MENA-2 MONDAY MORNING ROUND-UP

Egypt

Egypt: inflation stable in June at 11.8% Y-o-Y Frustration with army, government mounts State security officers protest dismissal of police Suez Canal working despite protests Egypt detains former minister over pesticides Gas pipeline to Israel to be ready by weeks end CBE sells T-bills worth EGP5.5 billion, as planned Electrolux to acquire Olympic Group stake for EGP40.6/share AMOC BoD approves FY2010-2011 net income of EGP1,052 million, up 89% Y-o-Y

Saudi Arabia

Yansab 2Q2011 net income soars to SAR964 million, up 34% Q-o-Q Advanced 2Q2011 net income reaches SAR156 million, up 19% Q-o-Q Almarai reverses 14% price increase, complies with Ministry of Commerce & Industry SHARCO reports 2Q2011 net profit of SAR35.7 million, up 37% Y-o-Y, down 3% Q-o-Q

Jordan

Strike spoils business at capital market institutions

Lebanon Morocco

Lebanon sees no big Syrian cash inflows

No let up in Moroccan protests for deeper reform

EFG Hermes Research

Saudi Arabian Fertilizer Company (SAFCO) - 2Q2011 Results Disappoint; Reiterate Neutral - Flash Note 10 July 2011 Methanol Chemicals Company (Chemanol) - 2Q2011 Headline Figures Weaker-than-Expected; Reiterate Sell - Flash Note 10 July 2011 Saudi Arabia Economics Flash Note - Lowering Our 2011 Inflation Estimate to 5.0% - 10 July 2011

Agenda
Saudi Arabia Sat 6 August >> Etihad Atheeb AGM and EGM

Egypt News
Egypt: inflation stable in June at 11.8% Y-o-Y Egypts urban consumer prices remained stable at 11.8% Y-o-Y in June from 11.9% Y-o-Y in May, according to data released by CAPMAS. The figure comes in line with our expectations of 11.9% Y-o-Y. Headline inflation was up only 0.5% M-o-M, largely driven by a 10.2% M-o-M increase in tobacco prices as the governments decision to increase sales tax on tobacco prices by 10 percentage points took effect. Meanwhile, food prices inched up only 0.2% M-o-M after falling 0.5% M-o-M in May, with annual food inflation decelerating to 19.0% Y-o-Y from 19.8% Y-o-Y in May. Non-food inflation accelerated to 6.7% Y-oY in June from 6.2% Y-o-Y in May, reflecting the increase in tobacco prices. Excluding tobacco prices, nonfood inflation remained flat at 4.3% Y-o-Y.

