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AGTHIA NEUTRAL

CURRENT BUSINESSES PRICED IN, VALUATION SENSITIVE TO

NEW PRODUCTS; INITIATE WITH NEUTRAL Our DCF valuation of AED2.22/share, which is 4.9% above the current share

price, suggests that the current business lines are fully priced into the stock.We assign a P/BV of 1.5x to the estimated investment cost of AED120 millionfor Agthias new products to arrive at AED0.10/share. Our fair value (FV) ofAED2.32/share is 9.6% above the stock price; hence we initiate with aNeutral. Upside potential depends on the new business lines, which have yetto start. We expect the new business lines to need time to ramp up capacityand will require aggressive marketing expenses to achieve decent marketshare.

Our valuation for Agthia is highly sensitive to long-term wheat price forecasts;a 5% change in long-term wheat prices results in an 8.4% movement in our

FV in the opposite direction. The flour and feed segment contributes 63% ofthe groups profitability during our forecast horizon despite the expectedgrowth in the other divisions (i.e., water and beverages and processed fruitsand vegetables). The flour and feed segment also exposes Agthia toquarterly earnings volatility.

We think Agthia can increase the pace of earnings growth, expected to peakin 2012, and defy its strong reliance on B2B sales and the Abu Dhabi marketthrough the acquisition of a strong consumer franchise. We believe thespectrum for possible acquisitions include businesses related and unrelatedto Agthias current operations. Agthia enjoys ample borrowing capacity tofinance inorganic growth.

Revenues(AED m)

EBITDA(AED m)

Net Profi t(AED m)

EPS(AED)

PER(X)

EV/EBITDA(X)

Div. Yield(%)

2012E 1,141.00 175.10 138.00 0.23 9.20 6.90 3.10

2011E 1,078.00 155.60 121.00 0.20 10.50 7.70 2.70

2010E 1,004.00 145.50 111.00 0.18 11.50 8.30 2.80

2009A 921.00 138.80 106.00 0.18 12.00 8.70 2.40

2008A 854.00 92.50 74.00 0.12 N.A. N.A. N.A.

November 8, 2010

Price: AED 2.12

United Arab Emirates[Packaged Foods &

Meats]Bloomberg: [AGTHIA UH]

Market Cap:USD 346.33 m

Outstanding Shares:600.00 m

Six Month Avg.

Daily Trading Vol.(USD m): 0.26

52 Week High/Low:AED 2.48 / AED 1.54

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Also view Auerbach Grayson Research on Reuters, Bloomberg, FirstCall, FactSet, CapitalIQ, and TheMarkets.comThis report has been prepared by our correspondent named above on the date set forth above. This report was not prepared by Auerbach Grayson & Company and the correspondennamed above is not an associated person of Auerbach Grayson & Company. The correspondent named above and its research analysts are not members of the Financial IndustryRegulatory Authority and are not subject to the FINRA Rules on Research Analysts and Research Reports and the attendant restrictions and required disclosures required by that rule.[Ithe report is to be distributed to more than major U. S. Institutional Investors Auerbach Grayson & Company accepts responsibility for the contents of this report as provided for in SECReleases and SEC staff no-action letters.] All persons receiving this report and wishing to buy or sell any of the securities discussed herein should do so through a representative oAuerbach Grayson & Company. Auerbach Grayson & Company and its affiliates do not own one per cent (1%) or more of any class of equity securities issued by any of the companiediscussed in this report. Auerbach Grayson & Company and its affiliates have not received any investment banking compensation from any of the issuers discussed in this report in thepast twelve months, and does not intend to seek or expect to receive investment banking compensation from any of the issuers discussed in this report in the next three (3) monthsAuerbach Grayson & Company has not acted as manager or co-manager of any public offering of securities issued by any of the companies discussed in this report in the past three (3)years. Neither Auerbach Grayson & Company nor any of its officers own options, rights or warrants to purchase any of the securities of the issuers whose securities are discussed in thisreport. Auerbach Grayson & Company does not make a market in any of the securities discussed in this report, and it and its associated persons do not stand ready to buy from or sell toany customers, as principal, any of the securities discussed in this report.


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initiation of coverage

Fair Value of AED2.32/Share; Initiate with Neutral

Our DCF valuation of AED2.22/share, which is 4.9% above the current share price,suggests that the current business lines are fully priced into the stock. We assign a P/BVof 1.5x to the estimated investment cost of AED120 million for Agthias new productsto arrive at AED0.10/share. Our fair value (FV) of AED2.32/share is 9.6% above thestock price; hence we initiate with a Neutral. Upside potential depends on the newbusiness lines, which have yet to start. We expect the new business lines to need timeto ramp up capacity and will require aggressive marketing expenses to achieve decent

market share.

A Commodity Play Despite Diversification Plans

Our valuation for Agthia is highly sensitive to long-term wheat price forecasts; a 5%change in long-term wheat prices results in an 8.4% movement in our FV in theopposite direction. The flour and feed segment contributes 63% of the groupsprofitability during our forecast horizon despite the expected growth in the otherdivisions (i.e., water and beverages and processed fruits and vegetables). The flour andfeed segment also exposes Agthia to quarterly earnings volatility.

Acquisition of Strong Consumer Franchise Could Change Positioning

We think Agthia can increase the pace of earnings growth, expected to peak in 2012,

and defy its strong reliance on B2B sales and the Abu Dhabi market through theacquisition of a strong consumer franchise. We believe the spectrum for possibleacquisitions include businesses related and unrelated to Agthias current operations.Agthia enjoys ample borrowing capacity to finance inorganic growth.

Ahmed Gad, CFA

+971 4 364 1904

[email protected]

Gigi Tharian Varghese

+968 24760023

[email protected]

STOCK DATA

Price AE

Fair Value A

Last Div. / Ex Date AED0.05 on 29 Ap

Mkt. Cap / Shares (mn) AED1,27

Av. Mthly Liqdty (mn) A

52-Week High / Low AED2.36 / A

Bloomberg / Reuters AGTHIA UH /AG

Est. Free Float

SHARE PRICE PERFORMANCE RELATTO ADI REBASED

CONTENTS

I. VALUATION AND RECOMMENDATION

II. INVESTMENT THESIS

III. BUSINESS MODEL AND STRATEGY

IV. FLOUR AND FEED - THE KEY SEGMENT

V. WATER AND BEVERAGE

DIVERSIFICATION IS PAYING OFF

VI. PROCESSED FRUITS AND VEGETABLES

VII. FINANCIAL STATEMENTS

KEY FINANCIAL HIGHLIGHTS

December Year End (AED mn) 2009a 2010e 2011e 2012e

Revenue 921 1,004 1,078 1,141

EBITDA 139 146 156 175

EBITDA Margin 15.1% 14.5% 14.4% 15.3%

Net Profit 106 111 121 138

EPS (AED) 0.18 0.18 0.20 0.23

DPS (AED) 0.05 0.06 0.06 0.07

Net Debt (Cash) (95) (65) (133) (200)

P/E* (Attrib.) (x) 12.0 11.5 10.5 9.2

EV / EBITDA (x) 8.7 8.3 7.7 6.9

P/BV* (x) 1.6 1.4 1.3 1.2

P/CF* (x) 5.1 10.5 8.5 8.1

Div. Yield 2.4% 2.8% 2.7% 3.1%*Price as at 07 November 2010

Source: EFG Hermes estimates

agthia rating neutral 08 November 20

Current Businesses Priced In, Valuation Sensitive toNew Products; Initiate with Neutral

consumer goods uae

1.2

1.6

2.0

2.4

07-Nov-09

07-Feb-10

07-May-10

07-Aug-10

Price (AED)

ADI (Rebased)


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agthia 08 November 2010

consumer goods uae

I.VALUATION AND RECOMMENDATIONDCF VALUE OF AED2.22 PER SHARE FOR THE CURRENT OPERATIONS...

