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Abu Dhabi National Hotels (ADNH.AD)

CMP AED 3.11 Target AED 4.77 Potential Upside 53.2%

MSCI GCC Index 349.06 Abu Dhabi Securities Market 2,196.33

Key Stock Data Sector Hospitality Reuters Code ADNH.AD Bloomberg Code ADNH DH Equity Net Out. Shares (bn) 1.00 Market Cap (AED bn) 3.110 Market Cap (USD bn) 0.846 Avg. 12m Vol. (mn) 0.923 Volatility (30 day) NA Volatility (180 day) 69.639

Stock Performance (%) 52 week high / low (AED) 10.15/ 2.87

1M 3M 12M Absolute (%) 3.67% -36.5% -52.9% Relative (%) 7.7% 1.8% -1.7%

Shareholding Pattern (%)

Abu Dhabi Investment Council 17.50 Public 82.50

ADNH and ADX Movement

Executive Summary Abu Dhabi National Hotels (ADNH) commenced operations in 1978, following the purchase of three hotels from the government. The company currently operates within the following segments: hotels, catering & contract services and transport services. It has the ownership and representation of 5-star hotels in Abu Dhabi and Al Ain, which includes the Hilton Abu Dhabi, Hilton Al Ain, Le Meridian Abu Dhabi, Sheraton Hotel Abu Dhabi, and also the chain of nine Al Diar hotels. Revenues soar 32% in 9M08 For the nine months ended September 30, 2008, ADNH’s total revenues surged 31.6% to AED 1,244.45 million from AED 945.65 million, driven by an increase in revenues across segments. Revenues from hotels, catering & contract services and transport services ascended 30.6%, 31.9%, and 34.8% in 2007, respectively. Cost of Sales (CoS) rose 36.8% Y-o-Y to AED 828.71 million and as a percentage of revenue was 66.6%, up 252 bps from 64.1% in 9M07. The company’s overall operating expenses increased 33.8% to AED 917.80 million from AED 686.04 million on account of a 13.3% rise in general & administrative expenses and 10.3% rise in depreciation charges in 9M08 along with higher CoS. Despite this, the company’s operating profit improved 25.8% to AED 326.45 million from AED 259.61 million. Net profit attributable to the shareholders decreased 11.1% to AED 291.54 million in 9M08 from AED 327.86 million due to investment losses made by the company. Meanwhile, the adjusted annualised EPS decreased to AED 0.39 in 9M08 from AED 0.44 in 9M07. Outlook and valuation The UAE hospitality sector witnessed a strong revenue growth in the first ten months of 2008. Even though the short-term outlook looks bleak given the current financial turmoil, investments in the infrastructure sector and governments initiatives would support industry growth. Investments to the tune of USD 136 billion is planned for Abu Dhabi to develop its business and tourism assets thereby increasing the number of visitors to 3 million by 2015, with more than 23,000 hotel rooms. The UAE has planned investments to the tune of AED 228 billion by 2012 in theme parks. ADNH is amongst the largest hotel in UAE and as a result is likely to one of the biggest beneficiary of these development initiatives. Furthermore, the company has a strong project-pipeline that would be completed by 2012, which we believe would positively impact top-line growth. Currently, ADNH’s stock is trading at a P/E multiple of 8.86x and 7.23x on 2009E and 2010E earnings, and at a P/B multiple of 0.93x and 0.85x on 2009E and 2010E BVPS, respectively. Meanwhile, the stock has gained 3.0% since the beginning of this year as against a negative YTD return of 8.1% registered by the Abu Dhabi Securities Exchange. Based on our DCF valuation, we have arrived at a Fair Value of AED 4.77 exhibiting a 53.2% upside from its closing price of AED 3.11 (as on January 26, 2009). Accordingly, we initiate our coverage on the Abu Dhabi National Hotel’s stock with an OVERWEIGHT recommendation. AED Millions 2007A 2008E 2009E 2010E 2011E Operating revenues 1,321.8 1,567.0 1,442.7 1,518.3 1,937.7 Operating profit 351.5 425.4 377.4 404.1 525.0 Operating Margin (%) 26.6 27.1 26.2 26.6 27.1 Net Profit 471.7 386.3 350.8 430.4 592.1 Net Profit Margin (%) 35.7 24.6 24.3 28.3 30.6 Adjusted EPS (AED) 0.472 0.386 0.351 0.430 0.592 Total Assets 3,399.5 3,635.5 3,938.6 4,251.4 5,037.9 RoAE (%) 17.9 12.8 11.0 12.3 15.0

OVERWEIGHT

Background Abu Dhabi National Hotels (ADNH) is a publicly listed company started in 1978, by purchasing three hotels from the government. Over a period, the company diversified into several businesses and operates under the following segments: hotels, catering and contract services and transport services. The company obtained ISO 9001:2000 in 2004 for meeting international quality standards. ADNH has the ownership and representation of 5-star hotels in Abu Dhabi and Al Ain. Its hotel management arm operates five hotels - the Hilton Abu Dhabi, Hilton Al Ain, Le Meridian Abu Dhabi, Sheraton Hotel Abu Dhabi, and also the chain of nine Al Diar hotels. ADNH, in partnership with major Abu Dhabi institutions, also has investment interests in hotels and resorts overseas. The company got listed on Abu Dhabi Securities Exchange and at present Abu Dhabi Investment Council (Government) holds 17.5%, while rest of stake is held by the public. The In 1986, the company established its tourism division “Sunshine Tours”, to facilitate tourists in the country. During the same year, ADNH formed “Al Ghazal”, a taxi & chauffeur-driven car service operating guided tours that ranges from sand skiing and desert safaris to sailing and snorkelling activities. The current fleet strength stands around more than 2500 vehicles. It grew its offerings from a high-end taxi service into stretched limousines, rental and leasing, and bus transportation. In January 2001, ADNH formed a joint venture with a UK-based Compass, for catering interests. It provides catering services to over 40 airlines, outside/outdoor, off-shore, educational, and hospital catering. ADNH Compass operates in the UAE, Oman, Qatar, Iran, and Egypt. ADNH also started a cleaning service for offices, airports, hotels and a wide range of establishments. Business Model

ADNH is majorly involved in the management of hotels. It is also engaged in providing catering services to airlines, off-shore, educational and hospitals

and cleaning services to various establishments. The company provides chauffer services as well as has its own tourism unit.

Affiliates of Abu Dhabi National Hotels ADNH has a number of subsidiaries, affiliates and Hotels under management.

