QNBFS Weekly Market Report July 14, 2016

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1. ` Page 1 of 6 Market Review and Outlook QSE Index and Volume During the shortened trading week (4 day week), the Qatar Stock Exchange (QSE) Index increased by 464.41…
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  • 1. ` Page 1 of 6 Market Review and Outlook QSE Index and Volume During the shortened trading week (4 day week), the Qatar Stock Exchange (QSE) Index increased by 464.41 points, or 4.7% during the week to close at 10,428.67. Market capitalization increased by 4.1% to QR559.7 billion (bn) versus QR537.6bn at the end of the previous week. Of the 44 listed companies, 36 companies ended the week higher, while 7 fell and 1 remained unchanged. Qatar Insurance Co. (QATI) was the best performing stock for the week with a gain of 10.1% on 414,405 shares traded. On the other hand, Ahli Bank (ABQK) was the worst performing stock with a decline of 3.3% on 111,689 shares traded only. QNB Group (QNBK), Ezdan Holding Group (ERES) and QATI and were the primary contributors to the weekly index gains. QNBK was the biggest contributor to the index’s weekly increase, adding 100.2 points to the index. ERES was the second biggest contributor to the gain, contributing 83.3 points to the index. Moreover, QATI tacked on 57.8 points to the index. On the other hand, Al Meera Consumer Goods Co. (MERS) had a negligible impact on the index. Trading value during the week increased by 220.0% to reach QR876.7 million (mn) versus QR274.0mn in the prior week. The Banks and Financial Services sector led the trading value during the week, accounting for 37.0% of the total trading value. The Industrials sector was the second biggest contributor to the overall trading value, accounting for 21.3% of the total trading value. QNBK was the top value traded stock during the week with total traded value of QR116.7mn. Trading volume increased by 291.6% to reach 23.2mn shares versus 5.9mn shares in the prior week. The number of transactions increased by 215.2% to reach 14,331 transactions versus 4,546 transactions in the prior week. The Banks and Financial Services sector led the trading volume, accounting for 36.3%, followed by the Real Estate sector, which accounted for 20.0% of the overall trading volume. Qatar First Bank (QFBQ) was the top volume traded stock during the week with total traded volume of 2.96mn shares. Foreign institutions remained bullish during the week with net buying of QR103.2mn vs. buying of QR37.3mn in the prior week. Qatari institutions remained bearish with net selling of QR27.8mn vs. net selling of QR31.2mn the week before. Foreign retail investors turned bearish for the week with net selling of QR28.4mn vs. net buying of QR780,779 in the prior week. Qatari retail investors remained bearish with net selling of QR47.1mn vs. net selling of QR6.9mn the week before. In 2016 YTD, foreign institutions bought (on a net basis) ~$510mn worth of Qatari equities. Market Indicators Week ended July 14 , 2016 Week ended July 05 , 2016 Chg. % Value Traded (QR mn) 876.7 274.0 220.0 Exch. Market Cap. (QR mn) 559,687.6 537,551.4 4.1 Volume (mn) 23.2 5.9 291.6 Number of Transactions 14,331 4,546 215.2 Companies Traded 43 43 0.0 Market Breadth 36:7 34:6 – Market Indices Close WTD% MTD% YTD% Total Return 16,872.90 4.7 5.5 4.1 ALL Share Index 2,887.49 4.0 5.0 4.0 Banks and Financial Services 2,822.82 4.9 5.9 0.6 Industrials 3,143.25 2.6 4.0 (1.4) Transportation 2,533.92 2.1 2.5 4.2 Real Estate 2,643.90 4.7 6.2 13.4 Insurance 4,283.24 7.7 5.2 6.2 Telecoms 1,151.05 3.6 4.7 16.7 Consumer Goods & Services 6,520.30 0.1 1.7 8.7 Al Rayan Islamic Index 3,988.01 3.2 4.3 3.4 Market Indices Weekly Index Performance Regional Indices Close WTD% MTD% YTD% Weekly Exchange Traded Value ($ mn) Exchange Mkt. Cap. ($ mn) TTM P/E** P/B** Dividend Yield Qatar (QSE)* 10,428.67 4.7 5.5 (0.0) 240.73 153,690.2 14.0 1.6 3.9 Dubai 3,471.90 3.0 4.9 10.2 571.25 91,531.0# 12.3 1.3 4.3 Abu Dhabi 4,576.73 0.0 1.8 6.3 223.56 