Page 4 - FSUOGM Week 23

FSUOGM COMMENTARY FSUOGM
Gazprom overtakes Sberbank
to become Russia’s most
valuable company
The company’s share price has seen sharp spikes following recent dividend increases, writes Bne Intellinews
RUSSIA
THE shares in Russia’s state-owned gas giant Gazprom jumped again, rising by 10% in a day, to make it Russia’s most valuable company, worth US$82 billion, as rumours of the immi- nent departure of CEO Alexi Miller swirled in Moscow.
e shares in the so-called “state within the state” already spiked by 30% in the last week of May as bne IntelliNews reported, adding US$20 billion to the company’s market capitalisa- tion in a matter of days a er the management hiked its dividend twice in a week: management announced it was increasing dividends from the 8 rubles per share it has been paying for years to 10 rubles per share, only to increase it again under pressure from the Ministry of Finance to 16.6 rubles a few days later – e ectively doubling the dividend payout to what is now a 27% divi- dend yield. e shares of Russia’s biggest com- panies are extremely under-valued because of management’s reluctance to share their pro ts with shareholders and their propensity to take all their spare money and plough it into the ground in the form of never-ending capex programmes.
Managerial shake-up
Changes are afoot at the gas behemoth as it has seen several senior managers replaced recently and the government has also threatened to take direct control of its massive investment programme. Investors have been wondering if the increase in the dividend payout this year is a one-o , but comments by the company since suggest that something more fundamental is happening.
“ e market has reacted positively since the changes in Gazprom’s management and the upward revision to suggested dividends, which, at the time of the announcement, provided for a sizable DY of 10%. e company’s commitment ( nally) to adopt the new dividend policy by the year-end and its stated intention to move to a 50% of IFRS net income payout in two-three years, have also been welcomed by investors.
For now, though, we think that the market has started to price in further potential changes in corporate governance, providing ‘credit’ for them to the company in advance,” Dmitry Loukashov, oil and gas analyst for VTB Capital (VTBC), said in a note.
Shares of Gazprom grew by 4.14% as of June 3, driving the market capitalisation of the com- pany to US$82 billion (5.38 trillion rubles) and so overtaking the US$79.8 billion (5.216 trillion rubles) of Russian state-owned banking giant Sberbank, which had held the title of Russia’s most valuable company for well over a year. Gaz- prom shares are now up a huge 36% YTD, easily outstripping the 23% gain the leading RTS index has made in the same period.
As part of the general drive to “transform” Russia’s economy in the shape of President Vladimir Putin’s May Decrees and the associated 12 National Projects, the government has also clearly launched a drive to improve the e ciency at the state-owned enterprises (SOEs). Gazprom alone accounts for approximately 10% of GDP by itself and collectively the SOEs made up the bulk of Russia’s xed investment in 2018.
Gazprom has been going through a manage- ment shake up in recent months as several senior and long-serving o cials were replaced in May.
Since the end of February, three deputy chair- man of the board have le : Alexander Medvedev (export), Valery Golubev (domestic market) and Andrey Kruglov, ( nancial unit). In April Kirill Seleznev, who runs Gazprom Mezhregiongaz’s sales subsidiary, also le the board. He is report- edly one of Miller’s closest allies. Further down the tree the the head of the capital construction department Sergey Prozorov and one of the main curators of the large-scale purchasing Mikhail Sirotkin have also le .
Cost discipline
At the same time Gazprom vice-chairman Oleg Aksiutin announced plans to reform the company’s corporate expenditures department
Rumours of CEO Alexei Miller’s resignation have been doing the rounds on the market for years, but became louder since mid-May.
P4
w w w . N E W S B A S E . c o m Week 23 12•June•2019