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MENA-2 SUNDAY MORNING ROUND-UP

Egypt
SODIC achieves sales of EGP550 million in 1H2011, Al Mal reports Egypt economic court sentences Samih Sawiris to jail term Central Bank of Egypt kept benchmark interest rates in hold, in line with our expectations Citadel Capital to set up oil refinery in Iraq Microbus replacement programme amongst the suggestions to boost the local auto industry NBE to possibly finance PPP project

Saudi Arabia
Herfy takes on SAR45 million SIDF loan to finance ongoing bakery expansion

Morocco
Maroc Telecom to mull wage hikes, averts strike

EFG Hermes Research


Orascom Construction Industries (OCI) Egypts Tax Rate to Weigh on 2Q2011 Earnings; Uncertainties Remain, Maintain Neutral - Company Note - 25 August 2011

Agenda
Egypt 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
SODIC achieves sales of EGP550 million in 1H2011, Al Mal reports Sixth of October Development and Investment Company (SODIC) [OCDI.CA] has achieved sales of EGP550 million in 1H2011, Al Mal reported, quoting the companys Business Development Director, Ahmed Demerdash Badrawi, as saying. This implies that SODIC managed to pre-sell units worth EGP380 million in 2Q2011, up from EGP170 million in 1Q2011. Badrawi added that SODIC has spent EGP100 million per month at construction sites. The company has faced difficulties in collecting no more than 16% of its receivables, or EGP144 million, Al Mal quoted Badrawi as saying. The company has delivered 250 villas in Allegria, to date, and plans to deliver 600 villas by year-end 2011. Badrawi highlighted the agreement reached between the company and the Ministry of Housing, Utilities and Urban Planning (Ministry of Housing) guaranteeing that SODICs land in West Cairo will not be jeopardised under the condition that it develops the land with concrete works in three years. SODIC had requested a height restriction of 25 metres for its Westown project, but the Ministry of Housing has only allowed it a maximum height of 15 metres. (Al Mal) SODIC: EGP17.03, MCap: USD259 million, OCDI EY / OCDI.CA Egypt economic court sentences Samih Sawiris to jail term A Cairo-based economic court has sentenced Samih Sawiris, the Executive Chairman of Orascom Development Holding (OD Holding) [ODHR.CA], to two years in jail for manipulating the firms stock price and providing incorrect data on its finances, Reuters reported, citing a judicial source. Sawiris has also been fined EGP50,000 and denied the right to trade in the stock market for one year. The court allowed Sawiris bail of EGP20,000 until a final ruling is issued. The company has appealed the court verdict, Al Borsa reported. (Reuters, Al Borsa)

OD Holding: EGP7.84, Rating: Buy, FV: EGP26.20, MCap: USD733 million, ODHN EY / ODHR.CA Central Bank of Egypt kept benchmark interest rates in hold, in line with our expectations The Central Bank of Egypt (CBE) kept benchmark interest rates in hold at its 25 August meeting, in line with our expectations. The overnight deposit rate and overnight lending rate are unchanged at 8.25% and 9.75%, respectively, and the seven-day repo at 9.25%. The discount rate was also kept unchanged at 8.5%. The CBE noted that the weak economic outlook should limit upside risks to the inflation outlook. We expect benchmark interest rates will remain steady in 2011 and into 2012, especially with inflation showing tentative signs of slowing. We expect to see a gradual deceleration of inflation in 2H2011. Headline inflation moderated to 10.4% Y-o-Y in July from 11.8% Y-o-Y in June. We, however, do not expect to see a cut in interest rates, which could result in capital outflows and an increase in dollarisation levels. (Central Bank of Egypt, Monica Malik) Citadel Capital to set up oil refinery in Iraq Citadel Capital (CCAP.CA), an Egyptian private equity firm, announced that it has inked an agreement with the Iraqi government to establish an oil refinery in the country with a production capacity of 150,000 barrels per day, Zawya Dow Jones reported. Under the terms of the agreement, Citadel Capital will have three years to prepare studies and designs before construction begins. During that time, the company will build power stations to supply energy to the refinery, the company said in a statement to the Egyptian Stock Exchange. The refinery will take four years to build and will extend over 1.5 million square metres, the company explained in its statement. (Zawya Dow Jones) Microbus replacement programme amongst the suggestions to boost the local auto industry The Ministry of Trade and Industry is studying the application of a replacement programme for microbuses, similar to that applied to taxis, Mamdouh Essa, Minister of Trade and Industry, was quoted as saying. This comes as part of the Ministry of Trade and Industrys five-part strategy to revive the local automotive industry. The second phase of the taxi replacement programme began in June 2011; 32,000 taxis have been scrapped since the programme began in 2009. Other initiatives include: i) the application of standardised specifications to raise quality, ii) giving preference to locally produced vehicles in touristic projects versus imports, given Egypts net export position for buses, iii) encouraging exports, particularly spare parts, and iv) taking advantage of trade agreements, such as the Aghadir Trade agreement and EU trade agreements. (Al Alam Al Youm) NBE to possibly finance PPP project The National Bank of Egypt (NBE) is looking to finance the public private partnership project (PPP), which is developing Alexandria University Hospitals. The companies planning the project have applied for a ten-year loan of USD1.2 million and have requested at least a two-year grace period. The bank is looking to invite other banks to participate in the loan, which it could possibly arrange. NBE could finance up to 50% of the loan amount. (Al Mal)

