Page 76 - RusRPTApr19

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
Russian metals and steel major Novolipetsk Metallurgical Kombinat (NLMK) hosted a capital markets day on March 4 during which the company reiterated its steel volume growth targets, updated its capex program and Ebitda targets, and upgraded the dividend policy. NLMK has already been one of the top 15 dividend payers among Russian blue chips. Now the company has updated its dividend policy to smooth out dividend payments during the period of higher capex, like its peer Severstal has done, Sberbank CIB commented on March 5. "Should net debt/EBITDA be below 1.0x, NLMK will pay 100% of free cash flow (FCF) calculated based on adjusted capex (guided at an average of $0.7bn annually until 2023, like Severstal), which on our numbers implies a total of around $1.0bn of additional dividends to be paid in 2019-23 (around $300mn this year, for a 2pp increase to the yield)," Sberbank calculated. If net debt/Ebitda goes above 1.0x, the payout ratio will be reduced to 50%. "At current spot steel prices and FX, we see a 12.6% dividend yield this year and a payout of 100% of adjusted FCF through 2019-23, as we think net debt/Ebitda will stay below 1.0," Sberbank added, noting that this yield is generally in line with the bank's expectations for Severstal. For 2018 the company would pay about $2.03bn in dividends, out of which about $1.7bn would go to Fletcher Group Holdings Limited of Vladimir Lisin owning 84% in NLMK, Vedomosti daily estimated on March 5. Previously NLMK reported expectedly weak 4Q18 IFRS numbers, with a 17% q/q decline in Ebitda mostly due to negative steel price dynamics as well as a deterioration in the product mix. NLMK now targets the Ebitda to rise by $1.25bn by 2023, with operating efficiency and cost-cutting initiatives contributing $500mn, with steel output growth adding $300mn and additional high value added products another $450mn. "Such a gain in Ebitda implies 35% growth versus the 2018 level and a 6% CAGR [Compound Annual Growth Rate] over 2019-23, which seems achievable to us," Sberbank CIB wrote, comparing this to Severstal's target of 15% Ebitda growth in each of the next five years.
The board of directors of Russian petrochemical major Sibur voted to pay a record-high dividend of RUB33.8bn ($0.5bn) for 2018, which would already include RUB11bn paid in 1H18 and leave RUB22.8bn to be distributed for 2H118, the company said on March 14. Current Sibur's dividend policy sees a minimum dividend payment at 25% of annual adjusted IFRS profit. RUB33.8bn would thus be a minimum possible dividend payment on RUB135.2bn profit recorded for 2018. The 2018 payout would exceed the 2017 dividends by over 38%. Throughout the end of 2018 Sibur was in focus as the company was expected to announce a highly anticipated IPO, to raise
76 RUSSIA Country Report April 2019 www.intellinews.com