We value Agthias existing operations using a DCF approach at AED2.22 per share, 4.9% abovthe current share price. We use a cost of equity of 11.8%, implying an equity risk premium(ERP) of 8% above the current yield on the Abu Dhabi Government USD-denominated bondmaturing in 2019. This ERP is 50 bps above the higher end of the range that we apply to ourconsumer sector coverage in Saudi Arabia to account for market and liquidity risks (Agthiatraded on average USD260,000 per day over the last six months). We assign a perpetualgrowth rate of 2.5% to account for possible expansion in the current business lines, especiallyin the scalable beverages division.

FIGURE 1: DCF VALUATIONIn AED million, unless otherwise stated

2010e 2011e 2012e 2013e 201

COPAT 145 156 174 181 18

Capex (88) (47) (49) (38) (4

Change in Working Capital (28) (15) (27) (30) (1

Free Cash Flow 7 94 99 112 12

Discounted Free Cash Flow 7 83 78 80 8

Terminal Value 1,519

Perpetual Growth Rate 2.5%

WACC 11.1%PV of Cash Flows 2010e-2014e 332

PV of Perpetuity 978

Total Firm Value 1,309

Net (Debt) / Cash 25

Equity Value 1,334

No. of Shares (mn) 600

DCF Value (AED) 2.22

Current Price (AED) 2.12

Upside / Downside 4.9%


... AND AED0.10 PER SHARE FOR NEW PRODUCTS

We apply a P/BV ratio of 1.5x to the estimated investment cost (cAED120 million) of the newproducts (frozen bakery, dairy and processing of fresh fruits and vegetables), in line with theP/BV of the current businesses implied by our DCF value (1.44x). This yields an additional valof AED60 million (net of required capex), or AED0.1 per share.

We do not include the new investments in our forecasts since we cannot assess the possiblemarket share gains for Agthia in the respective markets at the moment.


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VALUATION SENSITIVE TO NEW PRODUCTS; INITIATE WITH NEUTRALWe initiate coverage on Agthia with a fair value (FV) of AED2.32 per share, 9.6% above thecurrent share price, and initiate coverage with a Neutral rating. The current share price reflecthe existing operations, in our opinion. Our valuation, as well as the long-term stockperformance, depends on the success of the new product initiatives, which have yet to beproven.

Forward integration into the frozen bakery segment, representing 54% of the cost of the newproduct initiatives, could come together with the current product mix faster than the otherproducts due to Agthias leading position in the flour market and its knowledge of its clientbase, in our view. However, Agthia would face well-established competition in dairy and, to alesser extent, fresh fruits and vegetables processing. The penetration of these new markets

needs time and requires significant spending on marketing and advertising, in our opinion.

SENSITIVITY TO LONG-TERM WHEAT PRICES

We run a sensitivity analysis for our FV to our assumptions for long-term US wheat prices ancost of equity. We use the Bloomberg consensus forecast for 2013 US wheat prices, atUSD270 per tonne, as our long-term base case price assumption. This price is c7% below thecurrent wheat price. We examine our FV sensitivity in 5% increments to our base caseassumptions.

FIGURE 2: FV SENSITIVITY TO WHEAT PRICES AND COST OF EQUITY

In AED per share, unless otherwise stated

Change in Long-term US Wheat Price Assumption

-10% -5% 0% 5% 10%

CostofEquity 10.8% 3.02 2.80 2.58 2.36 2.13

11.3% 2.86 2.65 2.44 2.23 2.03

11.8% 2.71 2.51 2.32 2.13 1.93

12.3% 2.58 2.39 2.21 2.03 1.85

12.8% 2.46 2.28 2.11 1.94 1.77


Our analysis reveals that our valuation for Agthia is highly sensitive to wheat prices; a 5%change in long-term wheat prices results in an 8.4% movement in our FV in the opposite

direction, assuming a base case cost of equity of 11.8%. A rise in wheat prices negativelyimpacts Aghtias margins and thus its valuation, in our view, and vice versa. This highlights ouopinion that Agthia remains exposed to commodity risk despite the growing significance of tother segments during our forecast horizon.

As a result, the stocks trading multiples should be capped, in our view. Our FV impliesestimated 2010 and 2011 P/E multiples of 12.0x and 11.0x, respectively. Our estimated 2010and 2011 implied EV/EBITDA multiples also stand at 9.0x and 8.4x, respectively. Thesemultiples are at a discount to Almarai (Price: SAR215, Fair Value: SAR219, Rating: Neutral),which enjoys an unrivalled business-to-consumer (B2C) platform and product mix in the GCCregion, and are almost at parity with Juhaynas (Price: EGP5.53, Fair Value: EGP5.85, Rating:Neutral) despite the latters strong earnings potential and non-exposure to the lower margin

flour business.


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II.INVESTMENT THESISPHASE I OF THE TURNAROUND ACCOMPLISHED

Agthias current management team was hired in 2005 to maximise the groups profitability.Since then, management has been able to record market share gains in all the constituents oits product mix, as well as grow the beverage segment organically and successfully integratethe fruits and vegetables processing segment. We consider the ongoing organic expansion inthe flour and feed (FAF) segment and the beverage segment as the last episode of thisturnaround.

YET COMMODITY RISK AND CLIENT CONCENTRATION PERSIST

Agthia is a price taker in the flour market, despite its leadership position, due to the Abu Dha

governments flour subsidies. According to the agreement with the Abu Dhabi government,flour prices are fixed at AED70 per 50-kg bag (AED1,400 per tonne). Agthia cannot raise flourprices at will and is compensated for the difference between flour prices in Abu Dhabi and thnorthern emirates on a quarterly basis. As a result, Agthia is a price taker of its competitorspricing policy in the northern emirates.