SUBSIDIARIES / ASSOCIATES / AFFILIATES COUNTRY % SHARE Al Diar Hotels UAE 100.00

Al Diar Mina Hotel UAE 100.00

Al Diar Regency Hotel UAE 100.00

Al Ghazal Transport UAE 100.00

Hilton Abu Dhabi UAE 100.00

Le Meridien Abu Dhabi UAE 100.00

Sheraton Abu Dhabi Resort and Towers UAE 100.00

Abu Dhabi National Hotels Compass Middle East UAE 51.00

Abu Dhabi National Hotels Travco UAE 50.00

Otic – Jersey United Kingdom 38.60

Otic BV Netherlands 37.19

HOTELS UNDER MANAGEMENT Al Diar Dana Hotel UAE -

Century Hotel Apartments UAE -

Oryx Hotel UAE -

AFFILIATED HOTELS AND PROPERTIES

Mercure Grand Jebel Hafeet Al Ain UAE -

ADNH has a history of over three decades in the hospitality industry Board of Directors • Chaired by – H.E. Saif Mohamed Al Hajeri

• Vice Chairman – Mr. Ahmed Khalaf Al Otaiba

• Mr. Hamad Salem Khardous Al Amri

• HH Ahmed Bin Mohammed Al Dhahiri

• Mr. Hamad Abdullah Al Shamsi

• Mr. Alaa Eraiqat • Mr. Mohamed Thaloob Salem Hamad Al Darei

• Mr. Khamis Mohamed Buharoon

• Mr. Khalid Khouri Source: ADNH

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UAE’s real GDP growth rate is expected to be 7.7% in 2008, 1.5% in 2009 and 4.7% in 2010 GCC tourism revenues to generate USD 69 billion by 2017 5.4 million tourists visited Dubai hotels in 9M08 with Europeans leading the pack

Industry Scenario UAE’s real GDP witnessed a four-year CAGR growth of 8.7% during 2003-2007, on a rise in crude oil prices that grew at a four-year CAGR of 26.4% to USD 71.70 per barrel. Driven by soaring crude oil prices, in 2007, the country’s real GDP rose 7.4%. All economies in the GCC are facing the pinch of the financial turmoil that is leading to a slowdown. The Economist Intelligence Unit (EIU) estimated that the UAE’s real GDP growth rate for 2008 would be 7.7% and forecasts lower growth rate of 1.5% in 2009 and 4.7% in 2010. Early this year, the Government of Abu Dhabi said that it is targeting a 7% annual growth through 2015 and thereafter at 6%, by developing its non-oil sector and would look at new revenue sources such as government bonds to finance its budget. The Abu Dhabi Economic Vision 2030 plan aims at diversifying the economy away from oil revenues that have become volatile. If the plan works as envisioned, the oil sector’s contribution to the Emirates’ economy could fall to 44% by 2020 and 36% in 2030. The key growth drivers would include petrochemicals, metals, aviation, and tourism among others. Under a new five-year blueprint recently unveiled by The Abu Dhabi Executive, the Emirate is committed to spending USD 275 billion on infrastructure, real estate projects and other non-oil projects. As per McKinsey, GCC tourism industry is large and growing. Tourism revenues in 2007 were estimated to be around USD 28 billion and by 2017 the sector is expected to generate USD 69 billion. The World Tourism Organization data shows that travel and tourism in the Middle East grew 11% in 2007 compared to 5% in other parts of the world. Despite the global meltdown, the hospitality sector in the Middle East registered a healthy growth rate during 2008. According to top hospitality industry analysts, in 2008, the regions hospitality sector, which has been witnessing high occupancies, continued to do well with more hotels opening, and growing revenues. Another positive is that ongoing projects are said to be on-schedule. While, over the first nine months of 2008, hospitality revenues in the Gulf have increased, they are expected to decline in the fourth quarter of 2008. Abu Dhabi had a 39.9% rise in revenue per room in the first nine months of the year, followed by Oman with 32.9% and Saudi Arabia with 23.1%, while Dubai grew 4.7%. Hotel performance remains very strong in Abu Dhabi with revenue per available room (RevPAR) up 45%, while Dubai’s RevPAR grew 6.7% year-to-October 2008. Middle East, Real Travel & Tourism activity growth (% per annum)

2000 2001 2002 2003 2004 2005 2006 2007 2008E Personal Travel & Tourism -3.39 6.47 24.29 5.79 1.33 2.07 7.42 4.37 2.23 Business Travel & Tourism 2.19 -5.24 15.14 -4.51 8.12 0.80 8.72 10.33 2.15 Govt's Expenditures 7.69 7.23 0.76 1.83 0.36 4.05 7.07 8.80 4.88 Capital Investment -13.29 11.64 5.76 1.98 6.81 8.64 10.39 16.89 9.38 Visitor Exports -1.75 10.04 34.54 13.08 0.63 1.94 4.78 6.15 4.97

Other Exports 49.74 -

19.35 30.73 20.85 0.87 33.99 8.45 -4.00 7.43 Travel & Tourism Consumption -1.90 5.67 25.63 6.73 1.86 1.90 6.69 5.75 3.16 Travel & Tourism Demand 4.32 1.02 22.67 8.63 2.27 9.53 7.65 4.87 5.16 Source: World Travel & Tourism Council According to the Department of Tourism & Commerce Marketing (DTCM), the total number of tourists visiting Dubai hotels in 9M08 was 5.4 million, 6% higher than the year before, using the average quarterly figure of 2007 as a benchmark. Europeans dominated the numbers, with 1.7 million tourists in the nine months, followed by Arabs and Asians, both around 1.3 million for 9M08, led by increase in business travellers.

Dubai has an occupancy rate of more than 80%, which is the highest in the world. DTCM figures indicate that hotels in Dubai registered average occupancy levels of 83.2%. The number of hotels and hotel apartments is expected to increase to 488 by 2010, up from 452 in 2007. Dubai’s room strength is expected to rise to 64,179, a surge from 51,168 room units in 2007. McKinsey figures for 2007 show that the number of hotel rooms in the GCC increased from 140,000 to 180,000 between 2002 and 2007 with development being concentrated in the five-star category. To ensure that hotels performance remains strong, countries like the UAE are realigning their strategies. They are increasing their marketing effort. The DTCM has done a lot of road shows across the world including the USA, China and South Africa, with an aim to enhance the awareness of Dubai attractions and facilities for tourists. Hotels in Dubai have taken the route of offering discounts to attract tourists. For instance, Dubai hotels discounted room rates by up to 60%, in addition to a 25% reduction in food and beverage prices from mid-January until mid-February in view of the Dubai Shopping Festival (DSF). As per the region’s current estimates, the entertainment and leisure sector is witnessing an annual growth of 20-25%, touching AED 36 billion. Abu Dhabi is investing USD 136 billion in developing business and tourism assets and intends to increase the number of visitors to 3 million, and hotel rooms to more than 25,000 by 2015. The UAE is heavily banking on its visionary and iconic projects currently underway in the country to achieve their tourism growth estimates. Total investments in theme parks in the UAE are projected to exceed AED 228 billion by 2012. Prominent theme parks currently under development in Abu Dhabi & Dubai include Warner Bros and Ferrari theme parks in the capital and Dubailand, a multi-billion dollar enclave of 24 theme parks, four and a half times the size of Manhattan. Paramount Pictures and Marvel Entertainment are also teaming up with local developers to build mega resorts.

