Page 59 - RusRPTJune18

of more value-added projects in Moscow has increased to 50% of total portfolio, which in turn should lead to better margins. Finally, debt burden is the lowest vs other developers, allowing Etalon to boost its dividends. We believe Etalon’s dividend yield may reach 9% for 2017, overtaking LSR Group.
Rosneft ROSN LI $7.3/GD 24% The highly likely approval of MET benefits for the Samotlor high
R 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/GD 13% R
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
In 2018 Russian listed companies are to distribute RUB1.83 trillion ($30bn) in dividends, 20% more than they handed over to shareholders in 2017, VTB Capital estimated in a special report on May 22. "Between now and YE18, they [Russian listed companies] are to offer RUB1.60 trillion, with the main flow in the summer, when the final 2017 dividend distribution season starts," the bank notes. The most notable increases of total payments come from Sberbank state-controlled bank, Norilsk Nickel metals major rocked by high-profile shareholder conflict, and Russia's largest oil company Rosneft . VTB also highlight X5 Retail Group and Evraz as increasing the dividend payments, and note Gazprom Neft and Tatneft oil majors, as well as Alrosa diamond major among companies contracting their payments. The bank estimates the next 12-month dividend yield (DY) at 5.7% for the RTS index, below the forward Bloomberg consensus estimates of 6.4%. In the Emerging Market space Russia has the highest DY, overtaking the Czech Republic and Pakistan, with the Russia DY spread to EM is nearing its highest since 2007 at 350bp. Double-digit next 12-month DYs are offered by Severstal (13.6%), Globaltrans (11.9%), NLMK (11.3%), HMS Group (10.5%) and Nornickel (10.4%). VTB also notes Enel Russia (9.8%) and Etalon (8.8%) among ‘domestic’ companies. "In the space of ‘exporters’, Tatneft prefs (8.0%) and Aeroflot (7.7%) are set just a touch lower, but is still higher than the Russian RUB sovereign bond (7.36%)," the report adds. However, despite the increase in payout ratios, there are notable exclusions from the 50% payout principle for large State Owned Enterprises (SOEs), such as Sberbank and Gazprom. Meanwhile, Rosneft’s and Transneft’s recommended dividends are fully in line with guidance. "We believe that
59 RUSSIA Country Report June 2018 www.intellinews.com