Kuwait in Focus

Kuwait in Focus November 2009 CONTENTS Kuwait Economic Brief ...................................................................................... 2 Oil Market and Budget Developments ........................................................... 3 Monetary Developments September 2009 ..................................................... 6 Real Estate Activity ..................................................................................... 11 Kuwait Research Coverage ............................................................................ 15 Agility .......................................................................................................... 16 Jazeera Airways .......................................................................................... 20 Sultan Center ............................................................................................. 21 Wataniya Telecom ........................................................................................ 23 Companies in Focus ........................................................................................ 24 Al Ahli Bank of Kuwait (ABK) ....................................................................... 25 Bank of Kuwait and the Middle East (BKME) ................................................. 28 Boubyan Petrochemical ................................................................................ 32 Burgan Bank (Burgan) ................................................................................... 35 Burgan Co. for Well Drilling, Trading & Maintenance (Burgan Well Drilling) ....... 38 Commercial Real Estate Company ................................................................ 41 Gulf Cable and Electric Industries Company (Gulf Cable) ............................... 44 Haj & Umrah Services Consortium Co. (Mashaer) ......................................... 47 Kuwait Cement Company ............................................................................. 51 Kuwait Financial Center (Markaz) .................................................................. 54 Kuwait Food Group (Americana) .................................................................... 58 Mabanee Company (Mabanee) ...................................................................... 61 Mobile Telecommunications Company (Zain) ................................................. 64 National Industries Group Holding (NIG) ......................................................... 68 National Investment Company (NIC) .............................................................. 71 National Real Estate Company (NREC) ......................................................... 74 Tamdeen Investment Company (Tamdeen) ................................................... 77 The Transport and Warehousing Group (TWG) ............................................... 80 United Real Estate Company ........................................................................ 83 YIACO Medical Company (YIACO) ................................................................ 86 Kuwait Market Statistics ................................................................................. 89 nbkcapital.com | 1 Kuwait Economic Brief • Oil Market and Budget Developments • Monetary Developments September 2009 • Real Estate Activity National Bank of Kuwait NBK Economic Research T. +965 2259 5500 F. +965 2224 6973 E. [email protected] DISCLAIMER AND COPYRIGHT While every care has been taken in preparing this publication, National Bank of Kuwait accepts no liability whatsoever for any direct or consequential losses arising from its use. The Economic Brief is distributed on a complimentary and discretionary basis to NBK clients and associates. This report and previous issues can be found in the “Reports” section of the National Bank of Kuwait’s web site. © Copyright Notice: NBK Economic Brief is a publication of National Bank of Kuwait. No part of this publication may be reproduced or duplicated without the prior consent of NBK. 2 | nbkcapital.com Kuwait Economic Brief Kuwait in Focus - November 2009 OIL MARKET AND BUDGET DEVELOPMENTS Crude prices surge on upbeat macro data, weak dollar... Kuwait budget surplus could reach KD 6 bn in FY2009/10… Oil prices surged through October, breaking decisively through the $70 per barrel (pb) mark for the first time since the recovery in prices began at the beginning of the year. The price of Kuwait Export Crude (KEC) rose by $11.7 to $76.1 in October and is now higher than a year ago. Some of this rise has been attributed to further weakness in the US dollar, which fell by 0.5% through October. But crude prices surged by 18% in Euro terms, too, suggesting that there were other factors at play. Amongst these were encouraging signs from various macro-level