MENA-1 TUESDAY MORNING ROUND-UP

UAE
Limitless to get two-month extension on USD1.2 billion loan ICD to repay USD4 billion of debt on 21 August 2011

Kuwait
Jazeera Airways 2Q2011 headline results ahead of estimates

Qatar
Moodys assigns debut A1 rating to QEWC with a stable outlook IQ puts two steel projects on hold due to lack of gas Fitch affirms Doha Bank at A with a stable outlook Qatar Cinema reports a net profit of QAR4.2 million in 1H2011

Bahrain
Bahrain approves extra spending and raises borrowing ceiling Impact of political unrest on Bahrains economy up to USD2 billion

EFG Hermes Research

MENA Strategy Note - Sharp Sell-Off to be Short-Lived, but Stay Defensive; Add CIB, Remove NBK from MENA Top 20 List - 08 August 2011 MENA Macroeconomic Quarterly - 3Q2011: Inflation Differentiating MENA from Other Emerging Markets - 08 August 2011 Aldar Properties - 2Q2011 Misses Estimates on Lack of Sizable Land Sale, Expect Strong 2H2011; Maintain Buy - Flash Note - 08 August 2011 Commercial Bank of Kuwait (CBK) - Lower Earnings Forecasts on Higher Cost of Risk; Reduce FV and Rating to Sell Company Note - 08 August 2011

Agenda
Qatar Tue 9 August >> Masraf Al Rayan press conference Tue 9 August >> Qatar Electricity & Water Company (QEWC) 2Q2011 results Thu 11 August >> Barwa Real Estate Company 2Q2011 results Sun 14 August >> Qtel 2Q2011 results Sun 14 August >> Doha Insurance 2Q2011 results Sun 14 August >> Qatar German for Medical Devices Company 2Q2011 results Sun 14 August >> Ezdan Real Estate Company 2Q2011 results Sun 14 August >> Al Meera Consumer Goods Company 2Q2011 results Sun 14 August >> Qatar Fuel Company (Woqod) 2Q2011 results Mon 15 August >> Qatar German for Medical Devices Company press conference Mon 15 August >> Zad Holding Company 2Q2011 results Mon 15 August >> Salam International 2Q2011 results Mon 15 August >> The Qatar Company for Meat & Livestock Trading (Mawashi) 2Q2011 results

UAE News
Limitless to get two-month extension on USD1.2 billion loan

Limitless LLC, controlled by state-owned Dubai World, received a fifth extension on a USD1.2 billion loan as it works on a restructuring plan, two bankers familiar with the plan said. The loan has been extended to 30 September 2011 from 31 July 2011 without a change in the terms, the bankers added. (Bloomberg) ICD to repay USD4 billion of debt on 21 August 2011 The Investment Corporation of Dubai (ICD) said yesterday that it will repay in full a USD4 billion debt facility maturing on 21 August 2011. ICD said that it will repay the three-year facility (a tranche of the USD6 billion of conventional and Islamic facilities signed on 21 August 2008) from internal sources derived from cash dividends received from ICDs operating subsidiaries. ICDs Chief Executive, Mohammed Al Shaibani, said that the announcement demonstrates that as part of the Government of Dubai, ICD is committed and able to meet its debt obligations. (Zawya Dow Jones)

Kuwait News
Jazeera Airways 2Q2011 headline results ahead of estimates Jazeera Airways (JAZK.KW) reported 2Q2011 revenues of KWD13.9 million (up 63% Y-o-Y and 22 % Q-o-Q), ahead of our forecast of KWD12.8 million. The carrier reported a net profit of KWD2.2 million, which marks the fourth conservative profitable quarter since its turnaround. This compares to our 2Q2011 net income forecast of KWD0.95 million. However, the bottom line was boosted by forex gains of KWD0.7 million in 2Q2011, which we did not include in our forecasts. Excluding this forex movement, clean net income of KWD1.5 million was still ahead of our KWD0.95 million estimate. The load factor came in at 66.6% and indicates a pick-up from 1Q2011. Yields continued to show strength, coming in at KWD40.2 for 2Q2011 (versus KWD26.4 for 2Q2010 and KWD35.9 for 1Q2011), reflecting: i) Jazeeras higher surcharges, ii) introduction of new routes (in particular the high-yielding Cairo route launched in May 2011), iii) reduction of capacity in Kuwaits market with the exit of Wataniya, and iv) improvement in the product offering (by increasing the baggage allowance and offering food), which enables the carrier to charge higher ticket prices. The company has no hedging policy in place, but was successful in protecting its bottom line by actively adding surcharges in 2Q2011. The companys planned rights issue (200 million shares at KWD0.1/share (par)) is imminent, but still awaiting the issuance of an Emiri decree, which could happen in 3Q2011. Our conclusions: The companys results have come in above our expectations (although boosted in part by forex gains again). Following four consecutive profitable quarters, we believe Jazeera Airways is well-positioned to sustain this profitability and should gain further market share with the exit of Wataniya from Kuwaits market. Our FY2011 earnings forecast of KWD4.6 million now looks conservative, and we believe there is room for upgrades. Meanwhile, we are mindful that the companys balance sheet still remains highly levered after the acquisition of Sahaab. Therefore, we feel Jazeera will need to complete its rights issue to help improve its stretched balance sheet. (Company Disclosure, Abid Riaz, Nadine Hassouna) Jazeera Airways: KWD0.24, Rating: Neutral, FV: KWD0.18, MCap: USD199 million, JAZEERA KK / JAZK.KW

