Page 74 - bne IntelliNews Country Report: Russia Dec17

However, the company’s announcement to pay dividends of RUB0.68/share,
a generous 5% dividend yield, despite its legal battle with Rosneft have convinced some investors that the company is an exception and cares about corporate governance and its shareholders enough to be worth a punt. At the same time President Vladimir Putin’s personal intervention and peacemaking attempts suggest that Sistema will survive a battle with Russia’s most powerful and best-connected company to earn another day.
On the obverse side of the coin Alrosa’s shares were unloved as lingering uncertainty over the company’s future direction was a miasma on the stock following its flooding accident in the summer that killed eight miners. However, in just the last days the authorities released a report exonerating the management of any blame and stock immediately bounced upwards. The clarity is welcome and analysts are revisiting the company, which banks like VTB marked back up to 'buy'.
Aton top stock picks for 2H17, drivers
Company Ticker TP Upside Key drivers potential
Sberbank SBER RX RUB210 43% The bank trades at a 2017 P/E of 5.0x and P/BV of 1.0, which is well below EM peers. It enjoys high and sustainable ROE above
20%. Dividend payout ratio can be increased after 2017. Best liquidity in the market and strong corporate governance.
Alrosa
ALRS RX
RUB125 43%
Trades at 4.7x 2017 EV/EBITDA, offering a discount to global diversified miners (5.3x) and Norilsk Nickel (6.6x). Recent stock underperformance caused by sanction concerns (Alrosa is a state-owned company) is unjustified, in our view. We expect the stock to be supported by strong summer monthly sales as well as its FY16 dividends (10% yield). Alrosa generates strong FCF yielding 15% and has low debt of 0.6x.
Unipro UPRO RUB3.55 41% Turnaround story: we expect bright 2017 earnings with further
RX momentum supported by the Berezovskaya unit’s relaunch. One of
the best high-conviction dividend plays in the sector.
TCS Group
TCS LI
$15.2/GD 35% R
Management guides for 25-30% EPS growth in 2017, the highest in the sector. Strong 1Q17 IFRS results suggest the bank is on track to reach its FY guidance. Dividend policy assumes a 50% payout ratio from IFRS net income on a quarterly basis. The stock trades at a P/E of 9.0x, high compared to peers, but for this reason the bank operates at the highest ROE in the sector (40%+).
Etalon
ETLN LI
$4.7/GD 32% R
This year should be a strong for the company in terms of earnings growth: we expect EBITDA and EPS to increase by 53% and 50%, respectively, driven by falling inventories from built flats. The share of more value-added projects in Moscow has increased to 50% of total portfolio, which in turn should lead to better margins. Finally, debt burden is the lowest vs other developers, allowing Etalon to boost its dividends. We believe Etalon’s dividend yield may reach 9% for 2017, overtaking LSR Group.
Rosneft ROSN LI $7.3/GD 24% The highly likely approval of MET benefits for the Samotlor high
R watercut field in the coming months could become a strong trigger for the name: we estimate a +5-6% effect on annual EBITDA. The
74 RUSSIA Country Report December 2017 www.intellinews.com