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National Real Estate

Source: Taib Bank

Quarterly Result Update

NRE reported revenues of KWD 28.89 million during 9M09, down 5.4% YoY.

Net income remained almost flat at KWD 20.56 million during 9M09.

We have revised our FY2009 revenue estimates downwards by 20.3% due to lowering of profitability estimates for Agility. Net income estimates for 2009 have also been revised downwards by 24.0% to incorporate the revision in revenue and lower investment income.

We are downgrading our earlier OVERWEIGHT recommendation on NRE to UNDERWEIGHT with a revised DCF target price of KWD 0.187 on a downside of 11.6% on potential risks associated with its investment in Agility.

National Real Estate Company (NRE) reported a 5.4% YoY decrease in revenues to KWD 28.89 million during 9M09 from KWD 30.55 million in the same period last year. This was mainly due to a significant decline in the fair value of its investment properties even as rental income and share in the associates’ results increased during the period. The fair value of investment properties decreased by KWD 3.51 million compared to KWD 0.35 million in 9M08, sufficient to offset the increases in rental income and share in the associates’ results. The company’s rental income increased 7.9% to KWD 6.46 million and its share in associates’ results improved by 4.1% to KWD 25.93 million, on account of improved bottom-line performance by Agility, in which the company holds a 22.4% stake. Agility’s financial performance was marked by a 10.0% YoY decline in revenues to KWD 1,234.58 million. However, an 11.4% drop in overall expenses and a 24.7% slump in finance costs helped the company post a 7.2% increase in net income to KWD 115.55 million.

NRE’s total expenses were down 18.1% to KWD 8.00 million during 9M09 from KWD 9.77 million in the same period last year, led by lower general & administrative (G&A) expenses and reduced staff costs, partially offset by higher depreciation charge. The company’s G&A expenses dropped 19.0% to KWD 4.44 million from KWD 5.48 million in 9M08.

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