Page 88 - RusRPTMar19

Rosneft ROSN LI $7.3/GDR 24% The highly likely approval of MET benefits for the Samotlor high watercut field in the coming months could become a strong trigger for the name: we estimate a +5-6% effect on annual EBITDA. The
dividend payout increase to 50% is an additional supportive factor.
MMK MAGN RUB41.5/ 24% RX GDR
MMK’s shares have fallen 20% from the 1Q17 high and it remains one of the cheapest steel names globally at 3.8x EV/EBITDA for 2017. Steel industry is recovering and the steel over bulks premium in China is expanding; MMK, which has the lowest integration into raw materials, is the key beneficiary.
Novatek NVTK LI $133/GD 17% The stock has been considerably oversold on the back of the crude R oil slump and has not yet recovered. Timely launch of Yamal LNG
along with the new strategy presentation in 2H17 are key drivers for a re-rating, in our view.
Globaltrans
GLTR LI
$8.7/GDR 13%
This year should be successful for the company, because the deficit of gondola cars on the rail network has led to rising tariffs, which have already achieved RUB1,500 per rail car per day. As a result, we see upside risk to our earnings estimates. Additionally, the company may pay interim dividends for 1H17, while the annual dividend yield is close to
8.3.2 Dividends dynamics
Russia’s state-owned gas giant Gazprom held an investor day in Hong Kong on February 25 and announced it may pay record high dividends this year. Gazprom’s management sees the possibility of paying 50% of IFRS net income in dividends after the investment cycle is over in 2020, Bloomberg reports, citing the company’s CFO Andrey Kruglov at the Investor Day briefing in Singapore.
“The company’s budget assumes dividends of RUB10.43/share for 2018, which translates into a dividend yield of 6.7%. Our base case assumes flat dividend per share (DPS) for 2019-20, so we note some upside potential here. We would deem this development as positive for the name,” VTB Capital (VTBC) said in a note.
Gazprom paid RUB8.04 per share in 2017, the same as the year before. The announcement follows on from statements last August that the company could increase dividend payout this year.
In the first nine months of this year the company’s profits increased 1.8-fold to RUB1 trillion ($15.2bn), according to its IFRS accounts. Gazprom aims to keep increasing dividends in rubles in 2019-20 due to growing free cash flow (FCF) and declining investments.
The company has taken on several mega-pipeline projects in recent years, including the Power of Siberia link to China and the Nord Stream 2 pipeline to Germany, but as these projects start to wind down the company’s capex will fall off, leaving more revenues free to pay out as dividends. Some 700km of the 1,200km are now completed and the deadline for completion has been moved up from the start of 2020 to sometime in the fourth quarter of this year, the company said. After that the company sees gas capex declining in 2019-20 from the 2018 peak.
So far the company has managed to avoid paying out the full 50% demanded from all state-owned enterprises (SOEs) by the Ministry of Finance, but government is keen to increase its revenues via dividend payouts and the pressure to increase the payout has not abated. In 2017 Gazprom paid out a total of RUB190bn as dividends, or 20% of its profits, according to its IFRS accounts. In November the company warned investors that the payout in 2018-
88 RUSSIA Country Report March 2019 www.intellinews.com