MENA-1 MONDAY MORNING ROUND-UP
UAE
DFM books net profit of AED2.18 million in 1Q2011
Damas to speed up repayment of debt to banks
Sharjah Islamic Bank to sell sukuk
Kuwait
Emir appoints new cabinet, oil minister replaced by non-royal
Global’s unit to launch USD350 million Turkey fund
Qatar
Qatar considers additional LNG to Japan as Chubu seek supply
Qatar Petroleum signs USD100 million deal with JX Nippon
Oman
Galfar 1Q2011 results: contract execution falls, as expected; margin pressure continues
Bahrain
Bahraini King orders lifting of state of emergency starting 1 June 2011
EFG Hermes Research
Aldar Properties - Gain on Asset Sale Bolsters 1Q2011 Bottom Line; Maintain Positive FY2011 Outlook,
Buy - Flash Note 08 May 2011
Agenda
UAE
Mon 9 May >> Arabtec BOD meeting (1Q2011 results expected)
Qatar
Wed 25 May >> Vodafone Qatar FY2010-2011 (March year-end) results
UAE News
DFM books net profit of AED2.18 million in 1Q2011
Dubai Financial Market ([Link]) has announced 1Q2011 net income of AED2.18 million, up 98% Q-o-Q.
Revenue for the quarter came in at AED48.7 million, down 12% Q-o-Q, while operating expenses
decreased to AED46.5 million, down 15% Q-o-Q. Revenue included AED33.6 million in operating income
and AED15.1 million investment returns. DFM trading value during 1Q2011 was AED10.9 billion, down 8%
Q-o-Q. (Company Disclosure)
Damas to speed up repayment of debt to banks
Chief Executive of Damas International ([Link]) has said that the company is looking to pay the first
tranche of its debt, cAED1.1 billion, within the next three years rather than six years. Damas finalised a
cascade agreement with Tawhid, Tamjid, and Tawfique Abdullah, Damas Real Estate and various bank
creditors of the Abdullah brothers. Damas is required to repay USD99.4 million plus 1.9 million grams of
gold. (Zaywa Dow Jones)
Sharjah Islamic Bank to sell sukuk
Sharjah Islamic Bank PJSC ([Link]) has hired HSBC and Standard Chartered to manage the sale of Islamic
bonds. The USD-denominated sukuk will be sold subject to market conditions and after fixed-income
investor meetings in the Middle East, Asia and Europe, the bank said in a statement to the Abu Dhabi
bourse on 8 May 2011. (Bloomberg)
Kuwait News
Emir appoints new cabinet, oil minister replaced by non-royal
A new cabinet was sworn in by the Emir on 8 May 2011 in Kuwait. Mustapha al-Shamali was re-appointed
as Finance Minister, while Mohammad Al-Busairy, the former Minister of Communications, was named the
new Oil Minister, replacing Sheikh Ahmed Al-Abdullah Al-Sabah, who was also Minister of Information.
Sheikh Ahmad al-Abdullah al-Sabah was one of the government members that had a motion submitted by
parliament to be questioned before the government resigned.
The country’s oil portfolio tends to be held by members of the al-Sabah family, thus the appointment of
Mohammad Al-Busairy is notable. We estimate that there are around six new members into the
government. However, these are in portfolios generally held by non-royal family members. These include
the ministries of health, education, and justice, amongst others. Most of the ministries held by the royal
family have remained in the same hands, including the ministries of defense, interior and foreign
ministers. We see the relatively more substantial change in the cabinet for Kuwait as an attempt by the
Prime Minister to improve relations with parliament. This could also partly explain why it took over one
month to form the new cabinet. Given the comments of opposition, however, we believe that parliament
will likely remain confrontational, especially towards Sheikh Ahmed, who has returned as Deputy Prime
Minister, and Prime Minister Sheikh Nasser. (Reuters, Monica Malik)
Global’s unit to launch USD350 million Turkey fund
Global Capital Management (GCM), a wholly-owned subsidiary of Global Investment House [[Link]],
plans to launch a private equity fund in Turkey with a targeted capital of USD350 million to invest in small
and medium-sized enterprises (SMEs). GCM will first focus all of its activities on Turkey, after which time
it will be marketed in the region once the necessary approvals are received by the involved countries.
(Zaywa Dow Jones)
Qatar News
Qatar considers additional LNG to Japan as Chubu seek supply
Qatar is considering selling Japan more than 60 extra cargoes of fuel that it pledged last month, Energy
Minister Mohammed Bin Saleh al-Sada has said. Japan’s Chubu Electric Power Company requested
additional supply on 7 May 2011 in the event that the utility decides to shut down its only nuclear plant.
