Russian Oil and Gas: Still plenty of value (Gazprom, Lukoil, Novatek, Rosneft, Surgutneftegas and Tatneft)
Despite improving shareholder distributions (average payout ratio increased from 31% to 41% over the past three years) and falling capital intensity, the sector continues to trade at exceptionally low multiples (4.9x PE on our FY18E estimates). The market may not view current spot prices as sustainable, which may turn out to be a conservative view; however, even more importantly, it does not seem to price in the broken correlation between the RUB and the oil price (thanks to the new budget rule, discussed in our January strategy report). We now view Rosneft and Gazprom as our two top picks in the sector, as we find the disconnect between spot prices and the consensus expectations as the biggest in these two names. We also upgrade Surgtuneftegas’ preferred shares to BUY (new PT at RUB 45).
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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