WOOD Flash – Rosneft: 4Q18 – earnings suppressed by more write-downs, but FCF & leverage reduction still on track
Rosneft’s headline 4Q18 earnings were below both our and the consensus estimates; however, its FCF generation, de-leveraging and cost control all exceeded our expectations. We view Rosneft’s asset portfolio as considerably undervalued; however, its share price is likely to fail to reflect the corporate fundamentals, in our view, unless the market sees prospects of increasing the rewards for the minority shareholders, which is linked to rising dividends and, in turn, requires earnings to normalise. This was our base case last year, when we upgraded the stock to a BUY, but two consecutive quarters of write-downs have deferred a full earnings recovery and have raised questions on the company’s desire and ability to pay out 50% of the underlying, rather than reported, earnings.
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.
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