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RUSSIA | STRATEGY
AUGUST 8, 2012
Equity Strategy
Who Owns the Equity Market and
Why It Matters
Good business leaders create a vision,
articulate the vision, passionately own the
vision, and relentlessly drive it to completion.
Jack Welsh
At a glance
Companies controlled by foreign
strategic shareholders (like E.ON
Russia) generally have better margins
than others, while statecontrolled
companies still have plenty of scope to
raise dividend payouts.
█
Ownership structure matters for valuations. Companies dominated by
strategic foreign investors generally have the best net margins and the highest
dividend payouts. Companies with the highest minority investor content are
more often near the bottom of the table in terms of valuation, while
statecontrolled companies still have a much lower dividend payout than others.
█
Operating environment influences financial metrics. When we look at the
companies’ operating environment, private, regulated companies that have to
compete against state corporations appear to be the most profitable in terms
of net margin, have the highest dividend payout and low leverage in terms of
net debt/EBITDA, but moderate P/E and P/BV.
█
Relative freedom implies higher valuation at expense of lower
profitability. We also look at companies under the category of “relative
freedom”, which combines the industry characteristics and restraints with the
equity ownership structures. Here we find that the greater the freedom a
company enjoys, the lower its net profitability but, in general, they have a
high dividend payout. Greater freedom also implies lower EPS growth but
higher P/E and P/BV ratios.
█
Russian equity market owned primarily by state and minority investors.
The total value of the Russian equity market is currently $749 bln, or 40% of
the expected value of GDP in 2012. The free float is currently 27%, while the
state’s equity stake is today at 30% and worth $223 bln. At the market’s peak
in May 2008, the value of the state’s holding was $441 bln.
█
Recent years marked by unrealized IPO plans. In mid2008, a total of
close to $50 bln worth of equity issuance was planned from state and private
enterprises. The total amount actually listed was less than $5 bln in both 2009
and 2010, while in 2011 the total came close to $10 bln. Only $322 mln has
been raised YTD via two IPOs (RusPetro and EPAM Systems), and $520 mln
via the recent Globaltrans SPO.
█
Privatization program about to regain missed figures. The state’s
“fasttrack” privatization list has a current value just above $12 bln, while the
full fiveyear program would yield circa $81 bln if sold at current valuations
and under the terms previously proposed. If all of the planned equity issues
from the state, via the privatization program and from other expected IPOs
and SPOs, were to take place over the next five to six years, then the state’s
equity stake in the market would be cut to roughly 20%, while the free float
would be boosted closer to 40%.
Private companies in stateregulated
industries, such as NOVATEK,
generally have very high net margins.
Companies operating with a high
degree of relative freedom often
have lower EPS growth but are more
highly rated by investors.
The state currently owns a 30% stake
in the equity market, valued at
$223 bln, which is down from
$441 bln in mid2008 ($80 bln of the
difference can be accounted for by the
expansion of Russia’s risk premium).
The authors would like to gratefully
acknowledge the assistance of
Anastasia Lapotko in the preparation
of this report.
Chris Weafer
+7 (495) 933 9886
[email protected]
Ovanes Oganisyan
+7 (495) 933 9868
[email protected]
Iskander Abdullaev
+7 (495) 787 2346
[email protected]
In accordance with US SEC Regulation AC, important US regulatory disclosures and analyst certification can be found at http://www.troika.ru/eng/research/disclosure.wbp.
[email protected], www.troika.ru
AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
AUGUST 8, 2012
Contents
Who Owns Russian Equities?......................................................................................................... 4
Ownership categories .............................................................................................................. 5
Summary Tables – By Category ..................................................................................................... 6
Ownership Sector Breakdown ....................................................................................................... 8
Ownership structure on the sector level.................................................................................... 8
Does Ownership Matter? ............................................................................................................ 10
Does the Operating Environment Matter?.................................................................................... 11
Does Relative Freedom of Companies/Industries Matter? ............................................................ 12
Privatization Program.................................................................................................................. 13
TROIKA DIALOG
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AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Who Owns Russian Equities?
