“2009 Equity strategy” - Talaat Moustafa Group

“2009 Equity strategy”
Prime Investment Research

TABLE OF CONTENTS
10 March 2009
Egypt
Executive Summary 3
Strategy
Consequences of Global Crisis on The Region 4
Sectors Outlook 5
Putting It All Together (Big Picture) 6
2009 Sector Outlook (Summary) 7
2009 Picks
Short Term Picks 8
Long Term Picks 9
Economic Focus 11
Stock Market Focus 15
Banking Sector
CIB 18
NSGB 20
Oil & Services Sector
Maridive 22
Telecommunication Sector
Telecom Egypt 24
Mobinil 26
Pharmaceuticals Sector
EIPICO 28
Industrial & Capital Goods Sector
Orascom Construction Industries 30
El Sewedy Cables 32
Housing Sector
TMG 34
Financial Services Sector
EFG-Hermes 36
Stock Recommendations Guide 38
Disclaimer & Contacts
Please note that Market prices, trading multiples and stock performance charts are all calculated as of 9 March, 2009 closing prices.
Prime Research 2

EXECUTIVE SUMMARY
10 March 2009
Egypt
Contagion Effect From Global Recession is Bound To Happen
International financial markets continue to fluctuate with governments discovering new challenges to contain the problem from getting
worse or spreading. While our main concern in this report is the Egyptian economy and the equity market in Egypt, we think it is
necessary to give a quick review of the global scene since internal inadequacies per se are not the key cause behind the economic
slow down faced by Egypt at the moment. In the current situation, weakened external demand constitutes a bullet hit at the heart of
the Egyptian economy causing less receipts from Tourism, Suez Canal, Exports and ultimately less FDIs.
Origins of The Global Crisis
The global financial crisis became apparent in 2007 originating from rising housing demand at a time of low interest rates leading to
overvalued housing prices ending with high interest rates and a high default ratio. Coupled with deregulation of the financial markets,
increasing real estate prices led to higher appetite for risk among investors, gripping corporations such as Freddie and Fannie to guarantee
more than half of USA mortgages, that were originally sub prime. In absence of the regulatory role, sub prime mortgages were
pooled into Mortgage Backed Securities that enjoyed low rating leading investment banks such as Bear Sterns, Merrill Lynch and Lehman
Brothers to heavily invest in them. The reputable financial institutions ended up either acquired, filed for bankruptcy, or switched
to commercial banking. Moreover, commercial banks such as Indy Mach, Wachovia and Washington Mutual fell after rating agencies
downgraded Investment banks, causing sharp price declines, and, hence, putting stress on the system. Tight credit took LIBOR up
from 2.5% to 4%. Ultimately, high default rate, business close downs and credit dry up caused plunging demand in the USA. On the
regional level, oil prices recorded historical lows grabbing commodities along, GCC budgets tightened or turned into deficit, and projects
were delayed/cancelled. On the local level, with Egypt’s main trade partners being the USA and EU, a decline across Exports,
Tourism, Suez canal and FDI was discounted in equities, causing equity market to act the way it is right now.
We Estimate a Recovery on 2 Phases
So far, governments have not fully identified the magnitude of the financial problem, however, bailout plans have been rolled out and
approved in order to offer a quick fix to collapsing economies. Getting rid of toxic assets is not expected to be a simple task given the
lack of data on where those assets are. We believe that once banks have completely removed toxic assets and recapitalization is
achieved, probably by mid to end of 2009, a typical period of heavy regulations/low demand is expected to take place for 12 to 18
months. We expect this period to be characterized by partial improvement in equity markets in the GCC and Egypt. Regionally,
partial improvement of demand for oil will start to take shape leading to a price of US$50-55/barrel and ultimately resulting in
higher investment. Domestically, this will correspond to a period of partial improvement in equity markets accompanied by recovering
exports, tourism and Suez Canal revenues. Full recovery is expected to take place by end of 2010 at which time governments
will want to sell back their stakes in recapitalized banks, with private sector regaining confidence and investing directly and indirectly
following the re-regulations of the financial markets
Sector Strategy and Stock Picks
As we publish this note, FY08 results continue to come out, with a noticeable decline in Q4 results. Despite this, almost all stocks under
our coverage offer significant value to our intrinsic prices generated from our DCF models, even after accounting for the following
factors:
• Lower or stagnating commodities’ prices;
• Less domestic / external demand;
• Pile up of high cost inventory implying weaker capital;
• Expensive liquidity.
Accordingly, we drafted a short-term and a long-term strategy (available in pages 8 & 9). The short-term strategy comprises stock
picks for 2009, while, the long term strategy includes stocks that we believe investors can park in their money over the long term
for they offer a sizeable upside potential over the long term and will benefit the most in the next upward cycle.
The short term strategy targets sectors immune to the global slowdown, namely, Telecom, Pharmaceuticals, Banking as well
as other non-cyclical stock. Said sectors are targeting investors with short term gain objectives in 2009 mainly generated from
dividends paying stocks with stable earnings and pay out ratios due to their non-cyclical nature. Our Short Term Picks include
CIB, NSGB, Maridive, Telecom Egypt, and Mobinil.
The long term strategy targets sectors we view as offering significant upside potential over the long term and will benefit the most
with the next impulsive cycle. We are basically attracted by long term business strategy of OCI and el Sewedy Cables due to their
expansion plans as well as visible projects either privately for OCI or with the Government for Sewedy Cables. On the other side,
TMGH attract us due to the relatively cheap multiples it is trading at representing almost less than half of its book value. In other
words, one can argue that TMGH stock prices imply more than 70% discount to physical land market prices.
Finally, we prefer EFG-Hermes due to its regional market exposure as well as the diversified investment it currently has, namely its
27.8% in AUDI Bank and SODIC which the current market price of EFG-Hermes value below cost. Moreover, the company’s
balance sheet is rich with LE1.2 billion cash position implying Net Investments/Mkt. cap of around 65%
Prime Research 3

STRATEGY:CONSEQUENCES OF
GLOBAL CRISIS ON THE REGION
10 March 2009
Egypt
GLOBAL EFFECT ON THE EGYPTIAN ECONOMY
The Egyptian economy is currently hit by a contagion effect from the global financial crisis more than being hindered by internal
weaknesses albeit the soaring real estate prices. This makes us believe that the magnitude of local economic troubles and pace of
recovery is directly related to leading world economies. Thereby, we draw linkages between global forces and the Egyptian economy
in an attempt to draw a picture for recovery dynamics.
The global economic condition now is a result of an extended prosperity period, which led to over confidence, and lack of discipline.
In the course of this period a balloon of bad and doubtful debt was created and propagated through newly invented tools (i.e. securitization).
Since the US government and consequently the remaining of the world have admitted the economic crisis in early 2008, all
that is being done is patching gaps that were created in the system over the last 10 or more years. During this period the global financial
system has come to near halt resulting in a situation with typical recessionary symptoms in terms of residing demand and
business close downs.
How will the Recovery Take Place On a Global Scale?
We believe that global economical ailments will undergo two phases towards full recovery. Phase one started with governments
pumping life into financial institutions with high NPLs and low capitalization generated from toxic assets. This phase is expected to
end once these institutions become well capitalized and funded to cover the ailments of the previous era, some time between mid to
end of 2009, as most of the stimulus packages would be allocated.
Phase two comprises the gradual regaining of confidence in the global financial system from regulators on one side, and from investors
on the other side. Phase two is considered half way down the road towards gradual expansion in credit facilities and new investments
by global funds. Subsequently, governments will gradually reduce their stakes in the previously nationalized banks through the
capital markets. Main challenge of this phase is enacting an efficient set of regulations that will not deter potential growth. Phase
two is expected to end in recovering demand in the west, moving to the rest of the world through the spill over effect.
We expect the spill over effect of this improvement to go through another economic cycle of 12 to 18 months.
Having said this, we expect phase one to go on till mid to end 2009, showing a duration period of 18 to 24 months since it started
end of 2007. The recovery period or phase two is expected to reach full momentum by end of 2010 to mid 2011
So what does this imply to the Middle East?
Following the global trend, GCC witnessed ballooning real estate prices and indirect over exposure to toxic assets in the west. The
main impact on the region, however, resulted from crude oil prices crashing from over the US$100/barrel to less than half this level.
This created a sense of cash dry up and consequently led to cancellation of projects and subdued demand either for lack of confidence
in the future or for government budgets becoming more tight.
In our scenario, we expect that the recovery in the region will be twofold concurrent with the global recovery. The first comprises
the exposure of regional players to toxic assets, while the second will depend on rebounding oil prices consequent to recovering
external demand. Accordingly, pressure on regional state budgets will be elevated.
So Where Does This Put Egypt?
The Egyptian economy was relatively sheltered from Phase one due to overly protected banking system characterized by high excess
liquidity. However, this does not shield Egypt from having to wait for the global economy to come back on track. Egypt’s economy has
depended in the past years on regional fund inflows from investors and from Remittances, Tourism and Suez Canal receipts. All
of which are expected to experience a crunch until the global and more importantly regional recovery materializes. Egypt also experienced
a similar period of inflated asset prices (i.e. equities & land prices) due to over confidence.
Inflation To Go Down
Inflation is expected to go down locally driven by two reasons. Firstly, no more subsidy cuts are expected in the near future. Secondly,
because we do not expect that commodity prices will reach there highs any time soon since prices were brought up in 2007
driven by speculation, a prevailing pattern at the end of any upward cycle. This would mean that on average we expect oil prices to
reach around US$50-55 by end of 2009 while once full recovery is achieved, we expect oil to remain at US$80/barrel.
During 2006 to mid 2008 commodity prices have increased to a level that put a strain on consumers resulting in inflation levels that
made any type of fixed income investment unattractive, while equity investments provided the only option that can in theory provide
a return outpacing these high inflation levels.
Exports are expected to decline by 25% in FY09 mainly attributed to plummeting prices of oil and semi-processed goods constituting
the bulk (i.e. 62%) of Egyptian exports. Similar drastic price declines is not expected in FY10 which, together with a rebounding economy
in the latter half of FY10, justifies our expectation of 6% increase in export receipts.
Prime Research 4

STRATEGY-SECTORS OUTLOOK
10 March 2009
Egypt
Tourism slowdown is imminent in 2009, while recovery is expected to show early indicators by the second half of FY10. This will
lead to a 10% drop in tourist related revenues in FY09 and a 5% increase in FY10. Another segment expected to be hit is second
homes for tourists requiring a large initial investment that we believe may lag another year prior to its recovery meaning by 2011.
Real estate will continue to have pent up demand in low and medium income housing which will suffer a marginal drop due to the
negative sentiment but will remain more robust compared to the upper end of the market which has come close to a saturation level
in the previous bull wave. However, we expect another upward wave in the upper class linked to both global and more importantly
the regional demand, starting in Dubai and creating euphoria of demand in another country or state and then another wave is expected
to emerge in Qatar and KSA and will spill over into Egypt and other non-GCC Arab countries.
Telecom sector would suffer from lower disposable income, which would marginally limit growth in 2009 and 2010. However, addressed
market growth, given the fact that telecom services are now more of a necessity than a luxury, we believe it will be just a
muted growth rather than a decline in earning levels.
Consumer durables will be affected due to domestic decline in income levels and the negative sentiment, which will draw consumers
more to saving than spending. Furthermore, we expect another wave of increasing imported goods at lower prices due to lack of
global demand, which will put local goods on the defensive and will further impact margins. This would put the sector as speculative
at best. However, the auto industry will witness a slowdown while the market may shift further toward lower priced vehicles, which
will eventually benefit the local players marginally given the price differential.
Banking sector in Egypt is different from that of the most of the world since there is no structural issues that would cause major
concern about the performance of their portfolios. However, banks will remain more conscious about expanding their credit facilities
which will limit the growth on their balance sheets and income. However, we expect that banks will witness steady growth since no
major restructuring is required and the retail segment of the market is still underserved. Furthermore, by mid 2010 as global banking
sector show signs of recovery, competition will increase again in extending credit to both corporate entities and individuals.
Financial sector is mostly correlated to the capital market and thereby its slowdown and recovery will be fully correlated to that of
public sentiment and risk aptitude. The stock market is expected to gradually improve anytime from the second half of 2009 to first
quarter of 2010, since by that time the uncertainty of the size of the damage to the global financial sector will start to reside.
Agricultural sector has been hit by falling commodity prices, which led to less aggressive approach toward utilization of fertilizers in
order to cut cost. Furthermore, inventory of raw materials in fertilizer companies have been built up at relatively high prices. This
would lead to around six to nine months of squeezed margins accompanied with declining revenue volume till end of Q2 2009 followed
by minor growth in volumes till year end. Starting 2010, food inventories will diminish leading to gradual increase in prices and
volumes.
The question remains, Should equities recover, will Egypt outpace or at least equalize with other Emerging Markets upward moves?
The fact remains, the correlation of the coming impulsive wave between Egypt and the remaining of the emerging markets will largely
depend on structural and dormant variables in Egypt’s macro picture as well as how much discount/premium Egyptian equities
will be trading at by the time Equities recover.
Does Egypt have more structural changes or dormant variables that it can occur to outpace the other
emerging markets another time with the next upward cycle?
• If the government times the further removal of subsidies and eliminating more imbalances to the time when the emerging economies
witness the extent of the recovery, these actions will have less painful effect although it will entail forsaking short term
growth for a stable future outlook;
• Mortgage finance, though implemented in the previous cycle, it has not yet been fully utilized. With the next round of demand
spree over real estate this under utilized tool can provide the launching pad for another fast paced growth in the sector;
• The financial sector have not been severely hit this time thanks to local banks still reminded by the late 90s local credit crisis and
the continuous follow up of the CBE. However, the extent of the current down cycle on banks performance is yet to be established.
Given that we are already half way down the road, the current indicators show that the financial sector will come out of
this downward cycle with relatively minimal damage and, hence, will be in a better place to sponsor growth in the next cycle
than peer countries;
• Pressure from environmentalist groups in developed countries accompanied with low demand is currently taking place and will
continue in 2009 and 2010 leading to more shut downs in these countries. As economic recovery takes place another phase of
acquisitions of existing production facilities in emerging markets by foreign investors may seem cheaper than reopening given the
carbon emission benefits. This will create an improved BOP from FDI injections.
The following 2 pages will include a summary of our Global, Regional and Local view of how the recovery will happen,
followed by a summary of our outlook on main sectors. The remaining of this note will be dedicated to our Economic
and Stock Market Focus as well as a valuation of our Short and Long Term Stock Picks.
Prime Research 5

PUTTING IT ALL TOGETHER
(BIG PICTURE)

2009 SECTORS OUTLOOK (SUMMARY)
10 March 2009
Egypt
Financial Services & Banking
Banking Sector Outlook: Positive
Housing & Real Estate
Sectors Outlook: Negative
Upside
Downside
Upside
Downside
• By law, foreign banks shall have
funds in Egypt equivalent to its
obligations and payables, eliminating
the default risk due to
external factors
• Low trading Investments/total
Banking Assets
• Loan/Deposit ratio of 56%
• Excess liquidity
• Foreign exchange liquidity is
highly limited
Downside on Brokerage Firms
• Decline in average trading value
n FY09
• Expected decline in M&A activity
during FY09
• Egypt has one of the fastest
growing infrastructure sectors in
the region, covering various segments;
transport, tourism, commercial
and industrial
• Young growing population should
maintain growth once the waitand–
see attitude comes to an
end
• Unwillingness to borrow so as to
buy properties after the increase
in interest rates
• A new tax rate is expected to be
active this year
• A supply gap for the housing
units
• A decline in steel & cement selling
prices
• Government encourages steel
imports
Petrochemicals, Chemicals & Fertilizers
Sectors Outlook: Negative
Food & Agriculture
Sectors Outlook: Neutral
Upside
Downside
Upside
Downside
• Cheap feedstock
• Growing local demand
• Direct relationship with food and
agriculture
• Local natural gas prices increased
by 76% putting pressure on
manufacturers’ costs
• selling prices slumped dramatically
• Recent decline in raw materials
prices affected companies keeping
expensive inventory
• Population benefit
• Liberalizing trade in agricultural
products
• Government prioritizing land
reclamation
• Food consumption accounts for
26.8% of GDP
• Absolute decline in numbers in
monetary terms
Telecoms
Sectors Outlook: Positive
Upside
Downside
Pharmaceuticals
Sectors Outlook: Positive
Upside
Downside
• Low penetration rate of around
50%
• More than anticipated decline in
Mobile Sets’ Sales
• Growing population
• Price caps
• Population bodes well for spending
per subscriber
• Lower available Income
• Increased health awareness
• TRIPS halts growth
• Positive elasticity mitigates AR-
PUs Decline
• Prolonged recession would affect
spending
Tourism
Sectors Outlook: Negative
Upside
Downside
Construction / Building Materials
Sectors Outlook: Negative
Upside
Downside
• Cheaper destination when compared
to other destinations such
as Turkey, UAE and Morocco
• Growing government investment
in the sector to increase number
of rooms available
• Severe decline in tourist numbers
• Severe Decline in tourist spending
• Fall in hotel occupancy rates
• Steep decline in steel/cement
prices
• Slowdown in construction activity
• Government infrastructure projects
• Prolonged recession would hit
pent up demand for housing
units
Prime Research 7