122,181.6 12.1 1.5 5.3 Saudi Arabia# 6,691.23 2.9 2.9 (3.2) 4,371.90 411,493.4 15.4 1.6 3.7 Kuwait 5,390.70 0.0 0.5 (4.0) 103.88 79,462.8 17.9 1.0 4.4 Oman 5,859.96 0.8 1.4 8.4 32.19 23,182.1 11.3 1.3 4.4 Bahrain 1,172.80 1.8 4.9 (3.5) 10.18 18,184.3 9.8 0.4 4.6 Source: Bloomberg, country exchanges and Zawya (** Trailing Twelve Months; * Value traded ($ mn) do not include special trades, if any; #Data as of July 13, 2016) 10,105.52 10,140.79 10,319.74 10,428.67 0 4,500,000 9,000,000 9,900 10,200 10,500 11-Jul 12-Jul 13-Jul 14-Jul Volume QSEIndex 4.7% 3.0% 2.9% 1.8% 0.8% 0.0% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Qatar (QSE)* Dubai Saudi Arabia Bahrain Oman AbuDhabi Kuwait
  • 2. Page 2 of 6 News Economic News & Corporate News  QCB auctioned T-bills worth QR1.2bn on July 12 – Qatar Central Bank (QCB) has auctioned Treasury bills worth QR1.2bn on July 12, 2016, for which it received bids totaling QR3.16bn, as yields fell from last month's sale, suggesting an easing of liquidity. The three-month bills were sold at a yield of 1.51%, down from 1.64% for the three-month bill sale in June 2016, while the six-month bills were sold at 1.67% against 1.76% and the nine-month bills were sold at 1.72% against 1.79%. (QCB, Zawya)  QNB Group: Qatar’s economy ‘weathers’ low oil prices on strong macroeconomic fundamentals – QNB Group (QNBK) has said in its ‘Qatar Economic Insight’ that Qatar’s economy has “weathered low oil prices” due to strong macroeconomic fundamentals including a low fiscal breakeven price, accumulation of significant savings from the past and low levels of public debt. QNB Group expects the real GDP growth to accelerate from 3.3% in 2016 to 3.9% in 2017 and 4.2% in 2018 with the ramp up in investment spending and initial gas production from the Barzan Gas Project. Qatar’s inflation is expected to rise to 3.2% in 2016 and 3.4% in 2017 in line with the pick-up in global inflation, before moderating slightly to 3% in 2018. International inflation is expected to rise on stronger food and oil prices, while population growth should support domestic inflation. Lower hydrocarbon revenue and continued capital spending by the government are expected to result in modest deficits in 2016 and 2017, but the rebound in oil prices should gradually bring the government back to near balance by 2018. Revenue is expected to decline in 2016 due to the weakness in oil prices and slower non-hydrocarbon growth, but should pick up over the medium-term due to the introduction of a 5% value-added tax in 2018. The government is expected to continue its investment spending program, while rationalizing current spending, leading to a modest decline in expenditure as share of GDP from 2016 to 2018. The country’s credit growth is projected to reach 11.0% in 2016 and 9% in each of 2017 and 2018, supported by project lending and higher consumption from the rising population. The loan-to-deposit ratio is expected to stabilize at around 120%; NPLs are forecast to remain low over the medium-term as asset quality is expected to be backed by the strong macroeconomic environment. (Gulf- Times.com)  QNB Group maintains solid earnings expansion in 1H2016 – QNB Group (QNBK) reported a 12% YoY increase in its 1H2016 net profit to QR6.2bn, driven by operating income, which increased to QR11.5bn, up by 40% YoY, demonstrating the Group’s success in maintaining strong growth across the range of revenue sources. Net interest income increased by 40% YoY in 1H2016 to reach QR8.9bn. Net fee & commission income also contributed notably to earnings growth, rising 59% YoY to QR1.80bn, while net gain on foreign exchange rose 3% YoY to QR0.42bn. The Group’s cost- to-income ratio rose to 30.4% in 1H2016 vs. 21.0% in 1H2015. Total assets jumped 28% YTD to QR692bn in 1H2016, the highest ever achieved by the Group, on the back of a 28% YTD increase in loans and advances to QR497bn. Customer deposits grew by 24% YTD to QR488bn in 1H2016. Accordingly, the loan to deposit ratio came in at 101.7% in 1H2016 as compared