MENA-2 WEDNESDAY MORNING ROUND-UP

Egypt
Jail sentence for Samih Sawiris nullified; ODH reaches settlement with EFSA Policemen hurt in clashes with soccer fans Mubarak back in court over protester deaths

Saudi Arabia
SABIC proposes USD50/tonne increase to MEG prices for October 2011 SABIC maintains local urea and DAP prices for September 2011 Saudi Arabias PMI and the UAEs PMI fall to multi-month lows in August 2011

Lebanon
Government budget to rise by 15% Y-o-Y in 2012

Jordon
Government owes local contractors about JOD50 million Non-performing loans increase at commercial banks

Tunisia
Finance Minister says 2011 GDP contraction possible Central bank cuts key rate by 50 basis points

EFG Hermes Research

Orascom Construction Industries (OCI) - 2Q2011 Earnings In Line, Pulled Down by Higher Tax Rate; Reiterate Neutral Rating - Flash Note - 06 September 2011 Maridive and Oil Services (MOS) - Downgrade Forecasts and FV on Weak Contract Backlog Outlook; Maintain Neutral - Company Note - 06 September 2011

Agenda
Egypt Sat 10 September >> Ezz Steel AGM Mon 12 September >> Maridive EGM regarding 1:6 bonus shares

Egypt News
Jail sentence for Samih Sawiris nullified; ODH reaches settlement with EFSA Orascom Development Holding (OD Holding) [ODHR.CA] announced in an emailed statement that its Egypt-based subsidiary, Orascom Hotels and Development (OHD), has reached a settlement with the Egyptian Financial Supervisory Authority (EFSA) that effectively nullifies the jail sentence for Samih Sawirs in his capacity as the Chairman of OHD. The details of the agreement were not disclosed in the statement. We believe that the share price could react positively to this development, especially given its significantly weak performance seen over the past week resulting from the unexpected jail sentence for Chairman Sawirs issued by an Egyptian court and based on alleged irregularities in OD Holdings financial statements. (Company Disclosure, Jan Pawe Hasman, Shaza El Kady) OD Holding: EGP6.38, Rating: Buy, FV: EGP26.20, MCap: USD597 million, ODHN EY / ODHR.CA

Policemen hurt in clashes with soccer fans More than 130 police officers were injured in clashes with fans of one of Egypts most prominent soccer clubs following an Egyptian Cup match in Cairo, security sources and officials at the Health Ministry said. Security sources said that the clashes broke out on Tuesday at the Cairo Stadium between Al Ahli fans and police after some people shouted abuse at the police and the Interior Ministry. The fans later blocked a main road linking the city centre with the Nasr City suburb to the east before the army managed to bring the riot under control. Sources at the Health Ministry said that more than 130 policemen were hurt in the clashes, which also resulted in burning of some 13 police cars and the destruction of several privately owned vehicles. About 50 policemen were taken to hospital. (Reuters) Mubarak back in court over protester deaths The court trying former President Hosni Mubarak will hear more testimonies today after police witnesses suggested this week that neither he nor his interior minister gave orders to shoot. We will have the testimonies of another four witnesses also from the police, but they could be from different departments, Amir Salem, one of the lawyers representing families of victims, said. (Reuters)