We attribute this to Agthias focus on the Abu Dhabi market. Abu Dhabi represents the mainmarket for Agthia, with the companys market shares in Abu Dhabi exceeding those in the UAacross all of its product groups, although Agthias products are sold across the GCC region. Thbusiness-to-business (B2B) FAF enjoy a combined 85% volume market share in Abu Dhabi anB2C FAF also enjoys a 75% volume market share in Abu Dhabi. Al-Ain Water enjoys a 41%

volume market share in Abu Dhabi.PHASE II OF THE TURNAROUND FOCUS ON VALUE-ADDED PRODUCTS

Agthia plans to invest cAED120 million in new business lines, including in: i) a frozen bakeryplant at an estimated cost of AED65 million, set to be operational in 1Q2012, ii) thepenetration of the GCC regions dairy market after signing an exclusive manufacturing anddistribution agreement with Yoplait in August 2010, and iii) the processing of fresh fruits andvegetables under the processed fruits and vegetables division. The common factor of the newproducts is that they are all value-added products. Agthia does not plan to venture in lessvalue-added activities, such as sugar refinery, which might dilute the current operating margiAdditionally, Agthia is currently evaluating an investment in the poultry business.

MORE FOCUS ON B2CWe expect Agthia to address the B2C market with its new dairy and processed fruits andvegetables capacity. This should provide Agthia with cross-selling opportunities to its currentdistribution network (estimated at more than 1,000 clients). We also expect Agthia to attemto add market share points outside of Abu Dhabi, which could require it to increase itsadvertising budget and target lower margin key B2B contracts, such as restaurants and airlineto increase brand awareness. The water and beverage segments 9M2010 SG&A expenses,increased by 28% Y-o-Y to increase the divisions sales by 30% over the same period.

EARNINGS STILL SENSITIVE TO FAF SEGMENT

We still expect the FAF segment to represent c63.5% of Agthias net profit before unallocateitems on average during our forecast horizon, although we expect the water and beveragesegments net profit to grow by an estimated CAGR of 12.8% in 2009-2014. The expansion othe flour mill would the segments contribution to Agthias profitability at the current high


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For instance, we expect the recent rise in local flour prices to enhance the FAF segmentprofitability in 4Q2010, due to low-cost inventory, but to negatively affect the divisionsprofitability in 1H2011. The ability to pass on cost increases and the time lag between thechange in input and output prices should keep quarterly earnings volatile.

CORE BUSINESS FUNNELLING CASH FOR FUTURE EXPANSION

Agthias extensive product expansion plans require significant cash outlays, which aresupported by the two cash-generating businesses (FAF and Beverage). Agthia reported freecash flow of AED172 million in FY2009 despite the expansion of the beverage segment andtomato paste factory in Egypt. We expect FCF will remain positive over our forecast horizon our forecasts do not include expansion into dairy, frozen bakery and poultry businesses inFY2011. According to management, the approximate capital expenditure required to expand

into these businesses is AED120 million. In our opinion, a strong balance sheet with a net casbalance of AED67.5 million and strong FCF provides flexibility for future expansion bothorganically and through acquisitions.

FIGURE 3: CORE BUSINESS FUNNELLING CASH FOR EXPANSION

In AED million, unless otherwise stated


EARNINGS GROWTH TO PEAK IN 2012

We expect earnings to grow by 10% in 2011 due to both an estimated 17% growth in thewater and beverage division and a sharp decline in losses by the processed fruits andvegetables division. We expect earnings growth to peak at 14% in 2012 as the new flour millfully operational and the processed fruits and vegetables division returns to profitability.

Earnings growth would be muted beyond 2012 as we do not assume further capacityexpansions. The addition of market share points should be challenging, in our view.

It is worth noting that we do not incorporate the new products (dairy, frozen bakery andprocessed fresh fruits and vegetables) into our forecasts. The scale of the new investments(AED120 million) should not significantly affect our earnings forecasts during our forecasthorizon. If we assume annual sales for the new products of AED120 million (EV/sales of 1x) b2013 at a net profit of 15% (accounting for high advertising expenses required for the launchof the new products), we would arrive at an additional net profit of AED18 million, a 12.5%addition to our 2013 net profit forecast of AED144 million. These back-of-the-envelopecalculations assume a quick ramp-up of the new capacities and successful market penetratio

0

50

100

150

200

250

FY10e FY11e FY12e FY13e FY14e

Capi tal Expendi tu re Free Cash Flow Dividend End o f Year Cash Bal ance


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ACQUISITION OF STRONG CONSUMER FRANCHISE SHOULD ACCELERATE GROWTHWe think that Agthia can increase the pace of earnings growth through the acquisition of astrong consumer franchise that would enrich Agthias product mix in the B2C market andprovide Agthia with a growing footprint in the northern emirates and possibly the GCC regioWe believe that the spectrum for possible acquisitions is diverse; one could take place in abusiness related to Agthias current segments, such as bakery, or in unrelated businesses suchas poultry, in our view.

Agthia enjoys ample borrowing capacity to finance acquisitive growth. Agthia enjoys a netcash balance of AED25 million and gross debt of AED192 million. Only 10% of the debt is aterm loan and the rest is short-term borrowing to finance working capital and the receivableon government compensation for flour subsidies.


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III.BUSINESS MODEL AND STRATEGYAgthia, formerly known as Emirates Foodstuff and Mineral Water Company, is a leadingmanufacturer and supplier of flour and animal feed, mineral water, tomato paste and non-alcoholic beverages in the UAE. The company is 51% owned by the General HoldingCorporation (GHC), an Abu Dhabi government-related entity. GHC contributed in-kind assetsworth AED590 million to raise Agthias capital to AED600 million in 2004. GHC offered 49%of the company to the public in 2005. Abu Dhabi Pension Fund owns 5% of the company andthe balance (44%) is free float. Foreigners can hold up to 25% of the capital.

The company fully owns four subsidiaries operating under three different segments. The FAFsegment contributed 73% of the groups 2009 revenues and 80% of operating profit. The

bottled water and beverages segment contributed 22% of 2009 revenues and 24% ofoperating profit. The processing of fruits and vegetables segment is the least contributor torevenues (5% in 2009) and the only segment with operational facility outside of the UAE (AlAin Foods and Beverages tomato paste factory in Egypt). The start-up costs of the Egyptiansubsidiary caused the division to generate operational losses in 2009.

FIGURE 4: SNAP SHOT OF CONTRIBUTION OF DIFFERENT BUSINESS SEGMENT


BUSINESS SEGMENT -Operating Subsidiary

Revenue(2009)

% ofTotal

Revenue

MarketShare

Capacity GrossProfit

GrossMargin

SegmentOperating

Profit

OperatingMargin

% of TotalOperating

Profit

EBITDA EBITDAMargin

ROA Assets % oTotaAsse

Flour & Feed

Grand Mills for Flour and Feed(GMFF)

669 73% 43% 575* 154 22.9% 115 17.2% 80% 132 19.8% 19.8% 532 60.2%

Water & BeveragesAl Ain Mineral Water (AAMW)

206 22% 24% 29.6** 89 43.2% 35 16.8% 24% 34 16.8% 13.5% 256 29.0%

Processed Fruits &VegetablesAl Ain Vegetable Processing andCanning (UAE) & Al Ain Foodand Beverages (Egypt)

46 5% 12% 49.8* 11 22.8% -4.9 N/A -3% -1.9 -4.1% N/A 96 10.9%

Total 921 100% - - 250 27.2% 108 11.7% 139 15.1% 1,190*Thousand tonnes per annum**Million cartons per annumSources: Agthia, EFG Hermes estimates

TURNAROUND AND SHAREHOLDER SUPPORT

GHC brought in a new management team following the 2005 IPO to turn Agthia into aprofitable and diversified consumer staple company. The current top level management bringnotable experience from multinational consumer staples and agricultural developmentcompanies, including Gillette/P&G, PepsiCo USA, Johnson & Johnson and Bunge.

