Page 77 - RusRPTJul19

Leading Russian consumer lender TCS Group that operates Russia’s only pure online bank Tinkoff Bank plans an SPO of up to $300mn on London Stock Exchange, by issuing new shares, the bank said on June 4. TCS argues the capital is needed to ensure growth with 2019 loan portfolio growth outlook improved from 40%+ to 60%+. The rest of 2019 outlook is left unchanged with net profit of RUB35bn, given new loan products growth will contribute to 2020 profits, while the dividend policy did not change. "The management shared some long-term targets such as $1bn net profit in 3-4 years, a new strategy may be presented in 2H19," BCS Global Markets commented on the conference call of TCS on May 4. "The management persuades a capital raising allows to grow in new products and face the regulation tightening. We believe circa 10% dilution [of capital] doesn’t look concerning, still the logic of the deal with dividend payments to be unchanged looks a bit strange," BCS analysts commented, seeing less diversification of revenues, given more focus on lending with quite volatile incomes. TCS reported 25% year-on-year growth in IFRS net profit in 1Q19 to RUB7.2bn ($110mn), in line with consensus expectations of analysts. The group posted record-high net profit in 2018 thanks to rapid growth in fee and commission income, and said in March it would sell $150mn worth of its GDRs or approximately 4.2% of its share capital through structures connected to bank's founder Oleg Tinkov. The bank's net interest margin came slightly better at 22.5% given strong lending growth in the first quarter, BCS said on May 14, with the net interest income being 5% ahead of BCS analysts forecast. However, fees showed a 14% miss with 16% growth in 1Q19.
The shares of Russia's natural gas giant Gazprom are "trading at fair value" after surging by 40% on a recent surprise dividend announcement, BCS Global Markets wrote on June 10, downgrading the recommendation on the name to Hold, but upgrading the target price to $7.5 per GDR. As reported by bne IntelliNews, the shares in the so-called “state within the state” spiked by 30% in the last week of May, adding $20bn to the company’s market capitalisation in a matter of days after the management hiked its dividend twice in a week and pledged to comply with the 50% of IFRS net profit payout requirement in the next dividend season. After the company said it could share about 80% of 2018 of its free cash flow (FCF), the 2018 dividend yield is now estimated at 7.2%, in line with the average for oil producers, BCS GM estimated, noting that the yield is "not high, given the expected FCF compression in 2019 and negative M2M 2018-20e EPS CAGR (earnings per share compounded annual growth rate)."
8.4 International ratings
Russia - Rating agency
as of July 1, 2018
last change
Moodys (USD rating)
Baa3 (S)
25/1/18
Fitch (USD rating)
BBB- (S)
22/7/16
S&P
BBB- (S)
17/3/17
Russia’s credit ratings have been improving and all three ratings agencies have returned Russia to “investment grade” status (BBB- or more by S&P and Fitch, Baa3 by Moody’s).
77 RUSSIA Country Report July 2019 www.intellinews.com