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Veles Capital upgraded recommendation on Sitronics from "sell" to "hold" 11 September 2008 Source: www.veles-capital.ru
Last Tuesday Sitronics published the results of its activity for 2Q and 1H 2008. It should be mentioned that Sitronics’ financial results become better and better. According 1H 2008 results, the company demonstrated positive dynamics of OIBDA and sales income. A growth of income was boosted by all main activities of the company, including “Telecom Solutions” and “IT Solutions”, which increased company’s revenue by 47.2% and 36.7% respectively. Moreover, Sitronics succeeds to keep expenses low, directed company’s efficiency into positive zone. The only goal, which Sitronics has not achieved yet – to gain net income with positive results. We see Sitronics’ 1H results as positive. However, we should mention the risks either – according to company’s data, its debt, forming 603 mn USD, must be paid till the end of 2008. Sitronics’ free cash assets form only 104 mn USD and main activity can not generate enough cash assets to cover investment projects of the company. It means that the company operates only for debt, until balance structure allows it to attract extra loans, but the limit will be reached soon. New estimated fair price of Sitronics’ securities formed: 0.0814 USD per common share or 4.0683 USD per GDR. Our previous estimations were – 0.0854 USD and 4.2700 USD respectively. A sound effect was provided by increased forecasts for year 2008. However, a growth of investments and debt load rate frustrated a positive effect of increased expectations. Today the price of company’s stocks hits the fair level. We increase recommendation on Sitronics’ securities from “SELL” to “HOLD”. |
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