Page 76 - RPTRusFeb17

8.3 Stock market
The total value of IPOs and SPOs by Russian companies reached a six year high of $1.2bn (€1.13bn) since the beginning of 2017, hitting the highest year-on-year figure since 2011, Vedomosti daily reported on February 19. Companies that conducted IPOs or SPOs during the period include children's goods retailer Detsky Mir, which attracted $300mn in an IPO, Russia's largest producer of steel pipes TMK, which raised $180mn in an SPO, and phosphate fertiliser major Phosagro and aluminium producer UC Rusal, whose SPOs brought them $250mn and $240mn, respectively. The recent growth in oil prices and the election of Donald Trump as US president made Russian assets more attractive for foreign investors, Vedomosti wrote, adding that Russian companies are likely to speed up their SPOs and IPOs later this year.
Despite Russian equity stellar performance in 2016 (+54% on RTS Index), Russian equity remains the cheapest in the EM space, t rading at a 15% discount on a sector-neutral P/E basis vs the MSCI EM Index. This corresponds with Aton’s base-case RTS year-end 2017 target of 1,330 (+15% vs current levels). Under the bull-case scenario, which assumes higher dividends from state-owned companies and better Russia-US relations, our RTS target jumps to 1,400 (+21%). Aton expects Russia's GDP to deliver 1.5% growth in 2017. Though modest, this would be the highest growth rate in the past five years, and firmly establish Russia's economic recovery. The consumer, finance and utilities sectors have the highest market-cap weighted average upside potential, on our numbers, as they are set to benefit from a strong RUB, recovering Russian economy, and declining interest rates. Aton recommends focusing on names offering dividends, earnings turnarounds, compelling multiples, and industry-specific paradigm changes. Aton’s top picks are: LUKOIL, ALROSA, Sberbank, Aeroflot, X5 Group, RusHydro, Gazprom Neft, MMK, NLMK, TCS
76 RUSSIA Country Report February 2017 www.intellinews.com