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MARKETS OVERVIEW:
Selloff on the stock market extends into Friday. Dollar rebounds back above UAH/USD 8
The UX index on Friday shed 2.23% to close at 1474 points continuing the selloff from Thursday on world markets’ concerns about the Dubai World liquidity and despite the intraday positive dynamics of European markets. The PFTS index fell 2% finishing at 598 points. Daily trading volume totaled UAH 23m on the UX. Centreenergo and UkrNafta were among the biggest losers, shedding 3.4% and 3% respectively.
Konstantine Lytvyn
Friday was marked by a rebound of the dollar back above the UAH/USD 8.0 mark as the market reacted to the NBU’s Thursday intervention made in favor of the dollar. The Interbank FX Market closed at UAH/USD 8.0270-8.0450, with the Ukrainian currency losing 0.6% against the USD. During the week, the hryvnia gained 0.8% against the greenback. The National Bank of Ukraine held a target auction for individual borrowers on Friday, selling CHF 0.9m to five commercial banks at UAH/CHF 7.97.
Oleksiy Blinov
ECONOMICS & POLITICS
Naftogaz voices plans for gas imports
The Chairman of the Ukrainian gas monopoly Naftogaz Oleh Dubyna, said that the Company plans to import 3.6 bln cubic meters of natural gas in November’09 and 4 bln cubic meters in December’09. He also noted that the plan for 1Q10 imports stands at 7bln cubic meters.
Astrum’s perspective: We view this statement as a guide for estimating the November’09 bill for imported gas, as the month is almost finished. This should shape the payment that Naftogaz will have to make by December 7. As the bill for imported gas in 4Q09 is USD 3.6bln, this will mean paying USD 750m for November’09. We expect that Naftogaz will not face problems in paying the bill, as the recent conversion of SDR 800m into dollars should have brought up to USD 1.3bln to state coffers, and we expect that the government will use this money for the gas payment, by buying back domestic state bonds (OVGZs) from Naftogaz. The plan for importing 4 bln cubic meters of gas in December’09 implies a monthly payment of USD 800-850m. This means that the government will either have to make another SDR conversion in December or buy some currency from the NBU. The announced volumes for November-December’09 will bring the total 2009 gas imports to 37.4bln cubic meters, with the total bill for 2009 amounting to USD 7.9bln, meaning that the average gas price for Ukraine in 2009 stands at up to USD 210 per 1,000 cubic meters. For comparison, in 2008, Ukraine imported 52.6 bln cubic meters of natural gas worth USD 9.4bln, at a price of USD 179.5 per 1,000 cubic meters, which was fixed throughout the year.
Oleksiy Blinov
COMPANIES & INDUSTRIES
Wholesale electricity price up 0.7% in December
The National Electricity Regulatory Commission (NERC) increased the wholesale electricity price by 0.7% m/m in December, from UAH 426 to UAH 429 per MWh.
Astrum’s perspective: We view the current increase as another technical move by the NERC rather than a step towards the recovery of the electricity generation segment. The December'09 wholesale electricity price is up by just 8.6% y/y, which is insufficient to prevent financial losses at the thermal generation companies Centrenergo (CEEN: BUY), Dniproenergo (DNEN: HOLD), Donbasenergo (DOEN: BUY), and Zakhidenergo (ZAEN: HOLD) as their current tariffs do not fully cover production costs. We reiterate our FY09 net loss forecast for all four listed thermal gencos and expect that the NERC will start increasing retail and wholesale electricity prices after the presidential elections in 1Q10. We expect household electricity prices will rise by up to 70% in 2Q-3Q10 and that industrial electricity prices will see an increase of up to 15% in 2010.
Yan Lipchinsky
Alfa Bank (Ukraine) plans new share issue
Alfa Bank (Ukraine) plans to increase its statutory capital by UAH 739m, or by 25%. The decision should be finalized at the upcoming EGM, slated to take place on December 28, 2009.
Astrum’s perspective: This capital boost should have a POSITIVE impact on the financial strength of Alfa Bank (Ukraine). We expect that this capital injection will be enough to cover the Bank’s credit risks over the next 12 months. We also maintain our BUY recommendation for Alfa Bank-12 Eurobonds.
Yaroslav Stetsik
Zaporizhtransformator supplies reactors to Siberia
According to the press service of Zaporizhtransformator (ZATR: N/R), the Company has completed the installation of three additional reactors at the Tyumen substation (Siberia, Russia) under a deal that covers the supply and installation of nine reactors. According to this contract, which was signed in 2007, the first three reactors were installed in 2008, the second set of three was assembled in November’09, and the third set of three reactors is planned for installation in 2010.
Astrum’s perspective: The Company benefits from the long-term nature of contracts and from strong global demand for electricity equipment. The production of transformers in Ukraine has declined by just 27% y/y in January-September’09, compared to the 51.4% drop suffered by the domestic machinery sector overall.
Igor Bilyk
Donetskstal boosts coke exports
According to the Metall-Courier, in December, Donetskstal group intends to export up to 100,000 tonnes of coke, or 60% above the monthly average exports in 10M09. The main coke exports directions should be South Africa (40,000 tonnes), India (30,000 tonnes) and Iran (30,000 tonnes). Donetskstal group owns two coke producers in Ukraine Yasynivka Coke (YASK: U/R) and Makiivkkoks.
Astrum’s perspective: We believe that the news is POSITIVE for Donetskstal-owned YASK and Pokrovske Mine (SHCHZ: N/R) which should benefit from higher demand for coke of the parent company Donetskstal.
Yuriy Ryzhkov
To receive additional information, please contact:
Yuval Shavit
Communications Director
Astrum Investment Management
Mob.: +380 (67) 236 46 73
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