|
Ukraine hryvnya appreciates sharply
Yesterday the Interbank currency market experienced a sharp appreciation of hryvnya from 6.5/7.0 in the beginning of the day to 6.0/6.4 at the session closure, as the National Bank of Ukraine (NBU) intervened with a USD sellout at the 5.95 UAH per USD level.
Later the same day, NBU officials announced that they had reached a consensus with commercial banks regarding the UAH’s stability and stated that an agreement was reached to unite the NBU’s and commercial banks’ efforts to keep the UAH below the 6.3 level.
Earlier this year, the UAH appreciated on the Interbank from 5.1 in January to 4.6 in May and stood strong until August 2008. Depreciation started in late August with the hike in the foreign currency demand, accompanied with the shrinkage of the Interbank currency supply. The UAH reached its historical low earlier this week as it was traded at 6.7/7.1 on the Interbank.
Our view:
We view the NBU’s intervention and the consensus reached with the commercial banks as a signal of its readiness to stabilize the FX market in the short run, supported by earlier news on the IMF providing a USD 16.5 bln standby loan to Ukraine to support its economy amidst the global crisis.
We believe that, besides the NBU’s steps, the currency supply somewhat expanded on the Interbank yesterday as exporters sold some of their currency stocks as they prepared to pay their monthly UAH-denominated expenses.
Sokrat expects that the NBU’s actions will be effective in stabilizing the currency market in the next few weeks. We also anticipate that the UAH will appreciate slightly towards the end of the year and may strengthen to below the 6.0 UAH per USD level. However, we view the anticipated current account deficit in 2009 as a major driving force supporting the UAH’s depreciation next year.
Kryukiv Railcar to supply 200 wagons to Ukrzaliznytsya: POSITIVE
Ukraine’s State Railway Transport Administration ‘Ukraliznytsya’ plans to acquire 200 passenger railcars from the Open Joint Stock Company Kryukiv Railcar [KVBZ UZ,BUY] in 2009. This announcement was made by Ukraine`s Minister of Transportation and Communication Yosif Vinsky during Tuesday’s working visit to the Kremenchug, Poltava Region, where the company’s plant is based.
The Minister further confirmed that for 2009, Ukrzaliznytsya does not plan to place any orders for passenger railcars from international companies.
Kryukiv Railcar Plant produces loading (flatcar, tank wagons bunker-type gondola) and passenger cars, spare parts and carts for freight cars, wheel sets, spare parts for cars and subway escalators, containers, road equipment. KVBZ’s production is supplied to more than 20 countries around the world.
Our view:
The given news is apparently POSITIVE, once again confirms the existence of strong cooperation between Kryukiv Railcar and Ukrzaliznytsya, which looks POSITIVE in terms of the KVBZ’s prospects for further contracts. This development also signifies the state administration’s increasing commitment to support its own economy by purchasing Ukraine-made railcars, whereas Ukrzaliznytsya used to regularly purchase as much as 50% of its new passenger wagons from the Russian-based company “Tverskoy Vagonostroitelniy Zavod”.
Given the risk that recent political tensions with Russia and the current economic crisis may result in a reduction of KVBZ’s market share of freight railcar exports to the Russian Federation, it is encouraging to see demonstrations of state support for domestic railcar producers. Earlier this week, Ukrzaliznytsya announced plans to acquire 4 thsd for 2008 (twice more than for 2007) and 5 thsd freight cars in 2009, for which it planned to obtain loans since the state railway operator’s revenues will cover less than 15% of the total costs for domestic freight railcar production in the 2008-2009 period.
Earlier, in mid-September, Ukrzalitsnytya awarded KVBZ a tender to supply 300 freight carriages at a total cost of USD 30.8 mln, Despite the announcement made by the Minister of Transportation and Communication, we foresee that Kryukiv Wagon may actually provide less than this amount to Ukrzaliznytsya in 2009.
We continue to hold an optimistic outlook on KVBZ, as the company is steadily pursuing its strategy of product diversification, which makes its stock somewhat more attractive amongst investors in comparison to the stocks of other railcar producers, in addition to successfully cooperating with the Belarus government’s main rail production purchaser, which will most likely result in additional orders for KVBZ products and increase the chances of reaching the Russian passenger railcar market, regardless of where relations between Ukraine and Russia stand in future. We reiterate our BUY recommendation for Kryukiv Railcar, with a target price of USD 9.46 per share and an upside of 570%.
For an in-depth analysis of Kryukiv Railcar, see our report “Railcar Producers in the Spotlight – Buy Your Ticket on Time” of July 2008. For more information please contact the Head of International Sales, Constantine Lisnychyy, +38 050 310 0819, lisnychyy@sokrat.kiev.ua
LUAZ Releases Financial Results for Jan-Sep: POSITIVE
The Bogdan Automobile Plant [LUAZ UZ, BUY] has reported on its results for the first nine months of 2008, in accordance with Ukrainian accounting standards. In the
period January-September 2008, the plant produced 70,427 cars, which represents an increase in output by 92% (or 33,752 cars), compared with the same period in
2007.
LuAZ’s net income for this period was USD 76.6 mln, constituting a growth of 3.2 times YoY. Its net revenues totaled USD 1.1 bln, representing a gain of 166% YoY. As
well, its EBITDA stood at USD 108.1 mln, which is up 2.2 times YoY.
In September, LuAZ produced 8,949 cars, a reduction of 19.1% (or 2,115 cars) compared to August. This sum includes 2,775 VAZ cars, 2,892 KIA cars and 3,282
Hyundai cars. However, LuAZ’s production increased by a healthy 86.4% or 4,147 cars in September 2008, compared to September 2007.