USD (billion) Total Leisure Investment in Middle East 1,006 Countries Dubai 381.4 Saudi Arabia 184.4 Abu Dhabi 131.3 Activities Pure leisure 171.8 Liesure Resorts 218.3 Mixed Used Developments 611.9 Developers Tatweer (including Dubailand - USD 110 bn) 170.0 Aldar 71.1 Emaar 16.5 Source: Global Futures and Foresights

According to the Construction Pipeline Report for the Middle East, Lodging Econometrics (LE), the Global Authority for Hotel Real Estate, the region has been viewed as an “extraordinary opportunity” for global hospitality brands. Around 341 of the 527 projects in the pipeline have already made a branding decision. The report anticipates that 75% of those would be making a branding decision prior to opening. Such phenomenal growth makes the Middle East one of the strategic areas for global hotel brands. It is estimated that with 77% of total development in the upscale segments, it serves as an important showcase area for companies to establish and advance their brands through large, iconic, and luxurious hotels. Increasing number of tourists from Asian countries such as India and Iran are patronising Dubai, while Arab visitors from the GCC are declining, according to new data released in January 2009, by the DTCM. Iran and India, together account for over 50% of total tourists. However, numbers of Arab tourists fell by 15%. The total number of travellers from the Middle East - including countries such as Egypt, Syria, Jordan and Lebanon - dropped during the first nine months of 2008. According to analysts, the shift in tourist demographics reflects Dubai’s growing appeal among newly affluent Asian consumers and a growing interest in the Gulf for exploring emerging alternatives such as Oman. The number of Asian visitors to Dubai in the first nine months of 2008 increased 11% over the same period previous year.

Hotels increasing rooms and offering discounts

In Abu Dhabi also, tourism has been identified as a high potential economic driver and its promotion is being led by the Abu Dhabi Tourism Authority (ADTA). The ADTA had set a target of 1.68 million hotel guest arrivals for 2008 in Abu Dhabi, an almost 16% increase over the guest arrivals in 2007. At last count, there were close to 12,000 rooms available in Abu Dhabi and all the hotels were running to capacity. The authority has a five-year strategic plan 2008-2012 aimed at delivering 2.7 million hotel guests by the end of 2012. The ADTA forecasts that by 2012, the number of hotel rooms in Abu Dhabi would rise to 23,000 with the demand & supply stabilising between 2012 and 2015. Interestingly, Abu Dhabi is likely to be less affected by the financial crisis because the visitors are mostly business travellers.

USD 146 billion to add 876 planes across 19 airlines

Airline Expected

Acquisitions

Planned Investment

(USD billion) Emirates 245 60

Qatar Airways 150 52

NAS Air 120 4

Saudia 93 12

Jazeera Airways 40 n/a

Source: Global Futures & Foresights The total number of passengers travelling to and from the GCC has almost doubled since 2002, from 45 million to 85 million in 2007. While the regions flag carriers are emerging as influential global players, there is still a significant opportunity for low-cost airlines in the region. Currently about 5% of passenger capacity is served by low-cost airlines, compared to 28% in the US and 54% in the UK. The long-term outlook of the region’s airline industry remains strongly positive. Positive indicators for the market are the strength of the region’s flag carriers, such as Emirates Airlines, Etihad and Qatar Airways, the planned growth of relatively new players, such as Jazeera Airways and Sama, and the expected emergence of others, such as FlyDubai and the billions of dollars being poured into the region’s related infrastructure, particularly in the UAE. Industry experts forecast that the region’s airline fleet is expected to number more than 1,000 aircraft within 15 years. With declining economic conditions, the tourism sector is also facing difficult times The Asia & the Pacific (APAC) is also feeling the pinch of the global slowdown. According to estimates, tourist arrival in the APAC increased by around 3% between January and October 2008 as against 10.5% growth during 2007. The slowdown was particularly strong since August following the spike in oil prices and subsequent cuts in airline capacity and increasing transport costs. This decline was furthered by extreme weather conditions, security and political shifts in major markets. The impact in receipts is expected to be even more significant as travellers shorten their length of stay and alter their consumption in terms of type of accommodation and other activities. While the impact of the deteriorating global economic conditions is spreading across the region, it has not seen a dramatic decline in business activity to affect corporate travel. Because expatriates dominate travel demand on the UAE routes, even job losses in local companies bring more business for airlines as workers leave for their home countries, as many companies have been noticed to book seats in bulk. Tourism targets can be achieved by focusing on sector standardisation, enhancement of the tourism experience, improved destination access, increased international marketing, additional product development and capitalisation and preservation of the Emirate’s distinctive culture, values and traditions. Abu Dhabi’s biggest attractions are its natural islands, warm, marine life-rich seas, 400 km of coastline and cherished Arabian heritage and traditions.

ADTA aims at delivering 2.7 million hotel guests by 2012-end New carriers, old and big players increasing routes draw healthy outlook for airline industry A slowdown was seen since August ’08 as rising oil prices forced airlines to cut capacity amidst rising costs

The authorities are also looking at airline companies, both big and low cost carriers, which are planning route expansions to drive growth. Nearly 876 aircrafts are on order by GCC-based airline companies. Meanwhile, airlines continued to report healthy load factors (the ratio of seats filled), on their UAE destinations in depressing times for the travel business globally. Most airlines reported strong ticket sales during the Eid Al Adha, Christmas and New Year holidays. Now that the holiday season is over, many airlines are reducing fares to maintain demand. Both Dubai and Abu Dhabi are attracting new services even though some airlines are cutting services on some routes to save money.

Financial Performance – FY 2007 Revenue During FY07, ADNH net revenues surged 10.5% to AED 1.32 billion from AED 1.12 billion, led by an increase in hotel revenues and rise in sales from transport services, partially offset by decline in revenues from catering and contract services. Total sales of hotels, contributing 53.0% of the total revenue in 2007, rose 16.6% to AED 700.79 million from AED 601.22 million in 2006. Catering and contract sales, representing 36.7% of total revenue, declined 3.0% to AED 485.05 million from AED 500.09 million. Transport revenues rose 43.2% to AED 135.93 million from AED 94.91 million in 2006. Rising Expenses ADNH’s CoS was AED 861.44 million, up 4.7% from AED 822.40 million in 2006 on account of a rise in expenses in transport services. The general and administrative expenses increased 41.6% to AED 29.78 million from AED 21.04 million in 2006. The company also reported a 6.5% reduction in its depreciation charges, which stood at AED 79.09 million in 2007 compared to AED 84.55 million in the previous year. Overall, the total operating expenses increased 4.6% to AED 970.32 million compared to AED 927.98 million in 2006. Subsequently, the company’s operating expenses, as a percentage of revenues, contracted 417 bps to 73.4% from 77.6% in 2006. GP and NP Margins During FY07, ADNH’s gross profit margin expanded to 34.8% from 31.3% Y-o-Y, as gross profit increased 23.1% to AED 460.33 million in 2007. Subsequently, net profit attributable to shareholders surged 61.2% to AED 471.66 million from AED 292.52 million, due to 355.7% increase in investment and other income. Net profit margin increased 1,123 bps to 35.7% in 2007. Adjusted earning per share (EPS) increased to AED 0.47 from AED 0.29 in 2006. However, both RoAE and RoAA expanded to 17.9% and 15.6% from 12.1% and 10.4%, respectively, in 2006.

