February 3, 2012
Kazakhstan: ENRC - Two’s company... three’s a crowd?
|
|
|
|
Glencore-Xstrata-ENRC: If Glencore bids for and eventually merges with Xstrata, we think a similar bid for ENRC is unlikely in the foreseeable future. We suspect Glencore has considered the acquisition of a stake in ENRC at some point, but a Glencore-Xstrata merger (if it even happens) would make it difficult for Glencore to sustain any interest in ENRC, given the potential regulatory hurdles that such market concentration would bring. Xstrata is the largest ferrochrome producer in the world (16% of global ferrochrome), while ENRC is the second largest (around 13%). In early 2011, The Sunday Times and Bloomberg reported on Glencore’s possible acquisition of a sizeable ENRC stake. Although Glencore did not confirm any plan to bid for ENRC, the UK Takeover Panel responded on 15 June by barring it from making a bid for six months – a restriction that we believe expired at the end of last year.
|
February 1, 2012
Turkey: Turkish banks - 4Q11 results preview
|
|
|
|
4Q11 preview. Turkish banks 4Q11 results season will kick off with Garanti Bank on 2 February. We forecast our coverage universe to record a 15% QoQ increase in earnings, which still represents a YoY decrease. Broadly speaking, we are below Bloomberg consensus forecasts for FY11 (hence, also 4Q11). We think banks’ 4Q11 profitability will be positively affected by increasing income from CPI linkers (at selected banks) in 4Q11, while book value growth will remain arrested due to bond market sell-off and resulting MtM losses on AFS securities.
|
January 24, 2012
Central Asia: Dragon Oil – Year of the Dragon
|
|
|
|
Growth, growth and growth... Dragon Oil (DGO) started the Chinese Year of the Dragon on 23 January by releasing a positive trading update. The company reiterated its previously disclosed 2011 exit rate of 71.5kb/d, with production averaging 61.5kb/d last year (+30% YoY), and its target of a 15% production increase in 2012, underpinned by an intensive drilling programme.
|
January 19, 2012
Kazakhstan: ENRC - Time for a change?
|
|
|
|
We have lowered our estimates for ENRC, as demand erosion in stainless steel, weaker commodity markets and negative corporate newsflow continue
to affect the stock price.
|
January 12, 2012
EMEA Telecoms Quarterly: Focusing on CIS and African geographies – 3Q11 wrap and look ahead
|
|
|
|
In 2011 (YoY) the telecoms sector was almost entirely down in dollar terms. Only two stocks – Rostelecom prefs and Kazakhtelecom – managed to end the year in the black. Both for very specific reasons: prefs have mostly traded at a 50% discount to common shares after Rostelecom was reconstituted in May 2011 and rallied on the belief that the company’s BoD would approve a generous dividend policy (this did not materialise); Kazakhtelecom announced the sale of its 49% stake in the leading Kazakh mobile operator K-Cell to TeliaSonera for $1.52bn.
|
December 9, 2011
Central Asia: Max Petroleum - ASK2 disappoints; investment case intact
|
|
|
|
ASK2: No oil. Max Petroleum (MXP) reported this morning (9 December) that its exploration well targeting the Triassic section failed to encounter a commercially viable reservoir. The well will now be completed as a producer in the shallower Jurassic section of the reservoir. The stock has already reacted to the negative news, falling c. 8% this morning. We want to reiterate that it is the nature of exploration risk that the odds can work against a company, and to date success at MXP’s post-portfolio has been 38%, so less than half of the wells are expected to translate into discoveries.
|
December 7, 2011
Central Asia: Max Petroleum - Stepping up to the plate
|
|
|
|
We initiate coverage of Max Petroleum with a BUY rating and GBp35 target price, implying 150% upside potential to the current price. Max Petroleum (MXP) is a small-cap Kazakhstan-based E&P play, targeting large resource potential in the pre-salt Pre-Caspian basin. This area has produced some of the world’s largest pre-salt oil & gas discoveries, such as the Tengiz, Kashagan and Karachaganak fields.
