reports
- Alexander Kornilov
UNIPRO: A Finnished Story?
Finland’s Fortum is buying Germany’s Uniper from E.ON with a view to concluding the deal in early-2018. Apart from increasing Fortum’s footprint in the Russian power market, the deal means a change in Unipro’s ultimate beneficiary, with sizeable related risks to Unipro’s currently compelling investment case. A potential adverse amendment to the dividend policy, changes in the management team, a forced asset sale, and a possible stock delisting are the key risk factors implied by the Fortum/Unipe...
- Andrey Lobazov
URALKALI: Next Buyback in March 2018?
We believe Uralkali is on track to reduce its net leverage to below 4.0x EBITDA by YE17. The latter is the ratio level prescribed by its covenant, and being freed of this restriction would open the door for another buyback in Mar 2018. On MtM potash price and RUB FX, sales should amount to 6.2mt in 2H17 which, in our view, is easily achievable, and implies a 6% HoH decrease and 94% capacity utilisation. The free float market cap is $410mn, slightly above Uralkali’s semi-annual FCF of $250-300mn,...
- Andrey Lobazov
ACRON: Revisited after Urea Rally – Reiterate HOLD
Urea rallied on stronger demand and higher anthracite costs in China, returning the Fertiliser sector to investor radars, and spurring street upgrades of Yara, Acron’s direct peer. We have refreshed our Acron model, reviewed its investment case, and reiterate the HOLD rating as we do not believe its valuation levels are justified. The stock is trading at 6.7x FY17 EBITDA, which is close to all-time high and implies a 55% premium to its own 5Y average, while its discount to Yara has narrowed by 1...
ATON DAILY (ROSN, LKOD, RSTI, NCSP, GLPR, LSRG) // September 19
â— Rosneft (ROSN LI; BUY, TP – $7.3) to build 30bcm gas pipeline in Kurdistan â–¼ Turkey’s Palmali claims $2.0bn from LUKOIL (LKOD LI; BUY, TP – $67) â–¼ State mulls new equity injections for Rosseti (RSTI RX; UR) â— Putin orders government to prepare plan to set ports tariffs in roubles (NCSP RX: NR, GLPR NR) â— LSR Group (LSRG RX; HOLD, TP – RUB950) discloses parameters of its new SPB project
ATON DAILY (CBR Rate Cut, Oil Tax, PSBR, VZRX, HYDR, GenCos, Primary M...
â— CBR cuts key rate by 0.5% to 8.5%, no dovish rhetoric â–¼ Government mulls incremental excise tax increase â— Promsvyazbank (PSBR RX; NR) and Vozrozhdenie bank (VZRZ RX; NR) merge â–² RusHydro (HYDR RX; BUY – TP RUB1.13) could still increase dividends â— System Operator releases preliminary KOM-2021 results AHML (BB+/Ba1/BBB-) opens the book for a RUB10bn bond, coupon guidance of 8.1-8.2%, and 8.35-8.46% yield to the 1Y put
- Andrey Lobazov
A STRONGER RUB: Revisiting M&M Sector Implications
The RUB has appreciated from RUB60.5/USD in August to 57.5 on a higher oil price, and USD weakness against major world currencies. Our Macro team has become less bearish on the Russian currency, anticipating the YE17 FX in a range of 57-59/USD vs 62 previously, which assumes only modest depreciation from current levels. A stronger RUB harms exporters and we believe now is a good time to revisit the implications of RUB FX volatility for the M&M sector. We highlight low-margin RUSAL and Evraz as t...
- Andrey Lobazov
NORNICKEL: Non-Deal Roadshow Takeaways – Reiterate BUY
We hosted a series of meetings in Europe with Nornickel represented by IRO Mikhail Borovikov. Thanks to its unique metals basket, the company is well-positioned for China’s environmental tightening, while the mounting number of electric cars could increase high-grade Ni demand by 30-40% in five-to-seven years. To capture the potential demand increase, Nornickel is considering production growth at the Polar Division, including a stage-3 Talnakh upgrade, and brownfield mining expansion at the Sout...
- Mikhail Ganelin
GLOBALTRANS: Supply/Demand Balance May Turn to Deficit
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 continu...
- Andrey Lobazov
POLYMETAL INTERNATIONAL: Decoupled from Gold Price – Reiterate BUY
Gold has rallied 10% since mid-July, but Polymetal shares have lagged the FTSE Gold Index by 12%. We believe this is a result of the market overreacting to the share-overhang risk related to Otkritie. We still regard gold as a safe haven, and anticipate that the price will average $1,350/oz in FY18 on global economic uncertainty stemming from North Korea tensions, US policies, and S&P bubble concerns. Polymetal trades at 5.5x EV/EBITDA when adjusted for Kyzyl – a 90%-completed growth project whi...
- Alexander Kornilov
RUSHYDRO: Taishet Fears Subside; BUY Reiterated
The market had concerns about RusHydro’s potential participation in the Taishet aluminium project and this has been a strong headwind to the stock. However, these have not materialised: the company’s participation terms released last week assume neither a cash burden to the company nor cheap power-supply commitments. Nonetheless, the market appears indifferent and the stock has not recovered. In this light, and combined with an 8% 2018 dividend yield, together with strong management commitment t...
- Andrey Lobazov
ALROSA: Cheap Valuation Insufficient – Downgrade to HOLD
We downgrade ALROSA to HOLD, cutting our target price to RUB85/share. We believe that its cheap valuation (4.4x 2017 EBITDA) alone is insufficient to offset the polishing industry’s challenges, and uncertainty regarding the Mir mine and its $15bn of reserves. We see no strong catalysts, while subdued sales in September and October, as per ALROSA’s guidance, can only be partially explained by an early Diwali, in our view. Jewellery demand is showing signs of a modest recovery, but without convict...
ATON DAILY (ROSN, ALRS, EU Duties, SBER, FEES) // September 8
â— Rosneft (ROSN LI; BUY, tp – $7.3) to partner with Statoil in high-viscous project â— ALROSA (ALRS RX; HOLD, tp – RUB85) reports August sales -11% MoM â–² EU decides not to introduce anti-dumping duties on Russian HRC â–² Sberbank reports good august RAS figures (SBER RX; BUY, TP — RUB240/share) â— Federal Grid Company (FEES RX; UR) considering projects in Vietnam
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