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EScroogeJr (< 20)

Russian stocks - a short list and some numbers



September 14, 2007 – Comments (0)

This is my second post on the topic. As we saw in the previous post, Russian stocks in general present a potentially remunerative, but still very speculative investment, or, to use a more appropriate term, gamble.

Here is a short list of major corporations whose ADRs are available on NYSE, London Stock Exchange (LSE) or Franfrurt Exchange. (A word of caution: all information here was taken from and has not been checked. There may be some potential for confusion due to the difference between the ADRs and the shares trading on RTS; also, there may be a mismatch in the prices of ADRs trading on different exchanges. Always do your DD, make sure you are buying the right security at the right price and on the right stock exchange). 

Company            RTS Ticker    WesternTicker   Market Cap (B)  P/S   P/E   Price 

Aeroflot               AFLT             AETG                3.0              1.0      11.9   $2.77

Avtovaz               AVAZ            AVAZ, AVVG     4.3               0.8      29.3  $155

Severstal             CHMF           CHMF               17.4             1.4       14.7  $17.7

Unified Energy     EESR            UESD, UES      48                1.5       15.7 $1.19

Gazprom             GAZP         OGZD, OGZPY.PK  244            3.1       10.8 $10.4

Norilsk Nickel       GMKN        MNOD, NILSY.PK  42              3.6        7.0   $225   

Irkutskenergo        IRGZ         IRGZ, IKSGY.PK     4.3             5.0        56.0 $0.9    

Lukoil                   LKOH        LKOH, LUKOY.PK   63.5          0.9        8.9   $75

Mosenergo            MSNG      MSNG, AOMOY.PK  9.7           3.9        30.7   $0.24

Mechel                  MTRL       MTL                        6.2            1.3         8.4  $15.1*

Mobile Telesystems MTSS       MBT                     20.6           2.8        12.1  $12.7**

Novolipet Steel        NLMK       NLMK                   19.3           2.7         9.6     $3.29

Volgatelecom          NNSI         NNSI, VLGAY.PK  1.1            1.2         14.9   $4.4

Novatek                  NVTK          NVTK                 15.8           7.6          27.1   $0.49

Polyus Gold            PLZL           PCZL, OPYGY.PK  7.9         10.8        6.8     $42

Rosneft                   ROSN         ROSN                   87           2.6         28.2    $8.2

Rostelecom            RTKM         ROS                     7.2           3.2         134     $10

Sberbank                SBER         SBER                    80           -             26.2    $41

Gazpromneft           SIBN          SIBN, GZPFY.PK    17.6        0.9         4.8      $3.7

Surgutneftegaz        SNGS         SNGS, SGTZY.PK  44          2.3         14.9    $1.23

Tatneft                    TATN          TATN                      10.6       0.9          9.7   $4.9***

Uralsvyazinform       URSI          URSI, UVYZY.PK      1.8        1.5         60.4   $0.06

Wimm Bill Dann      WBDF        WBD                        3.6        1.7        31.7 $108**** 

* is frequently wrong when it comes to securities that are traded in the US under assigned tickers that your YahooFinance or your brokerage will universally recognize . What we buy under the ticket MTL, costs $47.3

** $65 for MBT, see previous comment $65.

***On LSE. The site gives a different number - $2.17 for NYSE.  

****Again, the stupid web site gives $83 for the ADRs trading on LSE


Very brief comments on these stocks.

Aeroflot: state-controlled, nationalization unlikely, pretty good company, don't expect  the burden of employee pension plans that give so much troubles to airlines like Delta and United. 

Avtovaz - a politically sensitive company, Putin's crony in charge, can expect sympathy from the tax authorities, some progress is visible, but still plenty of skeletons in the closet.

Severstal - good private company, has tried to expand overseas, does its best to stay out of politics - as far its size allows. Will be the first in line if government decides to nationalize metals industry. 

United Energy - is supposed to spin off a dozen or so individual companies, valuation will be very difficult.

Gazprom - long-term future uncertain. Management believes high gas prices are forever, no contingency plans, inefficient, lots of diworsification, high political risks. Very lucrative in the short term. High foreign ownership is a danger, that's too large a piece of the pie to let go. When Putin or whoever comes after figure they no longer care about their reputation (or what remains of it by that time), foreigners will be struck out from the shareholder register, plain and simple.   

Norilsk Nickel - very good company, well-managed, the major shareholder is going out of his way to prove his usefulness to the government. May be asked to cede control at some point. Drop in nickel prices probably temporary.

Irkutskenergo, Mosenergo - price regulation is still uncertain, especially in the election (if we are to use that term) year. 

Mechel, Novolipetsk Steel - private, keep very low profile, political risk relatively low.

Volgatelecom, Rostelecom, Uralsvyazinform - a good way to make a bet on the rouble, exchanging our worthless dollars for a stable currency (I am serious).

Rosneft - Is in the business of producing oil, but, more importantly, in the business of confiscating other businesses. Uniquely positioned, in being the only company in Russia that can buy any other Russain company for 1 cent a share. That's a competetive advantage Exxon and Conoco can only dream about. Tremendous political  clout. Chairman of the Board Igor Sechin is the most likely candidate to succeed Putin next year.

Sberbank - a solid support from the government.

Lukoil, Surgutneftegaz, Tatneft, Gazpromneft: Gazpromneft is the safest of the four, due to its relation to Gazprom. Surgutneftegaz - very well-connected, but too cash-rich, Rosneft will want it soon. Lukoil - a dairy cow for the government, no hope for tax preferences. Has volunteered not to optimize its taxes, paying more than it should. Tatneft - an easy prey for Rosneft, one day will receive an offer it can't refuse.

Wimm-Bill-Dann - exellent management,  but outright expensive. Not sure if it can keep growing for much longer.

 P.S. In my previous post, I mentioned that Rosneft may hold the key to the problem of succession.  Yesterday's news of governmnet reshuffle, while not revealing the identity of Putin's chosen heir, support my hypothesis very nicely. The new PM is a father-in-law of the tax cop who concocted the accusations against Yukos. I repeat it again, I cannot overemphasize the importance of Rosneft. Here there is the structure ready to become a Russian Standard Oil - a monopoly that may one day control all 100% of Russia's oil production. Rosneft is the most important Russian stock to watch this coming year.

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