█
The state is the main equity player. The government is the biggest owner of Russian equities
with a 30% stake, valued at $223 bln, though its ownership is highly concentrated in a few
names and mostly in the energy and banking sectors. Oligarchs (see below for our definition of
who is classified as an oligarch and who is a businessman) own 15%, while businessmen have a
14% stake in the market. The free float owned by both institutional and private investors is
calculated at 27% and currently worth an estimated $205 bln.
Value of owners’ stakes, $ bln
State
Free float
Oligarchs
Businessmen
Foreign strategic investors
Other
223
205
109
106
39
67
Source: Companies, Troika estimates
█
All categories suffering since 2008. At the peak of the market, in May 2008, the state’s
holding was 34%, worth $441 bln, while free float was 30% and worth $380 bln. In the
intervening period, the value of the state’s holdings has lost $218 bln, while oligarchs lost $52 bln
and the free float fell by $175 bln.
█
The state lost an extra $80 bln due to the expansion of Russia risk. If the Russian equity
market had fallen in line with the decline of the MSCI EM Index over that period, then the current
value of the stock market would be roughly $1 trln, and the state’s equity holding would be worth
$310 bln (taking the average) or about $80 bln more than its current value. That is almost equal
to the total the state wants to raise from privatizations over the next five to six years.
█
Reasons for expansion of Russia risk. We believe that a combination of the following reasons is
responsible for Russia’s underperformance relative to the MSCI EM Index since mid2008.
Oil price weakness and the fact that the government did not use the 10y period of high oil
revenues to materially advance the reform agenda.
The debt crisis of late 2008, which was caused by companies not raising enough equity
financing during the boom years and instead relying on cheap forex debt in order for core
shareholders/oligarchs to retain maximum ownership.
The political transition and the subsequent street protests have created a perception of instability.
Ownership structure of the Russian market
State
9%
30%
Oligarch
Businessmen
27%
Foreign strategic investors
15%
5%
14%
Free float
Other
Source: Troika estimates
4
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
█
AUGUST 8, 2012
Equity valuations to GDP. The current value of the equity market ($749 bln) is equal to some
40% of the expected value of GDP for 2012. That is roughly in line with similar ratios for other
large emerging markets.
Stock market as % of GDP
Turkey
China
Russia
Brazil
UK
33%
37%
40%
44%
125%
Source: Bloomberg
Ownership categories
TROIKA DIALOG
█
Category definitions. We consider the current ownership structure of Russialisted companies, and
define the following types of owners: state, oligarchs, businessmen, foreign strategic investors,
minority investors (free float) and others (which may include Russian or foreign funds). Ownership
is defined by holding a stake that is greater than or equal to 25%. Whenever there are multiple types
of holders having 25% or more, the one with the largest stake is considered the owner.
█
Who is an oligarch? The classic definition of an oligarch is a person with a considerable amount
of wealth and close political connections. It was very easy to see who was in that category in
Russia during the 1990s and early in the first Putin administration. Since then, the line between
who can still be called an oligarch and who is now a core shareholder/businessman is less
obvious. For this exercise, we separate the core shareholders between the two categories based
on how investors currently perceive the difference.
█
Businessmen. Businessmen are essentially those in the Forbes 200 list who are not oligarchs.
█
Strategic investors. Foreign strategic investors are foreign companies from the same industry as
the Russian firm in which they hold a stake.
█
Others where the classification is unclear. Other holders include treasury shares, unclassified
holders and shareholders that do not fit within the other categories, are not specifically
stateowned and cannot in any way be classified as free float.
5
AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Summary Tables – By Category
Companies may appear in two separate categories if two distinct shareholders each own 25% or
greater of the equity.