2009 STOCK PICKS
10 March 2009
Egypt
Short Term Picks
Short-term recommendations are those for companies that are expected to perform better than average during the slow down, which
would imply that they are the least exposed to the current economic downward conditions. Thereby in 2009, We overweight sectors
of Telecommunication, Pharmaceuticals and banks due to the following:
1) Companies in defensive Sectors / High FCF Yields
2) Visible positive earnings in 2009
3) Cash rich companies well positioned to withstand a recession
4) Low leverage or None
5) High payout Ratio
6) Well branded products / services
7) Strong management with a track record
Short Term Stock Picks
Earnings Per Share Dividends Yield Valuation Multiples
RIC FY08 FY09 3Y Growth FY08 FY09 PE08 PE09
EV/
EBITDA08
EV/
EBITDA09
P/B
MOIL.CA 0.34 0.46 33% 9% 13% 7.74x 5.81x 6.76x 4.62x 3.30x
EMOB.CA 18.60 19.60 5% 10% 11% 7.57x 7.18x 3.85x 3.46x 6.22x
PHAR.CA 3.54 3.85 9% 9% 10% 7.07x 6.49x 2.92x 2.76x 1.48x
ETEL.CA 1.76 1.85 5% 9% 9% 8.35x 7.98x 4.97x 4.65x 0.91x
NSGB.CA* 3.52 2.76 -22% 7% 8% 4.26x 5.43x 0.00x 0.00x 0.82x
COMI.CA 4.69 4.98 6% 3% 4% 7.22x 6.79x 0.00x 0.00x 1.71x
1 Year Price Earning Growth Chart
40%
30%
MOIL.CA
TMGH.CA
20%
FY09 EPS
Growth
10 %
0%
-10%
SWDY.CA
CIEB.CA
EGTS.CA
ORTE.CA
AMOC.CA
PHAR.CA
COMI.CA
ETEL.CA
EM OB.CA
SUGR.CA
EXPA.CA
SKPC.CA
-20%
AUTO.CA
NSGB.CA
EFIC.CA
HRHO.CA
-30%
IFA P .CA
-40%
PIOH.CA
0x 2x 4x 6x 8x 10x 12x 14x 16x 18x 20x
Price / Earnings 09
*NSGB reads a –22% due to reversal of provision which if eliminated would result in a 13%
Source: Prime Estimates
Prime Research 8

2009 PICKS (CONT’D)
10 March 2009
Egypt
Long Term Picks
We draft our Long-term recommendations on companies that will provide the highest capital appreciation based on their fundamental
value compared to current market prices in the next upward stock market cycle. In our opinion, these long term picks will approach
their intrinsic values once demand rebound again and recovery takes place, moreover, they meet the following criteria:
1) Strong management
2) Visible ongoing Expansions
3) Well positioned within market Competition
4) Sustainable free cash flows
5) Highest upside to their DCF values
6) Currently trading on low multiples
Long Term Stock Picks
RIC
Upside To
DCF
FY08
Earnings Per Share Dividends Yield Valuation Multiples
FY09
3Y
Growth
FY08 FY09 PE08 PE09
EV/
EBITDA08
EV/
EBITDA0
9
P/Book
TMGH.CA 301% 0.79 0.99 49% 0% 0% 3.28x 2.63x 2.23x 1.59x 0.23x
SWDY.CA 127% 6.91 7.36 19% 0% 0% 5.67x 5.32x 5.61x 4.95x 1.46x
HRHO.CA 93% 2.77 0.95 -12% 4% 1% 4.95x 14.37x 0.31x 0.31x 0.67x
OCIC.CA* 202% 23.75 10.53 -30% 3% 1% 5.05x 11.38x 4.42x 6.19x 1.73x
3 Year Price Earning Growth Chart
40.0%
COMI.CA
30.0%
NSGB.CA
20.0%
SWDY.CA
M OIL.CA
PIOH.CA
ORTE.CA
PHAR.CA
10 .0 %
ETEL.CA
FY09 EPS
Growth
0.0%
EXPA.CA
AUTO.CA
AMOC.CA
CIEB.CA
EM OB.CA
SUGR.CA
-10.0%
EFIC.CA
HRHO.CA
-20.0%
SKPC.CA
-30.0%
Series1
IFAP .CA
-40.0%
0x 2x 4x 6x 8x 10x 12x 14x 16x 18x 20x
Price / Earnings 09
Source: Prime Estimates
*OCI reads –30% over a 3 years period due to LE1.4 unusual gains of divesture of Egyptian Containers Handling
Prime Research 9

2009 EQUITY STRATEGY
10 March 2009
Egypt
This Page has been Left Intentionally Blank
Prime Research 10

ECONOMIC FOCUS
10 March 2009
Egypt
GDP Growth-Gains Momentum From Domestic Demand
Although GDP growth is hindered by a receding global economy, momentum
is gained from domestic demand. Our expectation for GDP growth
hover around 4.1% growth in FY09, justified by the fact that household
demand and government expenditure constitute 82% of GDP. Also,
we Expect the latter half of FY10 to witness the beginning of an economic
rebound to be reflected in 4.5% domestic GDP growth, basically driven
by higher export, tourism and Suez Canal receipts. A close scrutiny of GDP
components is provided below.
High Household Consumption Driven by Wide
Population Base
We forecast a conservative estimate of 3.5% growth in household
consumption in FY09 and FY10. Bearing in mind that population
growth rate is 2%, this implies that spending patterns will increase by only
1.5% in FY09. This is very much on the conservative side taking into consideration
that no massive lay offs have taken place in Egypt. Q1 FY09, as
well as FY08 data reveals high propensity to consume. In FY08, household
consumption grew at 7.6%, a level exceeding GDP growth of 7.2%. Similarly,
1Q FY09 revealed GDP growth of 5.7% y-o-y, close to the 5.8% y-o-y
growth in GDP.
However, we believe suppliers to change their product definition to suit B and C income groups. In this respect new cash and carry,
and wholesale outlets are planned.
Government Spending-Paving The Road for Future
Growth
In order to lubricate the economy the government pledged LE15 billion
package to be spent on infrastructure as well as tax/tariff subsidies.
FY08 witnessed a 2.1% growth in government spending, while Q1
FY09 witnessed a 5.4% y-o-y surge. In FY09 and FY10 we expect government
expenditure to grow by 4% and 3%, respectively, based on the
authorities announced intentions to foster potential for economic growth
through creating a developed infra structural base. The breakdown of the
government stimulus package is identified as follows:
• Water and waste water projects for LE5 billion
• Public schools with a cost of LE150 million
• Industrial areas for LE400 million
• Medical centers worth LE400 million
• Port development for LE200 million
Moreover, LE2 billion has been allocated to subsidize custom duties and
taxes on investment related goods.
Budget Deficit-Financed Internally With Low Risk of Defaulting
Indicator
Nominal GDP (LE Billion)
GDP Growth (%)
Inflation Rate
Exchange Rate (LE/US$)
Current Account (US$ Billion)
Government Deficit/GDP (%)
EGP Million
500,000
400,000
300,000
200,000
100,000
0
Main Economic Parameters
FY06
FY09
1,067
4.1%
15%
5.6
-5.0
-7.0%
Government Budget
FY07
FY08
Budget Deficit
FY09f
FY10
1,216
4.5%
10%
5.8
-3.8
-7.1%
Source: Prime Estimates
FY10f
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Revenue Expenditure Deficit/GDP
Source: CBE/Prime Estimates
Budget deficit deteriorated significantly in FY08 to constitute 6.8% of
GDP compared to the 5.7% reported in FY07. The deterioration is
caused by hiking international prices of oil and basic food items subsidized
by the government. Hence, amounts devoted to subsidies witnessed
a 56% increase to LE84.2 billion. On the other hand, government
revenue witnessed a moderate 21% increase with income from taxes
constituting 62% of total revenue.
FY08 deficit was mainly financed through LE11.4 billion in external debt,
LE527 million in domestic debt, and LE38.9 billion from a government
contingency account. 1Q FY09, deficit amounted to LE22.8 billion financed
through LE519 million in bonds, LE19 billion in bills and LE20.6
billion in bank loans. LE3 billion was given in repayment of external debt
in 1Q FY09. Going forward, we adjust our budget deficit upwards to
settle at 7.0% and 7.1% of GDP in FY09 and FY10, respectively.
We expect the banking system excess liquidity to be used in financing
the budget deficit.
Fiscal
Account
(LE bn)
Total
Revenues
Total
Expenditures
Deficit/
Surplus
Deficit/
Surplus/
GDP
FY06
151.6
207.8
-56.2
-9.2%
FY07
180.2
222.0
-41.8
-5.7%
FY08 FY09f FY10f
221.4 263.7 303.2
282.3 338.7 389.6
-60.9 -75.0 -86.3
-6.8% -7.0% -7.1%
Source: CBE/Prime Estimates
Prime Research 11

ECONOMIC FOCUS (CONT’D)
10 March 2009
Egypt
The government agenda for enhancing public financing encompass the following;
• Applying the VAT in a later period in 2010 to replace the sales tax, expected to yield 2% of GDP as government revenue;
• Streamlining the subsidy system through canceling in-kind food subsidies and making direct cash transfers, instead;
• Undertaking a second round of privatization of state enterprises through free transfer of shares and retained ownership through
holding companies for restructuring and debt settlement.
Investment Friendly Environment
We perceive the current economic environment in Egypt as investment friendly, as illustrated by the following;
• Availability of credit that can be extended to business organizations as illustrated by a an L/D ratio of 55% as of November
2008, with excess cash amounting to LE343.7 billion or 38% of GDP and more than double the budget deficit of FY09 and
FY10, respectively
• Expansionary monetary policy inducing interest rate cuts to 10.5% and 12.5% on overnight deposits and lending, respectively,
with possible further 50 bps cut till June 2009
• Government measurements aiming at lubricating investment through postponing the introduction of VAT and energy price increases
until a later period in 2010. This is in addition to reinstating the free zone status for oil refineries, developing the infrastructure,
and subsidizing tariffs on investment-related goods
• Huge market with a high consumption potential
In 2008, domestic investment represented over 60% of total investment with FDI inflows standing at around 38%. Investment in oil
extraction activities, oil refining and manufacturing, transportation and communication represented 17%, 27% and 16% of total
investment, respectively. The USA contributed 36% of FDI, EU 29%, Arab countries 17%, and other countries 18%.
We expect a 6% growth in investment over FY09 and FY10. Announced projects and fields of foreign direct investment over
the coming years are identified as follows:
• Agricultural and milk projects with investment cost of LE2 billion to be injected by Saudi Investor, Soultan Ben Mohamed Ben
Masoud
• Industrial and tourism projects with investment cost of US$3 billion by the Kuwaiti Kharafi Group
• Abu Qir gas field with overall investment of US$1.3 billion by the Italian Edison SPA
• A new oil field discovered in the western desert, 80 km from the borders with Libya. Production capacity is 5k b/d of oil and 4.3
million cubic feet/day of gas
• A steel billet factory and a mineral salt extracting project with US$2 billion investment cost by the Kuwaiti Kharafi group
• A discussion of a Russian industrial zone to be established in Borg Al Arab over 5 years comprising factories for cars, airplanes,
electrical tools and petroleum equipment
• LNG floating terminals to ship gas produced in Egypt by Shell. The company already signed an initial multi-billion dollar contract
with Iraq government to establish a similar project there
• The second phase of East Port Said development project with a total investment cost of US$700 million to be completed in
2011. The project aims at increasing the port’s capacity to 5.1 million containers annually from the current 2.1 million.
Our main concern with regard to investment is that it is a function of fragmented, and in some cases contradicting, government decisions
as opposed to being a part of an integrated plan aiming at capitalizing on the country’s resources (i.e. manpower, agricultural
land … etc.) and preserving environmental resources and hence, ensuring sustainable growth. At the moment, investment opportunities
capitalize on the high consumption potential in Egyptian markets while exploiting the environment, which makes economic
growth in Egypt pretty unsustainable.
External Linkages Posing Pressure on the
External Account
Lower export, Suez Canal and tourism receipts are currently
perceived as the main growth hindrances. Q1
FY09, however, came in strong with regard to all three items,
however, the rest of FY09 is expected to reflect the repercussions
of the worldwide credit crunch. A 25% decline in exports is
expected in FY09 mainly attributed to plummeting prices of oil
and semi-processed goods constituting the bulk (i.e. 62%) of
Egyptian exports. Similar drastic price declines is not expected in
FY10 which, together with a rebounding economy in the latter
half of FY10, justifies our expectation of 6% increase in export
receipts.
Suez Canal and tourism receipts are expected to witness a
decline of 8% and 10%, respectively, in FY09. FY10, however, is
expected to witness a rebound of 5% and 6% in tourism and
Suez Canal receipts, respectively.
External Account
US$(bn)
Exports
Imports
Tourism
Suez Canal
Revenues
Transfers
Current Account
FDI
FY08
29.4
52.8
10.8
5.2
9.3
0.9
13.2
FY09
22.1
50.1
9.7
4.8
9.8
(5.0)
6.5
FY10
23.4
52.5
10.2
5.1
10.8
(3.8)
7.1
Source: CBE/Prime Estimates
Prime Research 12