Revenues up 10.5% to AED 1.32 billion Expanding margins and returns

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Chart Gallery

Size of the Company The salient features of the balance sheet are:

Cash and bank balance contributed 12.9% to total assets in 9M08 compared to 20.2% in the corresponding period of the last year. Cash balance declined 23.4% to AED 436.29 million from AED 569.25 million in 9M07, as cash was used to fund fixed assets. Accounts receivables and pre-payments ascended 84.2% to AED 512.27 million from AED 278.12 million. Current assets, representing 38.1% of total assets, advanced 6.7% to AED 1,228.04 billion Y-o-Y.

The share of non-current assets to total assets increased to 61.9% in 9M08 from 57.2% in

9M07, due to a 50.5% rise in property, plant & equipment to AED 1.14 billion from AED 0.76 billion. Moreover, available for sale investments stood at AED 933.02 million, up 12.8% from AED 827.11 million during the same period of the last year.

Annualised assets turnover ratio improved to 0.49 from 0.46 in 9M07, reflecting the rise in total

revenue. Total assets base surged to AED 3.38 billion from AED 2.82 billion in the comparable period of the previous year.

The company’s current liabilities increased 58.6% to AED 465.64 million from AED 293.62

million, primarily on account of a 62.6% rise in account payable and accruals to AED 454.27 million from AED 279.33 million.

During the first nine months of 2008, total non-current liabilities surged 3.4% to AED 59.93

million, as employee’s end of service benefits increased 11.1% to AED 52.86 million from AED 47.59 million.

The shareholders’ equity rose 15.9% to AED 2.86 billion, led by a rise 38.9% in share capital to

AED 1.00 billion from AED 0.72 billion, partially offset by a decline in retained earnings. The debt-to-equity ratio remained flat at 0.01. However, adjusted book value per share (BVPS) was reported at AED 2.86 in 9M08 compared to AED 2.47 a year ago. The shareholders’ equity to total assets ratio stood at 0.84 in 9M08 compared to 0.88 in 9M07.

Financial Performance Analysis – 9M 2008 For the nine months ended September 30, 2008, total revenues surged 31.6% to AED 1,244.45 million from AED 945.65 million, driven by increase in revenues across segments. Revenues from hotels, catering & contract services and transport services ascended 30.6%, 31.9%, and 34.8% in 2007, respectively. CoS rose 36.8% Y-o-Y to AED 828.71 million and as a percentage of revenue was 66.6%, up 252 bps from 64.1% in 9M07. The company’s overall operating expenses increased 33.8% to AED 917.80 million from AED 686.04 million on account of 13.3% rise in general and administrative expenses and 10.3% rise in depreciation charges in 9M08 along with higher CoS. Despite this, the company’s operating profit improved 25.8% to AED 326.45 million from AED 259.61 million. Conversely, net profit attributable to shareholders decreased 11.1% to AED 291.54 million in 9M08 from AED 327.86 million. This can be attributed to loss from investment and other income. Therefore, the company’s net profit margin narrowed to 23.4% from 34.7% during the same period a year ago. Meanwhile, the adjusted annualised EPS decreased to AED 0.39 in 9M08 from AED 0.44 in 9M07. Annualised RoAE plummeted to 13.2% in 9M08 from 18.5% in 9M07 and RoAA also decreased to 11.5% from 16.0% in the comparable period a year ago.

Annualised assets turnover ratio improved to 0.49 Debt-to-equity ratio was flat at 0.01 Revenues increased 31.6% to AED 1.24 billion

Working Capital Snapshot

(in AED '000) 2006A 2007A 9M07 9M08 2008E Current Assets 1,279,012 1,334,435 1,206,690 1,288,044 1,456,563 Inventories 29,306 34,947 37,708 52,161 65,682 Inventory Conversion Period (Days) 13 14 15 14 18 Accounts receivable and prepayments 283,682 320,359 278,122 512,273 636,479 Average Collection Period (Days) 80 83 81 92 111 Investments carried at fair vale through income statement 296,138 357,748 321,607 287,322 308,607 Bank balances and cash 669,886 621,381 569,253 436,288 445,795 Current Liabilities 327,947 314,402 293,620 465,640 567,121 Deferred income 17,308 0 0 0 0 Accounts payable and accruals 297,336 295,755 279,328 454,273 554,857 Average Payment Period (Days) 122 126 130 124 149 Term loans 5,817 3,942 4,880 3,317 3,617 Bank overdraft 7,486 14,705 9,412 8,050 8,646 Net Core Working Capital 15,652 59,551 36,502 110,161 147,304 Average Core Working Capital Cycle (Days) -29 -29 -34 -18 -20 Net Current Assets 951,065 1,020,033 913,070 822,404 889,442 Average Working Capital Cycle (Days) 275 272 270 203 222 Source: Abu Dhabi National Hotels

Peer Comparison In order to do a peer comparison, we have taken comparable companies in Hospitality Industry within the UAE that includes National Corporation for Tourism & Hotels and Abu Dhabi National Hotels.

Financial Performance of Comparable Companies in the Hospitality Industry NCTH# ADNH# 2007 9M08 2007 9M08 Ratios: Total Assets Turnover Ratio (x) 0.25 0.40 0.44 0.49 Gross Profit Margin (in %) 42.6 52.7 34.8 33.4 Net Profit Margin (in %) 29.9 17.4 35.7 23.4 Debt Equity ratio (x) 0.64 0.87 0.01 0.01 ROAE (in %) 11.1 13.5 17.9 13.2 ROAA (in %) 6.2 6.5 15.6 11.5 Market Indicators: Adj. EPS (AED) 0.82 0.61 0.47 0.39 P/E (x) 6.89 9.33 6.59 7.99 Adj. BVPS (AED) 7.50 6.02 3.03 2.86 P/BV (x) 0.8 0.9 1.03 1.09 Total Hotel Rooms - 1,355 - 2,308 (All figures in AED 'Million) Net Sales 274,862 349,386 1,321,772 1,244,447 % Y-o-Y change 29.6 99.0 10.5 31.6 Gross Profit 117,110 184,263 460,329 415,739 % Y-o-Y change 57.5 187.7 23.1 22.4 Net Profit 82,316 60,763 471,659 291,542 % Y-o-Y change 765.5 42.9 61.2 -11.1 Total Assets 1,333,619 1,251,671 3,399,486 3,384,779 % Y-o-Y change 57.0 17.4 29.0 20.1 Shareholders' Equity 749,556 602,442 3,026,722 2,859,210 % Y-o-Y change 96.5 12.5 34.6 15.9 Sources: Zawya, ADNH #NCTH – National Corporation for Tourism and Hotels #ADNH – Abu Dhabi National Hotels