Companies with largest
state ownership**
Companies with largest
oligarch ownership
Equity position*
Gazprom Neft
Mosenergo
Federal Grid Company
OGK3
Transneft
Rosneft
OGK1
VTB
MRSK Holding
OGK2
RusHydro
Sberbank
InterRAO UES
Aeroflot
Rostelecom
Gazprom
TGK1
Uranium One
TransContainer
NCSP Group
TGK7
Tatneft
Enel OGK5
96%
85%
83%
82%
78%
76%
75%
75%
64%
63%
60%
60%
60%
55%
53%
53%
52%
51%
50%
50%
32%
32%
26%
* as of close on July 27
** state equity holding includes stock held by
VEB
Source: Company information, Troika
estimates
Companies with largest
ownership by businessmen
Equity position*
Power Machines
MMK
NLMK
Acron
UC RUSAL
Severstal
Polyus Gold
Bashneft
TMK
GAZ Group
Norilsk Nickel
Sistema
RBC
MTS
Mechel
X5 Retail Group
TNKBP Holding
TGK7
ENRC
PIK Group
Evraz
VimpelCom Ltd
Mostotrest
NOVATEK
CTC Media
NCSP Group
FESCO
* as of close on July 27
Source: Company, Troika estimates
96%
87%
85%
84%
80%
79%
79%
76%
75%
73%
69%
64%
57%
51%
51%
48%
47%
44%
44%
38%
35%
31%
26%
25%
25%
25%
25%
Equity position*
O'Key
Rusagro
PhosAgro
Global Ports
Protek
Raspadskaya
M.Video
Siberian Cement
Dixy Group
IRC
AFI Development
HMS Group
IBS Group
LSR Group
Rosinter
Bank of St Petersburg
Cherkizovo Group
Sollers
Chelyabinsk Zinc
Pharmacy Chain 36.6
Pharmstandard
Vozrozhdenie Bank
Veropharm
Globaltrans
Magnit
NOMOS Bank
Eurasia Drilling Company
Etalon Group
Tatneft
Highland Gold Mining
Synergy Group
Alliance Oil Company
Evraz
Uralkali
LUKoil
Mail.ru Group
NOVATEK
ENRC
86%
82%
79%
75%
74%
74%
71%
70%
68%
66%
64%
63%
62%
62%
61%
60%
60%
58%
58%
57%
54%
54%
52%
50%
49%
48%
48%
47%
46%
46%
45%
44%
40%
38%
38%
37%
29%
26%
Companies with large
foreign strategic investor
ownership
Equity position*
E.ON Russia
Enel OGK5
TNKBP Holding
Mail.ru Group
CTC Media
VimpelCom Ltd
TGK1
82%
56%
47%
39%
38%
36%
26%
* as of close on July 27
Source: Company, Troika estimates
* as of close on July 27
Source: Company, Troika estimates
6
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
AUGUST 8, 2012
Stocks ranked by free float
Free Float*
Petropavlovsk
Razgulay Group
Alliance Oil Company
Magnit
Globaltrans
85%
53%
53%
51%
50%
Uranium One
Veropharm
LUKoil
Pharmstandard
Polymetal
MTS
PIK Group
Sollers
Chelyabinsk Zinc
Pharmacy Chain 36.6
Sberbank
Gazprom
49%
48%
47%
47%
46%
45%
44%
42%
42%
41%
40%
40%
Free Float*
Rosinter
RusHydro
IBS Group
Cherkizovo Group
Synergy Group
HMS Group
CTC Media
OGK2
AFI Development
MRSK Holding
Uralkali
Mechel
Mostotrest
Highland Gold Mining
Vozrozhdenie Bank
LSR Group
Dixy Group
X5 Retail Group
RBC
Norilsk Nickel
39%
39%
38%
38%
38%
37%
37%
37%
36%
36%
36%
35%
35%
34%
34%
33%
33%
32%
32%
31%
Free Float*
Siberian Cement
Eurasia Drilling Company
M.Video
Etalon Group
Rostelecom
Yandex
Surgutneftegaz
Aeroflot
Bank of St Petersburg
Global Ports
NCSP Group
TransContainer
Evraz
NOMOS Bank
OGK1
TMK
VTB
Sistema
TGK7
TGK1
IRC
Tatneft
Transneft
NOVATEK
Protek
30%
30%
29%
28%
28%
27%
27%
26%
26%
25%
25%
25%
25%
25%
25%
25%
25%
24%
23%
23%
23%
22%
22%
22%
20%
Free Float*
ENRC
Mail.ru Group
Severstal
Rusagro
E.ON Russia
Enel OGK5
Federal Grid Company
Raspadskaya
Acron
Mosenergo
VimpelCom Ltd
O'Key
OGK3
NLMK
InterRAO UES
MMK
GAZ Group
PhosAgro
Bashneft
Polyus Gold
Rosneft
UC RUSAL
FESCO
Power Machines
TNKBP Holding
Gazprom Neft
19%
18%
18%
18%
18%
17%
17%
16%
16%
15%
14%
14%
14%
13%
13%
11%
11%
11%
10%
9%
8%
8%
6%
5%
5%
4%
* as of close on July 27