to 98.3% in FY2015. On the asset quality front, QNB Group’s NPL ratio reached 1.8% in 1H2016 vs. 1.4% in FY2015. The capital adequacy ratio, as per the Qatar Central Bank (QCB) and Basel III requirements, stood at 14.2% as at 30 June 2016, higher than the regulatory minimum requirements of the QCB and Basel Committee. QNB Group successfully raised QR10bn in Additional Tier 1 Perpetual Capital Notes, to strengthen the Group’s Capital Adequacy Ratios and to support future growth across the Group. QNB Group completed the acquisition of 99.81% stake in Finansbank, Turkey. (QNB Group Press Release)  Nakilat posts in-line revenue and operating profitability with net income beat driven by higher-than-expected JV income; maintain Accumulate with a price target of QR26 – Qatar Gas Transport Company (Nakilat) reported a net profit of QR260.3mn in 2Q2016, indicating a growth of 8% QoQ vs. our estimate of QR227.9mn. However, on YoY basis, the net profit declined by 3% in 2Q2016. Operating items were generally in line with our estimate with: (1) Revenue from wholly-owned vessels coming in at QR770.4mn (+1% QoQ/+2% YoY) vs. our estimate of QR760.0mn (divergence of 1%). (2) Adjusted revenue of QR928.0mn (+4% QoQ/+1% YoY) vs. our estimate of QR882.8mn (divergence of 5%). (3) EBITDA of QR579.5mn (+0% QoQ/-1% YoY) vs. our estimate of QR575.4mn (divergence of 1%). (4) EBIT of QR404.1mn (+0% QoQ/-2% YoY) vs. our estimate of QR401.2mn (divergence of 1%). The beat in net income was primarily due to JV income jumping up to QR135.1mn (+27% QoQ/-3% YoY) despite some softness seen in the spot LPG shipping market. We await more details from management regarding JV income. We continue to rate QGTS an Accumulate with a QR26 price target. (QNBFS Research, QSE)  QEWS’ 2Q2016 results in-line with our estimates with net income beat purely due to other income jump; we maintain QEWS an Outperform with a price target of QR256 – Qatar Electricity & Water Company (QEWS) reported a net profit of QR443.8mn in 2Q2016, indicating an increase of 28% QoQ (+14% YoY), vs. our estimate of QR382.4mn. This beat in reported earnings was entirely driven by other income of QR45.2mn (more details awaited); excluding this item, net income would have been QR398.6mn, which is in-line with our estimate of QR382.4mn. Overall revenue was QR798.7mn in 2Q2016 (+11% QoQ/+6% YoY), bang in-line with our estimate of QR797.8mn. Moreover, EBITDA of QR438.8mn (+16% QoQ/+10% YoY) also came in line with our estimate of QR422.1mn (+4% divergence). We continue to rate QEWS an Outperform with a price target of QR256.00. (QNBFS Research, QSE)  S&P affirms ORDS at ‘A-’; outlook stable – Standard & Poor’s (S&P) has affirmed its long-term corporate credit rating on Ooredoo (ORDS) at ‘A-’ with a “stable” outlook. In its latest research update, S&P highlighted its view of ORDS’ significant revenue and EBITDA (earnings before interest taxes depreciation and amortization) geographic diversification, its leading market positions, and improving leverage in 2016 and thereafter. (Gulf- Times.com, QSE)  CBQK to disclose financial statements on July 19 – Commercial Bank (CBQK) will disclose the financial statements for the period ending June 30, 2016 on July 19, 2016. (QSE)  GWCS to disclose financial statements on July 21 – Gulf Warehousing (GWCS) will disclose the financial statements for the period ending June 30, 2016 on July 21, 2016. (QSE)  QNCD to disclose financial statements on July 31 – Qatar National Cement (QNCD) will disclose its financial statements for the period ending June 30, 2016 on July 31, 2016. (QSE)  QNNS to disclose financial statements on August 3 – Qatar Navigation Company (QNNS) will disclose its financial statements for the period ending June 30, 2016 on August 3, 2016. (QSE)