The companys key strategy has been margin management, which should enable it to reinvesand expand its product portfolio. Management has also adopted a product diversificationstrategy. Over the last two years, the company diversified its product portfolio to includeprocessed vegetables and tomato paste in the product mix. Management also organically gre

the bottled water capacity and ventured into the five-gallon home and office delivery (HOD)niche market.


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Additionally, Agthia signed a franchise agreement with Capri Sun, the worlds third largestjuice producer, to cover the GCC region (excluding Saudi Arabia).

Agthia is assessing the addition of new products, including: i) fresh bakery under the FAFsegment, ii) energy drinks, sports drinks and ready-to-drink (RTD) coffee and tea under thebeverages segment, and iii) stable juices, jams and ready-to-eat (RTE) meals under the fruitsand vegetables segment.

FIGURE 5: PRODUCT MIX

Flour and Feed Water and Juice Fruits and Vegetables

Current ProductsTraditional and specialty

flours

Mixes and improversFrozen bakery (4Q2011)

FeedLifecycle Program

Ideal Protein

Bottled waterHOD five-gallon

Flavoured waterEnhanced water

Juice

Tomato pasteTomato-based products

Frozen vegetablesHot chilli paste

Fruit pureeFresh fruits and vegetable

(2011)

Products under EvaluationFresh bread and bakeryHealth protection feed

Energy drinksSports drinks

RTD coffee and tea

Stable juicesJams

RTE meals

Source: Agthia

However, Agthia largely remains a commodity play due to the high contribution from the FAsegment to revenues and operating profit. The rise in grain prices especially wheat, coupled

with efficiency gains in the milling operations, has helped increase profitability per tonne andbalance and at times even outweigh the increasing profitability of the beverage segment.

FIGURE 6: REVENUE BREAKDOWN FIGURE 7: GROSS PROFIT BREAKDOWN

Source: Agthia, EFG Hermes Source: Agthia, EFG Hermes

GHC also supports Agthia by transferring assets at or below cost. Agthia realised income ofAED35 million following the transfer of Al-Ain Vegetables assets to Agthia in 2008. GHC alsohanded over Cold Stores, a provider of refrigerated warehousing, to Agthia for free in 2008.Finally, GHC wrote back AED33 million in dues from Agthia in 2008.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 1H2010

FAF Beverages Fruits abd Vegetables Processing

-5%

10%25%

40%

55%

70%

85%

100%

2006 2007 2008 2009 1H2010

FAF Beverages Fruits abd Vegetables Processing


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FUTURE STRATEGY FOCUS ON NEW BUSINESS SEGMENTSAgthia plans to invest cAED120 million in new business lines as well as continue spending onorganic growth of its existing business lines. The new business lines include: i) a frozen bakeryplant at an estimated cost of AED65 million, set to be operational in 4Q2011, ii) thepenetration of the GCC regions dairy market after signing an exclusive manufacturing anddistribution agreement with Yoplait in August 2010, and iii) the processing of fresh fruits andvegetables under the processed fruits and vegetables division.

The common factor of the new products is that they are all value-added products. Agthiaexpects a gross margin of 45-50% for the dairy and fresh fruits and vegetables products, and24-28% for the frozen bakery products. Agthia does not plan to venture into less value-addedactivities, such as sugar refinery, that might dilute the current operating margin. Additionally

Agthia is evaluating an investment in the poultry business.

CLIENT BASE

Abu Dhabi represents the main market for Agthia, with the companys market share in AbuDhabi exceeding that in the UAE across all its product groups, although Agthias products aresold across the GCC region. B2B flour and feed enjoy a combined 85% volume market share Abu Dhabi versus 43% and 49% in the UAE, respectively. B2C flour also enjoys a 75% volummarket share in Abu Dhabi versus 38% in the UAE. Al-Ain Water enjoys a 41% volume markeshare in Abu Dhabi versus 24% in the UAE.

The FAF segment historically exposed Agthia to an institutional client base, especially in the

animal feed market. On the other hand, Al-Ain bottled water, Capri Sun and Al-Ain tomatopaste and frozen vegetables are Agthias main retail brands. Management has been trying toincrease its B2C business by introducing new brands, increasing brand awareness andexpanding its distribution network. Al-Ain bottled water has even targeted lower margin B2Baccounts, such as Emirates Airlines, and has become the top-selling water brand in UAEeateries (14% volume market share) all to increase the brand awareness amongstconsumers.

The drive to increase B2B business and gain market share has pressurised Agthias margins.Using the beverages segment as a proxy, the segments EBIT margin declined from 18.1% in2008 to 16.8% in 2009 as selling and marketing expenses soared by 62%, in line with theintroduction of Capri Sun and the HOD five-gallon bottles to the product mix. The segments

EBIT margin reached a trough of 12.4% in 1Q2010 before recovering to 15.4% in 2Q2010.

INTERNATIONAL OPERATIONS

Agthia ventured into tomato paste production outside the UAE by establishing a 30,000tonne-per-annum factory in Egypt. The fully owned subsidiary aims to benefit from year-routomato cultivation in Egypt to produce tomato paste in bulk and export it to the MENA regioThe subsidiary has been affected by a decline in international tomato paste prices driven bycheap Chinese imports. The tomato crop in Egypt has also been significantly affected by a hosummer and pest disease. Consequently, the otherwise profitable fruits and vegetables divisiohas been experiencing losses since 4Q2009.

Agthia introduced new products to counter the losses incurred by the Egyptian subsidiary. Thplant currently produces frozen French fries and red chilli paste. More importantly,management plans to focus more on branded sales and move away from the low-margin

i l b l b i


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IV.FLOUR AND FEED - THE KEY SEGMENTDEMAND FOR FLOUR EXCEEDS CAPACITY

The FAF business is the major driver of Agthias revenue and profitability. The capacity ofGrand Mills is 200,000 tonnes of flour and 370,000 tonnes of animal feed. We estimate thatGrand Mills consumes c270,000 tonnes of wheat to produce 200,000 tonnes of flour at anestimated conversion rate of 75%. Grand Mills sales volume has exceeded its capacity since2006. To meet excess demand, Grand Mills outsources c40,000-50,000 tonnes of flour fromcompeting mills. Agthia is currently adding 100,000 tonnes of flour milling capacity to GrandMills, set to be operational in 2H2011.

Animal feed mill sales volume increased by a CAGR of 20% in 2006-2009, lifting capacity

utilisation to 85% from 49%.

