Research

The end of spring and the summer have brought some respite for the Ukrainian banking system. A number of positive factors, including currency exchange rate stabilization, drying up of the deposits outflow and recovery of the banking system’s liquidity decreased our worries about the sector’s future.

The end of spring and the summer have brought some respite for the Ukrainian banking system. A number of positive factors, including currency exchange rate stabilization, drying up of the deposits outflow and recovery of the banking system’s liquidity decreased our worries about the sector’s future.

SIA (State International Airport) Boryspil, the largest airport of Ukraine, with more than 62% market share in 2008, has issued seven local bonds, and one of them is still on the market. Issue 3-A (ticker PFTS OMABA3), with a volume of UAH 300 mln seems to be attractive due to high reliability and high yield to maturity (35%). This report expands our view on the issuer and marks both the strong upsides and the risks involved in Boryspil airport bonds.

On 23, June Ukrainian Parliament has passed a bill #3585 which main official aim is to “overcome the consequences of financial crisis” how it is written in the name of draft. This document regulates some issues of debt restructuring procedure, restricts foreign currency lending and preliminary external debt repayments. The law was passed by the overwhelming majority of parliament and main disputable issues were solved in compromise way, therefore we anticipate that President will sign this law soon. The final version of bill that was passed still hasn’t been officially published, therefore in our analysis we rely on information available from open sources such as news postings, newspapers, authorities’ interviews and latest available versions of draft.

May go bust. Creditors will not mind. Minority shareholders should SELL.

In this report we examine selected Ukrainian stocks that are still undervalued and look interesting for potential investors based on their strong fundamentals. The macroeconomic situation has become stable with a better outlook for the end of year compared with the figures which we predicted in 1Q09. The second IMF loan tranche played a positive role of increasing investor confidence in the local stock market. In our view, carefully chosen companies can be found with growth and value potential. We recommended to BUY such companies in the agriculture sector; MAYA GR, KER PW, MHPC LI; in energy PREN UZ, DOEN, UZ; in machinery MSICH UZ; in banking USCB UZ. We recommend to SELL positions in NFER UZ because the company could be going bankrupt. For each stock we provide a description of the price triggers that will help investors better understand the drivers which could influence possible stock price movements.

With this report, we decided to introduce the most promising Ukrainian agricultural companies that, in our view, have a winning combination of the strongest positions on the Ukrainian market, together with good corporate governance and a well-build business structure.

In 1Q09, OJSC Enakievo ISW sold its 37.04% stake in JV Metalen LLC to Metinvest Holding LLC. The price is unknown; our estimate is USD 55-65 mln. Our interpretation: Metinvest Holding provided OJSC Enakievo ISW with liquidity, to be used in particular for the construction of Blast Furnace No. 3. Metinvest benefited from that deal by effectively increasing its share in the Enakievo ISW group, because OJSC Enakievo ISW will now have to issue 9.07 mln new shares in order to acquire all rights in Metalen (previously, we expected the issuance of 5.71 mln new shares). We also do not rule out additional share issuances aimed at financing BF No. 3’s construction.

A memorandum on economic policy was sent to the IMF this week, Ukrainian officials have announced. The memorandum describes a number of actions aimed at stabilizing the economic situation in the country. The key points of the document will be announced once it is signed by the President, Prime-Minister, the Governor of the National Bank and the Minister of Finance.

Дефляция на практически все виды товаров и сырья в 2008–2009 гг. была особенно ярко выражена для природного газа. Падение цен на азотные удобрения было меньшим, и может продолжиться. Украинские азотчики неконкурентоспособны, так как цены на природный газ в Украине существенно выше спотовых мировых. Тяжелые краткосрочные перспективы создают предпосылки для передела отрасли, которая, на наш взгляд, очень перспективна со средне– и долгосрочной точки зрения.