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bne Invest
June 28, 2019 www.intellinews.com I Page 10
Russian carrier Aeroflot upgraded to Buy as fuel cost fears dealt with
Shares of Russian national air carrier Aero-
flot have been upgraded to Buy by BCS Global Markets on June 26 with an increased target price of RUB130 implying a 10% return, the bank said in a note on June 26.
Aeroflot was one of investor darlings in 2017, but rising costs of both staff and fuel hurt its bottom line last year, with profits continuing to be under pressure in the first quarter of 2019. Now BCS GM sees Aeroflot's investment case improving in both structural and fundamental terms, seeing a brighter outlook on regulatory and cost relief
in 2019-2020, as well as expected resumption of dividends.
Zero VAT rate for inter-regional flights in Russia could bring a total of RUB7.5bn-10bn of tax relief, out of which Aeroflot could get 50% as a third of its domestic traffic will be eligible for the exemp- tion. A recent initiative by President Vladimir Putin is also expected to cap volatility and medium- term price growth of jet fuel.
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Russian oil major Russneft could boost dividends 2.5-fold
Russian oil company Russneft could boost its dividend payout 2.5-fold to up to $100mn annually in the next three years, the head of the company, billionaire Mikhail Gutseriev, told the shareholders as cited by Vedomosti on June 21.
As reported by bne IntelliNews, the sharp post- sanction deleveraging of Russian blue chips released cash flows that were converted into some of the best-paying dividend stocks in the world. This year investors are expecting dividends payouts to reach an all time high, both in terms of dividend yields and in actual cash handed over.
Russneft doubled its IFRS net profit in 2018 to RUB14.8bn ($228mn). The company is one of Russia's six largest crude oil producers with assets in key extraction regions such as West and Central Siberia, Volga-Urals regions, as well as Azerbaijan.
Russneft' dividend policy could be revised once the leverage is brought down from 2018 level of net debt to Ebitda of 2x. Gutseriev pledged to trigger the higher payout once net debt is equal to Ebitda.
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