Page 52 - IFR Opportunities in Russian capital markets

CHAPTER03
ifrintelligence reports/Opportunities in: Russian Capital Markets
Table 3.4: Annual value of Russian IPOs, 1996–2007E (US$m)
Period No. of IPOs Total raised, US$m
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006 excl. Rosneft
Rosneft 1
2006 total 14 17,659 2007 possible — 30,000
1 111
——
—— 1 52
1 323 ——
2 1 5
12
13
220 14 620 4,926 6,999 10,656
Source: Alfa Bank Research
Diluting the index
Russia's IPOs are already making a mark on the composition of the market and starting to dilute the natural resources companies' dominance of the RTS index.
Two years ago, the 10 largest names accounted for 85% of the value of the market. Currently, the 10 largest names account for 69%. The top 15 names used to account for 94% of the total market value at end-2004, while currently they account for 76%.
Opening up new sectors
Over the last decade, portfolio investors have been happy to invest into Russia's raw materials producers, simply because they have been so cheap when compared to their peers around the world.
However, after the market gains of the last three years this is no longer true; indeed some Russian steel and oil companies were trading at a slight premium to their emerging market peers.
At the same time, the Russian story changed from simply ‘catch-up’ by the extractive industry valuations to the boom in consumer-orientated business, and these companies were all but absent from the universe of publicly listed companies.
Because of the fast growth of consumer companies such as supermarkets and their inability to raise investment capital from traditional sources, these companies have also been among the vanguard of Russian IPOs. (Table 3.5 shows potential IPO issuance for 2007 and the sectors which are forecast to see most activity.)
While the capitalisations of these companies pales in comparison to their raw materials cousins, the distribution of stocks by sector on the RTS is already more diverse and will continue to diversify in the short term, allowing investors to build a more representative portfolio.
Table 3.5: Forecast IPO issuance, 2007 (US$m)
Sector No. of possible IPOs Cash to be raised (US$m) % of total
Construction 3 Consumer, food, retail 25 Electricity 5 Financials 10 IT&Media 5
Leisure Manufacturing Metals
Oil
Real estate Telecom Transport Total
600 2.0 3,000 10.0 6,000 20.0
11,000 36.7 550 1.8 4 100 0.3 12 2,200 7.3 13 3,800 12.7 4 1,400 4.7 2 300 1.0 2 300 1.0 6 750 2.5 91 30,000 100.0
Source: Alfa Bank Research
45