FIGURE 8: FLOUR CAPACITY UTILISATION

In thousand tonnes (LHS) and In % (RHS)

FIGURE 9: ANIMAL FEED CAPACITY UTILISATIO

In thousand tonnes (LHS) and In % (RHS)

Source: Agthia Source: Agthia

MARKET LEADER WITH STRONG B2B FRANCHISE

Agthia enjoys a dominant market share in the UAE with a 43% volume market share of theB2B flour market and 38% of the B2C flour market. Agthias market share in Abu Dhabi standat 85% for the B2B flour market and 75% of the B2C flour market. Agthia enjoys a 49%market share of the UAE animal feed market (85% market share in Abu Dhabi). Agthia enjoys

top market positions in all UAE feed segments: professional farms, municipalities and the opemarket. The UAE flour market size is estimated at USD285 million, growing at 6% per annumwhile the UAE feed market size is estimated at USD222 million, growing at 7% per annum.

The flour market is highly concentrated, with Grand Mills and Al-Ghurair enjoying 76% of themarket between them. Imports satisfy 10% of local consumption, paving the way for moremarket share gains for local producers. Grand Mills dominant market share in the feedbusiness is unrivalled, with the rest of the market (51% market share) almost evenly splitbetween three local companies.

Circa 80% of the flour and 100% of feed production are sold in Abu Dhabi, while 20% of theflour production is sold in the northern emirates. Agthias main customer base is comprised o

commercial bakeries, stores, and poultry and cattle farms.

70%

90%

110%

130%

150%

150

175

200

225

250

275

FY06 FY07 FY08 FY09

Sales Volume (LHS)

Capacity Utilisation (RHS)

40%

50%

60%

70%

80%

90%

150

200

250

300

350

FY06 FY07 FY08 FY09

Sales Volume (LHS)

Capacity Uti lisation (RHS)


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consumer goods uae

FIGURE 10: AGTHIA LEADS IN UAE B2B FLOUR MARKET:MORE ROOM FOR GROWTH IN THE B2C CATEGORY

Category Market Share

Flour- B2B (UAE) 41%

Flour- B2C (UAE) 39%

Flour- B2B (Abu Dhabi) 90%

Feed (UAE) 47%

Source: Company Presentation

STRONG MARKET FUNDAMENTALS

The UAEs per capita wheat consumption is the highest in the world, according to the UnitedNations Food and Agriculture Organisation (FAO). The UAEs annual per capita wheatconsumption, at 204 kg per capita, is three times the worlds average. Future demand growthis expected to be driven by population growth and the UAE governments plan to increase sesufficiency in poultry production.

FIGURE 11: WHEAT CONSUMPTION PER CAPITA IN SELECTED COUNTRIES

In Kg per capita per annum, unless otherwise stated

Source: FAO

REVENUE GROWTH CAPPED BY ABU DHABI GOVERNMENT SUBSIDY

Rising raw material prices, especially wheat, have little impact on Agthias flour revenue eversince the Abu Dhabi government capped the retail flour price at AED1,400 per tonne in 2007

The Abu Dhabi government compensates Agthia through a subsidy system for quantities soldin Abu Dhabi. The subsidy is calculated at the end of every quarter based on the flour pricedifferential between Abu Dhabi and the northern emirates. Agthia deducts this subsidy from cost of goods sold.

0

50

100

150

200

250

Argen

tina

Austra

lia

Cana

da

Egyp

t

France

India

Kuwa

it

Le

banon

Pa

kistan

KSA

S.A

frica

UAE

UK

USA

Worl

d


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FIGURE 12: AVERAGE SELLING PRICE FOR FLOURAND FEED

In AED per tonne, unless otherwise stated

FIGURE 13: LITTLE CORRELATION BETWEENWHEAT PRICES AND FLOUR REVENUES


Animal feed prices have been declining since 2008. They are not only affected by wheat pricebut also by other input prices (like barley and corn).

PROFITABILITY DETERMINED BY COMMODITY PRICES

Our analysis indicates that the FAF segments gross profit is a function of two variables: thecarrying cost of wheat inventory and the premium of the flour selling price in the northernemirates over Abu Dhabis selling price.

Agthias inventory management is influenced by the price of wheat. Agthia procures wheat 4days in advance on spot price. The company tends to increase inventory in the event ofdepressed wheat prices to benefit from the anomaly between wheat and flour prices. We notthat the company has significantly benefited from these opportunistic windows since the staof the global financial crisis (1Q2009 in particular). On the flip side, the time lag between thechange in wheat inventory costs and the change in flour price causes volatility in thesegments earnings.

FIGURE 14: INCREASED PROCUREMENT ATPRICE DIPS

In days (LHS) and In AED per tonne (RHS)

FIGURE 15: GROSS MARGIN VOLATILITY


700

900

1,100

1,300

1,500

FY06 FY07 FY08 FY09

Feed Flour

-40%

-20%

0%

20%

40%

60%

80%

FY07 FY08 FY09

Wheat Price % Change

Flour Revenue % Change

200

250

300

350

400

450

500

60

80

100

120

140

160

180

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

Inventory Days on Hand (LHS)

Wheat Price (RHS)

-30%-20%-10%0%10%20%30%40%50%

0%

10%

20%

30%

40%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

Gross Margin (LHS)

Q-o-Q Wheat Price Change (RHS)

Q-o-Q Flour Price Change ex-Abu Dhabi (RHS)


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EXPANSION TO DRIVE REVENUE GROWTH IN THE LONG TERMThe ongoing 50% expansion in the flour mill capacity is expected to enhance the FAFsegments revenue growth outlook beyond 2011. Agthias current flour sales volume isaffected by the capacity of third party mills used for outsourcing. We expect flour revenues tgrow by an estimated CAGR of 9% in 2009-2012 due to the capacity expansion. Feed revenugrowth should be muted, in our opinion. We do not expect the feed mill utilisation capacity texceed 85%.

FIGURE 16: EXPECTED SALES VOLUMES ANDPRICES

In thousand tonnes (LHS), In AED per tonne (RHS)

FIGURE 17: EXPECTED FAF REVENUEBREAKDOWN


Source: EFG Hermes estimates Source: EFG Hermes estimates

SHORT-TERM VOLATILITY IN MARGINS

We expect short-term volatility in the divisions gross and net margins. The gross margin in3Q2010 came in at 14.4%, down from 21.7% in 1H2010, due to a decrease in flour volumesas one of the lines was temporarily shut down in July. The FAF segment also suffered from adrop in feed prices in 3Q2010. We expect a mild recovery in the gross margin to 15.0% in4Q2010 as we expect a Q-o-Q recovery in flour volumes and prices. We also expect volatilemargins in 2011. The rise in wheat inventory costs, amongst other inputs, should squeeze thedivisions margins during 1H2011, in our view. We then expect margins to recover in 2H2011as inventory costs slow down. We generally expect the FAF gross margin to drop from anestimated 18.1% in 2010 to 17.6% in 2011.

