Page 112 - RusRPTMay21

for 2020 will be RUB50bn ($666mn). “The annual yield is 9.2%, and implies a 132% payout of 2020 net income. In our model, we factor an annual dividend of RUB50bn as sustainable and do not see leverage going higher than 1.7x net debt/EBITDA over the forecast period,” VTB Capital (VTBC) said in a note. As bne IntelliNews reported in an interview with the company’s management, it intends to return profits to shareholder and has become more generous with its dividend policy. A long time market leader, the company lost its way due to disputes amongst its management and the exit of the company’s founder Sergei Galitsky in 2018. Once a market darling, the company’s shares have underperformed in the last years. Magnit GDRs and locals have declined 17% and 8% YTD, respectively, compared with a 12% YTD fall for market leader X5 Retail Group’s GDRs and a 9% gain in RTS. “We see slowing revenue growth caused by the elevated comparison base, uncertainties over profitability, and the vague prospects for the coming quarters pressuring food retail stocks,” VTBC said. “We note that the highest comparison base is for mid-March to mid-April and see Magnit and X5 stocks having rerating potential thereafter. Magnit and X5 demand 2021F EV/EBITDA of 5.7-6.0x, and their 12-mo dividends yields are 10% and 8%, respectively, which we view as appealing.”
● Real Estate
Russian real estate developer PIK BoD recommends to double dividend. The Board of Directors yesterday recommended dividends of Rb30bn for 2020, or Rb45/sh DPS, a combination of two payments, given RAS specifics, with 2020 DPS22.5/sh and Rb22.9/sh for 1Q21.
Analysis: Recommendation implies DPS doubled post Rb22.7/sh paid for 2019. Dividend record date is set for 17 May. Besides, as flagged at PIK’s Strategy Day, dividend policy was updated to at least 30% of IFRS net income, adjusted for non-cash items, from previous policy of distribution 30% of OCF, introduced in 2017. New policy implies better predictability of dividends flows in future, in our view.
● Metal & Mining
Rusal would like to see Norilsk Nickel’s dividend payment being predictable and not dependent on Norilsk Nickel’s inefficient management. Furthermore, another majority shareholder (Crispian) does not rule out altering the dividend policy, but would like to see better conditions than those offered by Interros. The news suggests that two of the three parties to the agreement between Norilsk Nickel’s shareholders (UC Rusal and Crispian) support a higher dividend payout than that propsed by Interros (50-60% of FCFE). While the discussions between the shareholders continue (see our Morning Comment story of 30 March), we think the news is positive for sentiment, suggesting that the balance in the conversation is moving towards a higher payout.
Norilsk Nickel's BoD has decided to decrease final 2020 dividends from $3.4bn (60% of EBITDA) to $2.14bn (50% of FCFF), partly satisfying an earlier management proposal (see our Morning Comment - 30 March 2021). Rusal said the cut was a one-off. Additionally, the majority shareholders of NorNickel have agreed on a $2bn buyback in 2H21 to support the share price. 0.5% of the company's shares after the buyback have been earmarked for a new employee incentive programme. The combination of a buyback and
112 RUSSIA Country Report May 2021 www.intellinews.com