We maintain our 2011 inflation forecasts and interest rate outlook. We forecast average deadline inflation of 12% Y-o-Y in 2011 (YTD the average is 11.4% Y-o-Y) as we expect inflation to accelerate over the coming two months on seasonality associated with the holy month of Ramadan as well as rising government wages. Public employees were granted an annual bonus of 15% effective April of this year, and the minimum wage will rise to nearly EGP700 effective July 2011. However, weak economic activity, with our expectations of a contraction in growth in 2011, should help balance these inflationary pressures. Such a balanced inflation outlook, also evident in stable non-food inflation, drives us to maintain our stable interest rate outlook for 2011. (CAPMAS, Mohamed Abu Basha) Frustration with army, government mounts Egyptian activists vowed on 10 July 2011 to stay camped in Cairo's Tahrir Square, accusing the army rulers of failing to sweep out corruption, end the use of military courts and swiftly try those who killed protesters during the popular uprising that toppled former President Hosni Mubarak in mid-February. Anger has been rising over what many Egyptians see as the reluctance of the military council to deliver on the demands of protesters. They include speeding up the pace of Mubarak's trial over the killings of demonstrators, which is scheduled to start on 3 August 2011. A speech by Prime Minister Essam Sharaf on 9 July 2011 that promised action but was thin on details only stoked frustrations. Protesters have blocked the main roads to Tahrir Square, set up barricades and pinned a banner reading "civil disobedience until further notice" outside the vast 'Mogamma' administrative building. Thousands stayed late into 10 July 2011 night, talking politics in makeshift tents or crowding around stages where activists read political poetry and musicians played guitars and violins. More than 100 political groups warned that they reserve the right "to use all legitimate methods to push for achieving their demands, foremost of which is a general strike [and] civil disobedience." (Reuters) State security officers protest dismissal of police State security officers in the Egyptian city of Ismailia staged a protest on 10 July 2011 over the dismissal of policemen accused of killing demonstrators during Februarys popular uprising. It is rare in Egypt for security forces to defy their commanders. Prime Minister Essam Sharaf said on 10 July 2011 that he had ordered the interior minister to dismiss all policemen accused of killing demonstrators who massed in January and February and lead to the ouster of former President Hosni Mubarak. The protest was contained after five hours and officers began making their way to the city stadium, where a football game was planned, the sources said. (Reuters) Suez Canal working despite protests The Suez Canal is operating normally despite days of sit-ins and protests near the vital waterway, a Suez Canal Authority (SCA) official told the state MENA news agency on 10 July 2011. About 1,000 people blocked the main road from Suez city to the canal and nearby Tawfik port after a speech by Prime Minister Essam Sharaf fell short of the demands of many Egyptians. Traffic through the canal is proceeding normally, Ahmed El Manakhly, head of traffic at the authority, told MENA. "The canal is working in cooperation with the armed forces to secure entries to the canal," he added. Soldiers have used batons to disperse protesters blocking a road connecting Cairo with the Red Sea town of Ain Sokhna, south of the city of Suez, after demonstrators tried to pitch tents alongside the road, witnesses added. (Reuters) Egypt detains former minister over pesticides An Egyptian judge has ordered that a former Agriculture Minister Youssef Wali be detained for questioning over accusations that the latter allowed the import of cancer-causing pesticides, the state news agency MENA reported on 10 July 2011. The agency said Wali, who served as Agriculture Minister under former President Hosni Mubarak in 1982-2004, is also suspected of squandering EGP200 million (USD33.6 million) of state funds by selling a plot of land to businessman Hussein Salem for below market price. MENA said Wali is accused of "bringing in 37 brands of pesticides that were proven to cause cancer." MENA has reported that the chemicals were banned from entering the country in 1996, but were allowed entry in 1998 under Wali until 2004. Wali has denied the charges. (Reuters) Gas pipeline to Israel to be ready by weeks end Repairs on an Egyptian pipeline supplying gas to Israel and Jordan are expected to be completed by the end of the week, the state's MENA news agency reported on 10 July 2011. The pipeline was blown up on 4 July 2011, the third such attack this year. Security sources said that the explosion occured at Bir Abd station, located some 60 kilometres (km) (40 miles) east of the Suez Canal in the northern Sinai Peninsula. The agency quoted an Oil Ministry official as saying that Gasco, Egypt's gas transport company, a subsidiary of the national gas company EGAS, was repairing the pipeline at a section that intersects with rail tracks. (Reuters)

