Gazprom: Having passed the bottom
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View information about Gazprom: news, researches and price targets.
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By Dmitry Lyutyagin (Veles Capital)
- We have revised our estimation of Gazprom’s shares. The reason for up-dating the company’s model was the report by IAS for 1H 2009, the budget draft for the next year and corrections of WACC method calculation.
- The provided financial report of the gas monopoly totally brought no surprises. As it has been expected, the second quarter was worse than the first one and likely was the weakest within the whole year. In 1H 2009 the financial estimates were affected by the decline of the gas sale at all markets by 22.3% average, and by the reduction of the retail price of gas by 9.6% in the state of the far abroad and by 24% in Russia. As a result within the six months of the year 2009 sales slipped by 24.1 bn USD or by 32.8% and formed 49.285 bn USD, operating profit and EBITDA showed reduction by 56.7% and 52.6% respectively and formed 12.98 bn USD and 16.18 bn USD.
- Operating activity margins reduced significantly in 2Q 2009 versus the 1Q estimates. However, as we mentioned above, we forecast moderate recovery of the efficiency in 3Q already. The future results we be affected positively by the growth of gas buying by the partners from the far abroad, the sale volume is expected to reach the before-crisis levels late third quarter – early fourth quarter, and also by having no contract for buying expensive Turkmen gas. The recovery of finances will slightly be held back by the gas price slipping in Europe by 12.2% due to the special features of the gas contracts.
- As for the corrections of Gazprom model, we should mention that WACC calculation method has been detailed, which turned into the growth of the given estimate on behalf of higher premium for the corporate risks. We have also reflected the forecasts and targets in the investment program, which have been provided in the monopoly’s budget draft for the next year. Particularly the investment program of Gazprom for 2010 will form 802.4 bn RUR, 663.56 bn RUR out of which are to be spent on the capital construction. According to the 2010 budget draft the sum total volume of the income and inflow forms 3.8 bn RUR (growth by 14.5% versus 2009 forecast. We see the income inflow to be more optimistic and suppose the growth by 16% occurs.
- As a result of executing the corrections, the new fair value of Gazprom shares formed 8.955 USD, versus 9.016 USD forecasted earlier (0.68% down). But due to the significant growth potential, which forms more than 45%, we confirm our recommendation BUY for the shares of the company.
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| Latest Russian Stock Market Reports |
Russian stock market daily morning report (March 11, 2010, Thursday)
As expected the lateral motion was indicated at the Russian share market on Wednesday. Up until the middle of the day the market was climbing basing on the good stats on the Chinese economy, in particular, on the volume of export and import in February. Given estimates showed growth of commodities import to the state, which has been supporting both the oil market and the industrial metals market. And that in its turn supported the companies within the same sectors. Later on sale prevailed at the market that might be characterized as attempts to fixate profit after the recent seven days of trades. As a result, closing of the Russian markets took place within the red zone. Among the interesting ideas of the past day we might outline the shares of Gazprom Neft, which were the drop leaders at MICEX due to the weak financial report for 2009 by US GAAP, and also the technical sale in the shares of Sberbank because of growth of its shares’ cost within the past days.
Russian stock market daily evening report (March 11, 2010, Thursday)
Calm trades almost with no idea with narrow variations of quotes took place at the market today. The oil, foreign markets, stats on the U.S. - all given factors did not provide optimism to the investors. The most interesting motion was on Uralkaliy due to statements by Sechin on the matter of export duties for fertilizers not being considered yet.
Russian stock market daily morning report (March 10, 2010, Wednesday)
After the holidays growth got suspended at the Russian share market. Domestic indices were correcting down by 1% in the first half of the day following Asia and European trading grounds, along with the drop of oil prices, which has been caused by dollar strengthening versus euro, and also the expectations of the investors on increase of oil supplies in the U.S. So, mainly the oil section was pulling the market down. Banks and power energy looked better than the market. In the second half of the day the drop suspended, and the market went laterally and continued trading within the psychological 1,500 and 1,400 points of the RTS and MICEX indices respectively. By the end of the session slight climbing following the American markets was indicated.
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| Russian Stocks Recommendations |
Surgutneftegas: Currency rates are putting away the dividends..., 26 November 2009
We have revised our model of Surgutneftegas. The reason for that was the output of the 3Q 2009 report, correction of our suppositions of the company’s future development, and also the postponing of the target time and evaluation one year forward. Particularly, in our model of Surgutneftegas we have corrected the former forecast of income for the current year towards reduction: on EBIT – by 2.2%, on the net profit – by 21.5%. Mainly that happened due to the corrections on the operating estimates, and also due to the continuing strengthening of Russian ruble, which, considering significant dollar liquidity of the company, turns into negative currency exchange. Due to the negative currency exchange precisely For the second quarter in a row Surgutneftegas shows low level of the net profit. The fourth quarter, as we see it, will not make an exception and we expect negative currency exchange similar to the ones in the third quarter.
Gazprom: Having passed the bottom, 23 November 2009
We have revised our estimation of Gazprom’s shares. The reason for up-dating the company’s model was the report by IAS for 1H 2009, the budget draft for the next year and corrections of WACC method calculation. The provided financial report of the gas monopoly totally brought no surprises. As it has been expected, the second quarter was worse than the first one and likely was the weakest within the whole year. In 1H 2009 the financial estimates were affected by the decline of the gas sale at all markets by 22.3% average, and by the reduction of the retail price of gas by 9.6% in the state of the far abroad and by 24% in Russia. As a result within the six months of the year 2009 sales slipped by 24.1 bn USD or by 32.8% and formed 49.285 bn USD, operating profit and EBITDA showed reduction by 56.7% and 52.6% respectively and formed 12.98 bn USD and 16.18 bn USD.
Rostelecom: Prospects are limited again, 11 November 2009
On Monday Rostelecom summed up the results of 1H 2009 by IAS. According to the report, the sales within the half year year grew by 4.4% versus 1H 2008 and formed 32.8 bn RUR. Net profit dropped from 9.8 bn RUR to 1.5 bn RUR. OIBDA margin reduced by 7.6 p.p. to the level of 17.6%.
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