Petroleum Industry of Serbia (NIIS)
The Petroleum Industry of Serbia (NIIS) quit the trend of profitability growth recorded during the last year, primarily under the influence of several factors that could be labeled as one-off. Continuation in crude oil prices recovery highlights that the results throughout the year will outperform last year's performance.
In 1Q18, NIS recorded a revenue growth of 4.4% to RSD 52.5bn, predominantly due to 24% crude oil price growth, while the 17% drop in USD exchange rate harmed further rise in revenue. Profitability was reduced by double-digit rates due to the negative impact of the FX rate, the increased prices of semi-finished products and crude oil, the lower sales of oil fuel during the winter and the delayed start of the agricultural season. EBITDA weakened by almost 20%, while net profit fell 30.7% to RSD 3.7bn, additionally due to increased depreciation costs. Operating cash flow (OCF) was recorded at the highest level in the last five years – at RSD 4.6bn (+ 3%).
¤ Shareholders General Assembly - The company's management scheduled an AGM on June 21st, with an expected proposal to allocate 25% of last year's profit to shareholders. Shareholders will receive a total of RSD 6.9bn or RSD 42.61 per share (dividend yield of 5.9%). June 11th was determined as the dividend date.
¤ Operating indicators – the downward trend in oil production continued in Q1 (-4.1%), which will obviously be a trend in the future due to exhausted oil fields in Vojvodina. Research in Romania gives results and should have effects in the second half of the year.
¤ CAPEX – In Q1 NIS invested RSD 7.8bn (+68%), and almost half of the funds were related to the project of deep refining, which will make most of this year's investments worth around RSD 47bn (RSD 26.5bn invested during 2017).
¤ Valuation - For a long time NIS shares have been traded in a narrow price range b/w RSD 720-730, the levels reached at the end of 2016, after the agreement of the OPEC members and the initial recovery of crude oil prices. Late progress in the company's results and improved outlook have not yet been reflected in the price, and currently NIS is traded on the expected PE of 4x and a dividend yield of 5.9%. At the moment, the spread between NIS dividend yield and the NBS reference rate is at the historically highest level (almost 3bp) and can be interpreted only by the absence of large institutional participants in the domestic capital market.
Established in 2007 in Novi Sad, Momentum Securities, privately owned corporate advisory and investment banking firm, is one of the largest providers of brokerage services and related corporate advisory services to owner managed businesses in Republic of Serbia. Momentum Securities is a member of the Central Securities, Depository and Clearing House, the Belgrade Stock Exchange and the Investor Protection Fund and an authorized participant in the Treasury auction platform. As an independent firm, our clients benefit from unbiased and tailored solutions. Our team works with founders, shareholders, boards and management teams to develop their companies by aligning processes, structures and work practices to improve efficiencies and achieve specific performance goals.
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