Strong pipeline of upcoming projects to strengthen ADNH’s presence in the hospitality sector

New Projects and Strategies Currently, ADNH has many under construction projects. Currently, the JW Marriott Resort & Spa is being redeveloped into a waterfront resort. It is expected to open by June 2010 and will feature 500 luxurious rooms, 99 chalets and 169 apartments. Under-construction projects include the Park Hyatt, Capital Centre hotel, Al Diar Barsha Hotel Apartments, the Sofitel Jumeirah Beach Hotel and the Siji Hotel Apartments. The Park Hyatt is a five-star hotel located on the Saadiyat Island. It is surrounded by two 18-hole golf courses and a 9-km stretch of natural beach. The resort has 270 rooms & suites, 44 chalets at the forefront and is expected to be completed by 2010. Capital Centre hotel is located near the Abu Dhabi’s International Airport and has 438 rooms & suites and is likely to come on-stream in early 2011. Al Diar Barsha Hotel Apartments is based between Dubai Internet City and Dubai Media City and is anticipated to be completed by the end of 2008. The hotel after completion will have 32 one-bedroom and 32 two-bedroom apartments, fully equipped with a spacious living room, kitchen and two bathrooms. The Sofitel Jumeirah Beach Hotel is located amidst the Jumeirah Beach Residence and retreats with 438 sea-facing rooms including 40 suites. Siji Hotel Apartments is situated in the east coast Fujairah. The 5-star luxury service apartment is near the Fujairah International Airport and is located in the Fujairah City Centre. The hotel offers 78 one, two and three bedroom apartments and was expected to be over by 2008. Recently, ADNH signed a Memorandum of Understanding (MoU) to develop two new hotels based on a new concept of cabins with YOTEL Investments (YIF), in Abu Dhabi. The two hotels will be coming up at the Airport and at the Abu Dhabi City Centre, and is likely to cater to participants, delegates and visitors to exhibitions and conferences. In April 2008, ADNH’s subsidiary, Al Ghazal Transport expanded its current limousine fleet with 30 new Audi A6 Avant cars to meet the growing demand for luxury transportation. The new fleet primarily will be catering to VIP guests from Sheraton Hotel & Resort, Le Meridien and Hilton in Abu Dhabi. In addition, the company is expected to expand its limousine services to VIP’s at the Abu Dhabi and Dubai International Airports. SWOT Analysis Strengths:

Multiple hospitality divisions catering to different sets of clienteles, and generation of synergies from that.

Very low leverage level in 2007 and 9M08, gives it more opportunities to raise funds from the market.

Tie-ups with major international players, like Hilton, Hyatt among others.

Weakness:

Investment income contributes substantially to the net income, the returns from which are a cause of concern in the near term.

Opportunities:

The ADTA forecasts 2.70 million hotel guest arrivals annually by the end of 2012, which is 12.5% more than initially predicted, generating more opportunities for hospitality sector.

Total investments in the UAE theme parks is projected to exceed AED 228 billion by 2012, thereby more visitors are expected to get attracted in the time to come.

Threats:

An expansion initiative taken by other players is expected to increase the competition in the upcoming years.

Currently, travellers are trimming down their length of stay and their consumption in terms of type of accommodation and other activities, thereby directly affecting top and bottom-line.

Risks and Concerns:

Decline in oil revenues is driving away investments from the overall economy. This is likely to decrease the funding, which may increase the gestation period for ongoing projects.

Due to global economic slowdown, tourism sector has taken a hit and is increasingly facing difficult conditions due to extreme weather, security concerns and political rifts.

Valuation Methodology: We have used DCF valuation method to arrive at the fair value of ADNH, as discussed below: Assumptions:

(i) Risk free Rate (Rf) of 2.88%, equivalent to three month average yield on 10-year US T-bill.

(ii) Unlevered Beta of 0.96 (iii) A terminal growth rate of 2.0%

Based on the inputs and the Capital Asset Pricing Model (CAPM), we have arrived at a Cost of Equity of 8.22%. Taking into consideration the long-term and short-term debts of ADNH, we have arrived at the Weighted Average Cost of Capital (WACC) of 8.19%.

Cost of Equity: 8.22% WACC: 8.19%

DCF Calculations

DCF Valuation (FCFF Model) Year 2009E 2010E 2011E 2012E 2013E Operating Profit (EBIT) 377,415 404,050 524,952 602,625 659,443 Tax on EBIT 2,359 2,526 3,282 3,767 4,122 Effective Tax Rate 0.63% 0.63% 0.63% 0.63% 0.63% NOPAT 375,055 401,525 521,671 598,858 655,320 Add: Depreciation and Amortization 74,788 80,968 95,947 113,753 138,056 Less: Capex 205,434 190,014 360,282 427,950 524,672 Less: Change in Net Working Capital -14,119 11,637 39,995 33,252 31,434 Operating Free Cash Flows to Firm (OFCFF) 258,528 280,841 217,341 251,409 237,271 Non-Operating Income -24,084 29,299 71,053 84,239 87,905 Tax on Non-Operating Income -151 183 444 527 550 Add: Non-Operating Cash Flows (After Tax Non-Operating Income) -23,934 29,115 70,609 83,712 87,356 Free Cash Flow to Firm (FCFF) 234,594 309,956 287,950 335,121 324,626 WACC (Ko) (%) 8.19% 8.19% 8.19% 8.19% 8.19% Present Value / Discount Factor 0.9243 0.8544 0.7897 0.7300 0.6747 Long-Term Growth Rate (g) 2.00% Terminal Multiple [(1 + g) / (WACC - g)] 16.49 Nominal Terminal Value [(FCFF * (1 + g)) / (WACC - g)] 5,351,938 Present Value of Free Cash Flows 216,842 264,820 227,402 244,626 219,033

Calculation of Equity Value and Fair Value Per Share NPV of Free Cash Flows (during Explicit Forecast Period) 1,172,723 Terminal Value: Residual Cash Flow (FCFF of 2013E) 324,626 WACC 8.19% Long-Term Growth Rate (g) 2.00% Divided by Capitalisation Rate (WACC - g) 6.19% Equals Nominal Terminal Value 5,351,938 Implied Multiple of 2013E EBITDA 6.71 Times PV/ Discount Factor 0.67 Present Value of Terminal/Residual Value 3,611,085 Enterprise Value 4,783,808 Implied Multiple of 2013E EBITDA 6.00 Less: Long-term Debts 18,434 Less: Market Value of Preferred Shares 0 Add: Surplus Cash and Investments 0 Equity Value 4,765,374 No. of Outstanding Shares (‘000) 1,000,000 Fair Value Per Share (AED) 4.765

Sensitivity Analysis We have prepared a sensitivity analysis table, showing the probable nominal terminal value, discounted terminal value and enterprise value, given different growth rate assumptions and the WACC. The shaded area represents the most probable outcomes.

