Russian stocks - a short list and some numbers
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 www.quote.ru 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****
*quote.ru 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.