CBE sells T-bills worth EGP5.5 billion, as planned The Central Bank of Egypt (CBE) has said that it sold EGP5.5 billion (USD924 million) in domestic treasury bills (T-bills) on 10 July 2011, the same amount that it was seeking. The CBE sold EGP2 billion of 91-day Tbills at an average yield of 11.934%, down from 12.112% during last week's auction. The CBE also sold EGP3.5 billion of 266-day T-bills at an average yield of 12.816%, down from 12.981% during the last issue on 28 June 2011. (Reuters) Electrolux to acquire Olympic Group stake for EGP40.6/share Electrolux, through one of its subsidiaries, will acquire the majority stake of Paradise Capital (52%) in Olympic Group (OG) [OLGR.CA] through a mandatory tender offer for up to 100% of the outstanding capital of Olympic Group at a price of EGP40.6/share, according to a press release from OG. Upon the completion of the mandatory tender offer for 100% of Olympic Group, Paradise Capital, through two of its subsidiaries, shall launch consequent tender offers to acquire up to 100% of the outstanding shares of Namaa for Development and Real Estate Investment (Namaa) at a price of EGP13.88/ share, and 100% of the outstanding shares of B-Tech for Trade and Distribution (B-Tech) at a price of EGP3.44/share. The implementation of the deal is subject to the fulfillment of certain conditions, as well as the obtainment of approval from the Egyptian Financial Supervisory Authority (EFSA), according to applicable laws and regulations. The offer is expected to be finalised at the end of July or at the beginning of August, a Bloomberg article added. We are suspending our coverage on OG as EFG Hermes Investment Banking is advising the company on its transaction with Electrolux. (Company Disclosure, Bloomberg, EFG Hermes Research) OG: EGP36.01, MCap: USD364 million, OGFI EY / OLGR.CA AMOC BoD approves FY2010-2011 net income of EGP1,052 million, up 89% Y-o-Y Alexandria Mineral Oils Company (AMOC) [AMOC.CA] announced on xx July 2011 that its board of directors (BoD) has approved FY2010-2011 financials, which covered the period July 2010 to June 2011. The BoD report shows a 43% Y-o-Y increase in revenues to EGP806.5 million and a 90% Y-o-Y increase in gross profits to EGP145.3 million for FY2010-2011, implying gross profit margins of 18%, up from 14% in FY20092010. Net profit after taxes jumped 89% Y-o-Y to EGP1,052 million (EPS: EGP12.21/share) from EGP557 million in FY2009-2010. These figures imply 4Q2010-2011 revenues of EGP2,755 million, up 23% Q-o-Q, and gross profits of EGP493 million, up only 7% Q-o-Q, which implies a gross profit margin of 18%, down from 21% in 3Q2010-2011. Net profit in 4Q2010-2011 seems to have been lifted by non-operational items to EGP376 million, up 21% Q-o-Q. (Company Disclosure)

Saudi Arabia News

Yansab 2Q2011 net income soars to SAR964 million, up 34% Q-o-Q The Yanbu National Petrochemical Company (Yansab) [2290.SE] has reported a net income of SAR964 million for 2Q2011, up 34% Q-o-Q, well ahead of our estimated SAR674 million. Gross profit came in at SAR1,139 million, up 28% Q-o-Q, and ahead of our estimated SAR849 million, while operating income came in at SAR1,084 million, up 29% Q-o-Q, and ahead of our estimated SAR795 million. According to the earnings release, the Q-o-Q growth is due to higher production and sales volumes. We believe that the results were ahead of our estimates due to higher-than-expected sales volumes as we had assumed that they would be similar to those in 1Q2011. We will provide more details once additional results become available. (Tadawul, Yousef Husseini, Ahmed Shams El Din) Yansab: SAR49.00, Rating: Buy, FV: SAR60, MCap: USD7,350 million, YANSAB AB / 2290.SE Advanced 2Q2011 net income reaches SAR156 million, up 19% Q-o-Q The Advanced Petrochemical Company (Advanced) [2330.SE] has reported a net income of SAR156 million, up 19% Q-o-Q, significantly ahead of our estimated SAR111 million. Gross profit was SAR170 million, up 17% Q-o-Q, versus our SAR130 million estimate, while operating profit reached SAR161 million, up 18% Qo-Q, versus our estimate of SAR117 million. According to the company, the high Q-o-Q growth is due to improved prices and higher sales volumes. We believe that the beat on the bottomline is mainly attributable to higher-than-expected sales volumes, however, it is not yet completely clear as full financials have not yet been released. We will provide more information once full financials become available. (Tadawul, Yousef Husseini, Ahmed Shams El Din) Advanced: SAR33.8, Rating: Neutral, FV: SAR36.0, MCap: USD1,274 million, APPC AB / 2330.SE

