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CFA Institute Research ChallengeHosted by

CFA Society Bahrain

Prepared byAhlia University

Table of ConTenTs

Highlights ��3

Business Description ��4Expanding broadband Services ��4Revenue �� 4Expense ��4Management ��4Shareholders ��4

Industry Overview and Competitive Positioning ��5Bahrain Economic Performance ��5Bahrain Telecom Sector overview ��5Mobile ��5Fixed Lines ��5Broadband ��6GCC Peer Review analysis ��6Porters Five Forces Analysis ��7

Investment Summary ��8High dividend yield with a steady dividend payout history ��8Low debt and strong cash flow generating ��8Financial Position ��8Possible risks ��8

Valuation ��9DDM Valuation ��9Required rate of return (Cost of equity) ��9Terminal Value ��9DCF Valuation ��9Revenue ��9Capital Expenditure (CAPEX) ��9Weighted Average Cost of Capital ��10Terminal Value ��10Relative Valuation ��10Weighting of the models ��10

Financial Analysis ��10Revenue estimates ��10Cost estimates ��10Debt to equity ��11DuPont Analysis ��11Activity & Liquidity ��11

Investment Risk ��12Industry risk ��12Company specific risk ��12

Appendix ��13

Refrences ��27

3

BASIC InFORmAtIOn

Company : Zain Bahrainticker symbol : ZAINBHPrimary Exchange1- Bahrain Bourse (BHB)target Price : BD 0�262 Current Price : BD 0�202Upside (%) : 29�7%Recommendation : BuyDecision

DAIly StOCk PRICES (BHD) - FIg.1

OVERVIEw

Telecommunication regulatory authority issued an individual mobile telecommunication license to Zain Bahrain on 22nd, April, 2003�

Zain is the second largest telecommunication company in the Kingdom of Bahrain� It had 724,548 subscribers in 2003�Zain has many branches all over the kingdom, almost in all the malls and areas� Recently, Zain launched the 4G LTE Network� As well as, it was the first to launch a nationwide combined EDGE and 3G network in the Middle East in 2003, also, the first to launch mobile TV services in 2004�

Zain provides many products and services; the mobile is having 76�6% of the total revenue, Interconnection 4�2%, Fixed Wireless 10�2% and other product and services 9�1%�

HigHTligHTs

We issue a BUY recommendation with target price BHD0�262 in which it reflects 29�7% upside from current price BHD0�202 on January 15, 2015� Our decision is based on three valuation models: Dividend Discount Model, Discounted Cash Flow Model and Price Relative Model with a weight of 40:40:20�

High dividend yield with a steady dividend payout history:

Compare to other GCC and Global telecom companies, the Dividends pay-out ratio of Zain Bahrain is the highest� Indeed, with a dividend pay-out ratio of approximately 80% and dividend yield of 8%, Zain Bahrain has surpasses the average dividend yield of the GCC telecom companies of 5%�

low debt and strong cash flow generating:

Zain Bahrain has a strong cash flow generation at operation levels along with consistent operating cash flows history� In spite of the fact that Zain Bahrain has spent greatly on its CAPEX and sustains the high dividend payout, Zain has low debt to equity ratio which stand at 43%�

2011 performance :

The revenue was decreasing and the cost of revenue was thehighest among all the years but the DMO was the lowest�

2012 performance :

Was an improbable year in Zain’s history regarding its revenue to fall under the maximum level, while Distribution, marketing at operation expense has increased rapidly� In addition, the cost of revenue started to decrease sharply�

2013 performance :

As a starting of a new year the revenues hit the peak whereas, the Distribution, marketing at operation expense was constantly rising as well as, the cost of revenue was in the process of falling� Moreover, the amortization increased by 2%�

2014 performance :

The ongoing competition for Zain in this year started with both revenues gains and costs to fall down� Nevertheless, the Distribution, marketing at operation expense has reduced again� Despite, the growth of amortization

increased in previous year it began to diminish by 1�1%�

( Source : Bahrain Bourse )

4

ZAIn REVEnUES - FIg.2

ZAIn ExPEnSES - FIg.3

mAjOR SHAREHOlDER PAttERn BEFORE IPO - FIg.4

business DesCripTion

Zain Bahrain is the second telecommunication operator lunched in Bahrain, providing Mobile and Fixed telecommunications and internet services� Zain Bahrain was granted the mobile license on April 19, 2003, by Bahrain Telecommunications Regulatory Authority (TRA)� The license term is 15 years with a right to apply to TRA for a renewal�

Expanding broadband Services

Zain provides a very good flexibility in the service, the customer can decide the way of using the telecom system: more data is needed or more talk time� Zain made it possible to go beyond voice services, into mobile data sharing by using the 3G, 3�5G and 4G networks�

Zain have a robust business sector service called BLife , that provide tailor-made solutions for any business� For example, Zain was the first to launch Virtual Private Network for businesses; the teams are linked by Zain and have a cost-effective and efficient communications network�

The first nation-wide WIMAX networks in the world in 2007 and launching the 4G LTE (Long-Term Evolution) network in 2013� This means Zain’s customers are taking advantage of the developments in Bahrain�

Revenue

Zain receives 76�6% of the total revenue from Mobiles, which is the primary source of the revenue� 10�2% is gained from the Fixed Wireless, 4�2% from Interconnection (Calls to other telecommunication companies), while 9�1% is generated from other products and services, such as: selling mobiles, mobile accessories, TVs and others� (Figure 2)

