ZAIN -Equity Report -23-05-2012

Recent Updates & Key Developments

Zain’s customer base grew 7% YoY in the first quarter of 2012, adding approximately 2.6 million subscribers to reach 40.3 million active customers. The main driving force behind this growth was Sudan, which added 3.2 million subscribers and represented a YoY growth of 29.6%. Offsetting this growth however was Zain KSA, which witnessed a 1.9 million decline in subscribers.

DCF- FCFF & Price Multiples

We have revised our previous valuation of Zain’s stock based on the company’s 1Q2012 financial results and its most recent developments. In order to reach our revised fair value of the stock, we used a weighted average of both the DCF-FCFF and the Price Multiples approaches, allocating 40% weight to the DCF-FCFF approach and 60% to the Multiples approach. We reached a weighted average fair value of Zain’s stock of KWD 0.912 hence representing a 28.4% upside compared to the current market price of KWD 0.710 as on 22/5/2012. Accordingly, we raise our previous update’s recommendation of “HOLD” to “ACCUMULATE” for Mobile Telecommunications Company (Zain).