ECONOMIC FOCUS (CONT’D)
10 March 2009
Egypt
We expect a 5% increase in remittance inflows explained by high
interest rates on deposits in Egypt relative to banks abroad, in addition
to a financially secure banking system immune to the global
financial turmoil.
15,000
External Account
Exchange Rate: Pressures Towards Further
Depreciation
Egyptian pound depreciated to its current levels at LE5.6/US$ compared
to its December resistance level at LE5.5/US$. The fall is accompanied
by declining official reserves to US$33 billion in December
from US$34 billion in October 2008. NIR in months of merchandise
imports is roughly estimated at 7 months, using recent import
data, from 7.9 months in June 2008 and 8.9 months in June 2007.
Accordingly, we see pressure on the Egyptian pound to further depreciate
to LE5.8/US$ by beginning of FY10. We believe the authorities
will maintain a flexible exchange rate policy due to the risks
entailed in managing the currency in a time of weakening balance of
payment.
Anticipated Immediate Slow Down of Inflationary
Pressures with The Possibility of Another
Wave of Grave Price Increases in The
Long Run
Inflation surged to 23.6% y-o-y in August 2008, following hiking
international prices further aggravated by oil subsidy cut in May,
2008. However, following international recessionary pressures and
tightening monetary policy, inflation declined to 14% y-o-y in January
2009. We expect monthly inflation rate to settle at 5% y-o-y by
June 2009 since June 2008 witnessed hiking prices.
Inflation surges during 2008 shed some light on inadequacies inherent in the economic system in Egypt, that we identify as follows;
• Prices not reflecting the real cost (i.e. subsidies/price distortions);
• Low productivity translated in low disposable personal income and resulting in reliance on subsidies;
• Inefficiency of some industries turning to be unprofitable following the oil subsidy cut;
• Vulnerability of the government budget to external price shocks.
We believe that as the international economy rebounds another wave of inflation surges is possible that might result from external
and internal factors, specified as follows;
• Increasing international demand leading to fast price increases globally;
• Internal economic reform towards liberalizing the economy through gradual subsidy cuts;
• Rapid population growth and depleting resources illustrated by the fact that currently Egypt imports 40% of its food needs.
In this respect, we emphasize the importance of encouraging investment in areas assessed to be economically viable assuming subsidy
cuts are undertaken.
Interest Rate Reflecting a Monetary Expansion
Monetary tightening has ended with the CBE shifting its focus from inflation concerns to stagnating GDP growth. Accordingly, interest
rates declined by 100 bps to 10.5% and 12.5% on overnight deposits and lending, respectively. We anticipate further interest
rate cuts with a floor of 9.5% and 11.5% on overnight deposits and lending, respectively. Timing of further cuts depends on the
speed by which inflation declines.
USD Million
CPI
10,000
5,000
0
-5,000
-10,000
-15,000
Exchange Rate
(LE/US$)
Overnight Interbank
Rate
FY06
FY06
10%
5.8
9.5%
FY07
FY07
15%
5.5
9.5%
FY08
Money Variables
FY08
12%
5.5
10.3%
FY09e
FY09
11%
5.7
8.8%
FY10f
CA Balance Balance of Goods & Services Remittances
`
Source: CBE/Prime Estimates
FY10
4%
5.8
8.6%
Source: MOF/Prime Estimates
Prime Research 13

2009 INVESTMENT STRATEGY
10 March 2009
Egypt
This Page has been Left Intentionally Blank
Prime Research 14

STOCK MARKET FOCUS
10 March 2009
Egypt
DISTRESSED EXTERMAL MACRO DRIVERS HIT
LOCAL MARKET DYMANICS
MSCI Egypt reached a peak in January 2008 where it managed to
grow by 50% from Jan FY07, however, amid global worsening conditions
and in line with EMEA markets, MSCI Egypt deteriorated intensively,
specially after May 5 decisions which investors received
bitterly on already soft volumes. Worse comes to worst with margin
calls for declining asset prices and brokers closing positions on fears
of declining equity values.
0
Tension Causing Redemptions
Average daily value declined vigorously in 2009, from an average of
LE1.3 billion to an average of LE500 million recorded in the beginnings
of 2009. This could be attributed to change in market dynamics,
namely, decline in institutional trading and lower foreign partici-
Source: Prime Estimates
pation. Worries from lower NAVs and less dividends from mutual funds causing asset prices to decline exponentially, despite the lack
of data on AUMs available on hand with fund managers, we don’t expect less than 65% decline in assets under management.
Consequently, institutional trading reached a deteriorated levels in March 2009 to 19%, down from an average of 60% recorded in
January 2008. Secondly, foreign trading, including GCC fund flows, continued to deteriorate due to declining oil prices and margin
calls, which also contributed negatively to lower volumes and negative sentiment. Moreover, anticipation of a weaker Egyptian pound
due to weaker BOP and lower interest rates causing foreign funds to wait till the currency settle down at which time funds inflows
would adjust to newer risk premium
2,500
2,000
1,500
1,000
500
02-01-2008
14-02-2008
28-03-2008
MSCI Egypt
12-05-2008
25-06-2008
07-08-2008
MSCI Arabian
24-09-2008
06-11-2008
18-12-2008
02-02-2009
100%
90%
80%
Retail % Institutions %
Institutions %, 86%
Retail %, 75%
100%
90%
80%
Local Value
Foreign Value, 51%
Foreign Value
60%
50%
70%
60%
70%
60%
40%
50%
50%
30%
40%
30%
20%
10%
0%
Retail %, 14%
Institutions %, 25%
40%
30%
20%
10%
0%
Foreign Value,
6.60%
20%
10%
0%
Jan-08
Feb-08
Mar-08
Apr-08
May-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Jan-08
Feb-08
Mar-08
Apr-08
May-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Source: Prime Estimates
We See Market Dynamics Improving by 2H FY09
Almost 3 months are already through from 2009 with a noticeable retail buying in small caps and the market turning over around
LE480 million daily with volumes starting to marginally improve to reach an average of 90 million recorded in march, up from 60 million
recorded in late 2008. Accordingly, we expect market dynamics to improve gradually once the currency stabilizes and BOP starts
to improve along with global improvement as discussed in the strategy part.
Historical PE is Touched, Indicating that
the Boom-Bust Cycle is Or Almost Over
In January FY08, PAMI stocks recorded a PE of 22x, at
which time the sub prime crisis continued to develop
dramatically, along with May 5, 2008 decisions, panic
selling dominated the market among local and foreign
investors, taking PE to historical levels, as noted by
values recorded in October 2008 to an average of
5.6x, a 37% discount to MENA peers.
24x
22x
20x
18x
16x
14x
12x
10x
8x
6x
PAMI P/E (1998-2009)
September 2002
PE 4.5x
October
2008
PE 5.18x
4x
01-Jan-98
09-Apr-98
16-Jul-98
19-Oct-98
21-Jan-99
02-May-99
02-Aug-99
02-Nov-99
03-Feb-00
14-May-00
15-Aug-00
15-Nov-00
19-Feb-01
31-May-01
04-Sep-01
04-Dec-01
14-Mar-02
25-Jun-02
30-Sep-02
05-Jan-03
16-Apr-03
24-Jul-03
26-Oct-03
03-Feb-04
10-May-04
10-Aug-04
10-Nov-04
16-Feb-05
25-May-05
24-Aug-05
28-Nov-05
05-Mar-06
11-Jun-06
11-Sep-06
19-Dec-06
28-Mar-07
05-Jul-07
08-Oct-07
20-Jan-08
21-Apr-08
28-Jul-08
30-Oct-08
Source: Prime Estimates
Prime Research 15

STOCK MARKET FOCUS (CONT’D)
10 March 2009
Egypt
Despite Worsening Market Dynamics, Regional Multiples Favor Egypt
Steep declines in equities have caused FY09 valuations multiples to turn in favor of Egypt given a dividends yield of around 8.7%,
50% higher than most countries except Kuwait, while trading at 7.67x FY09 earnings, representing the lowest PER09 next to UAE
which sound cheaper in this respect. However, collectively dividends yield coupled with a cheap PE would favor Egypt
P/E x
P/B x
20
18.50
3.0
2.76
15
10
5
10.51
7.67
9.77
14.48
5.38 5.31
2.5
2.0
1.5
1.0
0.5
1.80 1.88 1.78
1.65
0.63
0.90
0
0.0
Kuwait
Egypt
Saudi
Arabia
Bahrain
Dubai
Abu
Dhabi
Qatar
Kuwait
Egypt
Saudi
Arabia
Bahrain
Dubai
Abu
Dhabi
Qatar
Div Yld %
10.0
8.0
6.0
4.0
2.0
0.0
8.25 8.73
4.60
5.48
4.70
3.98
2.84
Kuwait
Egypt
Saudi
Arabia
Bahrain
Dubai
Abu
Dhabi
Qatar
A Selection of 30 Companies Generated a 38% Decline in EPS, While Market Prices Assume
80% Decline
We have slashed our forecasts for earnings across all sectors by an average of 38%, this implies a PER of 12x FY09 earnings, while
market trades on PER of 7.67x FY09 earnings.
We arrived at the 38% decline by the following:
1) Assuming lower or stagnating commodities’ prices to new prices
2) Accounting for lower domestic demand / lower exports
3) Anticipating higher levels of inventory
4) Accounting for more expensive liquidity.
Can The Market Be right?
Investors seem to be discounting worse than existing/expected economic conditions. Market pessimism seem to be disproportionate
to reality, exactly as optimism was out of proportion when the market was rallying. Main factors triggering the pessimism,
in our opinion, are identified as follows:
1) Global uncertainties regarding equities
2) Declining Oil Prices leading GCC investors to withdraw their investments
3) Brokerage Companies being more conservative not extending margins to investors who already lost their positions
4) Wait-to-see-attitude from investors in search for market bottoms
We Strongly Refute The Likelihood of Worsening Economic Conditions Based on The Following:
Source: Prime Estimates
1) Expected expansionary monetary policy by the Central Bank of Egypt
2) Government plan to lubricate the economy through devoting LE15 billion to infrastructure projects and tax subsidies
3) Huge consumption potential attracting FDIs
4) Investment friendly policies adopted by the government
5) Cheap labor.
Prime Research 16

2009 INVESTMENT STRATEGY
10 March 2009
Egypt
This Page has been Left Intentionally Blank
Prime Research 17

PRIME PICK: COMMERCIAL
INTERNATIONAL BANK (CIB)
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE40.2 LE34 Buy
18.2%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
CIB
Banking
EGX- LSE
Equity strategy
DCFE
LE70.3
LE5.55/US$
LE
COMI.CA - COMIq.L
Outstanding Shares (mn) 292.5
Par Value/Share (LE)
Financial Year Ending
LE10
December
Mkt. Cap (LE mn) 9,945
Weight to PAMI 5.28%
Av. Daily Volume (000) 820
Price Low – High (LE) (52Wk.) 27.01 - 64.88
Shareholders
Ownership Stake
Ripplewood Consortium 8.86%
Bank of New York 22.2%
Dubai Capital 5.24%
Free Float 63.62%
70
60
50
40
30
20
10
0
Jan-08
Mar-08
Stock Performance Chart
(LE / Share)
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
Income Statement 2008a 2009e 2010f
Interest Income 3,765 4,589 5,180
Interest Expense 1,967 2,306 2,643
Net Interest Income 1,799 2,283 2,537
Non-Interest Income 1,558 1,744 2,020
Non-Interest Expenses 1,330 1,612 1,866
Operating Income 2,027 2,414 2,691
Provisions 411 436 441
Net Profit Before Tax 1,616 1,978 2,250
Tax Provisions 0 30 45
Income Taxes 251 325 360
NPAT 1,365 1,624 1,845
Other Non Operating Items 0 0 0
NPAUI 1,365 1,624 1,845
Minority Interest Income -5 -6 -7
Non-Appropriation Items 0 173 232
Net Attributable Income 1,371 1,457 1,620
Balance Sheet 2008a 2009e 2010f
Cash and Cash Items 6,493 7,167 8,693
Inter-bank Assets 4,552 8,451 13,961
T-Bills & Gov. Securities 12,558 16,374 20,765
Net Marketable Securities 3,996 4,094 4,558
Net Loans and Advances 26,330 28,316 30,739
Debtors & Other Debt Balances 973 1,426 1,727
Subsidiaries & Direct Invst. 93 239 241
Net Fixed Assets 748 765 793
Other Assets 1,717 1,752 1,787
Total Assets 57,462 68,583 83,264
Claims on Assets
Inter-bank Liabilities 229 451 757
Customer Deposits 48,790 59,726 72,444
Creditors & Other Cr. Balances 1,229 1,100 1,332
Dividend Payable 0 546 748
Other Provisions 373 469 581
Bonds 109 120 132
Other Liabilities 866 874 883
Minority Interest 0 -6 -13
Total Liabilities 51,596 63,280 76,864
Tier 1 : Primary Capital 5,866 5,304 6,401
Paid-In Capital 2,925 2,925 2,925
Capital Surplus 0 0 0
Reserves 1,444 2,458 3,555
Retained Earnings 1,497 -79 -79
Total Shareholders' Equity 5,866 5,304 6,401
Total Liab. & Sh. Equity 57,462 68,583 83,264
Contingent Liabilities 13,291 14,886 16,672
Total Footings 70,753 83,469 99,937
Free Cash to Equity 2008a 2009e 2010f
NAI 1,371 1,457 1,620
Investment Flow: -1,679 562 -1,097
Change in Assets -9,699 -11,122 -14,681
Change in Liabilities 8,020 11,684 13,584
Table 1
Source: Bank Financials & Prime Projections
Equity Cash Flow -308 2,019 523
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 18

PRIME PICK: COMMERCIAL
INTERNATIONAL BANK (CIB)
10 March 2009
Egypt
Meet A Mature & Established Bank
CIB is a main player in the sector in Egypt as it captures a loan market share of 6%. Despite adverse economic environment loans
grew by 28.8% in FY08 leading to total L/D ratio of 57% from 55% in FY07. With regard to financial investments, the bank
tripled its holding of the risk-free government securities leading to total financial investments of LE16.6 billion representing 34% of
customer deposits in FY08 from 16% in FY07. Marketable securities, however, witnessed a 48% increase in marketable securities to
LE3.9 billion. The bank has applied new CBE amendments with regard to valuating available for sale financial investments and held to
maturity. Accordingly, earning assets expanded to LE47.3 billion demonstrating a 16% growth. The bank reported a strong equity
base through a Capital Adequacy Ratio (CAR) of 11.72%, perceived as protection against the global economic downturn.
Projections & Valuation
As a result of the economic slowdown and the global financial crisis, we expect a conservative loan growth rate of 8% and 9%
over FY09 and FY10, respectively. We forecast non-interest income to grow at 12% and 16% in FY09 and FY10, respectively,
compared to 38% growth in FY08 and 29% growth in FY07. In order to reflect the risk averse aptitude by investors, we raise
our cost of equity to 16.3% (i.e. 9.6% risk free rate and 6.7% market risk premium).
Investment Rationale
We have a positive sentiment on CIB, due to the following;
• Enhanced profitability as reflected in NIM standing at 3.8% from 2.9% in FY07;
• Manageable risk shown by a CAR of 11.7%;
• Room for growth demonstrated by L/D ratio of 57%;
• Share prices demonstrate 18% upside potential, though not exceedingly high, illustrate a solid earning base.
Size Items (LE millions) 2008a 2009e 2010f 2011f
Total Revenues 5,323 6,332 7,201 8,639
Net Banking Income 3,357 4,026 4,557 5,602
Earning Assets 47,437 57,235 70,024 81,465
Risk Assets. 34,879 40,861 49,259 68,802
Liquid Assets 27,600 36,086 47,978 52,967
Total Invested Capital 6,841 6,298 7,415 8,685
Non-Performing Loans (NPLs) 840 944 1,033 1,291
Specific Loan Provisions 640 945 1,278 1,695
General Loan Provisions 768 834 873 923
Profitability Ratios 2008a 2009e 2010f 2011f
Yr/Yr Net Interest Income Growth 49.8% 26.9% 11.1% 15.1%
Yr/Yr Non-Interest Income Growth 38.8% 11.9% 15.9% 32.7%
Gross Earning Yield (GEY) 7.9% 8.0% 7.4% 7.3%
Breakeven Earning Yield (BEY) 4.1% 4.0% 3.8% 3.7%
Net Interest Margin (NIM) 3.8% 4.0% 3.6% 3.6%
Cost of Funds (exc. equity) 3.9% 3.8% 3.6% 3.6%
Cost of Funds (inc. equity) 5.2% 4.7% 4.6% 4.6%
ROA 2.4% 2.4% 2.2% 2.4%
ROE 23.3% 30.6% 28.8% 29.6%
ROIC (after-tax) 20.0% 23.1% 21.8% 22.9%
Asset Quality Ratios 2008a 2009e 2010f 2011f
NPLs/Total Loans 3.0% 3.1% 3.1% 3.1%
Specific Loan Provisions/NPLs 76.2% 100.1% 123.7% 131.2%
Spe. & Gen. Loan Prov. /Tot. Loans 5.0% 5.8% 6.5% 6.3%
Productivity Ratios 2008a 2009e 2010f 2011f
Tot. Loans & Adv./ Tot. Deposits 57.4% 51.0% 46.0% 50.0%
Tot. Bills & Bonds/Tot. Equity 276.2% 308.7% 324.4% 165.5%
Liquid Assets/Total Deposits 56.6% 60.4% 66.2% 63.6%
Interbank Ratio 1987.8% 1875.8% 1844.9% 2450.2%
Source: Bank Financials & Prime Estimates
LE mn 2009 2010 2011
Old New Old New Old New
Net Loans 37,188 28,316 49,021 30,739 63,725 38,496
NII 2,250 2,283 2,732 2,537 3,025 2,921
Net Banking Income 4,042 4,027 4,915 4,557 5,580 5,602
NAI 1,882 1,457 2,392 1,620 2,743 1,988
Source: Bank Financials & Prime Estimates
Prime Research 19