Expense

The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization� (Figure 3)

management

The company’s management is led by Mr� Scott Gegenheimer who is the Chief Executive Officer (CEO) of the company� The CEO brings along strong experience in Zain from a number of telecom operators in MENA region and USA� Since inception, Zain management has applied the right competitive strategies which enable it to compete efficiently in Bahrain�

The company’s goal is to be the best mobile telecommunication service provider in the Kingdom of Bahrain, by bringing innovation, quality of coverage and services, and a perfect customer service experience in anytime and anywhere� The company manages to grab a market share of 32�7% of the total mobile subscriber through the launch innovative and new services in the market�

Shareholders

Zain Bahrain is formed as a closed joint stock company by Mobile Telecommunication Company K�S�C (63�00% pre IPO), Shaikh Ahmed Bin Ali Alkalifa (18�52% pre IPO) and other minor shareholders�

Zain Bahrain underwent an IPO on Bahrain Bourse in September 2014, which raised BD 4�8m for 15% of its shares� (Figure 4)

( Source : Zain Bahrain )

5

tElECOm REVEnUE - FIg.5

mARkEt mOBIlE SUBSCRIBER - FIg.6

COmPAnIES SUBSCRIBERS - FIg.7

ZAIn SERVICES REVEnUES - FIg.8

inDusTry overview anD CompeTiTive posiTionaing

Bahrain Economic Performance

The Bahraini economy experienced a significant acceleration in its headline growth in 2013 when the Kingdom’s real GDP expanded by 5�3% as compared to 3�4% in 2012� In contrast to the 15�3% pace of expansion in the hydrocarbons sector, Bahrain’s non-oil economy expanded by a fairly modest 3�0%� This growth pattern is likely to be significantly changed this year due to significant decrease in oil price�

Bahrain telecom Sector overview

Kingdom of Bahrain has 20 different companies that provide different services in telecommunication sector, in which it has a gross annual turnover of BHD423 million in year 2013, which it shows an increase by 3�5% from the previous year� The revenues for telecommunication sector counted as 4% from total Gross Domestic Product of Kingdom of Bahrain, in which it equal to 1�31 million from the total 32�79 million� (TRA)

mobile:

Mobile service is the biggest part from the total revenue from telecommunication sector (Figure 5) and it is continuously growing, in 2011 there were 1�7 million subscribers and it increased by 23�5% to reach 2�1 million subscribers� In the end of 2013 the number of subscriber reached to 2�21 with a penetration level of 173%, and the end of the third quarter of 2014 there were 2�41 subscribers with penetration level of 183% that shows a growth of 9�05% in number of subscriber (Figure 6)�

From (Figure 7) we can know that Zain Bahrain has a 32�7% of the total mobile subscriber as it is their market share and they will have approximately 0�788 million subscriber from the total 2�41 at the end of the third quarter of 2014 and the rest will be between Batelco 44% and Viva 23�3% as they are the only mobile operator in Kingdom of Bahrain� In the end of the third quarter of 2014, the percentage of clients who has a prepaid subscription is 79%, the rest is postpaid subscription� (Appendix F)

Zain Basically is losing the subscribers in past few quarters and it explains that Batelco has an advantage from that, in which in the first quarter of 2014 Batelco has 40�9% market share and it increased to reach 44% in the second quarter of 2014, however Zain has a market share of 34�9% in the first quarter of 2014 and it decreased to 32�7% in the second quarter of 2014� This figure explains the change in the market share of the three operators in the past few quarters� (Appendix F)

As it shown the mobile service is large portion of Zain revenue with 78�1% in which it other services have proportion of 21�9%� (Figure 8)

Fixed lines:

Fixed lines recently faces a reduction in revenues, because of the big number of users that switches from using the fixed lines to mobile which it reflects how people are really interested in the change in technology� At the end of the third quarter of 2014 there were approximately 246,000 fixed lines in Bahrain with a penetration of 19% which it depreciates from the last two years�

( Source : TRA )

( Source : TRA )

( Source : Team Calculation )

6

BROADBAnD SUBSCRIBERS - FIg.9

mARkEt PROPORtIOn OF BROADBAnD - FIg.10

nEt PROFIt OF PEER COmPAnIES - FIg.11

gCC DEmOgRAPHIC - FIg.12

Broadband:

Broadband services basically is going through a growth since 2012, in the number of subscriber we can notice this growth starting from 2012 which there was almost 1�26 million subscriber, however in 2013 the number of subscriber face a growth of 31% to reach 1�64 million� In the third quarter of 2014 there were 1�84 million subscribers with a growth of 12% and penetration level of 140%� (Figure 9)

Mobile broadband subscribers were represent 91% of the total broadband subscribers in Bahrain in the third quarter of 2014, fixed wired broadband has 3% of the total subscribers and it seems that it is growing in this time because of the deregulation on this part and the attractive pricing policies that Batelco offers� Fixed wireless broadband has 6% from total subscribers� (Figure 10)

gCC peer review analysis

GCC countries growing in telecommunication sector since the end of 2008, in which the economic for those counties is increasing and another main cause is the deregulation in which it makes easier to have more competitors in this sector and at the same time to grow�

The mobile penetration consists of 177% which reflects the growth in population� from an economic point of view we estimate that the growth will be in its peak in Qatar in 2022 because they will host the world cup at that time, the second country that we estimate it will expand its growth is United Arab of Emirates as they have the global event EXPO 2020, in which we can say that in this time that the economic for the GCC countries is expanding as they are part from it� (Figure 12)

In the telecommunication sector we can see that the Saudi Telecommunication Company (STC) has the highest income comparing with other operators in GCC countries with a net income of BHD 994,736 at the end of 2013 as it is increased by 36% comparing with the previous year� Etisalat takes the second place with net income of BHD 726,628 at the end of 2013 where an increase of 5% occurs from 2012� (Figure 11)

On the other hand Zain KSA recorded a net loss of BHD 165,979 making it in the last of the list of GCC telecommunication companies with not a big change comparing with the previous year� Vodafone Qatar takes places directly before Zain KSA with a net loss of BHD 29,700 at end of 2013, however we can see the big jump that it happened by 36�8% in which it decreases it losses amounted by net loss of BHD 46,966 in 2012�

( Source : TRA )

7

FORCES AnAlySIS - FIg.13

porTers five forCes analysis

Barging Power of Buyers

Telecommunication companies provide almost same products and services which do not vary much� Therefore, customers have many choices and they are seeking for low price with reliable services� The bargaining power of residential buyers is very high because of low switching cost and availability of the substitute while the bargaining power of business buyers is medium because their products and services are customized� Since residential customer is greater than business customer that make bargaining power of buyers to be high�

Barging Power of Suppliers

In order to provide services telecommunication companies need telecom equipment and devices (broadband switching, mobile handsets, routers, etc�)� We believe that the bargaining power of suppliers is low for two reasons 1) there are many telecom equipment suppliers 2) Zain Group which operate in more than 5 countries is a big buyer

threat of new entrants

The likelihood of new entrants in Bahrain market is low due to 1) Bahrain market is small which has population less than 1�5 million 2) Bahrain already has 3 mobile companies 3) telecommunication required large economies of scale and required hug capital to construct the infrastructure�

threat of substitute (HIgH)

The customer has the choice to choose between Zain and other telecom operators which provide almost the same products and services� In addition, the new rule by the Telecommunications Regulatory Authority (TRA) which allows customers to easily shifts from one Telecom Company to another and keep the same mobile number�

Intensity of competitive rivalry (HIgH)

Bahrain witnesses a heavy competition environment and price war between the three major mobile telecommunications operators (Batelco, Zain, and Viva)� Another competition come non-mobile telecommunications operators such as Menatelecom and Lightspeed which provide a specific service such as Broadband Internet�

(ReFeR To FiguRe 13 FoR A visuAl RepResenTATion)

8

Capex to CFO - FIg.14

Valuation methods

To reach to the target price, we chose to apply three valuation models namely Dividend Discount Model (DDM), Discounted Cash Flow Model (DCF) and relative valuation model in the level of importance of 40:40:20 respectively� Under relative valuation model we applied three multiples (P/E, P/BV, and P/FCFF)�

invesTmenT summary

We issue BUY recommendation on Zain Bahrain with a target price of BD 0�262 this offer 29�7% upside from the current price level of BD 0�202 on January 15, 2015�

High competition in Kingdom of Bahrain makes any of the three operators react fast to the changes that occur in the market� The changes related to technology, introducing offers, new packages, or perhaps lowering prices could have their impact on the company profitability and on the price itself�

High dividend yield with a steady dividend payout history:

Zain Bahrain is among the highest dividend yields companies in comparison to GCC and Global telecom companies�

Zain Bahrain has a dividend payout ratio of approximately 80%� Dividend yield for Zain is around 8% which is higher than the GCC telecom company’s average of 5%�

low debt and strong cash flow generating:

Zain Bahrain has a strong cash flow generation at operation levels along with consistent operating cash flows history�

In spite of the fact that Zain Bahrain has spent greatly on its CAPEX and sustains the high dividend payout, Zain has low debt to equity ratio which stands at 43%� (Figure 14)

Financial Position

We assumed in our projection that Zain Bahrain will have an increase in the revenues equal to 6%, this assumption is based on the growing demand for data usage and growth in fixed and mobile broad band subscribers�

This will lead to increase the ability of generating revenues and maintain a strong financial position� (Appendix A)

Possible risks

Our forecasting and assumption where based on fair competitive environment between the three main players (Zain, Batelco, Viva) any unexpected price war may influence the forecasted variables� Indeed, the forecasted variables may face one of the following risks: regulation, economic, competition, politic, credit and management risk�

( Source : Company Data, Team Estimates )

9

DDm - FIg.15

CAPm - FIg.16

valuaTion

To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively�

DDm Valuation

We applied dividend discount model to evaluate Zain Bahrain common share� This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region� Zain has a dividend payout ratio of approximately 80%� Dividend yield for Zain is around 8% which is higher than the regional peer companies’ average of 5%� We used two stages dividend discount model to expect Zain fair value� The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two� We found that target price is BD� 0�231� (Figure 15)

Required rate of return (Cost of equity)

Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return� Risk free rate was 5% based on a 10 years government bond� Two methods have been used to measure beta: industry average of all telecommunication companies as well as market model� Nevertheless, we got the same beta under both methods which was 1�02� Since, we do not have historical prices of Zain we used Batelco historical prices (two years, daily basis) to calculate beta and then adjusted for Zain’s leverage� Market return was 11�3% calculated through the average market return� (Figure 16)

terminal Value

The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio� The terminal value discounted by using cost of equity of 12% calculated earlier�

DCF Valuation

We also applied Discounted Cash Flow to the firm (DCF)� Under this model we arrive at a price of BD 0�295 for the fair value of the share� The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt� The debt to assets for Zain stands at 22�45%� (Appendix H)

Revenue

We estimate that there will be an increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share� The population of Kingdom of Bahrain is growing by 3% which will affect and increase the number of subscribers� By having the latest technology in the market, Zain will be up to date with customers’ requirements, like the increase in Data usage through apps such as Skype, Viper and Tango, making an alternative of using Voice over IP�

Capital Expenditure (CAPEx)

Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well� One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment�

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DD M Valuation 2014

2015 F

2016 F

2017 F

2018 F

2019 F

Period

1 2 3 4 5

EPS 0.016 0.023 0.025 0.027 0.029 0.031 Dividend payout ratio 80% 80% 80% 80% 80% 80% Dividend per share 0.013 0.018 0.020 0.021 0.023 0.025 Discount factor

0.892 0.796 0.711 0.634 0.566

Terminal Value 0.250

Present Value 0.142 0.016 0.016 0.015 0.015 0.014 Fair Value 0.231

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To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively.

DD M Valuation

We applied dividend discount model to evaluate Zain Bahrain common share. This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region. Zain has a dividend payout ratio of approximately 80%. Dividend yield for Zain is around 8% which is higher than the

We used two stages dividend discount model to expect Zain fair value. The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two. We found that target price is BD. 0.231. (appendix XX)


Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return. Risk free rate was 5% based on a 10 years government bond. Beta is calculated as 1.02, in which we calculated Batelco Beta by using market model and then we adjust it for Zain capital structure. Market return was 11.3% calculated through the average market return. (appendix XX)

Terminal Value

The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio. The terminal value discounted by using cost of equity of 12% calculated earlier.

D C F Valuation

We also applied Discounted Cash Flow to the firm (DCF). Under this model we arrive at a price of BD 0.295 for the fair value of the share. The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt. The debt to assets for Zain stands at 22.45%. (appendix XX)

Revenue

We estimate that there will be increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share.

Capital Expenditure (C APE X)

Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well. One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment. Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time. This will result in fluctuations in the free cash flow. As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology( ).

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DD M Valuation 2014

2015 F

2016 F

2017 F

2018 F

2019 F

Period

1 2 3 4 5

EPS 0.016 0.023 0.025 0.027 0.029 0.031 Dividend payout ratio 80% 80% 80% 80% 80% 80% Dividend per share 0.013 0.018 0.020 0.021 0.023 0.025 Discount factor

0.892 0.796 0.711 0.634 0.566

Terminal Value 0.250

Present Value 0.142 0.016 0.016 0.015 0.015 0.014 Fair Value 0.231

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To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively.

DD M Valuation

We applied dividend discount model to evaluate Zain Bahrain common share. This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region. Zain has a dividend payout ratio of approximately 80%. Dividend yield for Zain is around 8% which is higher than the

We used two stages dividend discount model to expect Zain fair value. The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two. We found that target price is BD. 0.231. (appendix XX)


Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return. Risk free rate was 5% based on a 10 years government bond. Beta is calculated as 1.02, in which we calculated Batelco Beta by using market model and then we adjust it for Zain capital structure. Market return was 11.3% calculated through the average market return. (appendix XX)

Terminal Value

The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio. The terminal value discounted by using cost of equity of 12% calculated earlier.

D C F Valuation

We also applied Discounted Cash Flow to the firm (DCF). Under this model we arrive at a price of BD 0.295 for the fair value of the share. The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt. The debt to assets for Zain stands at 22.45%. (appendix XX)

Revenue

We estimate that there will be increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share.

Capital Expenditure (C APE X)

Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well. One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment. Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time. This will result in fluctuations in the free cash flow. As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology( ).

10

wACC - FIg.17

Relative Valuation - FIg.18

models weight - FIg.19

Revenue Estimation - FIg.20

Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time� This will result in fluctuations in the free cash flow�

As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology�

weighted Average Cost of Capital

Weighted average cost of capital (WACC) is equal to 7�32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48�31%� Cost of debt equals to 2�9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51�69%� (Figure 17)

terminal Value

The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7�32% with the growth rate of 2%�

Relative Valuation

Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price� Then, we matched each of these ratios with regional telecom companies’ median ratios� The final multiple price has been arrived by applying an average on the fair price arrived by each of the multiples� (Figure 18)� The fair price arrived by the relative valuation method for the Zain is BD 0�263�

weighting of the models

We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively� The target price for Zain is BD 0�262 with an expected upside of 29�7%� (Figure 19)

finanCial analysis

Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio�

Revenue estimates

The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers� The total revenue is expected to increase by approximately 6% annually over the five years� At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD� 100,728,350� The sales to asset and sales to fixed asset ratio is expected to increase from 0�61x & 1�25x in 2014 to 0�66 & 1�39 in 2015� (Figure 20)

Cost estimates

The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization�

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Valuation M ethod Weight

Fair Value

Weighted Avg.

DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262

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Weighted Average Cost of Capital

Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)

Terminal Value

The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.