|
November 24, 2011
Õàëûê Áàíê: Ðåçóëüòàòû çà äåâÿòü ìåñÿöåâ
|
|
|
|
Ðåêîìåíäàöèÿ. Ðåçóëüòàòû Õàëûê Áàíêà çà äåâÿòü ìåñÿöåâ 2011 ã. ïðîäîëæàþò èçâåñòíûå òåíäåíöèè: êðåäèòíûé ïîðòôåëü áåç èçìåíåíèé (çà èñêëþ÷åíèåì ñåãìåíòà ïîòðåáèòåëüñêîãî êðåäèòîâàíèÿ), âûñîêàÿ äîëÿ ïðîáëåìíûõ êðåäèòîâ, àäåêâàòíûé óðîâåíü êàïèòàëèçàöèè è èçáûòî÷íàÿ äåíåæíàÿ ïîçèöèÿ.
|
November 23, 2011
Kazakhstan: Halyk Bank – 9M11 results review
|
|
|
|
Recommendation. Halyk’s 9M11 results show a continuation of trends seen in the bank’s previous reports, with a stagnant loan portfolio (except in the consumer lending segment), high NPLs, adequate capital and an excessive cash position. We think the market is fully pricing in the relative safety of Halyk’s funding profile. Despite 350-bpt spread-widening in Halyk’s paper and its subsequent return to August price levels, we think it would be fair to say that the bonds have reacted to market volatility by losing liquidity rather than with a sharp price action. At current levels (about 600 bpts to swaps, or 7.4% YtM for the five-year duration of HSBK17), we see no trade ideas in Halyk bonds.
|
November 15, 2011
Mongolia: SouthGobi Resources - Impending catalyst
|
|
|
|
Change of control? Subject to a favourable arbitration ruling in December, Rio Tinto (RIO LN) could take control of Ivanhoe Mines (IVN CN) on 18 January 2012 when the standstill agreement limiting RIO to a 49% interest expires. Should RIO take control of Ivanhoe, it would retain the Oyu Tolgoi copper-gold project, but likely divest non-core assets including IVN’s 57% SouthGobi interest. The best outcome for minority shareholders would likely be a sale to a strategic investor, at a premium to the current share price with a bid for the remainder.
|
November 10, 2011
Kazakhstan: Kazakhmys – In search of short-term catalysts
|
|
|
|
Corporate activity for ENRC still a likely driver: Kazakhmys continues to underperform the copper universe. Its 26% stake in ENRC accounts for GBP4.40/share (46%) of the current share price. Aside from copper markets, the key structural catalyst for Kazakhmys is the disposal or restructuring of the ENRC stake. In early 2011, market speculation centred on the possible acquisition of a sizeable stake in ENRC by acquisition-hungry Glencore (as reported by the Sunday Times and Bloomberg). Although Glencore did not confirm any plan to bid for ENRC, the UK Takeover Panel responded, on 15 June, by barring Glencore from bidding for ENRC for six months – a restriction we believe expires towards the end of December 2011. Given the significant potential for synergies between Glencore and ENRC, we would not discount Glencore returning. However Kazakhmys is not the only potential large seller of ENRC, with the three core shareholders controlling 43.8%. With ENRC currently trading at GBP6.70/share, we believe a material premium and a healthier price would be required to stimulate interest in a sale by any party. Kazakhmys has to realise more value for its 26% stake in ENRC as markets recover.
|
October 24, 2011
Central Asia: Dragon Oil - Delivering solid production growth
|
|
|
|
Targeting 100kb/d by 2015. Today (24 October), Dragon Oil announced an oil production target of reaching a 100kb/d plateau by 2015; it aims to sustain this rate for at least five years. The likelihood of reaching this target is backed up by this year’s higher-than-expected production, which averaged 61kb/d during 3Q11; the company expects it to end the year at 70kb/d.