PRIME PICK: NATIONAL SOCIETE
GENERAL BANK (NSGB)
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE18.9 LE15.37 Buy
22.9%
Value
Share Data
Company Short Name
NSGB
Sector
Banking
Company Traded Market
EGX
Report Reason
Equity strategy
Valuation Methodology
DCFE
Previous Target
LE52.3
Exchange Rate
LE5.55/US$
Stock Currency
LE
Reuters Code
NSGB.CA
Outstanding Shares (mn) 302.9
Par Value/Share (LE)
LE10
Financial Year Ending
December
Mkt. Cap (LE mn) 4,471.4
Weight to PAMI 2.48%
Av. Daily Volume (000) 133.9
Price Low – High (LE) (52Wk.) 13 - 44.85
Shareholders
Ownership Stake
Societe Generale 77.2%
Free Float 22.8%
Income Statement 2008a 2009e 2010f
Interest Income 3,200.2 3,382.9 3,734.9
Interest Expense 1,772.3 1,796.1 1,921.0
Net Interest Income 1,427.9 1,586.7 1,813.9
Non-Interest Income 1,178.7 1,014.9 971.1
Non-Interest Expenses 1,096.6 1,190.9 1,315.6
Operating Income 1,509.9 1,410.7 1,469.3
Provisions 213.4 364.9 413.8
Net Profit Before Tax 1,296.6 1,045.8 1,055.5
Tax Provisions 0.0 73.2 105.5
Income Taxes 160.2 52.3 52.8
Unusual Item 0.4 - -
NPAUI 1,136.9 920.3 897.2
Non-Appropriation Items 71.5 84.9 81.9
Net Attributable Income 1,065.4 835.4 815.3
Balance Sheet 2008a 2009e 2010f
Cash and Cash Items 3,102.6 3,873.4 4,183.2
Inter-bank Assets 9,027.2 8,286.3 10,823.1
T-Bills & Gov. Securities 2,976.4 4,415.6 4,768.9
Net Marketable Securities 3,776.3 2,943.8 3,179.3
Net Loans and Advances 25,011.2 26,620.3 28,233.5
Debtors & Other Debt Balances 558.5 591.7 611.1
Subsidiaries & Direct Invst. 40.3 (321.6) (683.5)
Net Fixed Assets 729.5 772.5 817.5
Other Assets 824.8 841.3 858.1
Total Assets 46,046.8 48,023.3 52,791.2
Stock Performance Chart
(LE / Share)
Claims on Assets - - -
Inter-bank Liabilities 1,460.2 1,314.2 2,284.9
50
45
40
35
30
25
20
15
10
5
0
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
Customer Deposits 36,889.2 38,733.7 41,832.4
Creditors & Other Cr. Balances 1,499.1 1,138.0 1,240.2
Dividend Payable 0.0 449.5 491.4
Other Provisions 689.3 912.4 1,168.6
Long-Term Debt 49.6 71.2 78.3
Total Liabilities 40,587.4 42,619.0 47,095.9
Tier 2: Secondary Capital 771.9 470.0 355.3
Subordinated Debt 771.9 470.0 355.3
Tier 1 : Primary Capital 4,687.4 4,934.3 5,340.0
Paid-In Capital 3,029.4 3,029.4 3,029.4
Capital Surplus - - -
Reserves 1,091.6 1,528.3 1,913.9
Retained Earnings 566.4 376.6 396.7
Total Shareholders' Equity 5,459.4 5,404.3 5,695.4
Total Liab. & Sh. Equity 46,046.8 48,023.3 52,791.2
Contingent Liabilities 15,556.8 17,890.3 20,037.2
Total Footings 61,603.6 65,913.6 72,828.4
Free Cash to Equity 2008a 2009e 2010f
NAI 1,065.4 835.4 815.3
Investment Flow: (1,012.7) 55.1 (291.1)
Change in Assets 1,356.4 (1,976.5) (4,768.0)
Change in Liabilities (2,369.1) 2,031.5 4,476.9
Equity Cash Flow 52.6 890.4 524.2
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Bank Financials & Prime Projections
Prime Research 20

PRIME PICK: NATIONAL SOCIETE
GENERAL BANK (NSGB)
10 March 2009
Egypt
Meet A Bank with Solid Foundation & Potential Growth
We identify NSGB as the second main market player, next to CIB, holding a loan market share of 6%. In FY08, net loans witnessed
a 27% increase leading to a staggering total L/D ratio of 73%, compared to 56% by year end FY07. Nonperforming
loans is down to 7% from 11% in FY07 reflecting enhanced asset quality. Financial investments, however, witnessed a
20% decline due to 25% decrease in government securities and 15% decline in marketable securities. Accordingly, earning assets
demonstrated a 2% decline in FY08 to LE40.8 billion. The bank reported a CAR of 13% showing limited risk.
Projection & Valuation
Reflecting a slowing economy, we forecast a conservative annual loan growth of 6% in FY09 and FY10. Also, non-interest income is
expected to witness a 14% decline in FY09 and a 4% decline in FY10, compared to a growth of 105% in FY08 and 9% in FY07. The
staggering increase in non-interest income in FY08 is due to LE389 million provision reversal. We make the conservative expectation
of no such reversals in the coming years. However, we believe in the efficient operations of the bank based on past performance.
Investment Rationale
We highly recommend the bank, due to the following;
• Limited risk as indicated by CAR of 13%;
• High profitability shown by a NIM of 3.5%, ROA of 2.5% and ROE of 26.5%;
• Trading at a discount as demonstrated by a 23% upside potential, P/E of 4.2% and a P/B of 0.8x.
Size Items LE mn 2008a 2009f 2010f 2011f
Total Revenues 4,378.9 4,397.7 4,705.9 5,347.1
Net Banking Income 2,606.6 2,601.6 2,784.9 3,289.2
Earning Assets 40,791.0 42,266.0 47,004.8 51,884.1
Risk Assets. 37,814.7 37,850.3 42,235.9 45,745.6
Liquid Assets 18,882.4 19,519.1 22,954.5 24,472.9
Total Invested Capital 5,508.9 5,475.5 5,773.7 6,164.2
Non-Performing Loans (NPLs) 1,897.6 2,091.6 2,259.8 2,413.1
Specific Loan Provisions 1,804.6 1,978.9 2,195.6 2,300.5
General Loan Provisions 332.6 373.3 419.7 489.6
Profitability Ratios 2008a 2009f 2010f 2011f
Yr/Yr Net Interest Income Growth 20.4% 11.1% 14.3% 16.9%
Yr/Yr Non-Interest Income Growth 104.7% -13.9% -4.3% 20.5%
Gross Earning Yield (GEY) 7.8% 8.0% 7.9% 8.1%
Breakeven Earning Yield (BEY) 4.3% 4.2% 4.1% 4.0%
Net Interest Margin (NIM) 3.5% 3.8% 3.9% 4.1%
Cost of Funds (exc. equity) 4.6% 4.5% 4.3% 4.2%
Cost of Funds (inc. equity) 6.1% 5.9% 5.7% 5.6%
ROA 2.5% 1.9% 1.7% 2.0%
ROE 20.8% 17.0% 15.8% 19.6%
ROIC (after-tax) 19.3% 15.3% 14.1% 17.5%
Asset Quality Ratios 2008a 2009f 2010f 2011f
NPLs/Total Loans 7.0% 7.2% 7.3% 6.9%
Specific Loan Provisions/NPLs 95.1% 94.6% 97.2% 95.3%
Spe. & Gen. Loan Prov. /Tot. Loans 7.9% 8.1% 8.4% 8.0%
Productivity Ratios 2008a 2009f 2010f 2011f
Tot. Loans & Adv./ Tot. Deposits 73.5% 75.0% 74.0% 76.0%
Tot. Bills & Bonds/Tot. Equity 112.6% 125.3% 128.4% 159.5%
Liquid Assets/Total Deposits 51.2% 50.4% 54.9% 53.2%
Interbank Ratio 618.2% 630.5% 473.7% 384.0%
Source: Bank Financials & Prime Estimates
LE mn 2009 2010 2011
Old New Old New Old New
Net Loans 29,964 26,620.3 35,965 28,233.5 44,225 32,012.7
NII 1,689 1,586.7 1,990 1,813.9 2,475 2,119.6
Net Banking Income 2,611 2,601.6 3,127 2,784.9 3,958 3,289.2
NAI 984 835.4 1,233 815.3 1,827 1,076.8
Source: Bank Financials & Prime Estimates
Prime Research 21

PRIME PICK: MARIDIVE AND
OIL SERVICES
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
US$4.45 US$2.72 Strong Buy
63.6%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Exchange Rate
Stock Currency
Reuters Code
Maridive
Oil & Gas services
EGX
Equity Strategy
DCF
LE5.55/US$
US$
MOIL.CA
Outstanding Shares (mn) 256
Par Value/Share (US$)
Financial Year Ending
0.40/share
December
Mkt. Cap (US$ mn) 645
Av. Daily Volume 627,501
Price Low – High (LE) (52Wk.) 1.8 - 7.18
Shareholders
Ownership Stake
Eleish Family 13.20%
Nadim Family 13.20%
Zeid Family 13.20%
Offshore Oil Services 21.39%
CIB 7.11%
EFG Private Company 2.91%
Free Float 28.99%
Stock Performance Chart
(US$ / Share)
Income Statement 2008a 2009e 2010f 2011f
Revenues 257.1 298.4 302.8 343.6
Growth -2% 16% 1% 13%
COGS 125.2 145.2 151.4 167.2
S,G & Admin. Expenses 23.5 27.3 33.3 31.4
EBITDA 108.4 125.8 118.1 144.9
Growth 1% 16% -6% 23%
EBITDA Margin 42% 42% 39% 42%
Depreciation 13.6 14.9 20.1 25.3
Operating EBIT 94.9 110.9 98.0 119.6
Interest Income 0.8 2.5 1.2 2.8
Interest Expense 4.6 5.0 3.7 2.8
Non-Operating Revenues 1.1 1.1 1.1 1.1
Pre Tax Income 92.2 109.5 96.6 120.7
Income Tax 1.4 2.7 1.8 2.4
Effective Tax Rate 1.5% 2.4% 1.9% 1.9%
NPAT 90.8 106.9 94.7 118.4
Extraordinary Items 10.0 0.0 0.0 0.0
Net Income 100.8 106.9 94.7 118.4
Minority interest 13.2 13.9 12.3 15.4
Net Attributable Income - NAI 87.6 93.0 82.4 103.0
Growth 9% 6% -11% 25%
ROS 34% 31% 27% 30%
Balance Sheet 2008a 2009e 2010f 2011f
Cash & Marketable Securities 78.1 149.5 86.2 166.4
Trade Receivables-Net 9.4 10.9 11.1 12.6
Inventory 5.6 6.5 6.6 7.5
Other Current Asset 83.3 95.2 96.0 108.5
Total Current Asset 176.4 262.0 199.8 295.0
Net Fixed Assets 192.2 262.7 331.2 338.2
Projects Under Implementation 118.3 59.1 59.1 0.0
Other Assets 9.8 9.8 9.8 9.8
Total Assets 496.7 593.6 599.9 643.0
Short Term Bank Debt 11.8 0.0 0.0 0.0
CPLTD 38.5 0.0 0.0 0.0
Accounts Payable 17.8 20.7 21.0 23.8
Dividend Payable 64.0 74.4 71.7 89.6
Other Current Liabilities 29.2 33.8 34.3 39.0
Total Current Liabilities 161.3 128.9 127.1 152.4
Long-Term Debt 101.2 81.1 66.2 55.2
Provisions for Deferred Taxes 0.0 0.0 0.0 0.0
Provisions 2.5 2.5 2.5 2.5
Total Shareholders' Equity 231.7 381.1 404.1 432.9
Total Liab.& Shareholders' Equity 496.7 593.6 599.9 643.0
8
7
6
5
4
3
2
1
0
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Free Cash Flow Statement 2008a 2009e 2010f 2011f
NOPLAT 93.6 108.1 96.1 117.2
Non-Cash Items 13.6 14.9 20.1 25.3
Gross Cash Flow 107.2 123.1 116.2 142.5
Gross Investments 137.2 -35.7 76.3 -32.0
Non -Operating Cash Flow 10.9 1.1 1.1 1.1
Free Cash Flow -19.1 159.8 41.0 175.6
Financing Flow
Interest Income After-Tax -0.8 -2.5 -1.2 -2.8
Investment Income After-Tax 0.0 0.0 0.0 0.0
Increase in Excess Cash & M. Sec. 0.0 125.6 -63.6 77.0
After-Tax Interest Expense 4.5 4.8 3.6 2.7
Decrease in Debt & Bonds -20.1 70.9 15.5 11.6
Provisions Used -0.7 0.0 0.0 0.0
Dividends Paid 13.5 71.4 80.9 79.9
Non-Appropriation Items 1.8 -110.4 5.8 7.2
Shareholders Equity -17.4 0.0 0.0 0.0
Total Financing Flow -19.1 159.8 41.0 175.6
Please refer to disclaimer on last page
Financial Summary (Figures in US$ million)
Source: Company Financials, Prime Projections
Prime Research 22

PRIME PICK: MARIDIVE
10 March 2009
Egypt
Meet An Oil Dependent Stock, Yet Immune To Oil Price
Maridive Group is one of the largest companies in Middle East in terms of fleet size.
Maridive operates in two segments; Offshore Construction Services (OCS) and Offshore
Support Vessels (OSV). The group comprises four entities; Maridive and Oil Services,
Maridive Offshore Projects, Maritide Offshore Oil Services and Valentine Maritime Ltd., all
together offering a wide range of services to oil and gas Exploration and Production companies
including maintenance, construction, salvaging, transport and supply of materials.
Maridive diversifies its presence in various locations worldwide entering new markets to
raise market share. Yet, Maridive’s fleet is operating in South East Asia, Gulf of Mexico,
Australia, South America, West Africa and the Red Sea. Currently, Maridive is expanding its
fleet size to reach 73 vessels by FY11 from 60 vessels in FY08
Maridive FY08 consolidated financials reported a top line figure of US$257 million versus
US$264 million attained in FY07, reflecting a y-o-y decline of 2.6%. The slight decline in
revenues was mainly due to a loss of the barge which sank in the previous year affecting
Maridive’s fleet size and due to some delayed contracts which will be reflected in Q1 FY09
earnings.
Maridive Fleet Expansion
Year Vessels Barges
2008 49 11
2009 55 12
2010 57 13
2011 60 13
Total 73
Source: Maridive
Projections and Valuation
In FY09, we maintained utilization and daily rates for both segments (OCS & OSV) due to the fact that Maridive secures long
term contracts. However, we assumed both rates to decline by 15% in FY10 due to the expected decline in global exploration
spending derived by the severe decline in oil prices occurred in late 2008, as well as the cyclical nature of the industry which
states that rates are negatively affected after 12 to 18 months from the oil prices’ decline. Going forward, we forecasted rates to
rebound in FY11 to increase by 15%.
Speaking of margins, the company was able to reduce COGS/Revenue ratio to 48.7% from 53% in FY07. As a result,
OPEX declined by 5% y-o-y to stand at US$148.7 million down from US$155.9 million. We expect COGS to reach US$145 million
in FY09, reflecting a y-o-y growth of 16% and thus maintaining COGS/Revenue margin at 48.7%. Going further, we projected
COGS/Revenue to increase slightly in FY10 to 50% translated to a COGS figure of US$151.4 million. In FY11 and FY12, we maintained
COGS/revenue at 48%, recording US$167 million and US$184 million in COGS respectively.
EBITDA slightly increased by 0.6% to record US$108.4 million over US$107.8 million in FY07. EBITDA margin grew by 128 bps to
42.17% up from 40.89%. We maintained the EBITDA margin in FY09. Starting FY09, we forecasted EBITDA to grow at a 3 year
CAGR of 4.82% to reach US$145 million in FY11 from US$118 million. Our forecasted EBITDA margin came in slightly lower in
FY10 than FY09 by 320bps to 39% from 42.2%, projected to increase back again to 42% by FY11 and maintained in FY12.
We expect FY09 financials to report US$106.7 million in net income, achieving a y-o-y growth of 6% over US$100.8 million. In
FY10, we project net income to decline by 12% to US$95 million. By FY11, when the cycle begins to move upward, we expect
25% increase in net income to reach US$118 million.
Utilizing a WACC of 12.02% and a perpetual growth of 3%, we valued Maridive’s shareholders’ value at US$1.14 billion or
US$4.45/share. The target implies an upside potential of 63.6% given the prevailing market price of US$2.72/share.
Investment Rationale
We have a positive sentiment on the company due to:
• Maridive Group’s earnings are backed by secured long term contracts vary from one to two years. Yet, Maridive has already
secured contracts in FY09 and FY10 worth US$188 and US$233 million respectively.
• A high barrier industry entails limited supply of offshore vessels due to insufficient funds to finance building new vessels and
more than 110 vessels under construction were delayed or cancelled, Maridive is expanding its fleet size to reach 73 vessels
by FY11 from 60 vessels in FY08 which will benefit its international presence and market share.
• Demand on OSV vessels is supported by number of operating rigs as according to industry norms, every operating rig requires
two support vessels which are considered as fixed costs for E&P companies, which is currently Maridive is capitalizing
on.
Prime Research 23