Relative Valuation

Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom

the fair price arrived by each of the multiples. (appendix XX)

The fair price arrived by the relative valuation method for the Zain is BD 0.263.

Weighting of the models

We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)

=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.

Revenue estimates

The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)

Cost estimates

The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.

Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)

Debt to equity

Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.

Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net

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11

Cost Estimates - FIg.21

Debt to equity

Debt to equity ratio is 0% from 2010 to 2012while this ratio reaches 38% in 2013� In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019� Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers� The ratios explain the changes occur to the net income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements� (Appendix e)

DuPont Analysis

Looking at the entire 10 years period, ROE has been significantly decline from 43�7% in 2009 to 16�5% in 2019F� This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years� Two potential areas that we should investigate are 1) capital structure and 2) expenses� Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected� This can cause serious problems when Zain has negative net income� Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk� Therefore, Zain has high proportion of fixed cost� This can cause serious problems when revenue decreases� (Figure 22)

Activity & liquidity

In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt� Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible� (Appendix e)

ROE analysis (Fig 22)

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income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements.

DuPont Analysis

Looking at the entire 10 years period, ROE has been significantly decline from 43.7% in 2009 to 16.5% in 2019F. This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years. Two potential areas that we should investigate are 1) capital structure and 2) expenses.

Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected. This can cause serious problems when Zain has negative net income.

Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk. Therefore, Zain has high proportion of fixed cost. This can cause serious problems when revenue decreases. (appendix XX)

Activity & L iquidity

In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt. Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible.

Capital structure

Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. The level of debt increased in 2013 and 2014 because of the improvement they made in the service, in addition to introducing the 4G service. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.

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12

invesTmenT risk

inDusTry risk

Regulation risk (RR)

Telecommunication is considered one of the most regulated and monitored industry� Investments may need to be made in regions despite the fact that it may not always be feasible� In addition, the government may prohibit the companies in this industry from offering some products and services for security and other reasons� Because of continuously evolving nature of this industry, the companies might invest into segments and geographies which may have never been tested before because of the industry�

Economic risk (ER)

Bahrain’s economy depends heavily on the production of oil and its product� Almost 60% of Bahrain’s export receipts are contributed by petroleum production and refining� Additionally, petroleum production and refining constitute about 70% of government revenues� A decline in oil prices will likely slow down the economy and cause a budget deficit which may adversely affect companies�

Competition (COR)

The competition environment has the great impact on prices and sales� Bahrain witnesses a heavy competition environment and price war between the three major mobile telecommunications operators (Batelco, Zain, Viva) which may distort the forecasted sales number�

Political risk (PR)

Political difficulties have an impact on the telecom sector� Zain was not an exception; their sales were affected by the Arab spring in 2011, it decreased by 13% in that year� This decrease is the largest in the last five years comparing to (-4% in 2010, -13% in 2011, -5% in 2012, +6% in 2013 and -4% in 2014)�

Company speCifiC risk

Credit risk (CR)

In telecommunication companies products and services are sold on both pre-paid and postpaid (credit) terms� Post-paid terms are exposed to credit risk while pre-paid services are aimed at reducing credit risk�

management risk (mR)

It isn’t doubtable that companies in telecommunication industry are very much technology oriented and competitive� Indeed, the management vision and credibility are the main things that influence the performance of any company� Therefore, in order maintain its business growth; it is important for companies in this industry to formulate the right strategy at the right time�

Risks to target price (RtP)

Both DDM and DCF model relies largely on terminal value� Terminal value is very sensitive to growth rate as well as discount rate� Therefore, various scenarios analysis has been assumed with terminal growth rate in the range of 1% and 3% and WACC of 5�32% and 9�32% for DCF model (for DDM Cost of equity range of 10�06% and 14�06%) the price of the stock would deduce as given in the table below� Those was reflected in which it justify each level of risk�

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FIg.21 ( SEnSItIVIty AnAlySIS ) SOURCE : tEAm EStImAtES

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97)

(23,

935.

89)

(25,

372.

04)

(26,

894.

36)

(28,

508.

02)

(3

0,21

8.50

)

Prov

isio

ns fo

r dou

btfu

l deb

ts

(3

88.0

0)

(2

95.0

0)

(2,0

13.0

0)

(1,3

36.0

0)

(1,5

13.0

0)

(1,3

89.1

3)

(1

,595

.73)

(1

,691

.47)

(1

,792

.96)

(1

,900

.53)

(2,0

14.5

7)

Prov

isio

n fo

r inv

ento

ries

(2

4.00

)

(24.

00)

(7

2.00

)

(72.

00)

(1

20.0

0)

(2

11.0

0)

(8

7.76

)

(93.

03)

(9

8.61

)

(104

.53)

(1

10.8

0)

Ope

ratio

n Pr

ofit

27

,652

.00

21

,387

.00

12

,171

.00

6,

406.

00

5,00

2.00

7,

311.

07

8,

688.

73

9,21

0.05

9,

762.

65

10,3

48.4

1

10

,969

.32

Inte

rest

inco

me

343.

00

28

7.00

144.

00

27.0

0

8.

00

40.0

0

42

.40

44

.94

47

.64

50

.50

53.5

3

Oth

er in

com

e

29

7.00

31

.00

489.

00

8.

00

61

0.00

163.

00

167.

55

17

7.60

188.

26

19

9.56

211.

53

Gai

n on

Cur

renc

y re

valu

atio

n

15

5.00

226.