Almarai reverses 14% price increase, complies with Ministry of Commerce & Industry Almarai Company (2280.SE) has announced that it is reversing the price increase that it applied on 1 July 2011 effective 11 July 2011. Almarai had raised the price of a 2 litre bottle of milk and laban to SAR8 from SAR7. This complies with a decision by the Ministry of Commerce and Industry relating to the pricing of dairy products in the Kingdom. The company added that the justification behind raising prices - higher input costs- is still intact and will explain this to the appropriate authorities. (Tadawul) Almarai: SAR94.5, Rating: Neutral, FV: SAR101, MCap: USD5,796 million, ALMARAI AB / 2280.SE SHARCO reports 2Q2011 net profit of SAR35.7 million, up 37% Y-o-Y, down 3% Q-o-Q Saudi Hotels and Resorts Areas Company (SHARCO) [4010.SE] has reported 2Q2011 net profit of SAR35.7 million, up 37% Y-o-Y, but down 3% Q-o-Q. This brings net profit for 1H2011 to SAR72.5 million, up 27% Yo-Y. The companys gross profit reached SAR41.7 million in 2Q2011, up 31% Y-o-Y. Operating profit increased 36% Y-o-Y to SAR36.7 million in 2Q2011. (Tadawul)

Jordan News
Strike spoils business at capital market institutions A strike by employees at the Jordan Securities Commission (JSC) has worsened the situation at Ammans bourse and created ambiguity amongst investors. " We have not received disclosures like this before. Investors sell and buy in shares without knowing the situation of these companies," Jawad Kharouf, President of the Association of Certified Capital Market Professionals, said on 9 July 2011. Workers at the JSC, Amman Stock Exchange (ASE) and the Securities Depository Centre are holding an open strike to protest a Cabinet decision that restructures salaries of independent institutions, according to an announcement on the website of the ASE. Saturday 9 July 2011 marked the 39th day of strikes by employees at these establishments, according to the announcement. (The Jordan Times)

Lebanon News
Lebanon sees no big Syrian cash inflows Lebanon has not seen significant inflows of money from neighbouring Syria, according to Makram Sader, Secretary General of the Association of Banks in Lebanon, despite reports of Syrian capital outflows triggered by the uprising against President Bashar al-Assad. Sader said that reports of many billions of dollars of capital flight from Syria are exaggerated, and there is little sign of Syrian money piling into Lebanese banks. "Our deposit growth in the last five and a half months was USD3.3 billion less than our normal growth," Sader told Reuters. Annual deposit growth averaged 15% for the last five years, he said. He added that official Syrian figures showed withdrawals of around USD1.7 billion from Syrian banks in 1Q2011. (Reuters)

Morocco News
No let up in Moroccan protests for deeper reform Thousands of Moroccans staged protests on 10 July 2011, the latest in a series of peaceful demonstrations by a youth-led movement to demand reforms that go beyond constitutional changes crafted by the palace. Anti-riot police were deployed in the centre of Rabat to prevent up to 2,000 sympathisers of the February 20 opposition movement from clashing with those in favour of constitutional reform. Witnesses said that a protest in Casablanca drew close to 8,000, with a few hundred in a counter-protest under the watch of a heavy police deployment. Similar protests took place in other cities, such as Oujda and Agadir. King Mohammed is supposed to hand over some of his powers to elected officials under the reforms, which continue to keep him at the centre of every strategic decision. The move is viewed in other Arab monarchies as a test case for whether reform can hold back the wave of "Arab Spring" uprisings sweeping the region. (Reuters)

EFG Hermes Research

Saudi Arabian Fertilizer Company (SAFCO) - 2Q2011 Results Disappoint; Reiterate Neutral - Flash Note 10 July 2011