|
October 18, 2011
Kazakhstan: Halyk Bank - Mind the gap – in a good way
|
|
|
|
Growth. How much or how little growth can Halyk Bank produce going forward? This is the bank’s major headline risk, in our view. We expect loan growth of around 7-8% for FY11, while excess liquidity continues to weigh on top-line potential. We expect healthy growth in net income, of around 18% YoY in 2011, while EPS will expand more rapidly (34.7% YoY) as a result of the buy-back of common shares previously held by the Samruk-Kazyna National Welfare Fund. For 2011 we anticipate RoE in the range of 14-15%, on a heavy capital base.
|
October 17, 2011
Kazakhstan: Kazakh banks – This time is different
|
|
|
|
As cliched as it may sound, this time is indeed very different. Yields on Kazakh banks bonds have been creeping up since August 2011, a reflection of market sentiment globally. With this, valuations are aiming for the floor again. Kazkommertsbank’s (KKB) shares trade at 0.5x P/BV 2011 while Halyk Bank’s hover around 0.9x P/BV 2011, on our estimates. Such valuation levels are more akin to the levels of distress we saw in 2009.
|
October 10, 2011
EMEA: Telecoms Quarterly - Focusing on CIS and African geographies – 2Q11 wrap
|
|
|
|
High-yield low-beta stocks win...again. The YtD performance of telcos confirms what we have singled out as the current main theme for the sector see our report, No problem ‘mit deine kable’, dated 20 September 2011) – low-beta stocks with high and predictable dividend yields. All the CE3 telcos, Turk Telekom, Vodacom and Kazakhtelecom (for different reasons) are among the top performers. Russian names are the worst-performing stocks on a YtD basis. The CE3, Turkish and Egyptian stocks all did better than the relative index on the way down on a one- and three-month basis – exactly as happened in 2008-2009.
|
October 6, 2011
Central Asia oil and gas: Show me the munai
|
|
|
|
We reinitiate coverage of Dragon Oil (DGO) with a BUY rating and GBp693 target price (TP); Zhaikmunai (ZKM) with a BUY rating and $14 TP; and Kazmunaigaz EP (KMG EP) with a HOLD rating and $21 TP.
|
October 6, 2011
Turkey: Turkish banks - Fully valued; take profits
|
|
|
|
Taking profits. Turkish banks have outperformed EM financials by 24% since the beginning of August (and by 40% since the low in mid-August), mainly because EM financials have corrected sharply over the past two months.
|
October 4, 2011
Mongolia: SouthGobi Resources - Heading south on macro, not micro
|
|
|
|
Yet to see the weakness in coal demand that the equity market is pricing in. SouthGobi has provided a positive market update indicating SepQ11 sales volume and price were at or above the midpoint of management guidance, given in August, of 1.4mnt and USD52.5/t, respectively. This was better than our forecast sales of 1.25mnt and in line with our forecast price of USD53/t. SouthGobi also indicated it is not observing weakness in coal demand within its target markets in northern China, and expects DecQ11 sales volume to be similar to SepQ11, with moderately higher prices. Again, this would be better than our DecQ11 forecast for sales of 1.13mnt at a price of USD53.50/t. We upgrade our forecast CY11 EBITDA by USD8.7mn to USD31.3mn.
|
September 20, 2011
EMEA: Telecoms - No problem “mit deine kable”*
|
|
|
|
Fixed over mobile. In DM, telecoms revenue growth has been replaced by decline, with EMs following suit: falling CE3 revenues; slower growth in Russia and Turkey; slower revenue growth in Africa. After years of growth, mobile network operators’ (MNO) voice revenues are falling, with lower revenues overall, as they face the same problems fixed-line operators (FNO) faced a decade ago – how to lose as little voice revenue as possible, while accelerating data revenue growth. Achieving both objectives will be tough during the inevitable transition to a new business model – that envisages access-based voice pricing and a combination of access-based and metered data pricing, in line with an FNO model. Competition, regulation and the arrival of 4G are bound to drive MNO voice revenues lower, with data revenues only materialising as a proper growth driver in one-to-two years, in our view. Meanwhile, we see MNOs as struggling to maintain margins and, in all likelihood, needing to revise their capex upwards. We think SA and SSA MNOs are the best positioned, as they are basically the telecoms service providers (for both voice and data) in their respective countries. For FNOs, we expect slower voice revenue losses, broadband revenue growth, fairly stable margins and relatively low capex.