00

24

3.00

176.

00

10

4.00

56

.00

15

9.57

169.

15

17

9.30

190.

05

20

1.46

Oth

er p

rovi

sion

s

-

-

-

-

-

(7

53.0

0)

-

-

-

-

-

Fina

nce

cost

s

(530

.00)

(59.

00)

-

(208

.00)

(321

.00)

(794

.00)

(6

35.2

0)

(4

76.4

0)

(3

17.6

0)

(1

58.8

0)

(7

9.40

)

Prof

it of

the

year

27

,917

.00

21

,872

.00

13

,047

.00

6,

409.

00

5,40

3.00

6,

023.

07

8,

423.

05

9,12

5.35

9,

860.

25

10,6

29.7

2

11

,356

.43

T

otal

Com

preh

ensi

ve in

com

e of

the

year

27

,917

.00

21

,872

.00

13

,047

.00

6,

409.

00

5,40

3.00

6,

023.

07

8,

423.

05

9,12

5.35

9,

860.

25

10,6

29.7

2

11

,356

.43

0.08

72

0.

0684

0.04

08

0.

0200

0.01

69

0.

0164

0.

0229

0.02

48

0.

0268

0.02

89

0.

0309

Bas

ic e

arni

ngs p

er sh

are

(In

Fils

)

872.

00

68

4.00

408.

00

20

0.00

169.

00

75.2

9

105.

29

11

4.07

123.

25

13

2.87

141.

96

ap

pen

Dix

a :

inC

om

e s

TaT

emen

T

14

Bal

ance

S

heet

20

09

2010

20

11

2012

20

13

E20

14

E20

15

E20

16

E20

17

E20

18

E20

19

AS

SE

TS

C

urre

nt A

sset

s

Cas

h an

d B

ank

Bal

ance

s 19

,740

.00

18,0

97.0

0 5,

238.

00

1,76

6.00

3,

156.

00

14,8

78.4

4 15

,384

.75

17,2

12.6

8 15

,372

.07

13,5

55.6

2 11

,188

.27

Acc

ount

s an

d ot

her

rece

ivab

les

25,0

35.0

0 19

,111

.00

21,5

54.0

0 19

,930

.00

20,6

44.0

0 24

,000

.00

21,5

20.4

4 22

,811

.66

24,1

80.3

6 25

,631

.19

27,1

69.0

6

Inve

ntor

ies

2,40

7.00

2,

625.

00

2,60

1.00

1,

595.

00

2,97

1.00

3,

040.

64

3,11

1.91

3,

184.

85

3,25

9.50

3,

335.

90

3,41

4.09

O

ther

s

1,

978.

36

2,58

9.36

3,

199.

36

3,80

8.36

4,

416.

36

Tota

l Cur

rent

Ass

ets

47,1

82.0

0 39

,833

.00

29,3

93.0

0 23

,291

.00

26,7

71.0

0 41

,919

.08

41,9

95.4

5 45

,798

.56

46,0

11.2

9 46

,331

.07

46,1

87.7

8

N

on-C

urre

nt A

sset

s

Pro

perty

Pla

nt a

nd

Equ

ipm

ent

41,1

39.0

0 46

,309

.00

49,8

48.0

0 53

,310

.00

61,3

67.0

0 60

,181

.77

57,2

41.4

2 52

,688

.44

49,9

51.4

1 44

,991

.18

37,9

67.3

8

Inta

ngib

le a

sset

s 7,

754.

00

8,09

6.00

10

,155

.00

15,4

12.0

0 19

,166

.00

20,3

72.2

6 22

,542

.03

26,3

74.6

8 32

,174

.09

40,2

90.6

0 51

,127

.85

Tota

l Non

-Cur

rent

Ass

ets

48,8

93.0

0 54

,405

.00

60,0

03.0

0 68

,722

.00

80,5

33.0

0 80

,554

.03

79,7

83.4

5 79

,063

.12

82,1

25.5

0 85

,281

.78

89,0

95.2

3

Tota

l Ass

ets

96,0

75.0

0 94

,238

.00

89,3

96.0

0 92

,013

.00

107,

304.

00

122,

473.

11

121,

778.

90

124,

861.

67

128,

136.

79

131,

612.

85

135,

283.

01

LIA

BIL

ITIE

S A

ND

E

QU

ITY

Liab

ilitie

s

Cur

rent

Lia

bilit

ies

B

ank

Ove

rdra

ft -

- 83

9.00

9,

271.

00

- -

- -

- -

- A

ccou

nt P

ayab

le a

nd

Acc

rual

s 24

,450

.00

26,4

42.0

0 25

,466

.00

23,6

84.0

0 29

,166

.00

30,2

57.7

3 31

,390

.33

32,5

65.3

3 33

,784

.31

35,0

48.9

1 36

,360

.85

Cur

rent

Por

tion

of te

rm

loan

s 2,

585.

00

- -

- 3,

286.

00

4,56

8.00

4,

568.

00

4,56

8.00

4,

568.

00

4,56

8.00

4,

568.

00

Def

erre

d re

venu

e 4,

377.

00

4,14

4.00

3,

950.

00

4,74

9.00

4,

769.

00

4,84

9.00

4,

930.

34

5,01

3.05

5,

097.

14

5,18

2.65

5,

269.

59

Fina

nce

Leas

e O

blig

atio

ns

127.