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

0

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200

300

400

FY08e

FY09e

FY10e

FY11e

FY12e

FY13e

FY14e

Volume Sales- Flour Mill (LHS)Volume Sales- Feed mill (LHS)Selling Price- Flour RHSSelling Price- Animal Feed (RHS)

348 356 373 383 417444 448

325 313 305 314317 320 320

0

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900

FY08

FY09

FY10e

FY11e

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Flour Revenue Feed Revenue


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LONG-TERM NORMALISED GROSS MARGIN ESTIMATED AT 18-19%In the long-run, we estimate a sustainable gross margin of 18-19% for the FAF segment. Weestimate gross margin to increase in FY2012 and beyond to reflect the replacement of low-margin outsourced sales by in-house production. We expect the FAF net margin to stabilise a14.4% at the end of our forecast horizon, up from our estimate of 13.7% in 2010.

FIGURE 18: FORECASTED PROFIT MARGINS

In AED million (LHS), In % (RHS)


0%

5%

10%

15%

20%

25%

0

20

40

60

80

100

120140

160

180

FY08 FY09 FY10e FY11e FY12e FY13e FY14e

Gross Profit (LHS)Net Profit (LHS)Gross Margin (RHS)Operating Margin (RHS)


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V.WATER AND BEVERAGE DIVERSIFICATION IS PAYING OFFPRODUCT MIX AND MARKET SHARE

The water and beverage division sells bottled water under the Al-Ain brand and five-gallonHOD water under the Al-Ain and Ice Crystal brands. The division also produces Capri Sun, thetop selling juice worldwide, under licence in the GCC region (excluding Saudi Arabia).

The UAE water market size is estimated at USD235 million; USD163 million for bottled wateand USD72 million for the HOD market. The UAE enjoys the highest per capita consumptionof bottled water worldwide at 280 litres per annum. The bottled market has been growing at10% per year, while the HOD market has been growing at 5-7%.

Al-Ain is the second largest market player in the bottled market with a 24% volume marketshare, following the market leader Masafi with a 32% market share. Al-Ain enjoys a leadingvolume market share in Abu Dhabi at 41%, suggesting that the majority of sales occur in AbuDhabi. Al-Ain has been penetrating the B2B market in order to increase brand awareness andgain market share. Al-Ain is the top supplier of bottled water to UAE eateries with a 14%market share, and became the supplier for Emirates Airlines in 2010. Al-Ains HOD marketshare is 7% given that Al-Ain started to offer this product only in 2008.

Agthia ventured into the juice market in 1Q2009. Capri Suns current market share is 3.1% othe total UAE juice market and 9.5% of the still drinks subsector. Capri Sun is the third largesseller in the still drink market. The UAEs total juice market is estimated at USD261 million, owhich the still drink market represents 32% (USD84 million). The UAE still drink market hasbeen growing at 4% per year.

FIGURE 19: UAE BOTTLED WATER MARKET SHARES FIGURE 20: UAE JUICE MARKET SHARES

Source: Agthia Source: Agthia

STRONG COMMITTED INVESTMENT IN THE DIVISION

The company continues to invest heavily in the beverage segment. The company investedapproximately AED108 million in in 2008-2009, which is approximately 58% of the totalgroups capital expenditure over that period. Agthia added an annual capacity of 4 millionunits of HOD five-gallon capacity in 2008 and an annual capacity of 3.2 million cartons ofCapri Sun juice in 2009-2010. Al-Ain has just increased its bottled water capacity to 24 millio

cartons from 20 million cartons. Nevertheless, the segments asset turnover has increasedfrom 0.5x in FY2006 to 0.8x in FY2006-2009. Additionally, Agthia broadened its product mixby offering value-added products such as flavoured water and enhanced water.

Al Ain24%

Massafi32%Aquafina

(Pepsico)8%

Arwa(CocaCola)5%

Others31%

Nectar and100%Juice68%

Other StillDrinks29%

Capri Sun3%


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GROWING SIGNIFICANCE IN THE GROUPFollowing these investments, the divisions revenues and net profit grew by 49% and 38%,respectively. The division contribution to the groups revenue increased to 26.3% in 9M2010from 21.3% in FY2009. The divisions weight of net profit before unallocated items alsoincreased to 34.0% in 9M2010 from 23.9% in FY2009.

PROFITABILITY AFFECTED BY PACKAGING AND ADVERTISING EXPENSES

Agthia procures water from Al-Ain Municipality at a fixed cost. The major contributor to theoperating costs, as well as the swing factor, is the cost of polyethylene terephtalate (PET) usein bottling. Agthia procures the required PET from local producers at market prices. PETrepresents the majority of the operating costs for bottled water.

The gross margin on HOD sales is typically higher than that for bottled water due to the lowcost of packaging. However, this premium is wiped out by the high distribution and deliverycosts associated with HOD sales. Agthia started trial production of a hot fill line in 3Q2010 treduce PET requirements and save energy. We attribute the divisions gross margin expansionto 47.8% in 3Q2010 from 42.4% in 2Q2010 to the new hot fill line.

Selling and marketing expenses associated with the new product launches, especially CapriSun, determine the divisions net profit. Selling and marketing expenses in 9M2010 increasedby 27.6% Y-o-Y. The marketing expenses associated with Capri Sun were responsible for c50of the Y-o-Y increase in Agthias SG&A expenses for 9M2010.

CAPACITY UTILISATION AND COST SAVINGS TO DRIVE SALES GROWTH

We expect utilisation rates and cost savings associated with the hot fill line to driveprofitability. We do not factor in further capacity increases since current capacities are stillrunning at below optimum levels and market share gains require strong spending onadvertising and distribution. We also do not expect a major change in pricing policy.

We expect the gross margin to improve to 44% during our forecast horizon from 43% in 201lifting the net margin to 18.5% in 2010 and 19% in 2011 from 16.8% in 2009. We expect thdivisions net profit growth to peak in 2010 at 43%, at 17% in 2011 and 3% in 2012. Thedivision should contribute 35% to the groups net profit before unallocated items by the endof our forecast horizon, up from 24% in 2009.


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FIGURE 21: FORECASTED CAPACITYUTILISATION FIGURE 22: FORECASTED WATER ANDBEVERAGES REVENUE BREAKDOWNIn AED million, unless otherwise stated


FIGURE 23: FORECASTED GROSS AND NET PROFIT

In AED million(LHS), In % (RHS)


-20%

10%

40%

70%

100%

FY08

FY09

FY10e

FY11e

FY12e

FY13e

FY14e

CaprisunBottled WaterHOD (5-Gallons Business)

122154 179

199 204 212 212

0 36

6074 76

78 78

0

50

100

150

200

250

300

350

FY08

FY09

FY10e

FY11e

FY12e

FY13e

FY14e

Mineral Water HOD (5-Gallon)Capri Sun Other

10%

20%

30%

40%

50%

0

20

40

60

80

100

120

140

160

FY08

FY09

FY10e

FY11e

FY12e

FY13e

FY14e

Gross Profit (LHS) Opearting Profit (LHS)Gross Margin (RHS) Operating Profit Margin (RHS)


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VI.PROCESSED FRUITS AND VEGETABLESAT A BUDDING STAGE

Agthia entered the processed fruits and vegetables segment with the acquisition of Al-AinVegetable factory in 2008 from the parent company GHC. Agthia has since diversified thissegments product portfolio into frozen vegetables, extra virgin olive oil, soup mix, pastasauces, and its flagship product: tomato paste.