Qatar News
Moodys assigns debut A1 rating to QEWC with a stable outlook Moodys announced that it assigned for the first time a long-term local currency issuer rating of A1 to Qatar Electricity & Water Company (QEWC) [QEWC.QA] with a stable outlook, The Gulf Times reported. The rating is mainly supported by the beneficial contractual framework put in place by Qatar that significantly reduces its exposure and its Qatari joint ventures to common industry risks for utilities, namely, regulatory, demand and price risks, the rating agency said. (The Gulf Times) Qatar Electricity & Water Company: QAR135.00, Rating: Buy, FV: QAR183.20, MCap: USD3,709 million, QEWC QD / QEWC.QA IQ puts two steel projects on hold due to lack of gas Industries Qatar (IQ) [IQCD.QA] announced that it has put on hold two planned steel projects in the industrial city of Mesaieed worth QAR8.1 billion (USD2.22 billion) due to problems securing natural gas for the projects, Zawya Dow Jones reported. The market should also be aware that following extensive discussions with Qatar Petroleum, it has been agreed to put the Qatar Steel Phase 2 and 3 projects on hold due to natural gas allocation restrictions, the company said in a statement. The company added that it plans to revisit the projects upon securing sufficient natural gas allocations. Qatar Steels phase two project was originally scheduled for completion in 3Q2013 and phase three in 2015. Neither project broke ground or received the approval of IQs shareholders. Qatar Steel is a wholly owned subsidiary of IQ. (Zawya Dow Jones) Industries Qatar: QAR134.50, Rating: Buy, FV: QAR170.00, MCap: USD20,323 million, IQCD QD / IQCD.QA Fitch affirms Doha Bank at A with a stable outlook Fitch Ratings affirmed Doha Banks (DOBK.QA) Long-Term Issuer Default Rating (IDR) at A with a stable outlook, Bloomberg reported. (Bloomberg)

Qatar Cinema reports a net profit of QAR4.2 million in 1H2011 Qatar Cinema & Film Distribution Company (QCFD.QA) reported a net profit of QAR4.2 million in 1H2011, compared to QAR4.0 million in the corresponding period last year, the company said in a statement to the Qatar Exchange. EPS amounted to QAR0.82 as at 30 June 2011, compared to QAR1.10 as at 30 June 2010. (Qatar Exchange)

Bahrain News
Bahrain approves extra spending and raises borrowing ceiling Bahrains ministers approved additional 2011-2012 budget spending of BHD325 million to cover an increase in public sector wages. The ministers also approved an increase of the countrys borrowing ceiling to BHD3.5 billion from BHD2.5 billion, according to a statement issued by the cabinet. (Zawya Dow Jones) Impact of political unrest on Bahrains economy up to USD2 billion Bahrains economy has lost USD1.5-2.0 billion due to the political unrest in the country, according to the Head of Bahrains Chamber of Commerce Esam Fakhro. (Reuters)

