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Kuwait Projects Co.

Source: Taib Bank

Quarterly Result Update

Kuwait Projects Company (KIPCO) reported a total operating income of KWD 193.85 million during 1H10, down 16.0% YoY from KWD 230.36 million in 1H09.

Net profit plunged 55.8% YoY to KWD 9.56 million during 1H10 from KWD 21.64 million in 1H09.

We have revised our 2010E operating income downwards by 6.9% in view of the slow down in the banking sector. However, the net profit estimate has been revised upwards by 3.3%, on the expectation of lower operating costs.

KIPCO’s stock price has appreciated 38.8% since our last update report. Accordingly, we are revising our earlier OVERWEIGHT recommendation to NEUTRAL with a revised target price of KWD 0.495, implying an upside of 6.4%.

Profitability
During 1H10, net profit was down 55.8% to KWD 9.56 million from KWD 21.64 million, due to lower total income. As a result, adjusted annualised EPS declined to KWD 0.017 in 1H10 compared to KWD 0.039 during the same period last year.

We had updated KIPCO on July 12, 2010 with an OVERWEIGHT rating (target price of KWD 0.430, indicating a 28.4% upside). Currently, the company’s stock is trading at a P/E multiple of 12.36x and 8.86x on 2010E and 2011E earnings, and at a P/BV multiple of 0.90x and 0.85x on 2010E and 2011E BVPS, respectively. The stock has increased 0.7% on a YTD basis compared to a 1.9% decline in the KSE Price Index. Considering the above factors, we have arrived at a price target of KWD 0.495, implying an upside of 6.4% over the current price of KWD 0.465 (as of September 28, 2010). Accordingly, we our revising our earlier OVERWEIGHT recommendation to NUETRAL on Kuwait Projects Company .

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