Saudi Arabia News

SABIC proposes USD50/tonne increase to MEG prices for October 2011 Saudi Basic Industries Corporation (SABIC) [2010.SE] has proposed increasing the price of mono ethylene glycol (MEG) to USD1,400/tonne in October 2011. This would represent a USD50/tonne increase versus September 2011 prices and would be significantly higher than the current MEG spot price of USD1,270/tonne. (Argaam) Saudi Basic Industries Corporation: SAR92.75, Rating: Buy, FV: SAR133.00, MCap: USD74,200 million, SABIC AB / 2010.SE SABIC maintains local urea and DAP prices for September 2011 Saudi Basic Industries Corporation (SABIC) [2010.SE] announced that it has fixed local urea prices for the third consecutive month at SAR1,755/tonne (USD468/tonne) for September. SABIC has also fixed its September diammonium phosphate (DAP) price at SAR2,693/tonne (USD718/tonne), constant M-o-M. The current spot price for urea exported from the GCC region is SAR1,913/tonne (USD510/tonne). (Argaam) Saudi Basic Industries Corporation: SAR92.75, Rating: Buy, FV: SAR133.00, MCap: USD74,200 million, SABIC AB / 2010.SE Saudi Arabias PMI and the UAEs PMI fall to multi-month lows in August 2011 Both Saudi Arabias PMI and the UAEs PMI fell to multi-month lows in August 2011. This trend was largely expected with the quieter summer period merging with Ramadan. In the case of Saudi Arabia, the index is still solidly above the 50 level, which reflects growth in the economy. We expect to see some increase in the PMI from September into 4Q2011. In the case of the UAE, we believe that the nature of the index does not fully reflect the improvement in the core service sectors of the economy, including tourism, which as seen a solid performance. Saudi Arabias PMI fell to an 18-month low of 57.9 in August from 60.0 in July. Most sub-indexes declined, including the new orders index to 65.2 in August from 66.9 in July, and the employment Index to 53.2 in August from 53.6 in July. However, reflecting the reduced price pressures, both input and output price indices fell to 56.2 (from 59.0) and 52.9 (from 53.1) in August, respectively. The UAEs PMI fell to a 15-month low of 50.9 in August from 53.3 in July. New orders fell to 53.5 in August, a oneyear low, down from 55.7 in July. The employment index fell to 50.6 in August from 52.9 in July. Input prices increased slightly to 57.6 from 57.5, while output prices fell to 49.4 from 50.7. (Markit)

Lebanon News
Government budget to rise by 15% Y-o-Y in 2012 Lebanons 2012 government budget will increase by roughly 15% Y-o-Y and the deficit will not be more than USD3 billion at best, the countrys Finance Minister Mohammed Safadi said on Tuesday. The budget will increase by 15% roughly. Our deficit will be not more than USD3 billion at best. So we will be borrowing, Safadi told Reuters. He did not give further details, but said that he hoped to present the 2012 budget to the cabinet by the end of September. Our expectations, it (inflation) will not be less than 3% next year. But we are expecting growth of not less than 4% real GDP growth in 2012, he said.

The increase, if approved, is higher than our expectation for spending growth in 2012 of 6% Y-o-Y. We still await more details as to what would be the areas benefiting most from the spending increase. We are also forecasting a budget deficit of USD3.9 billion (8.4% of GDP) in 2012, with real GDP growth of 4.8%. (Reuters, Mohamed Abu Basha)

Jordan News
Government owes local contractors about JOD50 million Yahya Kisbi, Minister of Public Works and Housing, on Tuesday said that the government owes local contractors around JOD50 million, JOD21 million of which is owed by the Ministry of Planning and International Cooperation related to the implementation of Amman Development Corridor project. (The Jordan Times) Non-performing loans increase at commercial banks The percentage of non-performing loans to total credit at Jordans commercial banks rose to 9% in 2010 compared to 6.5% in 2005, a banking study revealed on Tuesday. The study said that non-performing loans amounted to around JOD2.434 billion as at the end of 2010 compared to JOD926 million as at the end of 2005. (The Jordan Times)

Tunisia News
Finance Minister says 2011 GDP contraction possible Tunisias economy could contract slightly this year, although the government still hopes for up to 1% growth, the countrys Finance Minister Jalloul Ayed said on Tuesday. Growth is not going to be very good. We were hoping for the GDP growth rate to be between 0% and 1% and it looks like now there is a possibility that it could be negative, Ayed told Reuters. To be optimistic it will be around zero, to be a little bit more realistic it will be a little bit negative, he said. (Reuters) Central bank cuts key rate by 50 basis points Tunisias central bank cut its key interest rate by 50 basis points to 3.5% on Tuesday, as it seeks to boost an economy still reeling from the aftermath of a revolt that toppled its president earlier this year. To boost economic activity and the implementation of investment plans by limiting the financial burden on businesses, the Council decided to reduce, again, the rate of the BCT half a percentage point to bring it back to 3.5%, the central bank said in a statement. The central bank last changed its key interest rate at the end of June, when it cut the rate by 50 basis points to 4%. (Reuters)

