Page 67 - RusRPTOct19

Rosneft ROSN LI $7.3/GDR 24% The highly likely approval of MET benefits for the Samotlor high 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/GDR 13%
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
Russia's Finance Ministry continues to fight to collect 50% of profits as a dividend payout from the state owned enterprises (SEOs), preparing a decree that would target subsidiaries of state holdings, Interfax reported on September 12. As reported by bne IntelliNews, Finance Ministry succeeded in forcing the 50% of IFRS net profit dividend payout ratio on almost all the country's largest corporations, such as Rosneft, Transneft, state-controlled banks Sberbank and VTB. Now, reportedly, the Finance Ministry will target the subsidiaries of state holdings that pay their mother structures less than the 50% target. One of the examples of such holdings is Rosneftegaz (aka Rosneftegas), controlled by the influential head of Rosneft Igor Sechin. The holding controls the state’s shares in such majors as Gazprom, Rosneft, and Inter RAO, and has been actively resisting the Ministry of Finance in the fight for dividends. The ministry is trying to raise new revenues to pay for president Vladimir Putin’s 12 national projects that will cost an estimated RUB27 trillion ($42bn), but analysts estimate the ministry only has 60% of the funding covered in the next years and needs to find new sources of income to make up the shortfall. Rosneftegaz repeatedly dodged dividend payouts arguing the need to support massive investment programmes, such as Zvezda shipyard. "Inter RAO [utility holding] may be best positioned for dividend hike," BCS Global Markets commented on September 13, seeing the news as positive. "The proposal, if adopted, may increase payouts for Gazprom’s generating assets and some MRSKs [Mosenergo] who are still paying less than 50% of net income. We think that the proposal also refers to InterRAO (controlled by state holding Rosneftegaz) and may push the company to pay higher dividends next year," BCS GM argues. Inter RAO has a "solid cash pile of RUB176bn, sustainable 23% free cash flow (FCF) yield, no massive capital expenditures (CapEx) planned and a current 25% payout ratio – one of the smallest across major industry players," the analysts estimate.
● Oil & gas
Russia's second-largest natural gas producer and global liquefied natural gas (LNG) runner-up Novatek could increase its dividend payout ratio as of 2020, Aton Equity wrote on September 24 citing a meeting with company's
67 RUSSIA Country Report October 2019 ww.intellinews.com