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Market Comment
With a 9.64% climb, the PFTS posted its best day yet this year, closing at 249.05. The best performers were Shakhtoupravlenie Pokrovskoye (SHCHZ), the coal mine formerly known as Chervonoarmiyska Zakhidna, and Alchevsk Iron & Steel (ALMK), with respective gains of 33.33% and 28.05%. Zakhidenergo (ZAEN) was the day's leader by number of trades and turnover, moving up 15.42%. The total equity trading volume soared up 6x day-on-day, but was still shy of USD 10 mln. Russia's RTS and Micex have opened down this morning, following losses on Asian markets. We see the PFTS moving beyond yesterday's hiccup and tracking its peers lower today.
Utilities
Kyivenergo’s heat segment to become profitable in 2008? Yesterday, the Kyiv City Council voted to distribute an additional UAH 246 mln from the Kyiv budget to cover the difference between Kyivenergo’s (KIEN) heat tariffs and heat production costs. Alexander Paraschiy: Including this last tranche, the city of Kyiv is going to compensate UAH 672 mln or 84% of Kyivenergo’s expected total losses from heat supply in 2008. Moreover, the expected increase in heat tariffs for business consumers by 1.4-10.1x could make Kyivenergo’s heat segment breakeven already this year (for first time in the last five years). On the back of the recent change in management at Kyivenergo aimed at increasing the efficiency of the company, we are positive about Kyivenergo’s future financial stability.
Centrenergo decides to pay extra dividends. At yesterday's EGM, Centrenergo (CEEN) shareholders decided to increase the company’s dividend payout from 15% of 2007 net income (as decided at the April 3 AGM) to 40%. Other conditions of the dividend payout remain unchanged (ex-dividend date is May 1, 2008; deadline for dividend payment is Dec. 31, 2008). This implies a total dividend payout at UAH 25.4 mln, or UAH 0.069 per share. Dividend yield as of the ex-dividend date (May 1, 2008) is 0.34%. Alexander Paraschiy: The decision to increase the dividend payout was explained by the need for the company to comply with a government May 7 decree that state-controlled fuel and energy companies pay 40% of 2007 net income as dividends. Still, the agendas of Zakhidenergo’s EGM this week and Donbasenergo’s next week do not include the issue of increasing dividends.
Metals & Mining
SCM sticks with Azovstal investment plans. SCM’s Head of Investor Relations Jock Mendoza-Wilson said at the Donetsk Investment Summit yesterday that SCM is holding to its USD 5 bln investment plan at Azovstal (AZST), despite the global financial crisis. Mendoza-Wilson said that SCM believes Ukraine has competitive advantages to other regions of the world.
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