indicators, including September Chinese (+13.9% YoY) and Indian (+10.4%) industrial production, more upbeat purchasing manager indices from around the world, and stronger-than-expected corporate earnings in 3Q09, especially in the US. All of these seem to support the case for a reasonably strong rebound in global oil demand. Kuwait Export Crude* 80 75 70 $ per barrelper $ 65 60 55 2Q09 3Q09 4Q09F 1Q10F 2Q10F *Note: Future price projections correspond to NBK’s price scenarios. Source: NBK Economic Research Department WTI touches above $80, The prices of other major global benchmark crude prices also appeared to move into a new despite a challenge to its range of $70-80 pb rather than the $60-70 seen since June. The prices of Brent and West benchmark status Texas Intermediate (WTI) ended October at $74.0 and $77.0, respectively, with the latter even rising above the $80 pb mark late in the month as dollar pessimism peaked. Despite this surge, the WTI benchmark received a blow in late October when Saudi oil major Aramco announced that it would no longer use this benchmark as a reference for pricing Saudi oil sales to the US, citing distortions that have left WTI prices unrepresentative of broader market conditions on occasion over the past few years. Starting in January 2010, a new blend of sour US Gulf Coast crudes will be used instead. The move appeared to have little immediate impact on WTI contract prices, however. nbkcapital.com | 3 Kuwait Economic Brief Kuwait in Focus - November 2009 Divergences over outlook for As confidence in the short-term economic situation has solidified, analysts have continued to oil demand growth in 2010… revise upward their forecasts for global oil demand, albeit from very low levels. In October, for example, the International Energy Agency (IEA) revised upward its projections for growth in oil demand in 2010 by 0.15 million barrels per day (mbpd) to 1.4 mbpd (1.7%). The IEA also expects the fall in demand in 2009, at 1.7 mbpd (1.9%) to be 0.2 mbpd less severe than previously thought. These upgrades were driven by more optimistic forecasts for world economic growth by the International Monetary Fund (3%), from which the IEA takes its lead. While analysts’ disagreements over demand in 2009 have narrowed, the IEA’s forecast for 2010 is still strikingly bullish compared to others in the market. Both OPEC and the Centre for Global Energy Studies (CGES), for example, see oil demand rising by just 0.7–0.8 mbpd next year. The disagreement is over the strength of oil demand growth in emerging markets. Demand in the OECD is expected to be flat to falling. OPEC production rises On the supply side, OPEC-11 (i.e., excluding Iraq) output increased for the sixth month in a again; now well above quota row between August and September, by 72,000 bpd, and is now 675,000 bpd higher than at targets… its trough in March. Compliance with OPEC’s target of reducing crude production by 4.2 mbpd from September 2008 levels has slipped to 63% from a peak of 79% in March. With crude prices rebounding towards $80 pb, there is little incentive for producers to restrict production any further at this stage. Indeed, recent speculation has focused upon whether the cartel will raise output quotas at its next meeting in December. But with output already above target, such a ‘cosmetic’ move might not affect market fundamentals very much. Moreover, even if the global economy continues to recover, a number of downside risks to oil prices remain, including a strengthening dollar, rising OPEC spare capacity, increasing non-OPEC output (particularly from Russia), and still high crude inventory levels. In such an environment, OPEC is likely to remain cautious in announcing any gear change in policy. KEC Price Scenarios Scenario $/barrel Low Base High 2008 90.4 90.4 90.4 1Q09 41.4 41.4 41.4 FY08/09 78.5 78.5 78.5 2Q09 58.5 58.5 58.5 3Q09 67.2 67.2 67.2 4Q09f 67.5 68.4 71.5 2009f 58.6 58.9 59.6 1Q10f 66.1 68.5 74.7 FY09/10f 64.8 65.7 68.0 Source: NBK Economic Research Department Seasonal demand increase Assuming that OPEC leaves production close to its current levels over the next six months, the could be offset by rising non- short-term prospects for oil market fundamentals will rest upon the speed of improvement in OPEC supply… demand and/or changes in non-OPEC production. Going into the Northern Hemisphere winter, these two factors could be more or less offsetting with rising seasonal demand for oil (+0.7 mbpd between 3Q09 and 1Q10) met by higher non-OPEC supply. This scenario might keep crude prices more or less at 3Q09 levels into 1Q10 – close to $70 pb. The price of KEC averages $65.7 for FY2009/10 as a whole. Stronger world growth could A faster than expected world economic recovery—perhaps of the sort envisaged

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