Page 91 - RusRPTNov19

looks to increase the focus on income diversification through marketplaces for both retail and corporates.
● Retail
O’Key has announced an interim dividend of $15.1mn, with the record day to be announced . The announced amount implies a 36% payout ratio from our 2019F net income and a 3.6% yield. The company has recently slowed its organic openings, with management guiding for no new hypermarkets and only 20 discounters in 2019, putting less pressure on cash flows and providing room for dividends. We keep the stock Under Review as there is still poor visibility over the medium-term scale of the business, the acceleration in discounters and cash flow management.
● Metal & Mining
Russian steel major Severstal has recommended paying RUB27.47 per share in dividends for 3Q19 , making an estimated 3% dividend yield and 104% of the free cash flow for the period, keeping its status as one of the highest paying dividend names in Russia . "At the current USD/RUB, the total payout should be around $352mn, in line with the lower bound of our estimated range ($350-400mn), for a 3.1% quarterly dividend yield," Sberbank CIB commented on October 18. However, "such generous [dividend] payments are unsustainable in the medium-term," BCS Global Markets warned on October 18, arguing that domestic steel prices would collapse within several weeks and Severstal’s financials would follow.
● Other
Russia’s Energy Ministry opposes 50% dividend payout for SOEs. The Energy Ministry opposes the MinFin’s proposal for a dividends payout of 50% of IFRS net income for state owned utility companies, Interfax/Vedomosti, citing Deputy Minister Yury Manevich. Rushydro, Rosseti dividend outlook at risk; IRAO looks safe. Manevish said that SOEs such as Rosseti in the North Caucasus or Rushydro in the Far East are carrying heavy social responsibilities (read construction obligations), hence the issue of dividends has to be discussed together with “industry development plans” on a case-by-case basis. In our view, such a position may put the dividend outlook at risk for the referenced companies and FSK.
91 RUSSIA Country Report November 2019 www.intellinews.o