00

- -

- -

- -

- -

- -

To

tal C

urre

nt L

iabi

litie

s

31,5

39.0

0 30

,586

.00

30,2

55.0

0 37

,704

.00

37

,221

.00

39,6

74.7

3 40

,888

.68

42,1

46.3

8 43

,449

.45

44

,799

.56

46,1

98.4

4

Non

-Cur

rent

Lia

bilit

ies

N

on-C

urre

nt P

ortio

n of

te

rm lo

ans

311.

00

- -

- 16

,714

.00

19,8

32.0

0 19

,832

.00

19,8

32.0

0 19

,832

.00

19,8

32.0

0 19

,832

.00

Pro

visi

on fo

r em

ploy

ees

end

of s

ervi

ce b

enef

its

317.

00

272.

00

314.

00

273.

00

330.

00

330.

00

330.

00

330.

00

330.

00

330.

00

330.

00

Oth

ers

- -

- -

- 3,

592.

76

To

tal N

on-C

urre

nt

Liab

ilitie

s 62

8.00

27

2.00

31

4.00

27

3.00

17

,044

.00

23,7

54.7

6 20

,162

.00

20,1

62.0

0 20

,162

.00

20,1

62.0

0 20

,162

.00

ap

pen

Dix

b :

ba

lan

Ce

sH

eeT

15

Tota

l Lia

bilit

ies

32,1

67.0

0 30

,858

.00

30,5

69.0

0 37

,977

.00

54,2

65.0

0 63

,429

.49

61,0

50.6

8 62

,308

.38

63,6

11.4

5 64

,961

.56

66,3

60.4

4

E

QU

ITY

Sha

re C

apita

l 32

,000

.00

32,0

00.0

0 32

,000

.00

32,0

00.0

0 32

,000

.00

36,8

00.0

0 36

,800

.00

36,8

00.0

0 36

,800

.00

36,8

00.0

0 36

,800

.00

Sha

re P

rem

ium

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

10

0.00

S

tatu

tory

Res

erve

4,

781.

00

6,96

8.00

8,

272.

00

8,91

3.00

9,

453.

00

9,45

3.00

9,

453.

00

9,45

3.00

9,

453.

00

9,45

3.00

9,

453.

00

Ret

aine

d E

arni

ngs

27,0

27.0

0 24

,312

.00

18,4

55.0

0 13

,023

.00

11,4

86.0

0 12

,690

.61

14,3

75.2

2 16

,200

.29

18,1

72.3

4 20

,298

.29

22,5

69.5

7 To

tal E

quity

63

,908

.00

63,3

80.0

0 58

,827

.00

54,0

36.0

0 53

,039

.00

59,0

43.6

1 60

,728

.22

62,5

53.2

9 64

,525

.34

66,6

51.2

9 68

,922

.57

Tota

l Lia

bilit

ies

and

Equi

ty

96,0

75.0

0 94

,238

.00

89,3

96.0

0 92

,013

.00

107,

304.

00

122,

473.

11

121,

778.

90

124,

861.

67

128,

136.

79

131,

612.

85

135,

283.

01

ap

pen

Dix

b :

ba

lan

Ce

sH

eeT

16

Cas

h Fl

ow

2009

20

10

2011

20

12

2013

E2

014

E201

5 E2

016

E201

7 E2

018

E201

9 C

ash

Flow

s Fr

om O

pera

ting

Act

iviti

es

Prof

it fo

r The

Yea

r

27

,917

.00

21

,872

.00

13

,047

.00

6,

409.

00

5,40

3.00

6,

023.

07

8,42

3.05

9,

125.

35

9,86

0.25

10

,629

.72

11

,356

.43

A

djus

tmen

t For

:

Dep

reci

atio

n an

d A

mor

tizat

ion

10

,450

.00

14

,175

.00

15

,770

.00

20

,877

.00

24

,320

.00

22

,144

.97

23,

935.

89

25,3

72.0

4

26,8

94.3

6

28,5

08.0

2

30,2

18.5

0

Gai

n on

dis

posa

l of P

rope

rty,

Pla

nt

and

Equi

pmen

t -

-

(359

.00)

-

-

(4

0.00

)

-

-

-

-

-

Insu

ranc

e C

laim

-

-

-

-

(470

.00)

-

-

-

-

-

-

Prov

isio

n fo

r Dou

btfu

l Deb

ts a

nd

Slow

mov

ing

Inve

ntor

ies

41

2.00

319.

00

2,08

5.00

1,

408.

00

1,63

3.00

-

-

-

-

-

-

Fina

nce

Cos

ts

53

0.00

59

.00

-

208.

00

32

1.00

-

-

-

-

-

-

Inte

rest

inco

me

(343

.00)

(287

.00)

(144

.00)

(2

7.00

)

(8

.00)

-

-

-

-

-

-

Prov

isio

n fo

r em

ploy

ees

end

of

serv

ice

bene

fits

89.0

0

15

0.00

81

.00

78

.00

62

.00

-

-

-

-

-

-

Loss

on

Prop

erty

, Pla

nt a

nd

Equi

pmen

t writ

ten

off

-

-

-

-

65.0

0

-

-

-

-

-

-

O

pera

ting

Prof

it be

fore

wor

king

C

apita

l cha

nges

39

,055

.00

36

,288

.00

30

,480

.00

28

,953

.00

31

,326

.00

31

,196

.04

32,

358.

