We have revised our financial forecasts for Globaltrans after the company reported strong 1H17 IFRS results and paid generous interim dividends. We therefore increased our target price to $12.3 per GDR (from $8.70) based on a RUB/USD FX rate of 63.0, keeping our BUY rating unchanged. Notwithstanding its impressive performance YtD, Globaltrans remains an attractive long-term investment story, in our view. It benefits from accelerating Russian GDP and relatively high commodity prices, will continue to pay generous dividends with an expected yield of 7.0-10% (depending on future capex), and may increase the rate of new railcar purchases in coming years. Despite a sharp rise in gondola tariffs in 2017, we see moderate upside potential next year, as there is no respective surplus at present, and any unexpected uptick in demand may boost tariffs further.
Globaltrans Investment is a rail transportation company in the Russian Federation. Co. is engaged in providing a wide range of railroad freight transport and logistics services. Co. provides rail freight transport and logistics services, as well as certain ancillary services to industrial customers and medium-size corporate customers in Russia and to destinations within Russia and to Ukraine. Co.'s regional network encompasses 10 branch offices. Co. is a private participant in the transportation of scrap and ferrous metals and it has market positions in the transportation of construction materials and ores.
Since its inception in 1991, ATON has built a reputation for combining in-depth local knowledge of the Russian market with the highest international standards in research, sales and trade execution. As a result, we have been able to attract many of the leading domestic and international institutional fund management groups as our clients. As one of the leading independent investment banks in Russia, we offer the full range of institutional brokerage service, including:
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