Al-Ain Vegetable owns a factory in the UAE with c15,000 tonnes of capacity, including 5,000tonnes of tomato paste. Agthia established Al-Ain Egypt in 2009 with a capacity of 30,000tonnes, of which 24,000 tonnes are dedicated to tomato paste and the rest to frozenvegetables and fruit puree. The Egyptian subsidiary targets the export of bulk tomato paste to

the MENA region.

LEADING MARKET SHARE IN A FRAGMENTED MARKET

Al-Ain Vegetables enjoys a leading market share of 14.6%, slightly above that of its two direccompetitors, in the USD12 million UAE tomato paste market. The market share stands at 19%in Abu Dhabi. Al-Ain is the fifth largest seller in the USD26 million UAE frozen vegetablesmarket with a market share of 6%. The leading producer has a market share of 11%. Bothmarkets are highly fragmented and there is strong room for market share gains, albeit at thecost of squeezed margins.

LOSS-MAKING ON ACCOUNT OF EGYPT OPERATIONS

This segment is a very small contributor to revenue and gross margins. The segmentcontributed 5.5% of 9M2010 revenues, although it has been mostly loss-making since itsinception with the exception of a few quarters. Losses in 2008 and 9M2009 were attributed tthe aggressive marketing campaign required to increase market share.

Starting in 4Q2009, the Egyptian operations wiped out the improvement in the UAEoperations. The division experienced a cumulative loss of AED13.7 million in the nine monthsbetween September 2009 and June 2010. Tomato prices increased significantly in Egypt as thharvest dropped by c50% Y-o-Y in 2010 due to a hot summer and pest disease. The sellingprices of tomato paste were also hurt by stiff competition from China. The UAE operationswere also affected by the absence of government-subsidised tomatoes from the local market

The division reported lower losses of AED1.5 million in 3Q2010 as Agthia introduced newproducts to counter the losses incurred by the Egyptian subsidiary. The Egyptian plantcurrently produces frozen French fries and red chilli paste. More importantly, managementplans to focus more on branded sales and move away from the low-margin, private labelexport business.


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FIGURE 24: RISING TOMATO PRICES AND COMPETITION LEAD TO LOSSESIn AED million (LHS), In % (RHS)

Source: Agthia, EFG Hermes

A TURNAROUND IN THE MAKING

We expect the division to record a narrow loss of AED1 million in 2011 and to return toprofitability in 2012 on recovery in gross margins and rationalisation of overhead expenses. Agross margin of 7.9% was witnessed in 3Q2010 despite the rise in tomato prices during thesame period. Our forecasts are more sensitive to our assumptions for SG&A expenses. Thesignificance of the segment to the group will stem from the swing from losses to profits rathethan from its absolute profitability. We expect the contribution of the segment to the group

net profit before unallocated items to peak at 3.4% in 2014.FIGURE 25: FORECASTED REVENUEBREAKDOWN


FIGURE 26: FORECASTED MARGI

In AED million (LHS), In % (RHS)


-30%

-20%

-10%

0%

10%

20%

30%

40%

(10)

(5)

0

5

10

15

20

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

Revenue Gross Profit Operating Profit Gross Margin (RHS)

36 38 41 4554 64 77

7 817

3140

4142

0

30

60

90

120

150

FY08

FY09

FY10e

FY11e

FY12e

FY13e

FY14e

Tomato Paste Frozen Vegetables

-40%

-20%

0%

20%

40%

(20)

(10)

0

10

20

FY08

FY09

FY10e

FY11e

FY12e

FY13e

FY14e

Gross ProfitNet ProfitGross Margin (RHS)Net Margin (RHS)


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VII.FINANCIAL STATEMENTSINCOME STATEMENT (DECEMBER YEAR END)In AED million, unless otherwise stated

2008a 2009a 2010e 2011e 201

Revenue 854 921 1,004 1,078 1,14

% Growth 47.6% 7.9% 9.0% 7.3% 5.8

COGS 675 671 764 815 85

Gross Profit 178.5 250.3 240.8 263.3 287

Gross Profit Margin 20.9% 27.2% 24.0% 24.4% 25.2

Other Operating Expenses / (Income) (13) (4) (12) (2) (

SG and A (114) (146) (146) (150) (15

EBITDA 92.5 138.8 145.5 155.6 175EBITDA Margin 10.8% 15.1% 14.5% 14.4% 15.3

Depreciation 38.4 42.2 44.5 46.6 48

Amortization 0 0 0 0

Net Operating Profit 77.8 108.2 107.1 115.4 132

Net Interest Income / Expense (4.1) (1.8) 3.7 6.0 6

Minority Interest - - - -

Earnings before Taxes 73.7 106.4 110.8 121.4 138

Taxes - 0.7 0.2 - 0

Net Profit 74 106 111 121 13

EPS (AED) 0.12 0.18 0.18 0.20 0.2

Source: Agthia, EFG Hermes estimates

BALANCE SHEET (DECEMBER YEAR END)


2008a 2009a 2010e 2011e 201

Cash & Liquid Assets 40.1 190.2 200.0 200.0 200

Net Accounts Receivable 355.2 220.8 232.6 242.8 266

Other Current Assets 162.7 232.0 266.4 284.9 299

Total Current Assets 558.0 643.0 699.0 727.6 765

Net Plant 409.3 454.0 523.4 527.9 532

Goodwill 93.0 93.0 93.0 93.0 93

Other Assets - - - - Total Assets 1,060 1,190 1,315 1,348 1,39

Due to Banks 121.5 89.1 134.5 67.0

CPLTD - - - -

Total Payables 129.3 173.7 193.5 207.3 218

Other Current liabilities - 2.0 - -

Total Current Liabilities 250.8 264.8 328.1 274.3 218

Long -term Loans - 11.5 - -

Minority Interest - - - -

Other Liabilities 14.2 14.6 12.8 12.8 12

Total Liabilities and Provisions 265.0 291.0 340.9 287.1 231

Shareholder Equity 795.3 899.0 974.5 1,061 1,15



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CASH FLOW STATEMENT (DECEMBER YEAR END)In AED million, unless otherwise stated

2008a 2009a 2010e 2011e 201

Cash Operating Profit after Tax 107 140 149 164 18

Cash Flow after Change in Working Capital (33) 252 121 149 15

Capital Expenditure 109 79 108 47 4

Free Cash Flow (142) 173 13 102 10

Non-operating Cash Flow (8) - - -

Cash Flow before Financing (150) 173 13 102 10

Net Financing 85 (22) (3) (102) (10

Change in Cash (64) 150 10 - 0



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EGYPT SALES TEAMLocal call center 16900

