Flash notes

On June 06, Metinvest Holding will likely hold its annual press conference. We expect good news to be presented, and markets to react. There is a only a week left for buying promising Metinvest Group members before their likely appreciation after the press conference.

On May 30, a Metinvest Holding official announced that the Group will supply 600 thsd mt of skelp and pipes for Central Asia – China natural gas pipeline. We affirm positive Azovstal expectations and consider possibilities regarding future of Khartsyzsk Tube Works.

The diarchy in the State Property Fund (SPF), created by the confrontation between the president and the prime minister, created grounds to question the legitimacy of the privatization that made Energy Standard group, one of the rival shareholders in 5 out of 6 oblenergos, refuse to participate until the government clears all political and judicial issues tied to privatization.

Recently PFTS saw a worst ever performance with –10% fall this week while global equity markets performed fairly better. In our view the reason for that was the artificially created lack of liquidity on the local money market as the interbank overnight rates skyrocketed to 40%. The prices at which the stocks are traded at the moment seemed unreasonably cheap to us as we see the recovery starting in May. We recommend using the momentum for acquiring Ukrainian stocks.

The stock of Donetskgirmash [DGRM UZ] has long remained a rather promising pick in the market due to its noticeably lower than the industry’s average EV/Sales and P/Sales ratios. However, for the last two years the negative profitability has been inevitably reported by the company at the year-end: USD 3.5 mln net loss in 2006 was followed by the USD 7.2 mln net loss in 2007.

Ukraine is in the WTO, at last. Thursday, Ukraine’s parliament approved protocol on Ukraine’s accession to the WTO. This was the final step needed for the country to access the organization, after Ukrainian President Viktor Yushchenko and WTO Director- General Pascal Lamy signed the accession protocol on Feb. 5, 2008 in Geneva. Ukraine has been trying to enter the WTO for 15 years and this final outcome is a strategic gain. We expect gradual improvements in the quality and volume of Ukrainian exports in the forthcoming years.

A UAH 5.53 Metinvest hint on its intentions? ENMZ’s Potential has unfolded in 2007. The significant 2000–2007 modernization and expansion program culminated in the July 2007 launch of Blast Furnace No 5, which is among the most advanced in the CIS. The company started to demonstrate profits, and the stock has appreciated 16 times YtD.