Earlier in April , Qatar Liquified Gas Company pledged to supply Japan with 4 million metric tonnes of
additional LNG supplies. (Bloomberg)
Qatar Petroleum signs USD100 million deal with JX Nippon
Qatar Petroleum (QP) has signed a 30-year agreement with Japan's JX Nippon for exploration and
production of gas off Qatar’s northeastern coast, QP said on 8 May 2011. (Reuters)
Oman News
Galfar 1Q2011 results: contract execution falls, as expected; margin pressure continues
Galfar Engineering and Contracting Company (Galfar) [[Link]] 1Q2011 earnings dropped 46.3% Q-o-Q to
OMR1.4 million (EPS: OMR0.004) versus our expectation of OMR2.8 million. Galfar reported a net loss of
OMR0.843 in 1Q2010, which was mainly due to a cost over run on the Muscat Express Highway (MEH)
project. We expected margins to recover in 1Q2011 post-completion of the MEH in 4Q2010. However, net
margins came in at 1.7% in 1Q2011 compared to 2.5% in 4Q2010, which we estimate was due to pending
work on MEH coupled with new regulations on wage increases during 2011. Contract execution was in line
with our expectation at OMR79.5 million, down 10.7% Y-o-Y and 21.5% Q-o-Q. Historically, 1H contract
executions are lower, reflecting the Q-o-Q drop, while the Y-o-Y decline is mainly a result of a lower
estimated order book. Galfar did not add any major projects in 1Q2011. Currently, we estimate the order
book at approximately 1x 2011 estimated revenues.
Galfar’s 1Q2011 results are disappointing. MEH’s cost over run impacted Galfar’s results in 2009 and 2010.
We had expected a recovery in net margins post-4Q2010, which would have indicated that the significant
cost over run on MEH was provisioned for in 2010. The Q-o-Q drop in margins clearly reflects that the
higher-than-expected cost over run will continue into 2011. We estimate a net margin of 3.5% on an 11%
Y-o-Y decrease in execution in 2011. We believe contract additions to be crucial for Galfar in 2011 given
that visibility in revenue is decreasing each quarter. We reiterate our Sell rating on Galfar as our fair
value (FV) of OMR0.449/share implies 3.2% downside potential. No further details on 1Q2011 results are
currently available. We will provide additional analysis once detailed 1Q2011 financials are released.
(Company Disclosure, Ahmed Gad, Gigi Tharian Varghese)
Galfar: OMR0.464, Rating: Sell, FV: OMR0.449, MCap: USD392.1 million, GECS OM / [Link]
Bahrain News
Bahraini King orders lifting of state of emergency starting 1 June 2011
King Hamad bin Isa Al-Khalifa has ordered that the state of emergency be lifted effective 1 June 2011.
Bahrain’s government declared a three-month state of emergency on 15 March 2011 after Gulf troops
arrived in the country following anti-government protests. (Bloomberg)
EFG Hermes Research
Aldar Properties - Gain on Asset Sale Bolsters 1Q2011 Bottom Line; Maintain Positive FY2011 Outlook,
Buy - Flash Note 08 May 2011
Aldar Books AED436 Million Gain on Ferrari World; Maintain FV, Buy Rating: Aldar reported a 1Q2011
bottom line of AED189.1 million, versus our forecasted net loss of AED102 million, mainly on the transfer
of Ferrari World to the government. We believe that 1Q sets the stage for coming quarters in terms of
Aldar’s reported earnings. We thus reiterate our Buy rating on the stock, which should benefit from
continuing positive short-term momentum, in our view, and as our fair value (FV) of AED1.84/share
implies 19% upside potential to the current market price.
Cash Balances, Government Receivables Increase on Asset Transfer: Aldar’s cash balances increased 153%
YTD to AED6.2 billion, driven by AED2.8 billion in convertible bond proceeds and cAED2 billion in cash
against asset transfers. The balance of the AED6.4 billion consideration for the asset transfer was booked
as receivables from the government. Total debt stood at cAED32 billion (ex-Mubadala convertible) in
1Q2011, with net debt of cAED25.9 billion implying debt to equity of 4.4x.
Deliveries on Raha Beach, Gurm Continue; Hospitality Outperforms: Revenue came in at AED784.7 million
in 1Q2011, 30% below expectations, due to lower-than expected revenue from unit deliveries. Income
from operational assets (including hotels) came in at AED191.7 million, well above expectations. Weak
margins on property sales resulted in overall disappointing margins of 21%. Post-impairment margins will
likely remain subdued going forward, while recurring income margins should benefit as take-up improves,
in our view.
SG&A Drops, Operational Losses Continue: Following the implementation of management’s cost-cutting
measures, Aldar’s SG&A expenses dropped 38% Y-o-Y. Nonetheless, an operating loss of cAED80 million
was recognised during 1Q2011, versus our expectation of AED182.3 million in operating profit. (Jad Abbas,
Ahmed Gad)
[Note – EFG Hermes is not responsible for the accuracy of news items taken from other media.]
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