Page 75 - RUSRptOct18

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
dividend payout increase to 50% is an additional supportive factor.
MMK MAGN RUB41.5/ 24% RX GDR
MMK’s shares have fallen 20% from the 1Q17 high and it remains one of the cheapest steel names globally at 3.8x EV/EBITDA for 2017. Steel industry is recovering and the steel over bulks premium in China is expanding; MMK, which has the lowest integration into raw materials, is the key beneficiary.
Novatek NVTK LI $133/GD 17% The stock has been considerably oversold on the back of the crude R oil slump and has not yet recovered. Timely launch of Yamal LNG
along with the new strategy presentation in 2H17 are key drivers for a re-rating, in our view.
Globaltrans
GLTR LI
$8.7/GD 13% R
This year should be successful for the company, because the deficit of gondola cars on the rail network has led to rising tariffs, which have already achieved RUB1,500 per rail car per day. As a result, we see upside risk to our earnings estimates. Additionally, the company may pay interim dividends for 1H17, while the annual dividend yield is close to
8.3.2 Dividends dynamics
The Ministry of Finance expects RUB 45-47bn of proceeds in annual dividends into the Federal Budget over 2019-21 from Rosseti , implying a 37-38% dividend yield outlook for Rosseti common shares. At the same time, the projections of the Ministry for Economic Development are on average 10-11 times lower, with annual dividend flows to the budget of RUB 4.0-4.9bn per annum. MinFin’s projection is clearly based on the assumption of a 50% payout of nominal net profit, adjusted for non-cash items. Taking into consideration the i) holding nature of Rosseti and lack of sufficient cash flow to match such payments; ii) significant investment programme, which we expect to stand at RUB 270-285bn per annum, boosted by the launch of the upcoming digitalisation capex, leading to only marginally positive FCF of RUB 11-30bn in this period; and iii) significant current debt levels, we doubt that Rosseti will be able to meet MinFin’s dividend proceed goals. We see MinEconomy’s
75 RUSSIA Country Report October 2018 www.intellinews.com