PRIME PICK: TELECOM EGYPT
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE24.02 LE14.74 Strong Buy
63%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart
(LE / Share)
TE
Telecommunication
EGX & LSE
Equity Strategy
DCF
LE24.87
LE5.55/US$
LE
ETEL.CA - ETELq.L
Outstanding Shares (mn) 1,707
Par Value/Share (LE)
Financial Year Ending
LE10
December
Mkt. Cap (LE mn) 25,162
Weight to PAMI 13.59%
Price Low – High (LE) (52Wk.) 10.7 - 23.9
Shareholders
Ownership Stake
Egyptian Government 80%
Free Float 20%
25
Income Statement 2007a 2008e 2009f
Revenues 9,993.1 10,413.2 10,710.0
Growth 5.0% 4.2% 2.9%
COGS 3,305.7 3,389.1 3,566.5
S,G & Admin. Expenses 1,485.1 1,741.0 1,826.4
Other Provisions 0.0 0.0 0.0
EBITDA 5,202.3 5,283.1 5,317.1
Growth 2.0% 1.6% 0.6%
EBITDA Margin 52.1% 50.7% 49.6%
Depreciation & Amortization 2736.7 2546.8 2817.8
Operating EBIT 2,465.6 2,736.3 2,499.3
Interest Income 81.3 94.9 150.9
Investment Income 1070.7 1222.5 1259.2
Interest Expense 599.8 354.7 287.2
Non-Operating Revenues 351.5 313.8 394.4
Pre Tax Income 3,369.3 4,012.7 4,016.5
Pre Tax Income Growth 8% 19% 0%
Income Tax 513.3 662.1 679.8
Effective Tax Rate 15% 17% 17%
NPAT 2,856.0 3,350.6 3,336.8
Growth 9.8% 17.3% -0.4%
Minority 0.0 9.3 9.7
Extraordinary Items (315.0) (264.7) (105.9)
Net Income 2,541.0 3,076.7 3,221.2
Profit Share to Employees & Board 97.3 64.6 66.4
Net Attributable Income - NAI 2,443.7 3,012.1 3,154.8
Growth 5.0% 23.3% 4.7%
ROS 24.5% 28.9% 29.5%
Balance Sheet 2007a 2008e 2009f
Cash & Marketable Securities 1,302.2 2,314.5 2,381.8
Trade Receivables-Net 4,792.5 4,997.0 5,396.6
Inventory 508.4 529.8 544.9
Other Current Asset 94.6 98.6 101.4
Total Current Asset 6,697.7 7,939.8 8,424.7
Net Fixed Assets 19,372.4 18,272.3 16,941.2
Projects Under Implementation 843.6 847.8 852.0
Other Assets 7,677.4 7,772.6 8,015.6
Total Assets 34,591.1 34,832.5 34,233.5
Short Term Bank Debt 1,834.5 377.4 290.8
CPLTD 0.0 1,345.5 695.5
Accounts Payable 130.3 135.8 125.7
Dividend Payable 0.8 1.0 1.0
Other Current Liabilities 3,195.9 2,997.2 2,774.4
Total Current Liabilities 5,161.6 4,856.9 3,887.4
Long-Term Debt 3,151.0 2,633.4 1,898.4
Provisions for Deferred Taxes 170.4 170.4 170.4
Provisions 324.4 421.0 520.3
Total Shareholders' Equity 25,743.9 26,701.6 27,698.2
Total Liab.& Shareholders' Equity 34,591.1 34,832.5 34,233.5
20
15
10
5
0
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Free Cash Flow Statement 2007a 2008e 2009f
NOPLAT 1,884.0 2,115.4 1,964.2
Non-Cash Items 2,736.7 2,546.8 2,817.8
Gross Cash Flow 4,620.7 4,662.2 4,782.0
Gross Investments 314.4 1,958.0 2,031.8
Non -Operating Cash Flow 31.0 33.4 196.5
Free Cash Flow 4,337.3 2,737.7 2,946.7
Financing Flow
Interest Income After-Tax -80.1 -91.9 -146.1
Investment Income After-Tax -1,054.4 -1,183.5 -1,219.0
Increase in Excess Cash & M. Sec. 535.0 921.3 169.5
After-Tax Interest Expense 508.4 241.5 195.6
Decrease in Debt & Bonds 2,503.8 629.2 1,471.6
Provisions Used 156.8 0.0 0.0
Dividends Paid 1,716.0 2,070.5 2,167.9
Non-Appropriation Items 97.3 64.6 66.4
Shareholders Equity -444.2 -7.0 0.0
Total Financing Flow 4,337.3 2,737.7 2,946.7
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 24

PRIME PICK: TELECOM EGYPT
10 March 2009
Egypt
MEET THE DIVERSFIED TELECOM OPERATOR
Telecom Egypt is the only fixed line operator in Egypt and the largest in the MENA region in terms of the number of subscribers
which amounted to 11.33 million in September 2008. The company is 80% owned by the government and has a stake of 45% in
Vodafone Egypt. Moreover, the company controls 56% of the DSL market through its TE data subsidiary.
Projections & Valuation
• Recently mobile operators have announced aggressive marketing schemes including a cut in calling prices to LE0.05/minutes
which we believe that it will make connection costs between governorates more cheaper using mobile phones than using fixed
lines which costs between LE0.08/minute to LE0.16/minute. Moreover, revenues from international calls which represented
28.39% in 9M FY08 will slow down in FY09 due to the shrinkage of the Tourist activity and lay offs or salaries cuts pertaining to
Egyptian expatriates.
• In spite of mobile to fixed substitution, TE growth drivers still exist such as a growth in voice calls revenues should the economy
dips into recession as consumers will tend to use cheaper fixed lines services,
• Following the elimination of the connection tariffs during November and the first week of December, we believe that number of
new subscribers will close the year at 737k subscribers compared to 421k last year.
• Revenues from the undersea cable activity will enhance the bottom line going forward taking into consideration that the investment
cost of the project is hovering at US$160 million but the company has managed to sign contracts with a total value
hitting US$176 million by the end of 1H FY08. The TE North cable is scheduled to come into stream at the second of 2009. We
believe that TE North will add LE311.8 million to aggregate revenues in FY09.
• We also believe that the internet segment is another growth driver going forward with expectation for this segment to record
revenues of LE480.1 million in FY08 and LE837.7 million in FY09 coupled with higher internet literacy and higher internet
penetration rate and increased use of the internet by businesses.
• Our latest DCF valuation for Telecom Egypt as of the 9M FY08 entails a total equity value of LE40 billion or LE24.02/share
INVESTMENT RATIONALE
• NTRA has postponed issuance of the 2nd fixed line license, until further notice, TE remains sole provider of fixed line services.
In case of 2 player market, the second operator will have to roam on TE network till its network is completely rolled out which is
hard to achieve given geographical distribution of Egypt Governorates, providing TE with additional infrastructure revenues
• Internet awareness continues to increase exponentially in Egypt with number of DSL subscribers expected to grow at a CAGR of
60% by FY12, allowing TE Data to capitalize on its 56% market share
• Capitalizing on Egypt’s Geographical position, TE is the best choice for bandwidth traffic originating from Asia & Africa to
Europe. US$70 million will be recognized in 2009 stemming from 25% utilization of the cable. Going forward, the investment will
increase TE footprints to the existing transit corridor, TE will be able to capture growth in bandwidth demand in Asia without
injecting more CAPEX
• Should Mobinil (only listed competitor to VF) gets delisted due to the arbitration case between OTH and FT, TE will be the only
access to the under penetrated Egyptian Mobile market through its 45% stake in VF.
• Leading Industry in financial indicators, EBITDA margin 52%, PE 7.8x, Div Yield 8%, FCF Yield 17%
Prime Research 25

PRIME PICK: MOBINIL
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE197 LE140.82 Strong Buy
40%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Mobinil
Telecommunication
EGX
Equity Strategy
DCF
LE209
LE5.55/US$
Stock Performance Chart
(LE / Share)
LE
EMOB.CA
Outstanding Shares (mn) 100
Par Value/Share (LE)
Financial Year Ending
LE10
December
Mkt. Cap (LE mn) 14,080
Weight to PAMI 7.60%
Price Low – High (LE) (52Wk.) 87 - 243
Shareholders
Ownership Stake
Mobinil Telecom 51%
Orange 71.25%
Orascom Telecom 28.75%
Orascom Telecom 20%
Free Float 29%
250
200
150
100
50
0
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Income Statement (LE mn) 2007a 2008a 2009f
Revenues 8,200.5 10,002.8 11,278.7
Growth 28.9% 22.0% 12.8%
COGS 1,828.0 2,057.4 2,389.5
S,G & Admin. Expenses 2,681.8 3,058.4 3,543.2
EBITDA 3,690.7 4,886.9 5,346.1
Growth 9.5% 32.4% 9.4%
EBITDA Margin 45.0% 48.9% 47.4%
Depreciation & Amortization 1285.9 1659.6 1988.7
Other Provisions 144.1 252.0 225.9
Operating EBIT 2,260.6 2,975.3 3,131.4
Interest Income 29.6 40.3 12.9
Investment Income 0.0 0.0 0.0
Interest Expense 124.0 586.6 617.2
Non-Operating expenses -16.7 59.7 70.9
Pre Tax Income 2,149.6 2,488.8 2,598.1
Income Tax 496.4 499.0 520.9
Effective Tax Rate 23.1% 20.0% 20.0%
NPAT 1,653.2 1,989.9 2,077.2
Growth 7.8% 20.4% 4.4%
Extraordinary Items (2) (20) (1)
Net Income 1,650.8 1,970.2 2,076.0
Profit Share to Employees & Board 141.1 109.8 115.7
Net Attributable Income - NAI 1,509.6 1,860.4 1,960.3
Growth 9.1% 23.2% 5.4%
ROS 18.4% 18.6% 17.4%
Balance Sheet (LE mn) 2007a 2008a 2009f
Total Current Asset 1,347.2 1,587.6 1,655.8
Net Fixed Assets 6,060.3 7,870.0 9,022.5
Projects Under Implementation 1,565.7 1,000.6 950.5
Total Assets 10,053.5 13,658.0 14,507.1
CPLTD 327.2 327.2 407.3
Total Current Liabilities 3,937.1 4,963.3 6,523.1
Long-Term Debt 3,577.3 4,848.1 4,440.8
Total Shareholders' Equity 1,751.6 2,239.6 2,381.2
Total Liab.& Shareholders' Equity 10,053.5 13,658.0 14,507.1
Free Cash Flow Statement (LE mn) 2007a 2008a 2009f
NOPLAT 1,616.0 2,367.4 2,436.7
Non-Cash Items 1,430.0 1,911.6 2,214.7
Gross Cash Flow 3,046.0 4,279.0 4,651.4
Gross Investments 3,507.3 3,519.5 3,261.1
Non -Operating Cash Flow -13.4 31.1 48.3
Free Cash Flow -474.8 790.6 1,438.6
Financing Flow
Interest Income After-Tax -28.9 -39.5 -12.5
Increase in Excess Cash & M. Sec. -201.1 134.3 -5.5
After-Tax Interest Expense 95.4 469.0 420.3
Decrease in Debt & Bonds -2,005.6 -1,276.1 399.1
Provisions Used 88.8 334.0 0.0
Dividends Paid 1,421.8 1,082.8 239.0
Non-Appropriation Items 141.1 109.8 115.7
Shareholders Equity 13.7 -23.6 282.5
Total Financing Flow -474.8 790.6 1,438.6
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 26

PRIME PICK: MOBINIL
10 March 2009
Egypt
Meet The Mobile Operator
Mobinil is the first GSM operator in Egypt and the largest among a tripartite industry with a market share of 48.74% by the end of
2008. Mobinil’s revenues in FY08 culminated at LE10 billion, 22% more than the figure booked in FY07 with the customers base
surging by 33% to 20.1 million subscribers. ARPU in contrast slumped by 17% coming in at LE47.5. On the EBITDA level, it improved
from 45% in FY07 to 48.9% in FY08 as OPEX surged by only 13.4%, but as an absolute figure EBITDA moved north by
32.4% to LE4.89 billion. Interest expenses meanwhile soared by 373% to LE586.58 million as the company had to increase its
interest bearing debt by 30% to finance CAPEX and new expansion including the 3G license coupled with higher interest rate. In
sum, net income grew by 19.2% in FY08 culminating at LE1.97 billion from FY07’s figure of LE1.65 billion.
Projection and Valuation
Figure In 000 2008 2009 2010 2011 2012
We confide in Mobinil’s capability to seize more than 40% of the new
Mobile Subscribers
addition to the market in our forecast period. Yet, this will occur at
41,272 49,277 55,680 60,803 64,901
the expense of ARPU which is expected to slump from LE47.3 in FY08 Penetration Rate 52.72% 61.78% 68.51% 73.43% 76.84%
to LE37 in FY12, which is mitigated through positive elasticity. Accordingly,
this will permit the company to maintain its market share Mobinil
net addition 10,672 8,004 6,403 5,123 4,098
above 45.56% till the end of FY13.
Subscribers 20,115 23,317 25,878 27,927 29,567
New increments to the market will plummet going forward as we believe
that the nearer the penetration rate to 80%, the smaller addition
to the market due to high illiteracy rates, high living costs coupled with
low per capita income, weaker desire of having mobile phones, concentration
of Egyptian in narrow area, and the downside in the tourism
sector due to the global financial turmoil. Hence, we project revenues
to witness slower growth during our forecast period, locking in a 5-
year CAGR of 5.28% in the top line figure.
Based on the guidance of the company's management, tangible
CAPEX will range between LE2.5 billion and LE3 billion in FY09
versus LE3.44 billion as Mobinil will tend to depend on its internal financing
sources due to the current strict borrowing and high cost of
loans.
Mobinil is preparing to takeover Link dot Net , a subsidiary of Orascom Telecom Holding. Link dot Net is a major ISP and internet
company in Egypt, UAE, KSA, Pakistan and Qatar. Yet we haven't incorporated this takeover in our valuation, this merger in our
view will in addition uphold mobile internet application in competition with Etisalat Misr and Vodafone Egypt which have similar
operations. Our Discounted Cash Flow (DCF) model yielded a target price of LE197, translating into an upside potential of 39%
Investment Rationale
• High dividend yield of 10.91% in FY09 compared to our PGI dividend yield hovering at 5.1%. Global peers have an average
dividend yield of 4.08%.
• Its healthy EBITDA margin and the defensive nature of the industry during recession.
market share 48.74% 47.32% 46.48% 45.93% 45.56%
Vodafone
Subscribers 17,611 20,813 23,374 25,423 27,063
market share 42.67% 42.24% 41.98% 41.81% 41.70%
Etisalat
Subscribers 3,546 5,147 6,428 7,452 8,272
market share 8.59% 10.45% 11.54% 12.26% 12.75%
Source: NTRA and Prime Estimates
• The ongoing arbitration case between OT and FT will have 2 scenarios, either one of the 2 parties will acquire Mobinil or a
Status Quo.
• When we think of the outcome of the arbitration and its effect on the share price, the above mentioned scenario is the most
likely, at which time, a significant premium to the market price will be offered, while the second scenario would be a Status
Quo which is doubled sided, from one side it will temporarily harm the share price due to a sell off from investors who were
parking in their investment for an acquisition premium, and from one side it will entail that the 2 parties will focus on enhancing
Mobinil core business and profitability as well as its market position given the heated competition in the highly unsaturated
Egyptian market.
Prime Research 27

