JAZIRA SECURITIES BROKERAGE NATIONAL MAIZE

Sunday, October 31, 2010 RESULTS UPDATE

New Capacities Coming Online in Q4 are Expected to Boost Revenues BUY

National Maize 9M FY10 ending September net income came at EGP63.9 million up from EGP59.9 million in 9M FY09, reflecting a 7% yoy in-
Market Price (EGP/share) 17.1
crease. Revenues grew 6% to EGP434 million, while EBITDA declined 4%. With these results, National Maize remains on track to achieve our target
end year bottom line of EGP85 million, reflecting a net income increase of 15% compared to FY09 attained figure. However, our revenues and Target (EGP/share) 22.7
EBITDA margin expectations have changed due to recent developments in raw materials prices. Upside 33%
Although sugar prices hiked 50% from June 2010 to the end of September 2010, as a result of Russian ban on agricultural exports, it actually remained
on a YTD decline of 9%, since it experienced a 40% decline in its prices in the first 4 months of 2010. Corn, on the other hand, witnessed a material Reuters Codes NCMP.CA
increase over the same period, as it increased 23% since 2010 beginning, as it didn’t witness any significant downward correction earlier in the year. Full Name: National Company for Maize Products
NCMP’s corn semi-hedged contracts made it not feel the whole brunt of the commodity appreciation during Q3, as EBITDA margin fell 11.6% to Short Name National Maize
20.5% in Q3 2010 compared to 23.2% in 1H FY10. However, when NCMP renew its corn contracts in December 2010, it will be impacted by the
whole increase in the commodity prices. That if commodities remain at its current high levels. Consequently, we have further projected EBITDA mar- Number of shares (mn) 30
gin to fall to 17.2% in Q4 FY10.
Market cap (EGP mn) 504.4
National Maize has a degree of latitude in adjusting its selling prices based on market conditions and input prices at any time for 67% of its sales or all
EV 2010 (EGP mn) 564.9
its products with the exception of its annual contracts with the carbonated drinks companies, which represent 33% of our expected 2010 sales. How-
ever, these contracts will be revised by early 2011. So the company will have no capability in passing the raw material price increase on 1/3 of its prod- 52 Week Low-High (EGP) 13.56 - 27.54
ucts until the end of the year. NCMP management believes that they generally can pass the raw material price increase they couldn't pass to the carbon- Average Daily Volume (52 weeks) 332.8k
ated drinks companies to the feedstock and confectionary customers, until they adjust their carbonated drinks contracts early next year. Since we are
Stock Performance Absolute / Relative to index
still new in covering the company, we will conservatively monitor this proposition.
Three month +15% / +11%
In our opinion, sugar price hike in the same time as corn, will make the company in a better position to revise its selling prices. This shows evident in
Q3 revenue figures, which are already higher than our expectations. This had led us to increase Q4 revenues higher than our previous projections. Six month -8% / +1%

All in all, as a result of the hike in corn prices, we reduced our target EBITDA margin for 2010 to 20.7% down from 21.6% in our previous report. One year -36% / -34%
Although we expect Q4 2010 EBITDA margin to be lower than the remaining of 2010’s quarters, Q4 expected EBITDA margin of 17.2% remain 30 N C M P Sha r e P r ic e (in E GP )
higher than the 15.3% achieved in Q4 2009. 25

We expect Q4 2010 revenues to surge 29% over Q4 2009 attained figure, as a result of the new corn grinding facilities and starch plant have both came 20

online in early Q4 2010 in addition to higher selling prices. 15

In 2011, we assumed that raw material prices will remain at Q4 levels, while NCMP will be marginally able to pass the cost to its clients, resulting in 10
EBITDA margins falling to 18.9% in 2011 versus 20.7% in 2010. However, as a result of sale volumes increasing 23% in 2011 vs. 2010, we expect O- N- D- J- F- M- A- M- J- J- A- S- O-
09 09 09 10 10 10 10 10 10 10 10 10 10
revenue and EBITDA to increase by 28% and 16%. while, NAI would increase by only 7% as a result of the grace period on NCMP’s debt expiring.
Even with these modest expectations for 2010 and 2011 earnings, and even with the 25% increase in NCMP’s market price since our initiation of cov- FY ending Dec. 2009a 2010e 2011f 2012f
erage report on July 6, 2010, the stock is still trading at a low PER (all of which is operationally driven) and with one of the highest dividend yield Revenues (EGP mn) 550 615 786 829
rates in the market, combined with an attractive DCF model upside. All of which make us reiterate our buy recommendation on National Maize. EBITDA Margin 22.2% 20.7% 18.9% 18.5%
1Q 2Q 3Q 9M 4Q FY
2009a 2010a 2009a 2010a 2009a 2010a 2009a 2010a 2009a 2010e Old 2010e New 2009a 2010e Old 2010e New EPS (EGP) 2.11 2.44 2.60 2.73
Revenues (EGP mn) 132 138 136 141 142 156 409 434 141 159 181 550 593 615
Growth 4% 4% 10% 6% 13% 29% 8% 12% DPS (EGP) 1.85 1.99 2.30 2.41
EBITDA (EGP mn) 30 35 33 29 34 32 100 96 22 32 31 122 128 128 PER 8.1x 7.0x 6.6x 6.3x
Growth 17% -10% -6% -4% 47% 45% 5% 5%
EBITDA Margin 22.6% 25.5% 24.0% 20.9% 24.1% 20.5% 24.5% 22.2% 15.3% 19.9% 17.2% 22.2% 21.6% 20.7% DY 10.8% 11.7% 13.4% 14.1%
Net Income (EGP mn) 17 23 21 19 22 21 60 64 14 21 21 74 85 85 EV/EBITDA 4.4x 4.6x 4.0x 3.8x
Growth 34% -7% -3% 7% 50% 51% 15% 15%
Source: National Maize historical & Jazira Capital estimates Net Debt (EGP mn) 91 132 135 135