Source: Company, Troika estimates
TROIKA DIALOG
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AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Ownership Sector Breakdown
Ownership structure on the sector level
Observing the sector breakdown reveals some additional
patterns in ownership structure.
The state’s stake is predominant in companies from the oil
and gas (36%), utilities (58%) and financials (61%) sectors,
while it has the lowest presence in TMT (8%), metals and
mining (3%) and real estate (2%). Manufacturing, consumer
goods, chemicals and construction have no state presence in
their ownership structures.
The overall stake of minority shareholders (free float) is
remarkably large in almost all sectors, being the greatest in
the consumer sector (41%) and the lowest in metals and
mining (21%) and manufacturing (18%).
Oligarchs own significant stakes in manufacturing (58%)
and metals and mining (55%), and hold a share slightly
over 20% in chemicals, transport and construction.
Businessmen own a major stake in consumer (58%), real
estate (51%) and chemicals (43%), while they are almost
or not present in financials (only 2%) and utilities.
Oil and gas sector ownership
State
13%
Oligarch
35%
Businessmen
26%
Foreign strategic investors
Free float
9%
7%
10%
Other
Source: Troika estimates
Utilities sector ownership
State
3%
23%
Oligarch
Businessmen
57%
Foreign strategic investors
13%
Free float
0%
4%
Other
Foreign strategic investors are most present in utilities
(13%), TMT (12%) and oil and gas (7%).
Two groups of industries appear to have similar ownership
structure patterns: metals and mining and manufacturing;
and oil and gas and utilities (though utilities have greater
state ownership).
Financials and consumer have peculiar ownership structures,
the former being heavily dominated by the state and the
latter by businessmen. Both have significant free float of
nearly 40%.
Source: Troika estimates
TMT sector ownership
8%
State
8%
17%
Oligarch
Businessmen
28%
Foreign strategic investors
27%
12%
Free float
Other
Source: Troika estimates
8
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Metals and mining sector ownership
Manufacturing sector ownership
State
3%
9%
AUGUST 8, 2012
State
3% 0%
18%
Oligarch
21%
Businessmen
55%
0%
12%
Oligarch
0%
Businessmen
Foreign strategic investors
58%
21%
Free float
Free float
Other
Other
Source: Troika estimates
Source: Troika estimates
Chemicals sector ownership
Financials sector ownership
State
4%0%
Foreign strategic investors
State
1%
22%
Oligarch
Oligarch
36%
31%
Businessmen
Businessmen
Foreign strategic investors
Free float
0%
43%
61%
0%
2%
0%
Free float
Other
Other
Source: Troika estimates
Source: Troika estimates
Consumer sector ownership
Transport sector ownership
0%
1% 0%
Foreign strategic investors
State
State
9%
21%
Oligarch
40%
Businessmen
59%
Oligarch
Businessmen
26%
Foreign strategic investors
Foreign strategic investors
23%
Free float
Free float
0%
0%
21%
Other
Other
Source: Troika estimates
Source: Troika estimates
Real estate sector ownership
Construction sector ownership
6% 2%
0%
State
8%
State
21%
21%
34%
Oligarch
Oligarch
Businessmen
Businessmen
Foreign strategic investors
50%
Foreign strategic investors
24%
Free float
Free float
34%
0%
0%
Other
Source: Troika estimates
TROIKA DIALOG
Other
Source: Troika estimates
9
AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Does Ownership Matter?