Sensitivity Analysis of Nominal Terminal Value (AED ’000)

Discount Factor

Long-Term Growth Rate 1.00% 1.50% 2.00% 2.50% 3.00%

6.19% 6,321,171 7,030,147 7,908,455 9,024,987 10,491,871 7.19% 5,299,468 5,793,946 6,383,756 7,099,409 7,985,989 8.19% 4,562,089 4,927,483 5,351,938 5,851,029 6,446,342 9.19% 4,004,846 4,286,460 4,607,258 4,976,030 5,404,408

10.19% 3,568,916 3,793,020 3,793,020 4,328,691 4,652,427

Sensitivity Analysis of Discounted Terminal Value (AED ’000)

Discount Factor

Long-Term Growth Rate 1.00% 1.50% 2.00% 2.50% 3.00%

6.19% 4,682,123 5,207,266 5,857,833 6,684,854 7,771,382 7.19% 3,745,620 4,095,113 4,511,987 5,017,804 5,644,431 8.19% 3,078,154 3,324,695 3,611,085 3,947,834 4,349,507 9.19% 2,580,674 2,762,143 2,968,861 3,206,494 3,482,535

10.19% 2,197,286 2,335,261 2,490,089 2,665,059 2,864,374

Sensitivity Analysis of Enterprise Value (AED ’000)

Discount Factor

Long-Term Growth Rate 1.00% 1.50% 2.00% 2.50% 3.00%

6.19% 5,922,469 6,447,611 7,098,178 7,925,200 9,011,728 7.19% 4,951,422 5,300,915 5,717,788 6,223,606 6,850,233 8.19% 4,250,877 4,497,418 4,783,808 5,120,557 5,522,230 9.19% 3,721,704 3,903,173 4,109,891 4,347,523 4,623,565

10.19% 3,307,934 3,445,909 3,600,738 3,775,708 3,975,023 Investment Opinion The UAE hospitality sector witnessed a strong revenue growth in the first ten months of 2008, supported by high occupancy and increase in the number of hotels. Abu Dhabi reported a 45% rise in RevPAR in 9M08. However, given the global economic meltdown, the performance of the industry has been somewhat affected, with a decline in the number of tourists and business visitors. However, government initiatives are helping to maintain the growth momentum in the industry. UAE is committed to realigning its strategies to ensure that the performance of the hospitality sector is not affected. In order to enhance the awareness regarding Dubai attractions and facilities, DTCM is organizing road shows across the world including the USA, China and South Africa. Hotels in Dubai are offering discounts. With the entertainment and leisure sector poised for a healthy growth, Abu Dhabi is investing USD 136 billion in developing business and tourism assets with more than 23,000 hotel rooms likely to cater to the targeted 3 million visitors likely by 2015. UAE’s theme parks planned investments run up to AED 228 billion by 2012. Prominent theme parks, currently under development in Abu Dhabi & Dubai, include Warner Bros and Ferrari theme parks in the capital and Dubailand, a multi-billion dollar enclave of 24 theme parks. ADNH is expected to reap maximum benefits from the planned developmental projects as it is amongst the largest hotels in the UAE. The company has a strong pipeline of upcoming projects including the JW Marriott Resort & Spa, Park Hyatt, Capital Centre Hotel, Al Diar Barsha Hotel Apartments, The Sofitel Jumeirah Beach Hotel and Siji Hotel Apartment. Furthermore, it is highly unlevered, which opens up additional means to finance its future growth endeavours. Going forward, we anticipate the company’s ongoing projects to by complete between 2010 and 2012, thereafter, it is likely to report strong top-line growth. At the current market price, ADNH’s stock is trading at a P/E multiple of 8.86x and 7.23x on 2009E and 2010E earnings, and at a P/B multiple of 0.93x and 0.85x on 2009E and 2010E BVPS, respectively. Meanwhile, the stock has gained 3.0% since the beginning of this year as against a negative YTD return of 8.1% registered by the Abu Dhabi Securities Market. Based on our DCF valuation, we have arrived at a Fair Value of AED 4.77 exhibiting a 53.2% upside from its closing price of AED 3.11 (as on January 26, 2009). Accordingly, we initiate our coverage on the Abu Dhabi National Hotel’s stock with an OVERWEIGHT recommendation.

Fair Value: AED 4.77 Investment Opinion: OVERWEIGHT

Financial Statements

Consolidated Balance Sheet (in AED'000) 2007A 9M07A 9M08A 2008E 2009E 2010E 2011E

ASSETS Current Assets Inventories 34,947 37,708 52,161 65,682 58,039 61,577 78,582 Accounts receivable and prepayments 320,359 278,122 512,273 636,479 578,081 612,544 781,707 Investments carried at fair vale through income statement 357,748 321,607 287,322 308,607 334,336 360,885 427,651 Bank balances and cash 621,381 569,253 436,288 445,795 655,248 758,472 838,323 Total Current Assets 1,334,435 1,206,690 1,288,044 1,456,563 1,625,704 1,793,477 2,126,263 Non-Current Assets Property, plant and equipment 796,107 758,194 1,140,915 1,189,078 1,319,723 1,428,770 1,693,105 Investment in associate 11,875 10,371 11,875 12,755 13,818 14,915 17,675 Available-for-sale-investments 1,246,140 827,111 933,016 965,778 967,525 1,001,839 1,187,188 Goodwill 5,278 5,278 5,278 5,278 5,278 5,278 5,278 Other assets 5,651 11,651 5,651 6,070 6,576 7,098 8,411 Total Non-Current Assets 2,065,051 1,612,605 2,096,735 2,178,958 2,312,920 2,457,900 2,911,657 Total Assets 3,399,486 2,819,295 3,384,779 3,635,521 3,938,623 4,251,378 5,037,919 LIABILITIES AND EQUITY Liabilities Current Liabilities Accounts payable and accruals 295,755 279,328 454,273 554,857 502,934 529,299 675,472 Term loans 3,942 4,880 3,317 3,617 3,717 3,734 0 Bank overdraft 14,705 9,412 8,050 8,646 9,367 10,111 9,966 Total Current Liabilities 314,402 293,620 465,640 567,121 516,019 543,144 685,439