  • 3. Page 3 of 6 Qatar Stock Exchange Top Gainers Top Decliners Source: Qatar Stock Exchange (QSE) Source: Qatar Stock Exchange (QSE) Most Active Shares by Value (QR Million) Most Active Shares by Volume (Million) Source: Qatar Stock Exchange (QSE) Source: Qatar Stock Exchange (QSE) Investor Trading Percentage to Total Value Traded Net Traded Value by Nationality (QR Million) Source: Qatar Stock Exchange (QSE) Source: Qatar Stock Exchange (QSE) 10.1% 7.7% 6.6% 6.2% 6.0% 0.0% 4.0% 8.0% 12.0% Qatar Insurance Doha Insurance QNB Group Qatar Islamic Bank Qatar First Bank -3.3% -2.2% -1.2% -0.5% -0.5% -4.5% -3.0% -1.5% 0.0% Al Ahli Bank Widam Food Co. Al Khaleej Takaful Insurance Qatar Fuel Al Meera Consumer Goods 116.7 111.7 66.4 44.4 41.6 0.0 40.0 80.0 120.0 QNB Group Industries Qatar Gulf Warehousing Barwa Real Estate Masraf Al Rayan 3.0 2.3 1.7 1.4 1.3 0.0 1.5 3.0 4.5 Qatar First Bank Vodafone Qatar Ezdan Real Estate Salam International Investment Barwa Real Estate 0% 20% 40% 60% 80% 100% Buy Sell 34.58% 39.95% 15.20% 18.37% 10.99% 14.23% 39.23% 27.46% Qatari Individuals Qatari Institutions Non-Qatari Individuals Non-Qatari Institutions 436 440 511 365 (75) 75 (200) (100) - 100 200 300 400 500 600 Qatari Non-Qatari Net Investment Total Sold Total Bought
  • 4. Page 4 of 6 TECHNICAL ANALYSIS OF THE QSE INDEX Source: Bloomberg The QSE Index witnessed an uptick and gained around 4.70% to 10,428.67 vs. the week before. The Index is approaching towards its strong weekly resistance of the 10,500 level. The Index managed to complete a strong bullish candlestick on the weekly chart. The RSI and the MACD lines are picking up pace, and has shown a positive divergence. Expected support and resistance levels remain at the 9,500 and 10,500 points, respectively. Only a move above or below these levels may decide the next direction of the index. DEFINITIONS OF KEY TERMS USED IN TECHNICAL ANALYSIS RSI (Relative Strength Index) indicator – RSI is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The index is deemed to be overbought once the RSI approaches the 70 level, indicating that a correction is likely. On the other hand, if the RSI approaches 30, it is an indication that the index may be getting oversold and therefore likely to bounce back. MACD (Moving Average Convergence Divergence) indicator – The indicator consists of the MACD line and a signal line. The divergence or the convergence of the MACD line with the signal line indicates the strength in the momentum during the uptrend or downtrend, as the case may be. When the MACD crosses the signal line from below and trades above it, it gives a positive indication. The reverse is the situation for a bearish trend. Candlestick chart – A candlestick chart is a price chart that displays the high, low, open, and close for a security. The ‘body’ of the chart is portion between the open and close price, while the high and low intraday movements form the ‘shadow’. The candlestick may represent any time frame. We use a one-day candlestick chart (every candlestick represents one trading day) in our analysis. Doji candlestick pattern – A Doji candlestick is formed when a security's open and close are practically equal. The pattern indicates indecisiveness, and based on preceding price actions and future confirmation, may indicate a bullish or bearish trend reversal. Shooting Star/Inverted Hammer candlestick patterns – These candlestick patterns have a small real body (open price and close price are near to each other), and a long upper shadow (large intraday movement on the upside). The Shooting Star is a bearish reversal pattern that forms after a rally. The Inverted Hammer looks exactly like a Shooting Star, but forms after a downtrend. Inverted Hammers represent a potential bullish trend reversal.