94

34,4

97.3

8

36,7

54.6

1

39,1

37.7

4

41,5

74.9

4

(Incr

ease

)/Dec

reas

e in

acc

ount

s nd

ot

her r

ecei

vabl

es

(2,3

69.0

0)

6,22

5.00

(4

,426

.00)

288.

00

(1,7

57.0

0)

(5,0

33.0

0)

(2,4

79.5

6)

(1,2

91.2

3)

(1,3

68.7

0)

(1,4

50.8

2)

(1,5

37.8

7)

(incr

ease

)/Dec

reas

e in

Inve

ntor

ies

(6

40.0

0)

(2

42.0

0)

(48.

00)

93

4.00

(1

,496

.00)

(6

9.64

)

(71.

27)

(7

2.94

)

(74.

65)

(7

6.40

)

(78.

19)

(incr

ease

)/Dec

reas

e in

acc

ount

s Pa

yabl

e an

d ac

crua

ls

(2

87.0

0)

1,78

8.00

(1

,064

.00)

(1

,866

.00)

5,

420.

00

(1,6

77.0

0)

1,13

2.60

1,

175.

00

1,21

8.98

1,

264.

61

1,31

1.94

(In

crea

se)/D

ecre

ase

in d

efer

red

reve

nue

1,

498.

00

(2

33.0

0)

(1

94.0

0)

79

9.00

20

.00

80

.00

81.

34

82.7

1

84.0

9

85.5

0

86.9

4

Cas

h G

ener

ated

from

Ope

ratin

g A

ctiv

ities

37

,257

.00

43

,826

.00

24

,748

.00

29

,108

.00

33

,513

.00

24

,678

.04

31,

022.

04

34,3

90.9

2

36,6

14.3

3

38,9

60.6

3

41,3

57.7

5

Paym

ent o

f em

ploy

ees

end

of s

ervi

ce

bene

fits

(3

5.00

)

(103

.00)

(3

9.00

)

(119

.00)

(5

.00)

(1

2.00

)

(12.

00)

(1

2.00

)

(12.

00)

(1

2.00

)

(12.

00)

Net

Cas

h fr

om O

pera

ting

Act

iviti

es

37,2

22.0

0

43,7

23.0

0

24,7

09.0

0

28,9

89.0

0

33,5

08.0

0

24,6

66.0

4

3

1,01

0.04

34

,378

.92

36

,602

.33

38

,948

.63

41

,345

.75

ap

pen

Dix

C :

sTa

Tem

enT

of

Ca

sH

flo

w

17

Cas

h Fl

ow F

rom

Inve

stin

g A

ctiv

ities

Purc

hase

of P

rope

rty,

Pla

nt a

nd

Equi

pmen

t

(9

,522

.00)

(1

5,18

2.00

) (1

3,82

4.00

) (1

3,23

0.00

) (1

8,87

5.00

) (1

1,62

8.00

) (1

1,04

6.60

) (1

0,71

5.20

) (1

3,92

9.76

) (1

3,23

3.27

) (1

2,83

6.28

) Pr

ocee

ds fr

om d

ispo

sal o

f Pr

oper

ty, p

lant

and

equ

ipm

ent

3.00

-

-

-

-

-

Inte

rest

Rec

eive

d

32

8.00

273.

00

14

4.00

27

.00

8.00

9.00

10

.00

11

.00

12

.00

13

.00

14

.00

Incr

ease

in In

teng

ible

Ass

ets

(4

,190

.00)

(5

,087

.00)

(7

,215

.00)

(1

6,36

6.00

) (1

7,32

1.00

) (1

0,53

8.00

) (1

2,11

8.70

) (1

3,93

6.51

) (1

6,02

6.98

) (1

8,43

1.03

) (2

1,19

5.68

) N

et C

ash

Use

d in

Inv

estin

g A

ctiv

ities

(1

3,38

4.00

) (1

9,99

6.00

) (2

0,89

5.00

) (2

9,56

9.00

) (3

6,18

8.00

) (2

2,15

4.00

) (2

3,15

5.30

) (2

4,64

0.71

) (2

9,94

4.74

) (3

1,65

1.30

) (3

4,01

7.96

)

C

ash

flow

s fr

om F

inan

cial

A

ctiv

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ly fa

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ps Z

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gene

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alue

�

27

referenCes

http://www�tradingeconomics�com/bahrain/gdp -

www�bh�zain�com -

http://www�bh�zain�com/en/ipo-site/Documents/Zain-IPO-Prospectus-E�pdf www�bloomberg�com -

www�bloomberg�com -

http://www�tra�org�bh -

http://www�globalresearch�ca/search?q=Zain+Bahrain -

https://www�kw�zain�com/kw/af/home�do?lang=en -

www�wikiwealth�com/swot-analysis:zain -

http://www�globalinv�net/contentdisp�asp?pageId=329 -

http://www�zawya�com/ -

Disclosures:

Ownership and material conflicts of interest:

The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company�The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report�

Receipt of compensation:

Compensation of the author(s) of this report is not based on investment banking revenue�Position as a officer or director:The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company�

market making:

The author(s) does not act as a market maker in the subject company’s securities�

Disclaimer:

The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness� The information is not intended to be used as the basis of any investment decisions by any person or entity� This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security� This report should not be considered to be a recommendation by any individual affiliated with [ CFA Society Bahrain ], CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock�

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