In August, the Bogdan Automobile Plant had increased production by 22.3% (or 2,019 cars) to 11,064, in comparison to results from the July. Compared to 2006,
LuAZ’s 2007 production grew by 33.6% (or 13,570 cars) to 53,919 cars.
The Bogdan Corporation – LuAZ’s parent company and the auto division of Ukraine`s Ukrprominvest group – saw an increase in car sales of 47.3% (to 71,949) for the
period January-September, while truck sales fell by 15% (or 1,250) and bus sales grew by 28.2% (to 2,967). Overall, however, the corporation’s nine-month sales grew
by 44.7%. In 2009, it expects to occupy 19% of Ukraine`s car market, 9% of the truck market and 30% of the bus market. Apart from the Bogdan Automobile Plant
(LuAZ), the Bogdan Corporation also includes 19 other companies, among which are OJSC Cherkasy Bus, and Hyundai Motors Ukraine.
Our view:
This news is all POSITIVE for the Bogdan Automobile Plant and its parent company, the Bogdan Corporation.
Due to the drop in sales on the Ukrainian new car market for the second month in a row, primarily due to non-availability of auto loans since May 2008, we have downgraded our forecast for the sector’s market growth for 2008 to 14%; however, we retain our estimates for LUAZ car production at the 90 thsd level. The corporation is well on its way to achieving that level. For the period January-September, the company’s net income was solid and its 92% growth in new car sales YoY was also much higher than the national average of 30%.
The company continues to have strong prospects particularly thanks to the Hyundai brand, which ranked in second place on the market in September. The 2008 output for Hyundai accounts for 41% of the overall output at LUAZ. In the backdrop of the new car market in Ukraine, the Hyundai brand has doubled sales for cars purchased on credit. This was made possible through a special loan program, arranged in cooperation with the Mriya Bank.
Next year we can expect some changes, both in operations and likely in financial terms, since the Bogdan Corporation will transfer its operations for bus production to Lutsk. It is not yet clear whether LuAZ will be producing the hundreds of buses ordered from the Bogdan Corporation (via the Ukrainian government) by the Ministry of Education of Azerbaijan for its national school bus program. What is clear is that 170 Bogdan buses, each of which is fitted with a Nissan engine, have already been supplied through this program.
The current liquidity crunch that has already reached Ukraine has led us to increase the WACC in the model. Due to our anticipation of an additional share issuance of a 33% stake, expected this autumn, we downgrade our 12M Target Price for LUAZ to USD 0.284 per share and reiterate our recommendation to BUY shares in the Bogdan Automobile Plant, with an upside of 284%.
For an in-depth analysis of the Bogdan Automobile Plant, see our October 13 flash note “Bogdan Automobile Plant – Consolidation on the Final Lap” and our report “Bogdan Automobile Plant – Ready to Shoot Forward” of August 2008. For more information please contact the Head of International Sales, Constantine Lisnychyy, +38 050 310 0819, lisnychyy@sokrat.kiev.ua
Kyivmedpreparat 3Q2008Net Revenue Up 23.4%: POSITIVE
In July-September, the Kyivmedpreparat company, increased its net revenue by 23.41% or UAH 37.394 mln to UAH 197.105 mln, compared July-September 2007.
Kyivmedpreparat, as Ukraine’s largest producer of antibiotics, ended 3Q2008 with a net profit of UAH 19.719 mln.
Kyivmedpreparat ended 2007 with a net profit of UAH 26.668 mln, having increased its net revenue by 21.2% or UAH 40.734 mln to UAH 233.287 mln, compared to 2006.
Kyivmedpreparat [KMED UZ, BUY], the leading antibiotics pharmaceutical producer in Ukraine and a member of the Arterium Corporation, decided to increase its share capital by UAH 100 mln, up to the level of UAH 200.1 mln. The share subscription is scheduled to take place in the period December 9-25, 2008.
Dragon Capital, a minority shareholder in Kyivmedpreparat, has voted against the additional shares’ issuance. According to Dragon Capital’s announcement on December 31, 2007, last year’s share issuance contravened the law in that it violated minority shareholders rights during the share subscription and the current decision to hold an additional share issuance was taken by shareholders who own fake shares. Currently, there are three active cases concerning Kyivmedpreparat’s share issuance before local courts for review.
Our view:
The company’s great 3Q2008 results leads us to confirm our forecast for Kyivmedpreparat’s annual results. We recommend BUYing shares in Kyivmedpreparat, with a two month target price of USD 37.8 and current upside of 41%.
We believe that the Ukrainian pharmaceutical industry remains stable under the current condition of the credit crunch. Consumers will most likely purchase Ukrainian made drugs due to the fact that their prices are, on average, seven times lower than those for imported products.
We are not sure whether the additional share issuance will take place during the period December 9-25, 2008; however, considering Kyivmedpreparat’s plan for GMP modernization in 2009, we believe that this is still the right step for the company to attract the resources required for such modernization. This is a viable option for KMED, since bank loans have become extremely expensive in the backdrop of the current financial crisis. We believe that the company will be able to implement GMP modernization at a level up to 80% in 2009.
For a more detailed analysis of Kyivmedpreparat and to gain an overall better understanding of the pharmaceutical market in Ukraine, see our 42-page report report “Ukrainian Pharmaceuticals: A forward look at GMP implementation” of October 2008. For more information, please contact the Head of International Sales, Constantine Lisnychyy at +38 050 310 0819 or lisnychyy@sokrat.kiev.ua
|
|