Here we consider trends for companies with various ownership structures in 200614.
The most profitable companies are those owned by strategic foreign investors (in terms of net
margin). Moreover, they pay the largest dividends and have very low leverage (in terms of net
debt/EBITDA).
Companies owned by minority shareholders and businessmen have the highest P/E and P/BV.
However, they appear to be the most indebted, along with oligarchowned firms.
In turn, oligarchowned companies have quite low relative profitability but pay higher than average
dividends. However, their P/E and P/BV are among the lowest on average.
Stateowned corporations have moderate profitability and low dividend payouts. P/E and P/BV are
relatively low for them on the whole. However, they have relatively low leverage.
Net debt/EBITDA
Net margin
5
4
EPS growth
25%
100%
20%
80%
15%
60%
10%
40%
5%
20%
3
2
1
0
1
2
3
2006
2008
2010
2012
0%
0%
5%
20%
2014
2006
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
2008
2010
2012
2014
2006
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
2008
Source: Troika estimates
Source: Troika estimates
Dividend payout
P/E
P/BV
20
5
16
4
20%
12
3
15%
8
2
4
1
30%
2012
2014
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
Source: Troika estimates
35%
2010
25%
10%
5%
0
0%
2006
2008
2010
2012
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
Source: Troika estimates
10
2014
0
2006
2008
2010
2012
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
Source: Troika estimates
2014
2006
2008
2010
2012
2014
State
Oligarch
Businessmen
Foreign strategic investors
Minority shareholders
Source: Troika estimates
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
AUGUST 8, 2012
Does the Operating Environment Matter?
We also define companies based on their operating environment and ownership structure.
█
Stateowned.
█
Regulated.
█
In competition with state company in the same industry.
█
Completely free.
█
Private, regulated, competes with state company
The latter type of companies seems to be the most profitable and has the greatest dividend payouts.
They also have rather low leverage.
Completely free companies, in contrast, are the least profitable and pay the lowest dividends. They
have the highest P/E and P/BV, though their EPS growth is pretty average. Moreover, completely
free companies are among the most indebted.
Companies that have to compete against state firms in the same industry have relatively large
dividend payouts and EPS growth rates, while they are valued moderately in terms of P/E and P/BV.
Net debt/EBITDA
Net margin
5
4
EPS growth
20%
100%
16%
80%
3
2
12%
1
8%
60%
40%
20%
0
4%
1
0%
20%
0%
2
2006
2008
2010
2012
2006
2014
2008
2010
2012
2006
2014
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
2008
Source: Troika estimates
Source: Troika estimates
Dividend payout
P/E
P/BV
25%
30
5
20%
25
4
15%
2012
2014
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
Source: troika estimates
20
2010
3
15
10%
2
10
5%
1
5
0%
0
2006
2008
2010
2012
2014
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
Source: Troika estimates
TROIKA DIALOG
0
2006
2008
2010
2012
2014
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
Source: Troika estimates
2006
2008
2010
2012
2014
State company
Regulated company
Competes with state company
Completely free
Private, regulated, competes with state company
Source: Troika estimates
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AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Does Relative Freedom of
Companies/Industries Matter?