  • 5. Page 5 of 6 Source: Bloomberg Company Name Price (July 14) % Change WTD % Change YTD Market Cap. QR Million TTM P/E P/B Div. Yield Qatar National Bank 151.00 6.56 3.54 126,791 10.6 2.0 2.3 Qatar Islamic Bank 103.00 6.19 (3.47) 24,338 12.0 1.6 4.1 Commercial Bank of Qatar 38.90 4.99 (15.25) 12,706 11.9 0.9 7.7 Doha Bank 36.85 4.69 (17.19) 9,521 8.0 1.1 8.1 Al Ahli Bank 40.15 (3.25) (8.45) 7,661 11.9 1.7 3.7 Qatar International Islamic Bank 63.50 1.76 (1.24) 9,612 12.1 1.9 6.3 Masraf Al Rayan 35.40 3.81 (5.85) 26,550 12.7 2.3 4.9 Al Khalij Commercial Bank 16.50 1.85 (8.18) 5,940 9.3 0.9 6.1 Qatar First Bank 12.15 6.02 N/A 2,430 N/A N/A N/A National Leasing 18.13 2.43 28.58 897 N/A 0.9 2.8 Dlala Holding 25.20 2.69 36.29 716 N/A 2.1 N/A Qatar & Oman Investment 11.44 1.96 (6.99) 360 27.2 1.1 5.2 Islamic Holding Group 68.90 (0.14) (12.45) 390 112.4 4.8 2.2 Banking and Financial Services 227,912 Zad Holding 86.00 4.75 1.42 1,125 11.7 1.3 4.7 Qatar German Co. for Medical Devices 11.68 1.57 (14.87) 135 N/A 1.3 N/A Salam International Investment 11.93 5.39 0.93 1,364 11.8 0.8 8.4 Medicare Group 95.00 0.11 (20.37) 2,674 18.4 2.8 1.9 Qatar Cinema & Film Distribution 32.50 0.00 (4.41) 204 15.2 1.6 4.6 Qatar Fuel 153.80 (0.52) 12.61 14,029 11.2 2.2 4.9 Widam Food Co. 63.30 (2.16) 19.89 1,139 14.6 4.0 4.3 Al Meera Consumer Goods 213.90 (0.47) (2.77) 4,278 25.9 3.4 4.2 Consumer Goods and Services 24,948 Qatar Industrial Manufacturing 43.00 1.90 7.90 2,043 11.1 1.5 7.0 Qatar National Cement 87.40 1.75 (5.75) 5,193 11.3 1.7 4.2 Industries Qatar 102.20 4.07 (8.01) 61,831 14.8 2.0 4.9 Qatari Investors Group 48.90 0.82 29.71 6,080 23.1 2.6 2.6 Qatar Electricity and Water 220.00 3.29 1.66 24,200 15.5 3.3 3.4 Mannai Corp. 90.50 0.67 (5.04) 4,129 8.4 1.8 5.5 Aamal 13.25 2.08 (5.29) 8,348 13.2 1.1 N/A Gulf International Services 37.00 1.09 (28.16) 6,876 13.1 1.8 2.7 Mesaieed Petrochemical Holding 18.80 0.53 (3.09) 23,619 19.8 1.7 3.7 Industrials 142,317 Qatar Insurance 79.70 10.08 14.63 19,219 15.8 2.9 2.7 Doha Insurance 21.00 7.69 0.00 1,050 9.7 1.0 4.8 Qatar General Insurance & Reinsurance 46.00 (0.22) (0.98) 4,025 4.5 0.7 3.0 Al Khaleej Takaful Insurance 24.01 (1.19) (21.28) 613 20.4 1.1 4.2 Qatar Islamic Insurance 59.00 1.72 (18.06) 885 12.5 3.0 6.8 Insurance 25,792 United Development 19.40 0.62 (6.51) 6,869 10.0 0.7 7.7 Barw a Real Estate 34.90 4.65 (12.75) 13,580 16.7 0.8 6.3 Ezdan Real Estate 19.20 5.21 20.75 50,928 29.1 1.7 2.6 Mazaya Qatar Real Estate Development 14.06 5.16 3.96 1,550 13.8 1.1 N/A Real Estate 72,928 Ooredoo 93.00 4.14 24.00 29,790 11.9 1.3 3.2 Vodafone Qatar 10.85 1.50 (14.57) 9,173 N/A 1.9 1.9 Telecoms 38,962 Qatar Navigation (Milaha) 89.10 1.37 (6.21) 10,204 9.4 0.8 5.6 Gulf Warehousing 59.70 2.05 4.92 3,499 16.2 2.6 2.5 Qatar Gas Transport (Nakilat) 23.69 2.55 1.46 13,125 13.3 3.8 5.3 Transportation 26,828 Qatar Exchange 559,688
  • 6. Contacts Saugata Sarkar Shahan Keushgerian Zaid al-Nafoosi , CMT, CFTe Head of Research Senior Research Analyst Senior Research Analyst Tel: (+974) 4476 6534 Tel: (+974) 4476 6509 Tel: (+974) 4476 6535 saugata.sarkar@qnbfs.com.qa shahan.keushgerian@qnbfs.com.qa zaid.alnafoosi@qnbfs.com.qa QNB Financial Services Co. WLL One Person Company Contact Center: (+974) 4476 6666 PO Box 24025 Doha, Qatar Disclaimer and Copyright Notice: This publication has been prepared by QNB Financial Services Co. WLL One Person Company (“QNBFS”) a wholly-owned subsidiary of QNB SAQ (“QNB”). QNBFS is regulated by the Qatar Financial Markets Authority and the Qatar Exchange QNB SAQ is regulated by the Qatar Central Bank. This publication expresses the views and opinions of QNBFS at a given time only. It is not an offer, promotion or recommendation to buy or sell securities or other investments, nor is it intended to constitute legal, tax, accounting, or financial advice. QNBFS accepts no liability whatsoever for any direct or indirect losses arising from use of this report. Any investment decision should depend on the individual circumstances of the investor and be based on specifically engaged investment advice. We therefore strongly advise potential investors to seek independent professional advice before making any investment decision. Although the information in this report has been obtained from sources that QNBFS believes to be reliable, we have not independently verified such information and it may not be accurate or complete. QNBFS does not make any representations or warranties as to
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