Net Income Misses at SAR790 million, Down 5% Q-o-Q; Reiterate Neutral: SAFCO released today headlines of its preliminary 2Q2011 earnings, showing a 13% Y-o-Y drop in net income to SAR790 million, well below our expectation of SAR1,049 million and Bloomberg consensus estimates of USD987.25 million. Gross profits came in at SAR778 million and operating profits at SAR757 million, both flat Q-o-Q, but up 36% Y-oY. This surprised negatively as we had expected a strong rise in earnings on higher prices (ammonia: +14% Q-o-Q; urea: +7% Q-o-Q) and a strong rebound in volumes (SAFCOs 1Q2011 volumes were also lower than expected) during 2Q2011. We reiterate our Neutral rating on SAFCO as our fair value (FV) of SAR200.0/share implies limited upside potential. We expect a negative market reaction to the results, but continue to believe that 2H2011 will be significantly stronger than 1H2011 on higher seasonal demand and urea prices. Results Do Not Reflect Price Increases; Ammonia Volumes Disappoint: The company has attributed the Qo-Q earnings decline to lower ammonia volumes and urea prices, which we find surprising, given: i) that the Middle Easts urea benchmark price in 2Q2011 averaged 7% higher Q-o-Q; and ii) the fact that the ammonia market was tight during 2Q2011 on healthy global demand. Moreover, 1Q2011 volumes already seemed to reflect only c90% of SAFCOs quarterly capacity. The company has not disclosed any planned or unplanned shutdowns during the quarter. SAFCO Announces SAR6/Share 1H2011 Cash Dividend; 92% Payout Ratio: The ex-dividend date will be on 16 July 2011. We think that the announced dividend has been fully accounted for by the market at the current levels. We see downside risk to our full year dividend estimate of SAR16/share, but continue to expect higher dividends for 2H2011 on a significant rise in global urea prices and SAFCOs relatively small growth CAPEX. (Ahmed Shams El Din, Rita Guindy) Methanol Chemicals Company (Chemanol) - 2Q2011 Headline Figures Weaker-than-Expected; Reiterate Sell - Flash Note 10 July 2011 2Q2011 Net Income Misses Estimates at SAR10.6 Million: The Methanol Chemicals Company (Chemanol) reported today headlines of 2Q2011 results. Net income grew by 10% Q-o-Q to SAR10.6 million, below our estimated SAR12.8 million and Bloomberg consensus of SAR13 million. Gross profit came in at SAR42.49 million, up 3% Q-o-Q, but 8% below our estimate, while operating profit was SAR21.5 million, up 5% Q-oQ, but below our estimate of SAR25.3 million. It is not yet clear whether the Q-o-Q growth was driven by an improvement in the gross profit margin or on the revenue level as the company has not yet released full financials. Valuation Remains Overstretched; Maintain Sell: The weak set of results confirms our view that: i) the market is overestimating the companys earnings potential; and ii) that the valuation is overstretched at the current levels. Chemanol currently trades at an estimated 2011 P/E of 30x, significantly above its global and regional peer average, which we view as completely unjustified. We estimate Chemanols 2011-2013 ROE at 6%, which compares negatively with our estimated cost of equity of 12.5% and companys current estimated P/BV of 1.2x. We maintain our fair value (FV) of SAR12.0/share, implying 13% downside potential, and hence reiterate our Sell rating on the stock. Upside Risks: Feedstock Prices Could Remain Unchanged: The main risk to our forecasts and valuation are our feedstock estimates as we have assumed that methane prices (Chemanols main feedstock) will increase to USD2/mmBTU in 2012. According to management, however, the Saudi Government is considering rolling over feedstock prices for companies that recently started commercial operations. This includes Chemanol as it did not start operations at its methanol plant until 2010. If prices are indeed rolled over, this would provide considerable upside risk to our forecasts and valuation. (Yousef Husseini, Ahmed Shams El Din) Saudi Arabia Economics Flash Note - Lowering Our 2011 Inflation Estimate to 5.0% - 10 July 2011 We Reduce our 2011 Inflation Forecast to 5.0% from 5.5%: We lower our average annual 2011 inflation forecast for Saudi Arabia to 5.0% from 5.5%. Consumer price inflation (CPI) has averaged 4.8% Y-o-Y in 1H2011, slightly below our expectation of 5.0% Y-o-Y. We had initially expected to see stronger inflation in May and June, which came in below the 4M2011 average of 4.9% Y-o-Y. This was largely due to a weaker outturn in food and rental price increases over the two months, although they continue to be the main inflation drivers. The Governments Bonus Measures have Limited Impact on Inflation: Notably, the impact of the governments wage increases and bonuses, followed by similar moves by some private sector companies, on inflation was limited, both Y-o-Y and M-o-M. There was some increase in education and entertainment