EFG Hermes Research

MENA Strategy Note - Sharp Sell-Off to be Short-Lived, but Stay Defensive; Add CIB, Remove NBK from MENA Top 20 List - 08 August 2011 Expect Sharp Sell-Off to be Short; MENA to Outperform Global Markets: Early signs indicate that the current sharp sell-off in MENA markets is unlikely to last for more than a few days, unlike the sustained selling pressure we saw in mid-2008. We do not believe that the US credit rating downgrade is itself enough to cause prolonged market weakness, although the Eurozone remains a major source of risk. We note that investors are far less leveraged than in 2008, and foreign investors are relatively uninvested in the region. MENA markets typically outperform global markets during periods of weakness, principally due to higher dividend yields, in our opinion. Global Markets Pricing in Weaker Growth Outlook; We Stay Defensive: Global markets are in the process of discounting a weaker growth outlook, and a negative feedback cycle is possible if developed markets see sustained sharp losses. We still prefer stocks geared to MENA domestic demand and continue to prefer banks over materials names. Our favoured markets are the UAE, as a recovery trade, and Qatar, due to its strong earnings outlook; both markets are priced at an unwarranted discount to MENA and emerging markets. We remain neutral on Egypt and Saudi Arabia, although recent weakness has made valuations more attractive. Opportunity to Accumulate Positions in MENA: The current sell-off should be viewed as an opportunity to build positions, in our opinion, as: i) we expect the sell-off to be fairly short-lived; and ii) much of the selling has been indiscriminate, with stocks with more defensive traits (like QEWC, Union National Bank, and Aldrees from our MENA Top 20 List) substantially underperforming their respective national benchmarks. We expect that investors will increasingly focus on companies with high dividend yields as the end of the year approaches. Expect Recovery in Volumes Post-Ramadan; Add CIB to MENA Top 20 List: We do not expect to see a sustained recovery in volumes until Ramadan ends and 3Q2011 earnings season approaches. Until then, any recovery in MENA markets is likely to be only short term, after which we may see markets resuming their sideways and range-bound performance. Further weakness in the Egyptian market means that we now see little additional downside potential for Commercial International Bank (CIB), the most liquid of the traded banks; we add the stock to our MENA Top 20 List. We remove National Bank of Kuwait (NBK), given the lack of any improvement in Kuwaits market. (Fahd Iqbal, Simon Kitchen) MENA Macroeconomic Quarterly - 3Q2011: Inflation Differentiating MENA from Other Emerging Markets - 08 August 2011 Inflation Contained in 1H2011, with Fewer Drivers than Emerging Markets: Inflation across the MENA region was relatively contained in 1H2011, with more than half of our countries under our coverage seeing flat or lower inflation levels compared to end-2010. Jordan was the only MENA country to increase its benchmark lending rates in 1H2011. Drivers of inflation have been narrower versus most emerging markets (with generally ample economic slack and limited asset price inflation), although rising food prices have been a common theme across the MENA region. Thus, monetary tightening would have been limited in lowering inflation levels, in our view. Interest Rates Still on Hold in 2H2011; Negative Interest Rates to Remain: We now generally expect a weaker rise in upward inflation as a result of: i) government measures to stabilise food and fuel price increases; ii) signs of stabilisation in global food prices; and iii) indications of weaker global producer price inflation. We lower our average annual 2011 inflation forecast for a number of countries, including Saudi Arabia. We now expect to see deflation in Bahrain. We expect interest rates to remain on

