Page 77 - RUSRptSept18

to Interfax. The total amount of dividends (RUB154.5bn, or $2.3bn) recommended for distribution corresponds to 50% of IFRS net income for 1H18. The EGM is to decide on dividends on 28 September in the form of absentee voting, with registration closing on 3 September. “Dividends of RUB 14.58 ($0.22) per share for 1H18 are fully in line with the company’s dividend policy to payout 50% of IFRS net income. This translates into an interim dividend yield of 3.4%, we calculate. As we mentioned in our report Rosneft – 2Q18 IFRS; beating expectations, of 7 August, the DY for 2018F might grow to 7%, which would make Rosneft a decent dividend payer this year. Overall, we view the news as not market-moving,” VTB Capital (VTBC) said in a note.
Privately owned Russian oil major Surgutneftegaz remains investment banks top pick as they expect it to pay out a massive 19% dividend yield this season , Sberbank CIB said in a note on August 16. The opaque company should not be an investor’s favourite as it shares little information with investors, who are still unclear what happened to a sizeable number of treasury shares, or indeed, who actually owns the company. However, it is famous for its massive cash pile and the current market conditions means it is making money hand over fist. “The current macro environment is highly favourable for Surgutneftegas' earnings, which benefit not only from the recovering oil price, but also from the FX gains realised at its $40.6bn cash pile,” Sberbank CIB said in a note. With costs denominated in rubles, but earnings in dollars, Russian oil companies are always big winners from devaluations and the ruble is down this year 16% since January, while oil prices have been averaging over $75 per barrel in the last three months – even after a fall in Brent futures on the back of the Turkish currency crisis. “All these factors, if they persist, could well support the company’s financial performance in the second half of the year. We calculate that if the ruble stays at the current level of 66.80 by the year end and Urals averages $71/bbl in 2H18, Surgutneftegas might deliver an 18.6% DY (RUB 6.80 DPS) for 2018, the highest among Russian Oil & Gas names,” Sberbank said in a report reiterating the stock as the bank’s top pick in the oil and gas space, reiterating its Buy recommendation with a 12-month target price of $0.66 and a 30% ETR. Part of this year’s currency depreciation has already been reflected in Surgutneftegaz’s results for 1H18 under Russian Accounting Standards (RAS), as net other income, which primarily comprises foreign exchange gains/losses, grew RUB286bn y/y in 1H18 (leading net income to soar 486% y/y to RUB 371bn for the period), Sberbank reported. And the situation is only improving as after the ruble’s slide earlier this year from fears over sanctions, it has stepped down again more recently as Turkey went into meltdown. While the consensus is that Turkey’s problems will not infect other emerging markets and cause a 1997-style Asian crisis in emerging markets, its problems have been acute enough to pull many EM currencies down – especially those of countries with large trade turnover with Turkey that includes Russia.
The board of Russian diamond major Alrosa approved a new dividend policy, which has been positively met by analysts, confirming previous unofficial reports that the uncut diamond monopoly will opt for more predictable dividend payments policy to shareholders . The new policy "fully satisfies investors in terms of: 1) high yields in the 10-13% range; 2) flexibility, with a clear formula that defines payments based on the debt load; 3) predictability, with the introduction of semi-annual payments," Aton Equity argued on August 8, expecting the stock to continue rerating and maintaining the Buy recommendation with a RUB115/share target price. Alrosa's new annual dividend yield is to amount to 10-13% based on the consensus free cash flow (FCF) forecast and a 70-100% pay-out. The company targets dividends at 70-100% of FCF at a target net debt/Ebitda ratio between 0.5-1.0x in the medium and long-term. The dividend floor is set at 50% of IFRS net income. The board also introduced interim payments that improved predictability and are "generally welcomed by investors." "With a minimum pay-out ratio of 50% and maximum of above 100%, Alrosa is now well placed among the leading dividend payers within Russian Metals & Mining space, offering a predictive
77 RUSSIA Country Report September 2018 www.intellinews.com