1
 NATIONAL MAIZE
JAZIRA SECURITIES BROKERAGE
Sunday, October 31, 2010 RESULTS UPDATE

Income Statement (EGP mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f
Revenues 570 550 615 786 829 872 917 955 The decline in profit margins was rela-
Growth 15.1% -3.5% 11.9% 27.8% 5.5% 5.2% 5.1% 4.2% tively compensated with the increase in
EBITDA 86 122 128 148 153 158 162 165
Growth -8.2% 41.1% 4.8% 16.2% 3.3% 3.0% 2.8% 1.9%
selling prices, combined with the fact that
EBITDA Margin 15.1% 22.2% 20.7% 18.9% 18.5% 18.1% 17.7% 17.3% all the capex is now historical and the ex-
Depreciation & Amortization (19) (21) (20) (24) (23) (23) (22) (22) pansions are currently operating. Thereby,
Reported EBIT 68 102 108 125 130 135 140 144 target price declined 0.5% to EGP22.7
Non-Operating Items - - - - - - - -
Net Interest (9) (7) (2) (11) (11) (9) (7) (5) versus EGP22.8/share in the previous re-
Net Profit Before Tax 58 94 106 113 119 127 134 139 port.
Income Tax (16) (20) (21) (23) (24) (25) (27) (28)
Net Profit After Tax 42 74 85 91 95 101 107 111
Extraordinary Items - - - - - - - -
Minority Interest - - - - - - - -
Net Income 42 74 85 91 95 101 107 111
Non-Appropriation Items (9) (11) (13) (14) (14) (15) (16) (17)
Net Attributable Income 34 63 72 77 81 86 91 94
EPS 1.1 2.1 2.4 2.6 2.7 2.9 3.1 3.2
Growth -14.1% 73.1% 15.8% 6.7% 5.0% 6.5% 5.7% 3.8%

Balance Sheet (EGP mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f
Cash & Marketable Securities 20 69 53 63 69 68 78 86
Trade Receivables-Net 115 110 123 157 166 175 184 191
Inventory 54 60 76 105 128 134 141 147
Other Current Assets - - - - - - - -
Total Current Assets 189 239 252 326 363 377 403 424
Net Fixed Assets 424 407 492 478 465 453 442 431
Other LT Assets 32 66 - - - - - -
Non-Current Assets 456 473 492 478 465 453 442 431
Total Assets 645 711 744 804 828 830 845 855

Short Term Bank Debt & CPLTD 61 70 83 103 119 96 87 75

Account Payable 95 47 53 68 71 75 79 82
Dividends Payable 40 66 72 81 85 91 96 100
Other Current Liabilities 90 93 102 124 127 131 134 136
Total Current Liabilities 286 276 310 376 403 393 396 393
Long-Term Debt & Bonds - 25 30 14 - - - -
Other LT Liabilities 43 48 28 30 31 33 34 36
Non-Current Liabilities 43 73 59 44 31 33 34 36
Paid in Capital 220 295 295 295 295 295 295 295
Total Shareholders' Equity 317 362 375 385 394 404 415 426

Free Cash Flow (EGP mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f
NOPLAT 53 80 87 101 111 108 113 116
Depreciation 19 21 20 24 23 23 22 22
Gross Cash Flow 71 101 107 125 134 131 135 137
Gross Investments 13 (51) (141) (44) (36) (20) (21) (21) Source: National Maize historical figures & Jazira
Operating Free Cash Flow Excluding Intangibles 84 50 (34) 80 99 110 113 116 Capital estimates
Investment in Goodwill & Intangibles - - - - - - - -
Operating Free Cash Flow Including Intangibles 84 50 (34) 80 99 110 113 116

2
 NATIONAL MAIZE
JAZIRA SECURITIES BROKERAGE
Sunday, October 31, 2010 RESULTS UPDATE

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