hold for MENA countries in 2011. We still see the most likely risk to this outlook as another cut in Qatars lending rate. Most MENA countries will continue to see negative interest rates, in our view. However, we note that credit growth will likely be driven by increasing domestic demand. Country Focus: Egypt Update: We revised our estimate for real GDP contraction in 2011 to 3.3% Y-o-Y from 2.5%. GDP declined by 4.2% in 1Q2011. Despite signs of a pickup in private consumption in 2Q2011, consumption remains significantly down on a Y-o-Y basis. We expect a weaker recovery in investment, which will require greater clarity on the political environment. We currently forecast Egypt to see positive real growth in 2012 of 3.0%, led by a recovery in private consumption and supported by increased tourism, although political developments remain a key factor. We believe the new budget, out in July, attempts to balance between providing support to domestic demand and containing the widening deficit. We forecast a deficit of 9.9% of GDP in FY2011-2012, and we expect government spending to provide some support to private consumption in 2011. We expect the current account deficit to narrow to 1.6% of GDP in 2011, primarily due to the sharp fall in imports due to the weakened domestic demand environment. This, coupled with stabilisation in capital outflows, leads us to expect that the EGP will remain supported at EGP5.96 in 2011 and EGP6.00 in 2012 against the USD. (Monika Malik, Mohamed Abu Basha, Mohamed Al Hajj) Aldar Properties - 2Q2011 Misses Estimates on Lack of Sizable Land Sale, Expect Strong 2H2011; Maintain Buy - Flash Note - 08 August 2011 Recurring Income, Development Operations on Track; Maintain FV and Buy: Aldar reported 2Q2011 revenue and earnings of AED775.7 million and AED127.3 million, respectively, significantly missing our estimates. This variance was driven by the lack of a sizable land sale being recognised. We maintain our Buy rating on the stock, as our fair value (FV) of AED1.84/share implies 52% upside potential over the current market price. With recurring income progressing as expected, a solid 2H2011 is expected as deliveries and land sales continue and as government transactions materialise. 2Q2011: Additional Gains Recognised, Equity Reached AED4,649 million: Aldar recognised AED279.9 million in 2Q2011 in additional gains from the transfer of assets to the government, which supported the bottom line in light of the absence of a sizable land sale. Shareholders equity stood at AED4,649 million, implying a current P/BV of 0.75x. We forecast a FY2011 BV of AED10,245 million, boosted by gains from ongoing and expected asset transfers/sales to the Abu Dhabi government. 2Q2011 Debt Steady at AED31.5 Billion; Expect Some Deleveraging in 2H2011: Total debt (ex-Mubadala convertible) totalled AED31,470 million during the quarter, implying net debt of AED25,951 million (implied D/E ratio of 6.8x and net debt/equity of 5.6x). Receivables from the government increased to AED2.8 billion on the back of asset transfers to the government. We expect Aldar to deleverage significantly in the medium term and forecast a net debt position of cAED15.5 billion in FY2012. 2Q2011 Rental & Hospitality Income up 91% Y-o-Y; Deliveries Continue: Recurring income operations are progressing in line with expectations, a key factor in determining Aldars ability to service its debt pile in the medium term. Recurring income from hospitality and IP came in line with expectation at AED266 million. Revenue was comprised of property sales from a land plot and units delivered within Raha Beach. Units within Al Zeina and Al Muneera are expected to be delivered in 2H2011. (Jad Abbas) Commercial Bank of Kuwait (CBK) - Lower Earnings Forecasts on Higher Cost of Risk; Reduce FV and Rating to Sell Company Note - 08 August 2011 Cut 2011 Forecasts on Higher Provisioning; Downgrade to Sell: We lower CBKs earnings forecasts by c70% for 2011 and by c6% over the rest of our forecast horizon as a result of higher credit provisioning assumptions, as well as lower loan growth forecasts. We had estimated earlier a slight decline in 2011 provisioning charges on stabilising NPLs; however, 1H2011 results have shown that CBKs cost of risk continues to increase on a Y-o-Y basis, and as at June 2011, the bank had used almost all of its operating earnings as provisioning charges, with earnings in 1H2011 well below our forecast and earlier management guidance. We cut our fair value (FV) for CBK to KWD0.76/share from KWD0.84/share. Our new FV implies 13% downside potential, and we lower our rating to Sell from Neutral. Stock Remains Expensive versus Peers in Kuwait: CBK trades at a 2012 P/E of 13.8x and P/BV of 2.1x. These are close to the lowest levels the stock has traded at over the past two years, but they are, in our view, expensive in a MENA and Kuwaiti banks context, particularly bearing in mind that the multiples for industry leader NBK (Price: KWD1.06, Rating: Neutral, FV: KWD1.24), which has a stronger franchise and a less risky credit quality profile, are lower at 12.3x 2012 P/E and 1.8x P/BV. CBKs stock has traditionally enjoyed support from shareholders (50% of CBK is owned by one branch of the royal family), particularly during times of weakness. While the share price has fallen by 5% year-to-date and has outperformed the rest of Kuwait banks, it is difficult, in our view, to use this argument for the stocks downside protection. Loan Growth Pickup in 2012 Dependent on Government Spending: We forecast a slight contraction in loans for CBK in 2011 and 4% growth in 2012. Our loan growth forecast for 2012 is below our sector loan growth assumption of 8%, as we expect CBK to continue focusing on restructuring its loan book. CBKs credit quality indicators are amongst the weakest in the sector, with

the NPL ratio at 15.4% in December 2010 and the NPL coverage at 58%. Our 2012 loan growth forecast for CBK and Kuwaits banking sector could offer upside risks in the event of significant progress with Kuwaits government spending, which has been below our expectations and below the governments budget levels over the past few years. (Elena Sanchez-Cabezudo)
[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.