prices since February, when the governments first additional spending package was announced. Nonetheless, education and entertainment averaged just 0.9% Y-o-Y in February-June. Moreover, there was a lower year-on-year contraction in clothing and footwear, and home furnishing categories. Clothing and footwear prices saw positive year-on-year inflation in June 2011, the first time since August 2009, although this would also have been supported by global inflation trends. We see that most of the immediate private consumption boosting government spending as having already taken place in 1Q2011. We Now Expect a Notably Weaker Strengthening of Inflation in 2H2011: We continue to see some strengthening in inflation in 2H2011, but now at a much weaker rate of 5.2% Y-o-Y. Higher global food prices and a wider pickup of inflation should gradually feed into domestic prices, as should the rise in Saudi output prices (to compensate for the rising costs) seen in 1H2011. We see inflation continuing to be driven by food and rental prices, with Ramadan falling in 2H, as global food prices remain close to record highs and the housing shortage continues. Our weaker acceleration in prices is the result: of i) signs of stabilisation in global food prices; and ii) indications of weaker global producer price inflation, as fuel and other input prices fall. Benign Inflation Outlook Further Supports Domestic Demand Outlook: We see an average annual 2011 inflation rate of 5.0% in 2011 (and 5.2% Y-o-Y in 2H2011) as being moderate given the strong domestic demand environment, especially the notable strengthening in private consumption. We do not see inflation at these levels negatively impacting consumption sentiment and spending. We reaffirm our outlook of benchmark rate remaining on hold in 2011, with real benchmark lending rates remaining negative (3.0% for 2011), supporting retail credit growth. The governments investment programme should also continue to support the investment outlook. (Monica Malik)
[Note EFG Hermes is not responsible for the accuracy of news items taken from other media.] __________________________________________________________________________________________________ _______________ Our investment recommendations take into account both risk and expected return. We base our fair value estimate on a fundamental analysis of the companys future prospects, after having taken perceived risk into consideration. We have conducted extensive research to arrive at our investment recommendations and fair value estimates for the company or companies mentioned in this report. Although the information in this report has been obtained from sources that EFG Hermes believes to be reliable, we do not guarantee its accuracy, and such information may be condensed or incomplete. Readers should understand that financial projections, fair value estimates and statements regarding future prospects may not be realized. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. This research report is prepared for general circulation and is intended for general information purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. It is not tailored to the specific investment objectives, financial situation or needs of any specific person that may receive this report. We strongly advise potential investors to seek financial guidance when determining whether an investment is appropriate to their needs. No part of this document may be reproduced without the written permission of EFG Hermes. EFG Hermes (main office), Building No. B129, Phase 3, Smart Village km 28 Cairo Alexandria Road, Egypt tel.: +20 2 3535 6140 | Fax: +20 2 3537 0939 EFG Hermes (UAE office), Level 6, The Gate, West Wing, DIFC Dubai - UAE tel +971 4 363 4000 | fax +971 4 362 1170 EFG Hermes (Saudi office), Kingdom Tower, 54th floor, Riyadh - Saudi Arabia tel +9661 211 0046 | fax +9661 211 0049 EFG Hermes (Qatar office) Al-Fardan Towers, Office Tower, 7th floor, West Bay, Doha - Qatar tel +974 409 3888 | fax +974 421 3499 Website: www.efg-hermes.com Bloomberg: EFGH | Reuters pages: EFGS .HRMS .EFGI .HFISMCAP .HFIDOM