Non-Current Liabilities Term loans 9,760 10,385 7,067 6,631 3,402 0 0

Employees' end of service benefits 48,602 47,593 52,862 56,778 61,512 66,396 73,642 Total Non-Current Liabilities 58,362 57,978 59,929 63,409 64,914 66,396 73,642 Total Liabilities 372,764 351,598 525,569 630,530 580,932 609,540 759,081 Equity Share capital 720,000 720,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Legal reserve 256,418 209,252 256,418 295,044 330,128 373,168 432,378 Statutory reserve 256,418 209,252 256,418 295,044 330,128 373,168 432,378 Foreign currency translation reserve 1,879 483 1,557 1,672 1,812 1,956 2,317 Retained earnings 537,593 781,325 693,135 698,340 868,031 1,076,204 1,362,585 Cumulative changes in fair values of available-for-sale-investments 966,414 547,385 651,682 570,890 720,479 685,937 868,409 Proposed dividends 144,000 0 0 144,000 107,113 131,405 180,771 Proposed bonus shares 144,000 0 0 0 0 0 0 Total Equity 3,026,722 2,467,697 2,859,210 3,004,991 3,357,691 3,641,838 4,278,839 Total Liabilities and Equity 3,399,486 2,819,295 3,384,779 3,635,521 3,938,623 4,251,378 5,037,919

Consolidated Income Statement (in AED '000) 2007A 9M07A 9M08A 2008E 2009E 2010E 2011E

Operating revenues 1,321,772 945,647 1,244,447 1,567,035 1,442,719 1,518,349 1,937,661 Direct operating expenses -861,443 -605,872 -828,708 -1,043,527 -963,628 -1,006,551 -1,280,648 Gross profit 460,329 339,775 415,739 523,508 479,091 511,798 657,013 General and administrative expenses -29,781 -21,575 -24,438 -30,773 -26,889 -26,780 -36,113 Depreciation -79,094 -58,592 -64,655 -67,384 -74,788 -80,968 -95,947 Operating profit 351,454 259,608 326,646 425,350 377,415 404,050 524,952 Investment and other income 124,184 68,647 -34,785 -36,320 -24,084 29,299 71,053 Finance costs -1,012 -396 -319 -343 -283 -238 -181 Profit before tax 474,626 327,859 291,542 388,687 353,047 433,111 595,824 Income tax -2,967 0 0 -2,430 -2,207 -2,707 -3,725 Profit for the year 471,659 327,859 291,542 386,257 350,840 430,404 592,100 Adjusted EPS 0.47 0.44* 0.39* 0.39 0.35 0.43 0.59

* Annualised

Consolidated Cash Flow Statement (in AED '000) 2007A 9M07A 9M08A 2008E 2009E 2010E 2011E

Cash Flows from Operating Activities: Profit before tax 474,626 327,859 291,542 388,687 353,047 433,111 595,824 Adjustments for: Depreciation of property, plant and equipment 79,094 58,592 64,655 67,384 74,788 80,968 95,947 Provision of employees' end of service benefits 14,942 13,806 12,406 14,248 15,426 17,376 20,779 Interest expense 1,012 396 319 343 283 238 181 Interest income -28,572 -21,898 -11,675 -13,394 -18,409 -19,829 -21,262 Loss (gain) on investments carried at fair value through income statement -61,610 -25,469 70,426 85,752 75,672 23,960 -15,906 Income from investment in associate and dividend income -15,566 -15,504 -19,257 -19,568 -19,177 -18,985 -18,985 Profit on sale of fixed assets -5,277 -3,120 -2,896 -2,896 0 0 0 Provision for impairment of other assets 6,000 0 0 0 0 0 0 Deferred income amortisation -17,308 -17,308 0 0 0 0 0 Operating profit before working capital changes 447,341 317,354 405,520 520,557 481,631 516,838 656,578 Working capital changes: Inventories -5,641 -8,402 -17,214 -30,735 7,643 -3,538 -17,005 Accounts receivable and prepayments -36,677 5,560 -191,914 -316,120 58,398 -34,464 -169,162 Accounts payable and accruals -6,781 -18,008 158,518 259,102 -51,923 26,365 146,173 Cash from operations 398,242 296,504 354,910 432,804 495,750 505,201 616,583 Director's remuneration paid 0 0 0 -4,258 -3,868 -4,745 -6,528 Employees’ end of service benefits paid and insurance funds paid -10,864 -10,737 -8,146 -9,795 -10,692 -12,491 -13,533 Tax paid -2,967 0 0 -2,430 -2,207 -2,707 -3,725 Interest paid -1,012 -396 -319 -343 -283 -238 -181 Net cash from (used in) operating activities 383,399 285,371 346,445 415,977 478,699 485,019 592,617 Cash flows from investing activities Proceeds from sale of property, plant and equipment 13,706 8,823 7,478 7,478 0 0 0 Purchase of fixed assets and available for sale investments -240,501 -285,947 -415,653 -477,786 -196,722 -286,216 -372,098 Advance payments for purchase of land -106,587 0 0 0 0 0 0 Interest received 28,572 21,898 11,675 13,394 18,409 19,829 21,262 Dividends received 15,504 15,504 19,257 19,568 19,177 18,985 18,985 Decrease in bank deposits maturing after more than three months 440 0 0 0 0 0 0 Net cash (used in) investing activities -288,866 -239,722 -377,243 -437,346 -159,137 -247,402 -331,851 Cash flows from financing activities Dividends paid -144,000 -144,000 -144,000 -144,000 -107,113 -131,405 -180,771 Loans repaid -5,817 -4,254 -3,318 -3,617 -3,717 -3,734 0 Net cash used in financing activities -149,817 -148,254 -147,318 -147,617 -110,830 -135,138 -180,771 Net increase/(decrease) in cash and cash equivalents -55,284 -102,605 -178,116 -168,985 208,732 102,479 79,996 Cash and cash equivalent at the beginning of period 661,740 662,400 606,676 606,456 437,149 645,881 748,361 Net foreign exchange difference 46 -322 -322 0 0 0 Cash and cash equivalent at the end of period 606,456 559,841 428,238 437,149 645,881 748,361 828,356

Common – Size Statements

Common-Size Consolidated Balance Sheet 2007A 9M07A 9M08A 2008E 2009E 2010E 2011E

ASSETS

Current Assets

Inventories 1.0% 1.3% 1.5% 1.8% 1.5% 1.4% 1.6% Accounts receivable and prepayments 9.4% 9.9% 15.1% 17.5% 14.7% 14.4% 15.5% Investments carried at fair vale through income statement 10.5% 11.4% 8.5% 8.5% 8.5% 8.5% 8.5% Bank balances and cash 18.3% 20.2% 12.9% 12.3% 16.6% 17.8% 16.6% Total Current Assets 39.3% 42.8% 38.1% 40.1% 41.3% 42.2% 42.2% Non-Current Assets Property, plant and equipment 23.4% 26.9% 33.7% 32.7% 33.5% 33.6% 33.6% Investment in associate 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Available-for-sale-investments 36.7% 29.3% 27.6% 26.6% 24.6% 23.6% 23.6% Goodwill 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% Other assets 0.2% 0.4% 0.2% 0.2% 0.2% 0.2% 0.2% Total Non-Current Assets 60.7% 57.2% 61.9% 59.9% 58.7% 57.8% 57.8% Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% LIABILITIES AND EQUITY Liabilities

