Page 14 - FSUOGM Week 46

FSUOGM PIPELINES & TRANSPORT FSUOGM

Transneft to cut costs, hitting

pipemakers

RUSSIA RUSSIAN state pipeline operator Transneft VTBC analysts deem this development
plans to cut its capital investment by 20% in 2020 as largely neutral for the company, although
The company will and by 12% in 2021, and will compensate for this it "would definitely support its free cash flow
reduce its capex by by increasing 2022-2025 capex, according to (FCF) and balance sheet in 2020-2021." VTBC
20% in 2020 and 12% Kommersant daily. maintains a Buy recommendation on Transneft
in 2021. As reported by bne IntelliNews, most recent shares.
reports have shown that Transneft will avoid the "At the same time, lower infrastructure
biggest risk to its financials, namely the reduc- spending by Transneft is negative for large
tion of its oil transportation tariffs. The company diameter pipe (LDP) producers, such as TMK,"
also positively surprised with its 2019 dividends. VTBC warns.
The decision to cut the capex in the short Sova Capital on November 12 forecasts
term, according to the daily, is due to the fall in Transneft to more than cover its dividend obli-
the company’s throughput and revenue in 2020 gations, as the analysts estimate strong FCF for
and the government’s decision not to split the 2020-21 of over RUB100bn, and expect the divi-
payment of 2020 dividends over several years. dend coverage ratio to improve over time.
The company’s initial capital spending pro- Sova has recently reiterated the Buy rating
gramme envisaged RUB3.6bn ($46.5mn) and on Transneft, and forecasts Transneft preferred
RUB2.5bn being spent on new projects in 2020 shares to yield above OFZs, at 7%. The dividend
and 2021 respectively, and RUB236.8bn and per share forecast for 2020 is RUB10,697 per
RUB 234.9bn being spent on the reconstruction pref, implying a 7.8% yield. Previously Sova Cap-
and modernisation of existing infrastructure, ital argued that Transneft shares are turning into
VTB Capital (VTBC) reminds on November 12. a solid dividend story.™

Gazprom sees recovering

exports to Turkey

TURKEY EXPORTS of Russian gas giant Gazprom to Tur- supportive for Gazprom's fundamentals," VTBC
key have jumped 2-fold year on year and by 39% wrote, maintaining a Buy recommendation on
The recovery was month on month in September 2020 to 1.9bn the company's shares.
driven by a reduction in cubic metres, Vedomosti daily writes citing the Gazprom has recently maintained its divi-
Gazprom's oil-indexed data from the Federal Customs Service. dend policy as the past months' sales have picked
prices. These were the highest monthly exports to up. The company also recently said it expects a
Turkey since January 2020, but the 9M20 deliv- positive cash flow in 2021. ™
eries still remained 25% y/y lower at 8.9 bcm.
As reported by bne IntelliNews, previous
reports showed that Gazprom continued to
recover gas exports and prices to Europe in 3Q20
and 9M20 overall.
"The recovery in exports to Turkey from the
first part of 2020 is positive for Gazprom’s finan-
cials and was driven by the reduction in Gaz-
prom’s oil-linked prices (which reflect oil prices
with a lag of several months)," VTB Capital
(VTC) commented on November 16.
At the same time, VTBC analysts believe that
Gazprom’s sales dynamics, including the recov-
ery towards the second half of the year, are in line
with market expectations.
"Therefore, we treat this news as neutral for
the stock, although in general the development is

P14 www. NEWSBASE .com Week 46 18•November•2020