PRIME PICK: EIPICO
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE39.2 LE25 Strong Buy
56.8%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart
(LE / Share)
EIPICO
Pharmaceuticals
EGX
Equity Strategy
DCF
LE46/Share
LE5.55/US$
LE
PHAR.CA
Outstanding Shares (mn) 72.124
Par Value/Share (LE)
Financial Year Ending
LE10/Share
December
Mkt. Cap (LE mn) 1,727.4
Weight to PAMI 0.96%
Av. Daily Volume(000) (52Wk.) 60.5
Price Low – High (LE) (52Wk.) 20 - 39.44
Shareholders
Ownership Stake
ACDIMA 43.18 %
Medical Union Investment 5.62 %
Others 0.72 %
Free Float 50.48 %
45
40
35
30
Income Statement 2007a 2008a 2009e 2010f
Revenues 850.2 910.1 979.3 1,077.3
Growth 14% 7% 8% 10%
COGS 380.2 559.2 474.7 484.8
S,G & Admin. Expenses 104.7 21.8 124.5 137.0
EBITDA 365.3 329.1 380.0 455.5
Growth 15% -10% 15% 20%
EBITDA Margin 43% 36.2% 39% 42%
Depreciation & Amortization 59.4 53.1 18.5 18.5
Other Provisions 30.2 32.9 27.5 33.1
Operating EBIT 281.9 277.7 334.0 325.8
Interest Income 16.3 20.0 7.0 39.5
Investment Income 0.3 2.9 3.3 3.2
Interest Expense 2.2 1.3 0.0 0.0
Non-Operating Revenues 4.2 22.2 17.7 19.5
Pre Tax Income 300.4 321.6 361.9 388.0
Income Tax 63.5 59.3 57.1 61.2
Effective Tax Rate 0% 0% 0% 0%
NPAT 236.9 262.2 304.8 326.8
Growth 17% 11% 16% 7%
Extraordinary Items -5.0 -5.6 0.0 0.0
Net Income 231.9 256.6 304.8 326.8
Profit Share to Employees & Board 15.2 15.2 18.1 19.4
Net Attributable Income - NAI 216.7 241.3 286.7 307.4
Growth 19% 11% 19% 7%
ROS 25% 27% 29% 29%
Balance Sheet 2007a 2008a 2009e 2010f
Cash & Marketable Securities 416.9 372.0 330.1 370.8
Trade Receivables-Net 227.9 241.7 304.0 334.4
Inventory 338.8 382.0 411.1 452.2
Other Current Asset 27.5 33.3 35.8 39.4
Total Current Asset 1,011.0 1,029.0 1,081.0 1,196.9
Net Fixed Assets 308.3 334.1 516.1 633.9
Projects Under Implementation 31.1 70.5 0.0 0.0
Other Assets 256.7 238.2 219.7 201.2
Total Assets 1,607.1 1,671.8 1,816.8 2,031.9
Short Term Bank Debt 0.0 0.0 0.0 0.0
CPLTD 0.0 0.0 0.0 0.0
Accounts Payable 26.2 22.5 24.2 26.7
Dividend Payable 137.4 0.0 181.5 194.6
Other Current Liabilities 73.7 68.2 73.4 107.7
Total Current Liabilities 237.2 90.7 279.1 329.0
Long-Term Debt 0.0 0.0 0.0 0.0
Provisions for Deferred Taxes 0.0 0.0 0.0 0.0
Provisions 301.3 258.4 326.8 359.8
Total Shareholders' Equity 1,068.4 1,314.9 1,210.9 1,343.1
Total Liab.& Shareholders' Equity 1,607.1 1,671.8 1,816.8 2,031.9
25
20
15
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Free Cash Flow Statement 2007a 2008a 2009e 2010f
NOPLAT 218.1 221.6 279.8 268.4
Non-Cash Items 83.4 51.4 46.0 129.7
Gross Cash Flow 301.5 273.0 325.9 398.0
Gross Investments 120.8 274.3 31.7 230.9
Non -Operating Cash Flow -0.6 13.5 14.9 16.4
Free Cash Flow 180 12 309 184
Financing Flow
Interest Income After-Tax -15.9 -19.6 -6.9 -38.9
Investment Income After-Tax -0.3 -2.9 -3.2 -3.2
Increase in Excess Cash & M. Sec. 34.0 -52.1 -48.8 30.9
After-Tax Interest Expense 1.8 1.0 0.0 0.0
Decrease in Debt & Bonds 0.0 0.0 0.0 0.0
Provisions Used 15.2 75.8 -40.8 0.0
Dividends Paid 129.8 129.9 163.4 175.2
Non-Appropriation Items 15.2 15.2 18.1 19.4
Shareholders Equity 0.2 -135.1 227.3 0.0
Total Financing Flow 180 12 309 184
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 28

PRIME PICK: EIPICO
10 March 2009
Egypt
Meet The Drug Maker..
Egyptian International Pharmaceutical Industries Company (EIPICO) is Egypt’s leading drug maker with local and export market
shares of 7% and 25% respectively. EIPICO manufactures more than 190 products covering 23 therapeutic areas, including soft gelatine
capsules, lyophilized products, gels, sprayers and effervescent tablets. It manufactures the products under license from multinationals,
including Roche. Moreover, the company has a 33% stake in drug maker Universal Company in KSA which will be operational
by 2H FY09 after finalizing Saudi authorities approvals. Moreover, the company is investing in its R&D department which will enable it
to increase the number of generics which has higher margins than under license products. The company exports its products to most
of the MENA region in order to escape price capping controls by the Egyptian governments.
Projections & Valuation
During our last meeting, the company’s management has confirmed that constructing the new factory has already began, and that
the new factory will be fully operational by mid FY10. Accordingly, our current valuation assumes that the company will be able to
double its capacity by FY10. The following table depicts EIPICO production in terms of Generics and Under license products. We expect
EIPICO’s revenues to record LE979 million in FY09, growing steadily thereafter at a 5 years CAGR of 9%, while we lowered our
target of LE271 million FY08 earnings to LE255 million. On the EBTIDA level, we expect an EBITDA of LE395 million, equating to an
EBITDA margin of 43.5%.
Drugs Produced 2007a 2008e 2009f 2010f 2011f 2012f
EIPICO Production (Generics) 192 199 208 208 217 226
Under license 61 61 61 61 61 61
Total 253 260 269 269 278 287
Table 75
Source: EIPICO, Prime Forecasts
Our DCF value for EIPICO has come down from LE46/share to LE39.2/share, reflecting our new risk free rate as well as new premium.
Also, it is worth mentioning that the company has investment in Saudi Arabia which we have not accounted for in our valuation,
but once the company reveals more details, we will revise our valuation upwards.
Investment Rationale
• Visible top line and bottom line growth given the industry characteristics which is defensive and immune from recession
• The company has a strong focus on generics which enjoys higher margins and more cost efficient.
• EIPICO opened a biotechnology centre in 2001 which will allow over the long term to harness biotech methods of producing raw
materials used in its products, and to conduct pre-clinical and clinical trials.
• Increased health awareness in the Egyptian market will increase Drug/capita expenditure
• Sales and distribution network covering most of the MENA region, Romania in Europe, and Pakistan in Asia
• Strong Export presence as well as recent expansion in Saudi Arabia which will allow it to escape strict price controls in the Egyptian
market
• Debt free, yet, the company still has a healthy cash flow to finance its expansions plans ( Doubling Capacity)
• Dividends Yield of around 10% as well as a PE of 6x
Prime Research 29

PRIME PICK: ORASCOM
CONSTRUCTION INDUSTRIES
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE341 LE120 Strong Buy
184%
Value
500
450
400
350
300
250
200
150
100
50
0
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart (LE)
(LE / Share)
Please refer to disclaimer on last page
OCI
Construction/Fertilizers
EGX
Equity Strategy
SOP DCF
LE560
LE5.55/US$
LE
OCIC.CA
Outstanding Shares (mn) 215
Par Value/Share (LE) 5
Financial Year Ending
December
Mkt. Cap (LE bn) 25.75
Av. Daily Volume (000) (52Wk.) 362.4
Weight to PAMI 13.5%
Price Low – High (LE) (52Wk.) 98.5 - 470
Shareholders
Ownership Stake
Sawiras Family 55%
Free Float 45%
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Income Statement 2007a 2008e 2009f 2010f
Revenues 13,482 20,637 22,057 26,322
Growth -18% 53% 7% 19%
COGS 10,248 13,911 16,094 18,338
S,G & Admin. Expenses 764 1,954 2,374 2,841
Other provisions 85 127 147 173
EBITDA 2,384 4,645 3,442 4,970
Growth -46% 95% -26% 44%
EBITDA Margin 18% 23% 16% 19%
Depreciation & Amortization 924 340 758 1,233
Operating EBIT 1,460 4,304 2,684 3,737
Interest Income 323 292 170 182
Investment Income 129 145 168 236
Interest Expense 605 128 195 115
Non-Operating Revenues (net) 161 123 (93) 17
Pre Tax Income 1,469 4,737 2,735 4,057
Pre Tax Income Growth -58% 223% -42% 48%
Income Tax 82.0 947.3 546.9 616.5
Effective Tax Rate 6% 20% 20% 15%
NPAT 1,387 3,789 2,188 3,441
Growth -59% 173% -42% 57%
Extraordinary Items 64,786 1,413 - -
Net Income 66,172 5,202 2,188 3,441
Minority Interest 151 - - -
Non-Appropriation Items - 78 33 52
Net Attributable Income - NAI 66,021 5,124 2,155 3,389
Growth 4071% -92% -58% 57%
ROS 489.7% 24.8% 9.8% 12.9%
Balance Sheet 2007a 2008e 2009f 2010f
Cash & Marketable Securities 3,989 15,092 9,021 9,718
Trade Receivables-Net 3,517 6,014 7,241 9,270
Inventory 734 1,124 1,201 1,434
Other Current Asset 81,499 2,691 3,113 3,547
Total Current Asset 89,740 24,921 20,576 23,968
Net Fixed Assets 3,473 8,526 13,959 17,137
Other Assets 1,739 3,535 3,208 2,979
Total Assets 94,952 36,981 37,742 44,084
CPLTD 10,648 2,667 700 500
Accounts Payable 5,525 9,109 10,606 13,673
Dividend Payable 63,219 858 364 578
Other Current Liabilities 852 2,892 3,346 4,071
Total Current Liabilities 80,244 15,526 15,016 18,822
Long-Term Debt 1,035 3,833 3,133 2,633
Provisions for Deferred Taxes 103 103 103 103
Provisions 2,307 2,435 2,582 2,755
other Non current liabilities 586 0 0 0
Minority interests 1,049 1,049 1,049 1,049
Total Shareholders' Equity 9,628 14,036 15,859 18,722
Total Liab.& Shareholders' Equity 94,952 36,981 37,742 44,084
Free Cash Flow Statement 2007 2008 2009 2010
NOPLAT 4,739 3,647 2,086 3,112
Non-Cash Items 1,009 468 905 1,407
Gross Cash Flow 5,748 4,115 2,991 4,518
Gross Investments 69,623 (76,908) 5,651 3,155
Non -Operating Cash Flow 61,320 1,229 (74) 15
Free Cash Flow (2,555) 82,252 (2,734) 1,378
Financing Flow
Interest Income After-Tax (321) (286) (167) (180)
Investment Income After-Tax (128) (142) (165) (232)
Change in Excess Cash & Mkt. Sec. (1,178) 14,225 (6,099) 612
Change in Subsidiaries and LT Investments 649 16 16 16
After-Tax Interest Expense 571 102 156 98
Change in Debt & Bonds (2,433) 5,183 2,667 700
Provisions Used (1,711) - - -
Dividends Paid & Minority Interest 151 63,141 826 313
Non-Appropriation Items - 78 33 52
Reserves Used 1,888 (0) - -
Change in Paid-in Capital & Capital Surplus (42) (64) - -
Total Financing Flow (2,555) 82,252 (2,734) 1,378
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 30

PRIME PICK: ORASCOM
CONSTRUCTION INDUSTRIES
10 March 2009
Egypt
Meet The Fertile Contractor
Orascom Construction Industries is a leading construction contractor operating in Egypt with also strong presence in the MENA region
and GCC countries along with Europe. Following its divesture of its cement line of business, the company has initiated operations in the
lucrative fertilizers business to capitalize on the growing demand for fertilizers generated from agricultural crops and biofuel. OCI fertilizers’
capacity comes from its operation via EFC, Sorfret, EBIC and Notore. The company has a total capacity of 3.8 million tons in
FY08, expected to reach 4.6 million tons by FY11. EFC has a production capacity of 1.4mtpa of urea, but the 30% owned EBIC has a
production capacity of 0.7 mtpa of ammonia and was expected to start operation late 2008. Notore Chemicals on the other hand, is
20% owned subsidiary by OCI in Nigeria with a production capacity of 0.5 mtpa of urea/ammonia. Sofert Algeria is now the only company
that has not started and will begin operation late 2010 with a sellable production capacity of 0.7 mtpa and 1.2 mtpa of ammonia
and urea respectively.
Projections & Valuation
• We forecast a 53% growth in the top line figure in FY08
culminating at LE20.6 billion, of which construction revenues
will constitute around 83.8%. The rest of the value
will mainly come from Egyptian Fertilizers Company
(EFC). Going forward we forecast a 5-year CAGR of
25.06% by the end of FY12 motivated by the rebound of
the construction activities and fertilizers price. The fertilizers
segment will capture 87% of aggregate revenues
by FY12.
• Looking ahead, EBITDA margin will slow down as the
construction segment has low profit margin compared to
the fertilizers segment. EBITDA margin will hover at 21%
in FY12 compared to 23.1% in FY12 and will reach a
minimum of 16.3% in FY09.
• Our assumptions are based on an average price of
US$522/ton for urea in FY08 and US$261/ton in FY09. As
for ammonia, we used an average price of US$500 in
FY08 and US$250/ton in FY09.
• Based on the management's guidance, EBIC and Notore came into stream by the end of FY08 while Sofret Algeria in late FY10.
However, we used a utilization rate of 0% in FY10 but 80% in FY11.
• Net income in FY08 will be boosted by a capital gain from the divestment of the Egyptian Container Handling Company at
US$255 million after all associated costs.
Investment Rationale
FY ending December 2008e 2009f 2010f 2011f
mtpa
EFC
Urea
Capacity 1.3 1.3 1.45 1.45
Utilization 90% 70% 70% 80%
Sorferet Algeria
Urea
Capacity 1.2 1.2 1.2 1.2
Utilization 0.0% 0.0% 0% 80.0%
Ammonia
Capacity 0.7 0.7 0.7 0.7
Utilization 0.0% 0.0% 0% 80.0%
EBIC
Ammonia
Capacity 0.8 0.8 0.8 0.8
Utilization 10.0% 82.0% 85.0% 85.0%
Nortre
Urea
Capacity 0.5 0.5 0.5 0.5
Utilization 50% 82% 85% 85%
Source: OCI& Prime Estimates
• OCI management has a track record on generating strong cash flows from its previous cement business as well as its ongoing
construction business which has been growing annually at an average 20% for the past 5 years.
• OCI will and have been always capitalizing on government expenditure plans of major infrastructure projects locally and in
the GCC with the later projects estimated at around US$1.5 trillion
• OCI is always focusing on high margin projects given its always capitalizing on its strong backlog which reached US$7 billion,
up from US$4.8 billion in 2007
• OCI enjoys a strong negotiation power in its construction contracts given the few number of contractors available, although someone
might argue that construction slowdown would lead to lower negotiation power, yet, OCI contracts include revision clauses
which will enable it to hedge against costs of raw materials
• OCI presence in the fertilizers’ business will enable stronger cash flows once all capacities are in place by 2011, given that we
forecast a rebound in fertilizers’ prices to average around US$320 from FY09-FY11
• OCI recent acquisition of Gavilon, a major fertilizers distributor in US, will enable it to market its fertilizers’ products efficiently
while achieving strong cost synergies given its fertilizer trade activity which is the largest independent importer of fertilizer into
the US with 7.1 mt of fertilizer products
Prime Research 31

