Page 130 - RusRPTJun19

diamond major trades at an attractive price to earnings ratio (P/E) of 6.8x, "clear positive catalysts" are still needed for the name. Alrosa pays 70% of its free cash flow (FCF) in dividends and is one of the best-paying dividend stocks among Russian Metals and Mining equities. The name is included in BCS GM's Dividend Basket portfolio that shows a 12-month dividend yield of 13.7%. The company reported revenues of RUB61.4bn ($921mn) for the fourth quarter of 2019, down by 14% q/q. The company's Ebitda was down 33% q/q to RUB26.9bn, which was 2% below the consensus expectations of analysts. Earnings for 2018 overall stood at $397mn and missed expectations by 4%. Alrosa's net profit in the reporting quarter was 69% q/q down to $114mn. The decline was attributed to non-operational losses. While the Alrosa's earnings were below the expectations, the cash flow outperformed the consensus, delivering an upside to dividend expectations.
Alrosa has reported positive 1Q19 earnings, thanks to lower costs and the additional tailwind for cash generation from the sale of non-core assets. However, as EBITDA was still down 35% y/y on weak diamond market conditions (in the midstream and downstream), VBTC decrease its earnings estimates and 12-month Target Price to RUB120 (Buy reiterated, ETR of 39%). We expect the y/y dynamics of Alrosa’s realised price to improve in 2Q19, supporting the still attractive dividend and FCFE yields of 11-14% in 2019-20F. EBITDA better than estimates on costs. Alrosa reported EBITDA 3% better than consensus and 14% better than VTBC expected. The outperformance vs. our forecast mainly came from the top line (subsidies received) and the 9% better total cash costs reported.
Russia’s leading fertilizer producer Phosagro posted strong 1Q19 IFRS results with revenues increasing by 22% quarter-on-quarter and 32% year-on-year to RUB72.3bn ($1bn), slightly missing consensus expectations, but coming in line with Ebitda growth of 34% q/q to RUB27.8bn and surprising with RUB21.2bn profit, albeit on non-operational factors. Previously for the end of 2018 Phosagro posted mixed results showing y/y growth in production volumes but compromised sales results. In 1Q19, the results came in mostly neutral, with some downside risks persisting for the company, BCS Global Markets commented on May 15. "Phosagro’s 2019 outlook is neutral: high season for phosphate fertilizers in Russia (expected in 2Q19-3Q19) and Latin America will be offset by expected drop in Indian imports in 2Q19 and potential risk from new capacities," BCS analysts wrote.
9.2.12 Transport corporate news
Russian rail operator RusTransCom will sell a controlling stake of 95.72% to Russia’s second-largest bank VTB Bank, Reuters reported citing unnamed market sources on May 16. Specialising in the transportation of grain, mineral fertilisers, and timber, previously the company announced plans to hold an IPO at the London Stock Exchange hoping to raise $300mn, as reported by bne IntelliNews, but later called the offering off after receiving "several proposals regarding private equity transactions, which are better aligned with the Group’s development strategy.” Now reportedly VTB could acquire the company that is valued at $1.36bn-$1.6bn, although the amount of the deal has not been undisclosed. VTB already controls major grain assets such as 50% in the state United Grain Company (OZK) and Novorosiysk Grain Terminal (NZT).
Russian maritime shipping major Sovkomflot will get a major deal for fourth new gas-powered Arctic tankers Arc7 to transport liquefied natural gas (LNG) from the upcoming project Arctic LNG-2 of independent gas
130 RUSSIA Country Report June 2019 www.intellinews.com