Current Liabilities Accounts payable and accruals 8.7% 9.9% 13.4% 15.3% 12.8% 12.5% 13.4% Term loans 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% 0.0%

Bank overdraft 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% Total Current Liabilities 9.2% 10.4% 13.8% 15.6% 13.1% 12.8% 13.6%

Non-Current Liabilities Term loans 0.3% 0.4% 0.2% 0.2% 0.1% 0.0% 0.0% Employees' end of service benefits 1.4% 1.7% 1.6% 1.6% 1.6% 1.6% 1.5% Total Non-Current Liabilities 1.7% 2.1% 1.8% 1.7% 1.6% 1.6% 1.5% Total Liabilities 11.0% 12.5% 15.5% 17.3% 14.7% 14.3% 15.1% Equity Share capital 21.2% 25.5% 29.5% 27.5% 25.4% 23.5% 19.8% Legal reserve 7.5% 7.4% 7.6% 8.1% 8.4% 8.8% 8.6% Statutory reserve 7.5% 7.4% 7.6% 8.1% 8.4% 8.8% 8.6% Foreign currency translation reserve 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Retained earnings 15.8% 27.7% 20.5% 19.2% 22.0% 25.3% 27.0% Cumulative changes in fair values of available-for-sale-investments 28.4% 19.4% 19.3% 15.7% 18.3% 16.1% 17.2% Proposed dividends 4.2% 0.0% 0.0% 4.0% 2.7% 3.1% 3.6% Proposed bonus shares 4.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total Equity 89.0% 87.5% 84.5% 82.7% 85.3% 85.7% 84.9% Total Liabilities and Equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Common-Size Consolidated Income Statement 2007A 9M07A 9M08A 2008E 2009E 2010E 2011E Operating revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Direct operating expenses -65.2% -64.1% -66.6% -66.6% -66.8% -66.3% -66.1% Gross profit 34.8% 35.9% 33.4% 33.4% 33.2% 33.7% 33.9% General and administrative expenses -2.3% -2.3% -2.0% -2.0% -1.9% -1.8% -1.9% Depreciation -6.0% -6.2% -5.2% -4.3% -5.2% -5.3% -5.0% Operating profit 26.6% 27.5% 26.2% 27.1% 26.2% 26.6% 27.1% Investment and other income 9.4% 7.3% -2.8% -2.3% -1.7% 1.9% 3.7% Finance costs -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Profit before tax 35.9% 34.7% 23.4% 24.8% 24.5% 28.5% 30.7% Income tax -0.2% 0.0% 0.0% -0.2% -0.2% -0.2% -0.2% Profit for the year 35.7% 34.7% 23.4% 24.6% 24.3% 28.3% 30.6%

Financial Ratios

2007A 9M07A 9M08A 2008E 2009E 2010E 2011E

Liquidity Ratios: Current Ratio (x) 4.24 4.11 2.77 2.57 3.15 3.30 3.10 Quick Ratio (x) 4.13 3.98 2.65 2.45 3.04 3.19 2.99 Inventory Conversion Period (Days) 14 15 14 18 23 22 20 Average Collection Period (Days) 83 81 92 111 154 143 131 Length of Operating Cycle (Days) 97 96 106 129 177 165 151 Average Payment Period (Days) 126 130 124 149 200 187 172 Length of Cash Cycle (Days) -29 -34 -18 -20 -23 -22 -20

Activity Ratios: Inventory Turnover Ratio (x) 26.81 24.11* 25.37* 20.74 15.58 16.83 18.27 Debtors Turnover Ratio (x) 4.38 4.49* 3.99* 3.28 2.38 2.55 2.78

Creditors' Turnover Ratio (x) 2.90 2.80* 2.95* 2.45 1.82 1.95 2.13 Total Assets Turnover Ratio (x) 0.44 0.46* 0.49* 0.45 0.38 0.37 0.42 Net Fixed Assets Turnover Ratio (x) 1.94 1.91* 1.71* 1.58 1.15 1.10 1.24

Working Capital Turnover Ratio (x) 1.34 1.35* 1.80* 1.64 1.44 1.29 1.44 Equity Turnover Ratio (x) 0.50 0.53* 0.56* 0.52 0.45 0.43 0.49 Profitability Ratios: Gross Profit Margin (GPM) (%) 34.8 35.9 33.4 33.4 33.2 33.7 33.9 EBITDA Margin (%) 32.6 33.6 31.4 31.4 31.3 31.9 32.0 Operating Profit Margin (OPM) (%) 26.6 27.5 26.2 27.1 26.2 26.6 27.1 Net Profit Margin (NPM) (%) 35.7 34.7 23.4 24.6 24.3 28.3 30.6 Return on Average Equity (RoAE) (%) 17.9 18.5* 13.2* 12.8 11.0 12.3 15.0 Return on Average Assets (RoAA) (%) 15.6 16.0* 11.5* 11.0 9.3 10.5 12.7 Leverage Ratios: Debt to Equity (D/E) Ratio (x) 0.01 0.01 0.01 0.01 0.00 0.00 0.00 Shareholders' Equity to Total Assets Ratio (x) 0.89 0.88 0.84 0.83 0.85 0.86 0.85 Total Liabilities to Total Assets Ratio (x) 0.11 0.12 0.16 0.17 0.15 0.14 0.15 Current Liabilities to Equity Ratio (x) 0.10 0.12 0.16 0.19 0.15 0.15 0.16 Growth Rates: % Y-o-Y Growth in Revenue 10.5 NA 31.6 18.6 -7.9 5.2 27.6 % Y-o-Y Growth in Operating Profit 31.0 NA 25.8 21.0 -11.3 7.1 29.9 % Y-o-Y Growth in Net Profit 61.2 NA -11.1 -18.1 -9.2 22.7 37.6 % Y-o-Y Growth in Total Assets 29.0 NA 20.1 6.9 8.3 7.9 18.5 % Y-o-Y Growth in Shareholders' Equity 34.6 NA 15.9 -0.7 11.7 8.5 17.5 Ratios used for Valuation: Adj. EPS (AED) 0.47 0.44* 0.39* 0.39 0.35 0.43 0.59 Adj. BVPS (AED) 3.03 2.47 2.86 3.00 3.36 3.64 4.28 P/E Ratio (x) 6.59 7.11 8.00 8.05 8.86 7.23 5.25 P/BV Ratio (x) 1.03 1.26 1.09 1.03 0.93 0.85 0.73 Current Market Price (AED) 3.11 3.11 3.11 3.11 3.11 3.11 3.11

*Annualised

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