Page 105 - RUSRptSept18

planned, as the launch of Novatek's second LNG line is to be brought forward to August 2018, Vedomosti daily reported on August 8 citing the executive director of Canadian Teekay. In June Novatek was already searching for more tankers to transport LNG , as its production volumes increase. In May Novatek established MAT, its own transportation subsidiary, (Morskoy Arktichesky Transport, or Sea Arctic Transport in English), to manage it’s fleet of tankers and icebreakers delivering LNG from its major projects According to the previous plans, Teekay’s Yamalmax class tanker was to be delivered in November, while another ship-owner, Dynagas, already has a LNG tanker (Clean Planet) at Sabetta port in Yamal peninsula where Novatek launched its first major LNG project.
9.2.2 Automotive corporate news
Volkswagen Group Rus distributing and assembling VW vehicles in Russia became the official supplier of cars and LCVs (Light Commercial Vehicles) to Kazakhstan , expanding to one of the largest markets in the region, Vedomosti daily said on July 29. Kazakkhstan makes the second-largest car market after Russia in the CIS space, with 46,377 vehicles sold in 2017, up by 5.9%. VW saw the sales drop by 26% to 1,466 vehicles in 2017. In Russia the company sold 96,500 vehicles in 2017, out of 1.6mn total units sold on a recovering Russian car market. Analysts surveyed by Vedomosti believe that VW Group Rus could improve the sales in Kazakhstan given that it has more resources than the local dealer (Mercur Auto is currently the dealer of VW in the country). Previously in 2017 Volkswagen said it it will double the proportion of Russia-made cars it exports from 10% of the total output to 20%.
9.2.3 Aviation corporate news
The challenging environment for Aeroflot , facing pressure in yields and margins, has pushed the stock to trade at RUB 115-130/share recently , down from the historical peak of RUB 200-220. The run of deteriorating financials might continue with the results for the third quarter of 2018, the most important quarter of the year, which generates the majority of earnings. VTB has assigned a 12-month Target Price of RUB 132. That implies an 18% ETR, including a 4% dividend yield, and a Hold recommendation. In early 2018, many industry players were aggressively investing in capacities ahead of the World Cup. In reality, tough competition and high fuel prices trimmed airlines’ earnings even in the high 3Q season, forcing them to limit further fleet expansion. The gloomy sentiment for Aeroflot continued with the release of the deteriorating the second quarter of 2018 RAS financials, indicating weak IFRS (30/31 August). The worst might be passed after the third quarter of 2018 RAS numbers as the leading indicator for IFRS. In the fourth quarter of 2018 the hiked fuel surcharges and cost-cutting measures finally bear fruit. The company’s new strategy could be a game changer. Aeroflot is now revisiting its long-term strategy. The emphasis is on innovations, better efficiency and more ambitious growth via the low-cost segment and transit. Developing Russia’s regional hubs with a low cost model might help to unleash the hidden potential of underdeveloped inter-regional flights (nearly two thirds of all internal flights are currently made through Moscow). This might improve Russia’s low air population mobility, at only 0.7x (1.4x if one adds long-distance rail transfers), which is below the 2-6x of developed countries. That might in turn help to achieve the government’s goal of higher economic growth by building up regional agglomerations, VTB Capital (VTBC) said in a note. But the bank estimates the new strategy could add up to 19mn PAX to the current 2022 target of 74mn. Less than half of that incremental PAX would drive EBITDAR growth to 8% p.a., double our assumption, and imply a 12-mo TP of RUB 170. Yields, fuel prices and changes in VAT are other factors.
105 RUSSIA Country Report September 2018 www.intellinews.com