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 19, 2010, Friday)
On Thursday the Russian share market was lightly volatile. The trades began with the slight gap down, but during the first minutes the market changed the movement direction and began climbing. In the second half of the trading session the sharfes were mainly slipping down. The oil quotes were the main driving factors. Besides, the stats on the unemployment of the U.S. showed slight restricting affect on the quotes. Among the liquid shares we should outline the shares of Rosneft and Vimpelcom. Shares of Rosneft continued slipping down due to the news on possible problems will accounting for the sold oil as a result of the acts by the courts of the U.S. and the UK. In case of Vimpelcom the quotes reduction of the company’s shares was indicated at NYSE, which might have been related to the possibility of excluding the notes of the operator from MSCI Barra indices.
Russian stock market daily morning report (March 18, 2010, Thursday)
On Wednesday the movement of the Russian indices gave a good run for market participants’ money. The session was extremely volatile, but in the end the market closed with good adding. Basing on positive macroeconomic stats and news early that day, and also on the climbing Asian and commodity markets, the open of the Russian markets was optimistic. The shares were adding more than percent since the very open. Later on the growth was warmed up by the open of European grounds and domestic indices reached maximum levels, having added on RTS and MICEX 2.1% and 1.5% respectively. However, closer to the end of the session a slight wave of sale swapped the market, being provided by the correction at the oil market because of the output information on oil supplies in the U.S. Also several corporate stories were developing at a time. Such as the possible claims against Rosneft on behalf of the foreign legal authorities of U.S. and UK on YUKOS case that still is in progress and made the shares of the given company become outsiders. So by the end of the day they lost 1.5%. Also rally went on in the shares of Gazprom Neft due to approved long-term dividend strategy. The shares of LUKOIL were among the growth leaders, due to Wednesday the head of the company confirmed that in April the deposit after Yu.Korchagin at Caspian would be launched and that is supposed to affect the extraction level of the current year positively. On Wednesday growth continued in the power energy segment also and the reason for that was the total fundamental underestimation of the shares within the sector.
Russian stock market daily evening report (March 18, 2010, Thursday)
The market was lightly volatile. The day began with growth and ended with dropping and mainly repeated the dynamics of the oil cost. A bit more aggressive sale was on the shares of Rosneft – threat on behalf the western legislation laid the quotes down. Demand is gradually returning to the preferred shares of telecommunication companies’ shares.
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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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