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first quarter this year on the back of high demand in Europe. The lack of dividends are another aspect of the scandal that broke after Sberbank analyst Alex Fak claimed that Gazprom has spent $93bn on infrastructure projects that benefit no one but the contractors – all friends of President Vladimir Putin. Fak was promptly fired for calling it like it is.
The situation at Rosneft, the state’s other massive hydrocarbons company is better as the company is pledging to cut its record-high debt burden to investors in an effort to improve its valuation and said in April that it will pay out 505 of profits as dividends – but has some conditions.
The company will pay RUB6.65 per share, which comes on top of the RUB3.83 per share the company has already paid for the first half of 2107. The total shareholders will receive for 2017 becomes RUB10.48 per share, which is half of the company’s net profit for 2017. The caveat is the dividends will be paid to the company’s holding company parent Rosneftegaz, which is also chaired by Rosneft CEO Igor Sechin. Russian Finance Minister Anton Siluanov complained that while technically the company has fulfilled the order, the money gets stuck at the holding company level and never reaches the budget.
Other state-owned flagship companies such as Aeroflot and Transneft have also said they will pay out 50% and now investors are awaiting their AGMs to see if they hold to their word.
The other major group of companies near the top of the dividend yield table are from real estate and include LSR Group and Etalon Group, which are benefiting from the economic recovery and rising incomes.
The board of LSR Group recommended a “solid” 2017 dividend payout at RUB78 per share, which is a dividend yield of 9.3%, beating the estimates by 10%, BSC Global Markets commented on May 31.
And after Etalon posted 61% year-on-year net profit boost to RUB7.9bn ($130mn) in 2017 it is also expected to stick to its policy of paying out 40%-70% of profits with the consensus saying it will pay 50%.
However, it has not gone well for everyone. The London-listed AFK Sistema board of directors cut its dividends in half (47%) despite boasting a healthy recovery in first quarter profits. The company is still recovering from a bruising corporate war with state-owned oil major Rosneft last year that cost it $1.76bn in an out of court settlement and contravenes the company’s otherwise generous dividend policy.
8.5 Fixed income
Foreign investors have continued the sell-off of Russian domestic federal OFZ bonds since the beginning of April, due to the new sanctions and the on going political showdown between Russia and the US. Bond investors have been overweight in the high paying but low risk Russian domestic treasury bonds last year, but their appeal has waned. In April-May RUB230bn worth ($3.6bn) of domestic bonds OFZ were sold by foreign investors, with RUB131bn in April and RUB97bn in May alone, according to the Central Bank of Russia (CBR data). Previous reports by
RUSSIA Country Report July 2018 www.intellinews.com