PRIME PICK: EL SEWEDY CABLES
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE77 LE39.15 Strong Buy
97% Value & Growth
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart
(LE / Share)
SEWEDY
Industrial
EGX
Equity Strategy
DCF
LE103
LE5.55 /US$
LE
SWDY.CA
Outstanding Shares (mn) 132
Par Value/Share (LE) 10
Financial Year Ending
Mkt. Cap (LE mn)
December
LE5,168
Weight to PGI 2.4%
Av. Daily Volume(000) (52Wk.) 184
Price Low – High (LE) (52Wk.)
Shareholders
LE28.5-146.4
Ownership Stake
El Sewedy Family 72.7%
Others 2.30%
Free float 25%
Income Statement 2007a 2008e 2009f 2010f
Revenues 9,377.5 9,690.0 6,306.0 8,824.7
Growth 29.3% 3.3% -34.9% 39.9%
COGS 8,118.7 8,141.6 4,644.4 6,998.4
S,G & Admin. Expenses 295.0 304.9 252.2 264.7
EBITDA 963.8 1,243.6 1,409.3 1,561.6
Growth 47% 29% 13% 11%
EBITDA Margin 10% 13% 22% 18%
Depreciation & Amortization 83.3 118.5 333.2 371.6
Other Provisions 0.0 0.0 0.0 0.0
Operating EBIT 880.5 1,125.1 1,076.2 1,190.0
Interest Income 83.8 5.5 9.6 12.8
Investment Income 0.0 0.0 0.0 0.0
Interest Expense 183.2 147.0 39.0 33.4
Non-Operating Revenues 0.0 0.0 0.0 0.0
Pre Tax Income 781.2 983.6 1,046.8 1,169.3
Income Tax 24.5 26.1 27.3 32.7
Effective Tax Rate 3% 3% 3% 3%
NPAT 756.7 957.5 1,019.5 1,136.6
Growth 37% 27% 6% 11%
Extraordinary Items 0.0 0.0 0.0 0.0
Net Income 756.7 957.5 1,019.5 1,136.6
Minority Interest 25.4 32.3 45.0 47.9
Net Attributable Income - NAI 724.3 912.5 971.6 1,083.2
Growth 37% 26% 6% 11%
ROS 8% 9% 15% 12%
Balance Sheet 2007a 2008e 2009f 2010f
Cash & Marketable Securities 982.4 1,207.8 1,021.3 1,418.2
Trade Receivables-Net 1,374.1 1,384.4 1,081.1 1,815.5
Inventory 2,074.9 2,616.3 2,333.2 2,823.9
Other Current Asset 272.3 355.3 269.7 333.4
Total Current Asset 4,703.7 5,563.9 4,705.3 6,391.0
Net Fixed Assets 756.6 1,483.7 1,346.1 1,102.2
Projects Under Implementation 414.2 0.0 0.0 0.0
Other Assets 377.7 578.0 519.4 518.1
Total Assets 6,252.3 7,625.6 6,570.9 8,011.3
Short Term Bank Debt 840.3 1,633.8 0.0 0.0
CPLTD 1,420.7 28.5 85.7 85.7
Accounts Payable 325.6 370.1 264.9 370.8
Dividend Payable 0.0 0.0 0.0 0.0
Other Current Liabilities 182.3 13.3 8.6 12.1
Total Current Liabilities 2,769.0 2,045.7 359.3 468.6
Long-Term Debt 39.6 600.0 514.3 428.6
Minority Interest 228.7 273.7 276.6 786.0
Provisions 33.0 80.0 40.0 38.0
Total Shareholders' Equity 3,079.2 3,528.2 4,499.8 5,583.0
Total Liab.& Shareholders' Equity 6,252.3 7,625.6 6,570.9 8,011.3
160
140
120
100
80
60
40
20
0
M ar-08
A pr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Please refer to disclaimer on last page
Dec-08
Jan-09
Feb-09
M ar-09
Free Cash Flow Statement 2007a 2008e 2009f 2010f
NOPLAT 858.7 1,095.2 1,047.9 1,156.4
Non-Cash Items 83.3 118.5 333.2 371.6
Gross Cash Flow 942.0 1,213.7 1,381.1 1,527.9
Gross Investments 1,416.5 -223.3 -323.3 1,096.2
Non -Operating Cash Flow 0.0 0.0 0.0 0.0
Free Cash Flow -474.5 1,436.9 1,704.3 431.8
Financing Flow
Interest Income After-Tax -83.6 -5.5 -9.6 -12.8
Investment Income After-Tax 0.0 0.0 0.0 0.0
Increase in Excess Cash & M. Sec. -169.2 799.4 -74.3 270.9
After-Tax Interest Expense 177.4 143.1 38.0 32.5
Decrease in Debt & Bonds -326.1 38.3 1,662.3 85.7
Dividends Paid 32.3 45.0 47.9 53.4
Non-Appropriation Items 0.0 0.0 0.0 0.0
Total Financing Flow -474.5 1,436.9 1,704.3 431.8
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 32

PRIME PICK: EL SEWEDY CABLES
10 March 2009
Egypt
Meet The Cable Manufacturer
El Sewedy Cables is a leading power cable provider in Egypt and the second
largest one in MENA. Sewedy Cables operations are basically divided into
power cables , electrical appliance, comprehensive turnkey projects
and wind energy projects. El Sewedy Cables market share is
over 56% based on sales revenues. Sewedy Cables enjoys a vertically
integrated model of producing power and special cables and cable related
products and services. Operations are divided into four segments as follow:
1) Wire & Cable which produces wire cables, special cables and winding
wires, as well as raw materials used in cable production such as copper
wire and plastic and polypropylene filler.
2) Electrical Products which produces cable accessories such as modular
terminators, power cable joins and transformers, as well as other
products such as fiber glass and concrete poles for street lighting
3) Turnkey projects which implements cable related infrastructure projects
to meet the needs of major infrastructure projects.
4) Latest addition is Wind energy to capitalize on the government plans
if rolling out wind energy as a replacement of normal energy sources
Projections & Valuation
Sewedy Cables capacity is expected to increase from the current 232.6k
tons/annum to 262.4k tons in 2010.
• Total Revenues surged by 25% to reach LE8.9 billion in 9M FY08
compared to LE7.2 billion in the comparable period last year. We expect
total revenues to decline by 32% from LE9.7 billion in FY08 to
LE6.3 billion in FY09. Going forward, top line figure is expected
to grow at a 5 year CAGR of 3.7%.
• Revenues of power cables segment contributed 81.4% of total
revenues in 9M FY08. We expect revenues of power cables to reach
LE6.5 billion in FY08 backed by 1) the increase in the company’s
production capacity from 124k tons in FY07 to 232k tons in
FY08. 2) The increase in selling prices of both copper and aluminum
to record an average of US$7,000/ton and US$2,000/
ton respectively in FY08. It is worth mentioning that the company’s production capacity is expected to witness an expansion in copper
to reach 137.5k tons in FY08, up from 68.7k tons in FY07. In addition, aluminum production capacity is expected to increase
by 79% from 35.4k tons in FY07 to 63.5k tons in FY08. We estimated that the company will operate at 85% utilization rate,
therefore, total sales volume is expected to increase by 63% to reach 164k tons. Going forward, we expect that total production capacity
to increase to 253k tons in FY09 and revenues of power cables and raw material segment to record LE5.1 billion. The decline in
revenues of this segment can be attributed to the expected decline in selling prices of both copper and aluminum in FY09 to US$3200/
ton and US$1500/ton respectively. Going forward, Revenues from this segment is expected to grow at a 5 year CAGR of approximately
7%.
• Revenues from Electrical products are expected to record LE858.6 million in FY08, up from LE222 million last year. Revenues from
this segment are expected to decline to LE623 million in FY09. Going forward, we expect this segment to contribute approximately 9%
of total revenues and to grow at a 5 year CAGR of 16.45%.
• EBITDA margin is expected to increase to 12% in FY08, up from 10% in FY07. Going forward, EBITDA margin is assumed at
22% in FY09 backed by the increase in production volume with the expansion plan in Libya and Qatar. Net income figure is expected
to grow by 26% to reach LE912 Million in FY08. The bottom line is assumed to increase by 18% in FY09 to reach LE971 Million. Going
forward, we expect net income figure to grow at a 5 year CAGR of 8.3%
• Utilizing a WACC of 17.9% and growth rate of 3%, our DCF value culminate at LE77/share, illustrating 97% upside potential over the
current market price of LE39.15/share.
Investment Rationale:
• Strong Fundamentals generated from a Sound Management with Visible business plans (Cables Expansion Capacity / Entry Wind Energy)
• High Industry Barriers which will help maintain El Sewedy Market Position
• El Sewedy Operations are mostly available in low competition markets
Production Capacities
In Tons 2008a 2009f 2010f
Egypt
Copper 63,600 63,600 63,600
Aluminum 40,000 50,600 50,600
Total 103,600 114,200 114,200
y-o-y % 32.82% 10.23% 0.00%
Sudan
Copper 4,200 4,200 4,200
Aluminum 6,000 6,000 6,000
Total 10,200 10,200 10,200
y-o-y % 13.33% 0.00% 0.00%
Syria
Copper 25,500 25,500 25,500
Aluminum 3,600 3,600 3,600
Total 29,100 29,100 29,100
y-o-y % 70.18% 0.00% 0.00%
Libya
Copper 11,200 19,800 19,800
Aluminum 2,400 2,400 2,520
Total 13,600 22,200 22,320
y-o-y % 63.24% 0.54%
Saudi
Copper 26,000 26,000 26,000
Aluminum 7,500 7,500 7,500
Total 33,500 33,500 33,500
y-o-y % 0.00% 0.00%
UIC
Special Cables 15,600 15,600 15,600
Winding Wires 16,000 16,000 16,000
Total 31,600 31,600 31,600
y-o-y % 53.85% 0.00% 0.00%
New Cables
Copper 7,000 17,500 17,500
Aluminum 4,000 4,000 4,000
Total 11,000 21,500 21,500
y-o-y % 95.45% 8.20%
El Sewedy Cables & Prime Estimates
• El Sewedy long term operations will always capitalize on governments infrastructure projects which are expected to increase in order to
stimulate economies
• Strong Revenue Stream addition once Wind Energy revenues kick off.
Prime Research 33

PRIME PICK: TALAAT MOUSTAFA
GROUP (TMG)
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE10.27 LE2.72 Strong Buy
277%
Growth
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart
(LE / Share)
TMG
Housing
EGX
Equity Strategy
DCF
LE15
LE5.55 /US$
LE
TMGH.CA
Outstanding Shares (bn) 2.03
Par Value/Share (LE) 10
Financial Year Ending
Mkt. Cap (LE bn)
December
LE5.5
Weight to PAMI 3%
Av. Daily Volume (000) (52Wk.) 9,242
Price Low – High (LE) (52Wk.) LE2.3 - 13.57
Shareholders
TMG for Touristic and Real
Estate Investment
Ownership Stake
49.85%
Misr Insurance Company 4.43%
Banque Misr 2.66%
National Insurance Company of
Egypt
0.23%
National Bank of Egypt 0.37%
Other Investors 22.96%
Free Float 19.50%
14
12
10
8
6
4
2
0
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Income Statement 2007a 2008a 2009f 2010f
Revenues 1,876 5,421 5,976 9,944
Growth 307% 189% 10% 66%
COGS 1,025 3,493 2,796 3,927
S,G & Admin. Expenses 267 146 268 385
EBITDA 583.7 1781.2 2911.5 5631.7
Growth 9.1 2.1 0.6 0.9
EBITDA Margin 31% 33% 49% 57%
Depreciation & Amortization 58 103 101 119
Operating EBIT 584 1,660 2,802 5,488
Interest Income 78.3 128.2 59.8 49.7
Investment Income 0 48 4 3
Interest Expense 14 12 8 6
Non-Operating Revenues 62 33 0 0
Pre Tax Income 707 1,856 2,857 5,535
Pre Tax Income Growth 1154% 151% 44% 89%
Income Tax 46 196 463 1,007
Effective Tax Rate 6% 11% 16% 18%
NPAT 661 1,660 2,395 4,528
Growth 1154% 151% 44% 89%
Extraordinary Items 501.5 0.0 0.0 0.0
Net Income 1,737 1,660 2,395 4,528
Profit Share to Employees & Board 0.0 0.0 0.0 0.0
Net Attributable Income - NAI 1,341 1,442 2,107 3,984
Growth 872% 8% 46% 89%
ROS 71% 27% 35% 40%
Balance Sheet 2007a 2008a 2009f 2010f
Cash & Marketable Securities 4465.5 1505.3 2019.1 6801.6
Trade Receivables-Net 1730.6 3296.4 2465.7 4317.5
Inventory 4013.8 10357.7 14976.4 15679.6
Other Current Asset 716.4 3041.9 3353.5 5580.0
Total Current Asset 10,960 18,203 22,816 32,380
Net Fixed Assets 2555.3 3798.1 9221.7 9868.7
Projects Under Implementation 284.6 384.6 697.9 802.2
Other Assets 4754.4
Total Assets 42,981 53,800 49,855 55,636
Short Term Bank Debt 51.8 110.9 0.0 0.0
CPLTD 357.1 513.5 316.7 332.5
Accounts Payable 301.8 457.6 504.5 839.4
Dividend Payable 0.0 2.0 0.0 0.0
Other Current Liabilities 1068.8 1426.8 1284.2 1155.7
Total Current Liabilities 3819.0 9876.6 8763.0 9608.9
Long-Term Debt 1706.9 1296.0 950.0 633.3
Provisions for Deferred Taxes 3.3 11.9 1.4 1.4
Provisions 6.0 48.2 44.7 49.9
Total Shareholders' Equity 21,824 21,954 24,932 28,717
Total Liab.& Shareholders' Equity 42,981 53,800 49,855 55,636
Free Cash Flow Statement 2007a 2008a 2009f 2010f
NOPLAT 613.0 1476.0 2328.9 4481.0
Non-Cash Items 0.1 121.5 109.3 143.7
Gross Cash Flow 613.0 1597.5 2438.1 4624.7
Gross Investments 19655.7 -648.9 2730.8 -1448.1
Non -Operating Cash Flow 1061.3 29.7 0.0 0.0
Free Cash Flow -17,981 2,276 -293 6,073
Financing Flow
Interest Income After-Tax -77.8 -126.9 -58.8 -48.8
Investment Income After-Tax 0.0 -47.0 -3.6 -3.2
Increase in Excess Cash & M. Sec. 894.4 -885.7 734.2 4983.3
After-Tax Interest Expense 12.8 11.2 6.9 5.1
Decrease in Debt & Bonds -642.8 195.5 653.7 300.8
Dividends Paid 415.3 215.6 289.4 543.3
Non-Appropriation Items 0.0 0.0 0.0 0.0
Total Financing Flow -17,981 2,276 -293 6,073
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 34

