Page 11 - FSUOGM Week 35 2020

FSUOGM INVESTMENT FSUOGM

Novatek sets H1 dividends, but

fails to impress

RUSSIA RUSSIA'S second-largest natural gas producer be important for investors, we see no substantial
and liquefied natural gas (LNG) leader Novatek implications for Novatek's investment case at
Novatek has has confirmed its commitment to raising the this point, as the expected dividend yield is still
recommended a dividend payout, as the conditions for removing fairly low," the investment bank commented.
dividend of RUB11.8 payout restrictions related to the Yamal LNG BCS Global Markets estimated that 1H20
per share for H1 2020. project have been met, Sberbank CIB wrote to dividend makes about 47.5% of the normalised
clients on August 26 citing the conference call of net income for the period.
the company's management. "Novatek had signalled it would increase its
"In previous years, the payout ratio based payout significantly in 2020 and a 47.5% payout
on adjusted net income has been in the 30-40% brings it to peer levels. However, Novatek is still
range (37% for 2019). Although the dividend not a high-yielding stock and its market valua-
policy has yet to be changed, the company is tion still infers a very large amount of growth,"
moving closer to a 50% payout," the bank wrote. BCS GM analysts commented.
As reported by bne IntelliNews, previously Assuming the 47.5% is the new target, BCS
the company pledged to decide on the dividends GM estimates the dividend payout at 4.2% div-
in 2Q20. For 2Q20 under IFRS Novatek showed idend yield. While this makes "a good and nec-
$2bn in total revenues, $0.99bn total Ebitda essary step in the maturation of a fast-growing
(including joint ventures such as Yamal LNG) company like Novatek," it will still likely "leave
and net income of $0.58bn. The company beat the stock lagging peers in yield in 2021 and 2022
the consensus expectations on its top and bot- once commodity markets return to normal."
tom lines by 2% and 7% respectively. "In other words, NVTK is still pricing in
Novatek recommended a dividend for 1H20 substantial growth from the company’s LNG
of RUB11.8 per share (down 17% year on year) projects over the next decade, and is not yet a
implying a 1% semi-annual dividend yield. high-yield play," BCS GM analysts conclude.
Sberbank CIB assumes a full-year dividend VTB Capital (VTBC) on August 26 also esti-
from 2020 normalised net income of RUB27 per mated the payout at 48% of net income, but sees
share, for a 2.4% dividend yield. the new dividend announcement as only "slightly
"While the improved dividend payout may positive" for the sentiment on Novatek.™

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