EFG Hermes Research

Orascom Construction Industries (OCI) - 2Q2011 Earnings In Line, Pulled Down by Higher Tax Rate; Reiterate Neutral Rating - Flash Note - 06 September 2011 Operationally Solid 2Q2011 Results; Earnings Hit by Tax Adjustments: Today, OCI reported a 20% Q-o-Q drop in its net income to USD165 million (+15% Y-o-Y), in line with our USD167 million estimate. The increase in Egypts tax rate to 25% from 20% weighed on 2Q2011 earnings, which also included a retroactive charge of 5% for 1Q2011 earnings, as well as a one-off charge to adjust the Egypt-related deferred tax liability. Operationally, revenues surprised positively across the board (9% ahead of our estimate), but this was partially offset by weaker construction margins, leading EBITDA and operating income to come in only 5% and 3% above our forecasts. Construction Backlog Recovers Slightly; Margins Normalise: The construction backlog increased 2.4% Q-o-Q to USD5.23 billion. Construction awards in 2Q2011 were USD1 billion, significantly above 1Q2011s awards of USD330 million. We estimate that construction revenue grew 24% Q-o-Q. EBITDA margins fell to 13% (from 16% in 1Q2011), and we think margins should normalise at these levels. We maintain our conservative assumptions to account for the risks of delays in Egypts sizeable infrastructure awards and increasing competition in the GCC. Fertiliser Margins Expand Further; Outlook Remains Solid: We estimate that OCIs fertiliser revenue grew 8% Q-o-Q and margins expanded, driven by higher volumes from Egypt and lower ammonia cost in the Netherlands. Grain prices seem resilient, inventories are historically low, and the Chinese export tariff scheme should keep markets tight. Downside risks include: i) a deterioration in non-commercial positions in soft commodities, and ii) a significant oil price correction that could hurt ethanol blending margins (c35% of US corn demand). Interim Dividends Approved, Restructuring Plans Proposed: OCI announced an interim cash dividend of USD1.10/share to be paid in 4Q2011, bringing total cash dividends paid in 2011 to USD2.10/share (versus our expected USD2.00/share). On another

note, management proposed a change to the legal status into a holding company under which construction and fertilisers will be re-organised as separate legal structures, subject to shareholder approval. (Ahmed Shams El Din, Rita Guindy) Maridive and Oil Services (MOS) - Downgrade Forecasts and FV on Weak Contract Backlog Outlook; Maintain Neutral - Company Note - 06 September 2011 Reduce FV to USD3.03/Share; Reiterate Neutral Rating: We reduce our fair value (FV) for Maridive to USD3.03/share from USD3.70/share to reflect the downgrades to our forecasts in 2011 and beyond. While we are still bullish on the oil and gas services sector fundamentals in the medium term, we have short-term concerns regarding Maridives contract backlog, which stands at just USD87 million beyond 2011. Moreover, we believe any new contract wins at this point are unlikely to contribute significantly to 2012 numbers, but rather to numbers in 2013 and beyond. The share price has fallen 24% since 21 June 2011 and in our minds reflects some of these short-term concerns. Therefore, we reiterate our Neutral rating on the stock, given the 14% upside potential our lowered FV provides. Downgrade FY2011 Earnings Estimates by 18% on Lower Margins: While we maintain our FY2011 revenue estimate at USD420.1 million (underpinned by a FY2011 backlog of USD356 million), we reduce our reported net income forecast by 18% to USD61.8 million to reflect: i) lower-than-expected operating margins reported by the companys OSV segment in 2Q2011 (Maridive took delivery of two new OSV vessels in 2Q2011, which resulted in additional pre-operational costs being booked), and ii) higher minority interest expenses in 2011, as we expect the companys 75% owned, Valentine subsidiary, to continue to be the larger contributor to the 2011 top line. Cut FY2012 Revenue Estimate by 13% on Weak Backlog Additions: We reduce our FY2012 revenue estimates by 13% to USD450 million, given the weak contract backlog for 2012. We had expected Maridive to announce new contract wins in 1H2011, but these have not materialised. We believe any new contract wins at this point will likely be initiated at the end of 2012/beginning of 2013. As a result, our net income estimate declines by 34% to USD84.8 million. (Abid Riaz, Nadine Hassouna)
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