|
September 7, 2011
Mongolia: Mongolian coal sector - The next M&A play?
|
|
|
|
Continued global M&A activity in the coal sector. Following the ArcelorMittal/Peabody bid for Macarthur Coal and press speculation that Anglo American may bid for Walter Energy, we revisit what we believe is possible M&A activity in the Mongolian coal sector. Macarthur Coal is trading on a FY12E EV/EBITDA multiple of 9.2x, implying significant upside potential for Mongolian coal names trading on an average of 3.4x 2016E EV/EBITDA (once/if forecast production growth is achieved).
|
August 31, 2011
FSU Banks Quarterly
|
|
|
|
Credit growth: Strong 2Q11 in Russia and Georgia. At the sector level, QoQ loan growth ranged from +2.5% (Kazakhstan) to +9.9% (Georgia). Bank of Georgia was the regional growth champion in 2Q11 (+10.2% QoQ on a standalone basis); Sberbank grew its loan book by a healthy 6.8% QoQ (under IFRS), while Kazakh banks continued to lag regional peers. In Russia, the retail segment continues to drive underlying credit growth (+8.6% vs +5.2% QoQ in the corporate segment), with total loans up 8.4% YtD to June.
|
August 11, 2011
Mongolia: SouthGobi Resources (1878 HK) - Sales up, but so are costs
|
|
|
|
SouthGobi’s 2Q11 financial and operating results showed a big QoQ uptick in coal sales. 2Q11 sales of 1.05mnt were up 133% QoQ and above our forecast of 900kt. However, receivables jumped USD39.3mn QoQ; 69% of revenue! Production of 870kt was below our forecast 1mnt. Disappointingly gross profit from mining operations of USD9.7mn (USD7.7mn in 1Q11) was below our forecast USD18.1mn due to higher costs. Direct cash costs of USD26.77/t, excluding royalties, were up 25% QoQ, and well above our forecast USD22/t, due to a higher strip ratio (4.74 vs a life-of-mine average of ~4) and higher fuel costs. Net income of USD67.3mn was above our forecast loss of USD4.5mn, but inflated by a non-cash gain of USD70.4mn on the fair value change of the CIC convertible note.
|
August 9, 2011
Global: Telcos: Where to hide?
|
|
|
|
We recommend stocks with low-risk profiles, especially those with a high share of fixed-line and residential telecoms revenues, which typically fare best when GDP growth slows and the local currency depreciates. In general, telcos are more vulnerable to currency moves than to changes in GDP. Telcos are defensive by nature, in our view, and consumers rarely cut their spending significantly. In general, corporate revenues shrink more than residential revenues, while fixed-line revenues hold up better than mobile revenues, mostly due to the nature of tariffs – typically a regulated flat-fee structure, vs competitive metered pricing.
|
July 15, 2011
CIS: Placing CIS oil & gas sector - Under Review
|
|
|
|
Given the recent hire of a Head of Oil & Gas research, we are placing the following oil & gas stocks Under Review.
|
July 13, 2011
Mongolia: SouthGobi Resources (1878 HK) - Making progress
|
|
|
|
Soumber marches forward. On 6 July 2011, SouthGobi announced that the Mongolian government had awarded a mining licence for its Soumber coal deposit. We view this as very positive given that Soumber contributes HKD35 to our HKD110 NPV. The next steps to develop Soumber are to submit a technical and economic study to the Mongolian government within 60 days and complete a prefeasibility study and updated resource statement, likely to be released in early 2012.
|
