Page 103 - RusRPTDec18

BCS Global Markets estimated on November 30 that cash flow yield (CFY) stood at an"impressive" 19%. Record-high EBITDA and CFY were expected, given ruble-denominated oil prices growth of 19% q/q and output growth of 3% q/q, BCS wrote. Nevertheless, the strong results are expected to support positive investor sentiment on Lukoil's shares. On November 29 the company also said it will use the 2018 earnings to speed up the share buyout programme of $3bn, planning to finish it by the end of 2019, and not in 2022 as previously planned. Based on current capitalisation on Moscow Exchange $3bn could make 5.59% of the company's shares.
Co-owner of Russia's second-largest and largest private oil company Lukoil Leonid Fedun passed 17mn shares or 2% of the company to his two adult children Anton and Ekaterina, the company said on November 1. The value of the stake is $1.2bn. Fedun's stake now stands at 7.5%, while the head of the company Vagit Alekperov holds 26.06% in Lukoil. The company also bought out and cancelled 100.56mn of treasury shares or 11.82% of the capital, which has pleased investors.
Gazprom Neft has released its 3Q18 financial results. The numbers were strong, and came above forecasts in all three lines. The key discrepancy to our forecast was from better than expected tax reliefs in the upstream segment. FCF was supported by tax reliefs as well and so was above our forecast. We are reiterating our Hold recommendation, as our 12-month Target Price of $6.10 implies a 16% ETR. Adjusted revenues in line. Revenues were supported by the 6.5% Q/q oil production growth domestically and the 1.7% Q/q increase in Urals in 3Q18. Additionally, the company reported higher than expected purchases of oil and oil products in 3Q18. Therefore, the top line grew 5% Q/q to $10,522 in 3Q18, or 4% above our forecast and 1% above consensus. If adjusted for the purchases of oil and oil products, revenues were in line with forecasts. Stronger than expected tax reliefs. The key discrepancy to our costs forecast came from the better than expected tax reliefs in the upstream segment. The total tax relief for the mineral extraction tax and export duty amounted to $911mn in 3Q18, we calculate (9% above our upbeat forecast). The other operating costs were in line with our forecast. As a result, EBITDA grew 11% Q/q to $3,000mn, or 3% above our forecast and 4% above consensus. Tax reliefs supported FCF. Non-operating costs were broadly in line with our forecast. Net income grew 29% Q/q to $2,017mn, or 3% above both our forecast and the market consensus. Gazprom Neft earned $1,153mn in free cash flow in 3Q18, which exceeded our forecast exactly by the difference between the actual and the forecasted tax reliefs. It is worth mentioning that almost all of Gazprom Neft's free cash flow consists of the amount of tax reliefs in the upstream segment.
9.2.2 Automotive corporate news
Russia's largest carmaker Avtovaz and Renault-Nissan-Mitsubishi plan to strike a RUB70bn ($1.1bn) investment deal for 10 years in Russia. Earlier this week Avtovaz applied to the ministry for the Special Investment Contract (SPIK), a new form of state-sponsored investment deal to secure a tax rebate and state guarantees in exchange for increased localisation and domestic R&D spending. The investment could double the company’s output. The deal could become the largest SPIK in the Russian auto industry, beating RUB46.5bn previously signed with Kamaz heavy vehicle producer and Daimler. The bulk of investment will be used for modernising Avtovaz, Renault, and Nissan plants in Russia, as well as Mitsubishi distributors. Unnamed sources close to the
103 RUSSIA Country Report December 2018 www.intellinews.com