Page 110 - RusRPTMay21

noting that, based on the historical records, any risks that exist are likely to be the upside.
Transneft held its FY20 IFRS results call on 31 March. For the first time, management provided guidance on the company’s FY20 dividend, which should be RUB9,250/pref, implying a 6% yield. Management also provided an outlook on volumes and capex for 2021. In 2021, total cargo turnover should be down just 1.7% Y/y to 1,163bn tkm, while transportation in tons should be nearly flat at 475mnt. In our last model update, we assumed total volumes of 470mnt for 2021. The company guides for revenue to increase 2.7% Y/y to RUB988.6bn, which is similar to our forecast of RUB962bn. Capex is guided for at RUB232bn but could be lower, according to management, as most investments will go towards upgrades and revamps. Transneft has no plans currently to build new pipelines. Capex for NCSP is guided at RUB15.7bn, which is almost double the 2020 level. Capex should be around RUB240bn in 2022 and RUB250bn in 2023. We assumed capex of RUB243bn in our model. Starting this year, Transneft should begin to receive dividends from the Caspian Pipeline Consortium (CPC). Divs for the next two years should be around $1bn, with Transneft receiving 7%, i.e $70mn. Transneft impaired RUB29.8bn for Druzhba compensation. As of YE20, RUB11.3bn had been paid out, and RUB18.5bn remains reserved for payouts. Most of the outstanding settlements are related to Rosneft, which should be decided in one to two months. Transneft is not involved in Rosneft’s Vostok Oil project. Transneft does not expect any change in flows from Rosneft’s Vankor field in the next five years, as there will not be a pipeline to take oil to a northern sea terminal, according to management. Management is currently happy with the status of NCSP, i.e. as a listed company.
SurgutNG reported its FY20 RAS results on 2 April. Net income was up 7x y/y to RUB729.6bn, implying a dividend of RUB6.72/pref. Consensus expected net income of RUB755bn and a dividend of RUB6.85/pref, while our estimate was for a dividend of RUB6.31/pref. The company’s ord dividend should be RUB0.65/share. Revenue was down 32% y/y to RUB1.1 trillion, while profit from sales decreased 52% y/y. Other income, which includes the FX gain, rose 45% y/y to RUB2.3bn. SurgutNG’s cash pile increased from RUB2.98 trillion in FY19 to RUB3.57 trillion in FY20, but it was mostly flat y/y in US dollar-terms at $48.2bn. Although the company’s pref dividend is ahead of our forecast, implying a yield of 15.6%, it was just slightly behind consensus expectations. We think the pref dividend remains attractive going into the expected record date in July. Following the record date, we do not view SurgutNG prefs as an attractive play, as we expect the ruble to strengthen.
Tatneft announced its final dividend for 2020 will be Rb22.24/sh, or 50% of net income. This is likely another example of a public debate over tax policy. Only a week ago consensus estimates put the dividend at cRb31.7/sh, while our own estimate was Rb32/sh, all likely based on the company’s reported FCF of Rb95bn and the already declared and paid Rb9.94/sh interim dividend. This calls into doubt the company’s dividend policy, which heretofore has called for the HIGHER of 100% of FCF or 50% of IFRS net income, not the lower of the two. Why would they go back to a lower minimum? We think the most likely interpretation is that this is a continuation of the somewhat public debate of the tax treatment of highly-viscous oil (HVO) production. On a similar
110 RUSSIA Country Report May 2021 www.intellinews.com