Saudi Arabia News


Herfy takes on SAR45 million SIDF loan to finance ongoing bakery expansion Herfy Food Services (6002.SE) has announced that it signed an agreement with the Saudi Industrial Development Fund (SIDF) worth SAR45 million. The loan will be paid back semi-annually beginning in 1Q2013 and ending in 2Q2018. The company will use the funds to finance the ongoing expansion of its baked goods factory, which is expected to begin operations in the coming six months. The bakerys additional bakery capacity combined with the increased meat processing capacity undergone in 2010 should allow the company to raise its third-party sales and further boost its top line. (Tadawul, Nada Amin) Herfy: SAR77.00, Rating: Buy, FV: SAR90.00, MCap: USD616 million, HERFY AB / 6002.SE

Morocco News
Maroc Telecom to mull wage hikes, averts strike Maroc Telecom (IAM.CS) on Friday said that it had reached a deal with two trade unions to suspend a three-day strike next week, as the company pledged to consider the unions demands, including for wage hikes. The company said that it reached the agreement with the two representative unions, Democratic Labour Confederation (CDT) and Democratic Labour Federation (FDT). The agreement covers stopping social protests and commits parties to engage in a reflection on career development, implementation of new disciplinary rules and improvement in wages, it said in a statement. The company did not provide more details. Last week, four unions, including the large Moroccan Labour Union (UMT) called a three-day strike from 29 August, mainly to press management for better pay. In addition to

higher wages, the four unions want the firm to introduce bonuses that reflect increases in profitability and ensure fairness in staff promotion. (Reuters)

EFG Hermes Research


Orascom Construction Industries (OCI) Egypts Tax Rate to Weigh on 2Q2011 Earnings; Uncertainties Remain, Maintain Neutral - Company Note - 25 August 2011 Likely Weaker 2Q2011 Earnings Priced in; Reiterate FV and Neutral: Orascom Construction Industries (OCI) will report 2Q2011 results on 6 September 2011. We expect a 19% Q-o-Q drop in earnings, as OCI increases its deferred tax liability, reflecting Egypts higher tax environment. The bottom line in 2Q2011 should reflect a 25% income tax, up from 20% previously, in Egypt and a retroactive 5% income tax on 1Q2011 earnings from Egyptian subsidiaries. Operationally, we expect a higher top line, as construction revenue recovers from 1Q2011s lull, but we believe that the impact of higher fertiliser prices will have been offset by lower construction margins Q-o-Q. We believe that the market is already pricing in weaker 2Q2011 earnings. We reiterate our fair value (FV) and Neutral rating. Fertiliser Outlook Stable; Construction Remains Challenging: Grain prices seem resilient thus far, inventories remain historically low, feedstock costs are still supportive to floor prices, and the new export tariff scheme in China should keep the fertiliser market tight. Downside risks include: i) a deterioration in non-commercial positions in soft commodities, ii) further tightness in credit to traders, and iii) a significant correction in oil prices that could hurt ethanol blending margins (c35% of corn demand in the US). In construction, we believe the outlook remains challenging on risks of significant delays in Egypts PPP projects (Egypt accounts for 23% of the backlog) and increasing competition in the GCC, particularly from Asian contractors. Downside Risks Largely in the Price: Major risks include: i) gas contracts revisions in Egypt, ii) Algerias specific risks, and iii) a further drop in OCIs construction backlog. OCI trades at an estimated P/E of 10x in 2011 and 7x in 2012, which suggests that downside risks are largely priced in. We view any further weakness as a good entry point to the stock. Market Valuation Implies USD6/mmBtu Gas Price in Egypt: Our model suggests that the market valuation implies a gas price of USD6/mmBtu in Egypt (OCI pays cUSD1.5/mmBtu), assuming the construction business and OCI Nitrogen are valued at 7x estimated 2011 EV/EBITDA and Sorfert at 4x estimated 2012 EV/EBITDA (50% discount to similar low-cost assets, reflecting its high risk profile). (Ahmed Shams El Din, Rita Guindy)
[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.