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of MFS. MubasherTrade is a trademark of Mubasher Financial
Services BSC. Mubasher Financial Services BSC (c) is an Investment Business Firm Category 1, licensed and regulated by the Central Bank of Bahrain.

Issuer of Report
Mubasher Financial Services BSC (c) is an Investment Business Firm Category 1, licensed and regulated by the Central Bank of Bahrain.
Website: www.MubasherTrade.com
E-mail: Research@MubasherTrade.com
Sales & Research Contact Details
INSTITUTIONAL SALES RETAIL SALES RESEARCH

MENA Bahrain UAE Research Team

Inst.Sales@MubasherFS.com Global@MubasherTrade.com UAE@MubasherTrade.com Research@MubasherTrade.com
+971 4 321 1167 Call Center: +973 1730 0849 Call Center: +971 800 567 000

Egypt Egypt
Institutions-Egy@Mubasher.net Egypt@MubasherTrade.com
+202 2262 3310 Call Center: 16699 / +202 2262 3230