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Market Comment
The PFTS had a slow start on Monday, rising slightly 0.12% on the smallest USD 2.5 mln trading volume so far this month. Raiffeisen Bank Aval (BAVL: BUY), MMK Illicha Steel (MMKI: BUY) led the rally and rose 1.35% and 1.37%, respectively. Poltava Iron Ore (PGOK: HOLD) and Stirol (STIR: BUY) were the worst performers, sliding 2.85% and 3.66%, respectively. We expect the volume to be light once again driven by turmoil abroad and a holiday period. As of 11:00 Kyiv time today, 11% of shares were up and 38% of shares were down.
Food
Russia bans imports of Ukrainian milk powder. According to Kommersant-Ukraine, Rosselkhoznadzor (Russia’s federal veterinary and vegetable control service) announced that as of August 20 it will not permit milk powder to be imported from Ukraine. This ban was imposed after following inspections of Ukrainian dairy plants in July 2008. In addition, Rosselkhoznadzor announced a preliminary list of seven Ukrainian cheese makers allowed to deliver their products to Russia, compared to 15 before. The decision on other Ukrainian dairy plants being allowed to import to Russia (31 were inspected last month) will be announced by August 20. Olha Pankiv: We view this milk powder ban as temporary and expect Russia to reopen its borders to these products in October-November 2008. The seasonal increase in supplies of both raw milk and milk powder from Ukraine and Belarus into Russia depressed domestic raw milk prices, and in our view, the ban was designed to prevent a further decline in domestic raw milk prices in Russia. We believe that the ban will have only a marginal effect on Ukrainian dairy producers (in 2007, only ~10% of Ukrainian milk powder was exported to Russia), who will switch deliveries to the Middle East while the ban is in place.
Astarta plans to operate two additional mills this season. In a conference call on Monday, Astarta’s (AST PW: BUY) management said the company will operate Narkevychsky and Volochysky sugar mills (both in Western Ukraine) this season, in addition to the five plants it currently controls. The company confirmed the purchase of the Narkevychsky mill for an undisclosed amount, and said that the Volochysky mill will be leased for next season. The company said investments of USD 10-15 mln will be needed to upgrade Narkevychsky mill (2008-2010). Olha Pankiv: The move was as we expected; management announced plans to acquire the two mills in February 2008. Astarta’s capacity will grow by 32% to 23.3 mt of beets processed per day.
Real Estate
TMM sells 20% of first-stage apartments in Kyiv residential & office complex. TMM Real Estate Development (TR61 GR: BUY) announced yesterday that it sold 20% of first-stage apartments in its Sonyachna Brama residential & office complex in Kyiv (total area of 234,036 ths m2), currently under construction. The sale of second-stage apartments will start in fall 2008. According to TMM, it plans to complete building the first stage of Sonyachna Brama by 2009. The second, third and forth stages of the complex are scheduled for completion in 2010, 2011 and 2012, respectively.
Machine Building
Kremenchuk Wheel produces trial lot of wheels for Renault. A Kremenchuk Wheel (KKOL: N/R) representative said last week that the company produced a trial lot of automobile wheels for Renault in Russia, which will undergo tests for one month and then serial production of the wheels is planned to be launched. Inna Perepelytsya: Kremenchuk Wheel did not disclose any other parameters of the potential deal or its partner, but we believe the company will deliver the trial lot to AvtoVAZ (Russia’s largest passenger car producer, which Renault bought a 25%+1 stake in this February). If these wheels are approved by AvtoVAZ, we expect that Kremenchuk would start delivering wheels no earlier than in 2009. We estimate that this deal could bring in an additional 5% to sales (~USD 5 mln) in 2009, and up to 10% in 2010-2011 as Renault car production grows at AvtoVAZ plants. AvtoVAZ is currently working out its development plan for 2009-2012 with Renault, and depending on the actual figures, Kremenchuk Wheel could be in line for even more orders than our back-of-the-envelope estimates.
Charter Fund Increase
Kyivmedpreparat EGM to consider 2x charter fund increase. At their EGM on September 30, Kyivmedpreparat (KMED: N/R) shareholders will consider increasing the company’s charter fund by almost twofold or USD 20.6 mln to USD 41.2 mln via an additional share issue. The company plans to issue 4 mln shares at par, USD 5.2 per share. Subscription is planned to be held from December 9 to 25, 2008.
Fixed Income
XXI Century announces redemption of USD 150 mln Eurobonds. XXI Century (XXIC: BUY) announced yesterday that it plans to redeem its USD 150 mln Eurobonds due 2011 with 1,500 warrants attached on August 25, 2008. The Eurobonds will be redeemed at par, together with accrued interest. The warrants, each of which gives the warrant holder the right to subscribe for 4,000 ordinary shares, will be cancelled on August 25, 2008.
Kominmet issues UAH 250 mln in local bonds. According to Ukrainian State Securities and Stock Exchange Commission, Kominmet (DMZK: HOLD) issued UAH 250 mln (USD 51.5 mln) in local bonds. The company didn’t disclose other parameters of the issue.
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