PRIME PICK: TALAAT MOUSTAFA
GROUP (TMG)
10 March 2009
Egypt
Meet The Developer..
TMG is the largest real estate developer in Egypt with total land area of 49.6 million m2.
TMG operations are broken down into Real estate projects include commercial, educational
and recreational facilities, as well as Hospitality business. Total consolidated
revenues recorded LE5.4 billion in FY08 compared to LE1.8 billion in FY07, with
revenues from units sold recording LE4.7 billion (representing 88% of total revenues)
while revenues from hotels and services activities contributed the remaining 12%. Said
increase can be attributed to recognition of revenues associated with delivery of units in
Madinaty project. Going forward, We expect a slow down in sales in FY09 and FY10. Top
line figure is estimated to grow at a 5 year CAGR of 19%. TMG posted EBITDA margin of
31% in FY08 which is expected to increase to 34% in FY09 as the increase in recognized
revenues will outpace that of COGS.
Projections & Valuation
The slowdown in the real estate sector coupled with market saturation with regard to the
high end, makes us believe that TMG will face a slowdown in the sales of its main projects
namely Madinaty and Al Rehab. Therefore, we estimated total sales for Madianty and Al
Rehab of LE2.4 billion and LE1.1 billion respectively in FY09.
We believe that shrinking in Tourism activity will affect negatively on Hotel revenues. Accordingly,
we expect a decline in average rate per room by 10% and average occupancy
rate is estimated at 30% . In addition, Marsa Alam project is assumed to be postponed to
FY10.
The slow down in the world economy will hinder TMG’s ability to expand in the region.
Therefore, Saudi Arabia Projects are expected to be postponed until the end of FY10.
Our Sum of the parts (SOTP) value for TMG culminated at LE10.26/share, which
illustrates upside potential of 277% compared to the last market share of LE2.72. With
Madinty and Al Rehab projects contribute approximately 39% and 25%, respectively of
the total value.
Company Land (LE 000s)
City Community & Complexes
TMG Stake
of Value
Rabwa II 1,043,990
Rehab I 6,356
Rehab II 5,245,549
San Stefano (Residential & Commercial)
2,000,768
Thabat 1,624,999
Madinaty 8,202,295
C&C Sum of the Part Value 18,123,957
Hotels & Resorts (ICON)
Four Seasons San Stefano (Hotel) 41,494
Four Seasons Sharm El Sheikh 369,157
Marsa Alam 152,854
Four Season Nile Plaza 753,240
Nile Hotel 63,552
H&R Sum of the Part Value 1,380,297
Alexandria Real Estate Inv.
(Marketing Segment)
1,336,106
TMG Sum of the Part Value 20,840,360
Source: Prime Estimates
Revenues by Project (LE 000s) 2009f 2010f 2011f
Rehab I 504,551 555,007 610,507
Rehab I phase VI & Commercial 345,783 16,248 25,111
Rehab II 1,908,500 1,470,345 1,128,784
Madinaty 1,527,150 5,447,785 3,360,897
Al Rabwa 215,771 278,578 234,891
San Stefano Reseditions & Commercial 205,440 1,042,385 235,000
Four Seasons San Stefano (Hotel) 71,492 109,387 237,845
Four Seasons Sharm El Sheikh 588,638 311,720 377,561
Marsa Alam 118,125 147,000 156,188
Four Season Nile Plaza 406,382 463,626 529,241
Nile Hotel 84,230 101,826 122,673
Consolidated Revenue 5,976,063 9,943,906 7,018,698
Source: Prime Estimates
Investment Rationale
Negative sentiment on real estate and Tourism slowdown, coupled with negative news on former TMG CEO, have caused sharp decline
in TMG stock price to reach around LE2-3 during the last period. Now that valuations are compelling given multiples of 0.2x P/B
and P/E of 2.5x FY09 earnings, we recommend TMG for the long term due to the following:
• Diversification of earnings inflows among residential, commercial, recreational facilities, and hospitality business.
• More negative news on former CEO is unlikely to be negative on the stock since the market has already discounted it, on the
contrary, positive news would be a strong upward share driver
• TMG is the only listed real estate developer offering lower to medium class housing units which is the tranche that composes
most of the pent up demand
• Following its IPO in August 2007, TMG share price hasn't taken its upward movement such as most of housing stocks during last
upward cycle for housing , which will probably occur during the next upward cycle.
Prime Research 35

PRIME PICK: EFG-HERMES
10 March 2009
Egypt
Target Price Market Price Recommendation Upside Potential Investment Grade
LE19 LE12.46 Strong Buy
60.5%
Value
Share Data
Company Short Name
Sector
Company Traded Market
Report Reason
Valuation Methodology
Previous Target
Exchange Rate
Stock Currency
Reuters Code
Stock Performance Chart
(LE / Share)
EFG - Hermes
Financial Sector
EGX
Equity Strategy
DCF
LE77/Share
LE5.55/US$
LE
HRHO.CA
Outstanding Shares (mn) 387.9
Par Value/Share (LE) 5
Financial Year Ending
December
Mkt. Cap (LE mn) 4,833
Weight to PAMI 5.2%
Av. Daily Volume(000) (52Wk.) 1,694
Price Low – High (LE) (52Wk.) 12.5 - 61.96
Shareholders
Ownership Stake
Dubai Financial Group 25.0%
Abu Dhabi Investment Authority 8.7%
EFG Employee Trust 5.0%
GDRs 8.7%
Free Float 15.5%
Institutional & Regional Investors 37.1%
70
60
50
40
30
20
10
0
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Income Statement 2007a 2008a 2009f 2010f
Revenues 1,719.6 1,620.1 1,022.0 1,513.1
Growth 91.4% -5.8% -36.9% 48.1%
Other Revenues 353.6 199.4 119.5 168.0
S,G & Admin. Expenses 799.1 887.5 556.8 853.6
Other Provisions 109.4 42.3 27.9 40.2
EBITDA 1,164.7 889.7 556.8 787.3
Growth 92.8% -23.6% -37.4% 41.4%
EBITDA Margin 67.7% 54.9% 54.5% 52.0%
Depreciation & Amortization 22.8 130.8 76.6 91.7
Operating EBIT 1,141.9 758.8 480.3 695.6
Interest Income 246.3 187.1 169.4 177.1
Investment Income 287.5 327.6 403.0 463.5
Interest Expense 38.1 64.5 42.6 37.0
Non-Operating Revenues 0.0 -116.9 -73.7 -109.1
Pre Tax Income 1,637.6 1,092.3 936.4 1,190.1
Pre Tax Income Growth 96% -33% -14% 27%
Income Tax 210.8 101.4 86.9 110.5
Effective Tax Rate 13% 9% 9% 9%
NPAT 1,426.8 990.9 849.4 1,079.6
Growth 95.1% -30.6% -14.3% 27.1%
Extraordinary Items -33.6 2.2 0.0 0.0
Minority Interest 111.9 59.6 51.0 64.8
Net Income Post Minority Interest 1,281.2 933.5 798.4 1,014.8
Profit Share 23.8 0.0 16.0 20.3
Net Attributable Income - NAI 1,257.5 933.5 782.5 994.5
Growth 81.6% -25.8% -16.2% 27.1%
ROS 73.1% 57.6% 76.6% 65.7%
Balance Sheet 2007a 2008a 2009f 2010f
Cash & Marketable Securities 4,841.1 3,101.7 4,106.7 4,788.9
Trade Receivables-Net 2,588.1 476.1 342.4 420.3
Other Current Asset 461.2 739.7 454.7 575.0
Total Current Asset 7,890.3 4,317.5 4,903.8 5,784.1
Net Fixed Assets 135.2 168.4 164.0 187.9
Other Assets 5,399.9 6,094.9 6,278.9 6,731.4
Total Assets 13,426 10,581 11,347 12,703
Short Term Bank Debt 0.0 0.3 0.0 0.0
CPLTD 58.7 37.7 38.0 38.0
Dividend Payable 387.9 186.2 95.8 223.2
Other Current Liabilities 3,563.1 1,484.5 921.8 1,269.1
Total Current Liabilities 4,009.6 1,708.8 1,055.6 1,530.3
Long-Term Debt 131.3 91.1 72.9 58.3
Provisions 169.2 153.2 181.1 221.3
Other Non Current Liabilities 184.7 842.0 893.0 957.8
Total Shareholders' Equity 8,930.8 7,785.8 9,144.2 9,935.7
Total Liab.& Shareholders' Equity 13,426 10,581 11,347 12,703
Free Cash Flow Statement 2007a 2008a 2009f 2010f
NOPLAT 928.7 665.7 387.8 577.4
Non-Cash Items 132.2 173.2 104.4 132.0
Gross Cash Flow 1,061.0 838.8 492.3 709.4
Gross Investments 419.8 251.0 -78.2 230.8
Non -Operating Cash Flow -29.3 -104.0 -66.9 -99.0
Free Cash Flow 612 484 504 380
Financing Flow
Interest Income After-Tax -243.1 -185.4 -167.8 -175.5
Investment Income After-Tax -283.8 -324.6 -399.3 -459.2
Increase in Excess Cash & M. Sec. 1,004.6 -1,523.6 1,432.4 805.5
After-Tax Interest Expense 33.2 58.5 38.6 33.5
Decrease in Debt & Bonds 37.4 60.8 18.3 14.6
Provisions Used 7.5 58.3 0.0 0.0
Dividends Paid 402.8 447.5 221.2 140.3
Non-Appropriation Items 23.8 0.0 16.0 20.3
Shareholders Equity -370.5 1,892.3 -655.8 0.0
Total Financing Flow 612 484 504 380
Please refer to disclaimer on last page
Financial Summary (Figures in LE million)
Source: Company Historical & Prime Estimates
Prime Research 36

PRIME PICK: EFG-HERMES
10 March 2009
Egypt
Meet The Broker’s business at FY09 P/E of 1.6x
EFG Hermes is the largest Investment bank in Egypt with local and regional exposure. The company has fully fledged branches in
Egypt and UAE as well as initiated operations via newly acquired brokerage licenses in Saudi Arabia and Qatar, Kuwait, and Oman.
Moreover, the company has a direct stake in Audi bank and indirect stake in Egyptian real estate developer SODIC. EFG-
Hermes enjoys healthy market shares in most markets it operates in. Latest market shares records a 26% in Egypt, 20% in Kuwait,
24% in Oman, 26% in UAE and finally around 1.2% in Saudi Arabia.
According to FY08 results, the company has hit a roadblock due to drastic market conditions originated from the credit crisis. Fee
and commission income declined 5.8% to LE1.62 billion in 2008 down for LE1.72 billion in 2007. Prop. and principal
trading contributed a positive LE352 million in 2007 and a negative LE84 million in 2008.
Substantial decline occurred in margin trading facilities to clients from a peak of US$250 million during the year to approximately
US$30 million without meaningful losses, resulting in the decline of gross receivables from LE2.6 billion in 2007 to LE958 million in
2008. As of December 2008, interest earning cash stood at US$500 million, excluding investments in Banque Audi, SODIC, Nile City,
seed capital in EFG-Hermes managed funds and shares purchased under the new Management Incentive Scheme or for cancellation.
By 2008 year end, EFG-Hermes has taken measures to reduce total operating expenses going forward. These measures included
redundancies, salary reductions for the top 200 employees, the implementation of a new expense policy and the relocation of certain
functions to Egypt, all of which should lead to a meaningful decline in operating expense.
Projections and Valuation
2009 already started with 3 months through and average daily
values have declined substantially in almost all markets. For
instance, Egypt, its 32% contributor to its top line, has
declined in average daily value from over LE1.3 billion to
around LE800 billion. This was caused by a lot of factors as
discussed in our stock market part, accordingly, we expect the company
in 2009 to witness another 36% decline backed by our assumptions
that average daily values will stagnate or partially
improve starting Q4 FY09. On the asset management front, we
expect the company, given the management previous track record, to
be able to re-collect its lost AUMs due to redemptions, however,
we expect no performance fees in 2009. Investment banking closed 8
deals in 2008 with an average value per transaction of around LE1.6
billion, we don’t expect much improvements in 2009 for investment
banking due to the current market conditions, however, a re-bounce is
expected by 2010 where deals in the pipe line awaiting market improvements
get closed. We value EFG using SOP DCF methodology
where we arrived at a total equity value of LE7.5 billion, implying
LE19/share, including its investments in SODIC, Audi Bank and its
Net cash position.
Investment Rationale
We are basically attracted to EFG-Hermes stock price due to the value
it offers through its investments.
EFG-Hermes has stakes in SODIC and Audi Bank, with the prevailing
market prices of EFG, Audi, and SODIC, along with a Net Cash position
of LE1.2 billion, investment and cash seem to be representing
65% of EFG market CAP, suggesting that the market sees
EFG brokerage business at LE4.2 with FY09 implied PE of
1.6x, or the market thinks that EFG investments will erode EFG
main business , which we refute, since we see AUDI contributing
positively to EFG income statement, as well as SODIC recording sales
starting 2010 and 2011. Accordingly, despite of the negative sentiment
on brokerage business, we find it very cheap to buy EFG main
business at a PE of 1.6x, and will probably result in a huge upside
before markets rebounds given that stocks such as EFG are leading
cycle players.
Revenue Breakdown
(LE mn)
2007 2008 2009f 2010f
Brokerage-Egypt 434.0 545.0 280.1 287.6
growth 28.0% 25.6% -48.6% 2.7%
contrib 25.2% 33.6% 27.4% 19.0%
Brokerage-UAE 137.0 150.0 151.1 152.1
growth 174.0% 9.5% 0.7% 0.7%
contrib 8.0% 9.3% 14.8% 10.1%
Brokerage-KSA 9.0 35.0 51.5 67.2
growth 0 288.9% 47.0% 30.7%
contrib 0.5% 2.2% 5.0% 4.4%
Brokerage-Kse 0.0 40.0 20.9 21.8
growth 0 0.0% -47.8% 4.5%
contrib 0.0% 2.5% 2.0% 1.4%
Brokerage-Oman 0.0 21.0 11.3 12.2
growth 0 0.0% -46.1% 7.8%
contrib 0.0% 1.0% 0.6% 0.6%
Asset Mgmt (Equity) 225.00 413.24 121.18 442.44
growth 309% 84% -71% 265%
contrib 13.1% 25.5% 11.9% 29.2%
Asset Mgmt (Money
Mkt)
286.00 80.76 113.67 177.88
growth 1582% -72% 41% 56%
contrib 16.6% 5.0% 11.1% 11.8%
Inv.Banking 451 232 152 256
growth 23.9% -48.6% -34.4% 68.0%
contrib 26.2% 14.3% 14.9% 16.9%
Private Equity 177.0 150.0 120.0 96.0
growth 121% -15% -20% -20%
contrib 10.3% 9.3% 11.7% 6.3%
Total Revenues 1,719.0 1,620.0 1,021.9 1,513.0
91.0% -5.8% -36.9% 48.1%
Source: Prime Estimates
Prime Research 37

2009 EQUITY STRATEGY
10 March 2009
Egypt
Stock Recommendation Guidelines
Recommendation
Target-to-Market Price (x)
Strong Buy x > 25%
Buy 15% < x Average LCY IBOR
Quality Earnings Reflect Above Normal Risk Factor
Prime Research
38

2009 EQUITY STRATEGY
10 March 2009
Egypt
PRIME EGYPT SALES TEAM
Yasmine Guindy
+202 3300 5666
yguindi@egy.primegroup.org
Ramy El Agamy (25 lines)
relagamy@egy.primegroup.org
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Mohamed Kamal +971-4-4070108 mkamal@uae.primegroup.org
Mohamed Khaled Hafez +971-4-4070102 mkhaled@uae.primegroup.org
PRIME EGYPT RESEARCH
Mohamed Seddiek Senior Analyst, Acting Head +202 3300 5720 mseddiek@egy.primegroup.org
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Disclaimer
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Prime Research 39

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