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Eastern Europe
August 17, 2018 www.intellinews.com I Page 22
Russia’s Surgutneftegas Prefs to top list of dividend yields for 2018 says Sberbank
Ben Aris in Berlin
Privately owned Russian oil major Surgutneft- egaz remains the investment banks' top pick as they expect it to pay out a massive 19% dividend yield this season, Sberbank CIB said in a note on August 16.
The opaque company should not be an investor’s favourite as it shares little information with in- vestors, who are still unclear what happened to
a sizeable number of treasury shares, or indeed, who actually owns the company. However, it is famous for its massive cash pile and the current market conditions mean it is making money hand over fist.
“The current macro environment is highly favour- able for Surgutneftegas' earnings, which benefit not only from the recovering oil price, but also from the FX gains realised at its $40.6bn cash pile,” Sberbank CIB said in a note.
With costs denominated in rubles, but earnings in dollars, Russian oil companies are always big winners from devaluations and the ruble is down this year 16% since January, while oil prices have been averaging over $75 per barrel in the last three months – even after a fall in Brent futures on the back of the Turkish currency crisis.
“All these factors, if they persist, could well sup- port the company’s financial performance in the second half of the year. We calculate that if the ruble stays at the current level of 66.80 by the year end and Urals averages $71/bbl in 2H18,
Russia’s Surgutneftegas Prefs will be number one for 2018 dividend yields.
Surgutneftegas might deliver an 18.6% DY (RUB 6.80 DPS) for 2018, the highest among Russian Oil & Gas names,” Sberbank said in a report reiterating the stock as the bank’s top pick in the oil and gas space, and reaffirming a Buy recom- mendation with a 12-month target price of $0.66 and a 30% ETR.
Part of this year’s currency depreciation has already been reflected in Surgutneftegaz’s re- sults for 1H18 under Russian Accounting Stand- ards (RAS), as net other income, which primarily comprises foreign exchange gains/losses, grew RUB286bn y/y in 1H18 (with leading net income to soar 486% y/y to RUB 371bn for the period), Sber- bank reported.
And the situation is only improving. Following
the ruble’s slide earlier this year from fears over sanctions, it has been on the decline again re- cently with Turkey fighting a currency meltdown. While the consensus is that Turkey’s problems will not infect other emerging markets and cause a 1997-style Asian debt crisis in emerging mar- kets, its problems have been acute enough to pull many EM currencies down – especially those of countries with a large trade turnover with Turkey such as Russia.
The ruble has depreciated another 6.4% since
30 June and now trades at RUB66.80 to the dol- lar, while the Russian Urals oil blend is trading at $72/bbl on average in July-August so far, above the 1H18 average Urals price of $69/bbl (Urals