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Head ofWestern Institutional SalesMohamed Ebeid+20 2 35 35 [email protected] LocalInstitutional Sales Amr ElKhamissy +20 2 35 35 6045 [email protected]

UAE SALES TEAMcall center

+971 4 306 9333

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Western Institutional SalesJulian Bruce+971 4 363 4092

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Head of GCC Institutional Sales

Amro Diab+971 4 363 4086

[email protected]

Gulf HNW Sales

Chahir Hosni+971 4 363 [email protected]

UAE Retail Sales

Reham Tawfik

+971 4 306 [email protected]

KSA SALES TEAMcall center

+800 123 4566

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Director of Client RelationshipMazen Matraji+9661 279 8640

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Client Relationship

Khalid S. Al-Bihlal

+9661 279 8670

[email protected]

RESEARCH MANAGEMENTCairo General + 20 2 35 35 6140

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Head of ResearchWael Ziada+20 2 35 35 [email protected]

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DISCLOSURES

We, Ahmed Gad and Gigi Varghese, hereby certify that the views expressed in this document accurately reflect our personal views about the securities andcompanies that are the subject of this report. We also certify that neither I nor my spouse or dependants (if relevant) hold a beneficial interest in the securities thatare traded in the UAE Stock Exchanges. EFG Hermes Holding SAE hereby certifies that neither it nor any of its subsidiaries owns any of the securities that are thesubject of this report.

Funds managed by EFG Hermes Holding SAE and its subsidiaries (together and separately, "EFG Hermes") for third parties may own the securities that are thesubject of this report. EFG Hermes may own shares in one or more of the aforementioned funds or in funds managed by third parties. The authors of this reportmay own shares in funds open to the public that invest in the securities mentioned in this report as part of a diversified portfolio over which they have nodiscretion. The Investment Banking division of EFG Hermes may be in the process of soliciting or executing fee earning mandates for companies that are either thesubject of this report or are mentioned in this report.

DISCLAIMER

This Research has been sent to you as a client of one of the entities in the EFG Hermes group. This Research must not be considered as advice nor be acted upon byyou unless you have considered it in conjunction with additional advice from an EFG Hermes entity with which you have a client agreement.

Our investment recommendations take into account both risk and expected return. We base our long-term fair value estimate on a fundamental analysis of thecompany's future prospects, after having taken perceived risk into consideration. We have conducted extensive research to arrive at our investmentrecommendations and fair value estimates for the company or companies mentioned in this report. Although the information in this report has been obtained fromsources that EFG Hermes believes to be reliable, we have not independently verified such information and it may not be accurate or complete. EFG Hermes doesnot represent or warrant, either expressly or implied, the accuracy or completeness of the information or opinions contained within this report and no liabilitywhatsoever is accepted by EFG Hermes or any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions orotherwise arising in connection therewith. Readers should understand that financial projections, fair value estimates and statements regarding future prospects maynot 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 researchreport is prepared for general circulation to the clients of EFG Hermes and is intended for general information purposes only. It is not intended as an offer orsolicitation or advice 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 isappropriate to their needs.


24/25

GUIDE TO ANALYSIS

EFG Hermes investment research is based on fundamental analysis of companies and stocks, the sectors that they are exposed to, as well as the country and

regional economic environment.

Effective 16 December 2009, EFG Hermes changed its investment rating approach to a three-tier, long-term rating approach, taking total return potential togetherwith any applicable dividend yield into consideration.

In special situations, EFG Hermes may assign a rating for a stock that is different from the one indicated by the 12-month expected return relative to thecorresponding fair value.

For the 12-month long-term ratings for any investment covered in our research, the ratings are defined by the following ranges in percentage terms:

Rating Potential Upside (Downside) %

Buy Above 15%

Neutral (10%) and 15%

Sell Below (10%)

EFG Hermes policy is to update research reports when appropriate based on material changes in a companys financial performance, the sector outlook, the generaleconomic outlook, or any other changes which could impact the analysts outlook or rating for the company. Share price volatility may cause a stock to moveoutside of the longer-term rating range to which the original rating was applied. In such cases, the analyst will not necessarily need to adjust the rating for the stockimmediately. However, if a stock has been outside of its longer-term investment rating range consistently for 30 days or more, the analyst will be encouraged toreview the rating.

COPYRIGHT AND CONFIDENTIALITY

No part of this document may be reproduced without the written permission of EFG Hermes. The information within this research report must not be disclosed toany other person if and until EFG Hermes has made the information publicly available.

CONTACTS AND STATEMENTS

Background research prepared by EFG Hermes Holding UAE Limited. Report prepared by EFG Hermes Holding SAE (main office), Building No. B129, Phase 3, SmartVillage, KM 28, Cairo-Alexandria Desert Road, Egypt 12311, Tel +20 2 35 35 6140 | Fax +20 2 35 37 0939 which has an issued capital of EGP 1,939,320,000.

Reviewed and approved by EFG Hermes KSA (closed Joint Stock Company) which is commercially registered in Riyadh with Commercial Registration number1010226534, and EFG Hermes UAE Limited, which is regulated by the DFSA and has its address at Level 6, The Gate, DIFC, Dubai, UAE. The information in this


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Trading:Operations:

Auerbach Grayson & Company Incorporated 25West 45th Street New York, NY 10036

Telephone: (212) 557-4444 800 31-WORLD facsimile (212) 557-9066 www.agco.com

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(212) 557-4444(212) 557-4478

Jonathan L. Auerbach (212) 453-3535David S. Grayson (212) 453-3553

Sales:

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Trading:

Operations:

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Rene Saner, Swiss Sales [email protected] (212) 453-3526

Information Systems & Research Services:

Isaac Matzner,Research Coordinator [email protected] (212) 453-3549

Richard Ross, Technical Research [email protected] (212) 453-3575

Ismael Sadek,Information Technology [email protected] (212) 453-3512

Steve Pollicino,Asian Trading [email protected] (212) 557-4444

Selim Sari,EMEA Trading [email protected] (212) 557-4444

Sarkis Iliozer,EMEA Trading [email protected] (212) 557-4444

John Geron, U.S. Trading [email protected] (212) 557-4444

Humberto Cruz,LATAM Trading [email protected] (212) 557-4444

Harold Warren,Russian Trading [email protected] (212) 557-4444

Geoffrey Gimber,Asian Trading [email protected] (212) 557-4444

Garth Ballantyne,European Trading [email protected] (212) 557-4444

David Sweet, Trading [email protected] (212) 557-4444

Danielle Simon, Trading [email protected] (212) 557-4444

Anthony Santostefano, Trading [email protected] (212) 557-4444

Ugur Sarman, Turkish Sales [email protected] (212) 453-3589Zoran Milojevic,EMEA Sales [email protected] (212) 453-3563

Thomas Furda,Russian Sales [email protected] (212) 453-3585

Simon Mandel,EMEA Sales [email protected] (212) 453-3571

Stephan Lueck,Austrian & German Sales [email protected] (212) 453-3538

Documents

agathia greyson