We look at the company breakdown according to relative freedom. Four types of companies are
identified – totally free, quite free, somewhat free and not free – based on the following factors:
█
The extent to which the state enters the ownership structure.
█
Whether it has to compete against a state company.
█
Whether the company operates in a regulated environment.
█
Whether the company is a commodity producer.
Several general conclusions can be drawn by looking at the data. First, the greater freedom the
company enjoys, the lower is its profitability and, generally, the higher its dividend payout.
Also, greater freedom implies lower EPS growth, but higher valuation in terms of P/BV and P/E.
A comparison of net debt/EBITDA for various company types does not reveal any particular trend.
Net debt/EBITDA
Net margin
4
20%
3
16%
EPS growth
100%
80%
60%
2
12%
40%
8%
20%
1
0
0%
4%
1
20%
40%
0%
2
2006
2008
2010
Totally free
Somewhat free
2012
2006
2014
2008
2010
Totally free
Somewhat free
Quite free
Not free
2012
2006
2014
2008
Totally free
Somewhat free
Quite free
Not free
Source: Troika estimates
Source: troika estimates
Source: Troika estimates
Dividend payout
P/E
P/BV
30%
25
5
25%
20
4
15
3
10
2
5
1
20%
2010
2012
2014
Quite free
Not free
15%
10%
5%
0%
0
2006
2008
2010
Totally free
Somewhat free
Source: Troika estimates
12
2012
Quite free
Not free
2014
0
2006
2008
2010
Totally free
Somewhat free
Source: Troika estimates
2012
Quite free
Not free
2014
2006
2008
2010
Totally free
Somewhat free
2012
2014
Quite free
Not free
Source: Troika estimates
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EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
AUGUST 8, 2012
Privatization Program
TROIKA DIALOG
█
State aims to sell close to $100 bln of equity over five to six years. Having raised R121 bln
($4 bln) in 2011, the privatization target this year is now R300 bln ($9 bln) via the sale of equity
in existing listed stocks. The very ambitious longerterm plan is to raise close to $100 bln over the
next five years, which is consistent with the plan outlined by President Vladimir Putin during his
election campaign. Realistically, this can only be achieved if investors see evidence of economic
improvement and progress in the promised reform agenda.
█
Energy sector plans very likely to be reviewed. Privatization will proceed on a twintrack with
the energy sector, which is likely to see further state consolidation before equity sales are
advanced. The priority over the next 1218 months will be to sell “surplus” equity, i.e. rather than
core equity, in already listed nonenergy sector stocks.
█
Revised plan not too dissimilar to previous version. The government is trying to breathe new
life into the privatization program. This is expected, as both the president and prime minister have
consistently highlighted the need for a faster sales timetable as one of the key priorities for the
new cabinet. However, the revised program is not much more than the previous program
separated into two timelines: basically, one list of stocks outside the energy sector that may be
sold over the next 12 to 18 months, and stocks in the energy sector that may be sold over a 5y
time line. This is consistent with Putin’s election promise to substantially remove the state from
ownership of nonstrategic companies by 2016.
█
Obvious differences of opinion within government. The specific details of the privatization
program have yet to be fully disclosed, and while some may explain that as pragmatism, i.e. leaving
scope to adapt the program to prevailing market conditions, others will see it as reflecting the fact that
there are still major disagreements within the government over how the program should proceed. We
should therefore view the first phase of the privatization program (i.e. the list of priority sales) as
reasonably complete, and the second list (i.e. the fiveyear program) as still only “indicative”.
█
Aiming for $9 bln this year. The economics minister said that the government aims to raise
R300 bln (circa $9 bln) from the sale of state assets this year, up from the R121 bln raised in
2011. The program he outlined remains in draft form at this stage, but basically breaks down into
two parts – those stocks on the priority list for sale in 2012 or 2013, and those for sale in a
vaguer time frame up to 2016.
█
Short sale list ready to go. The fasttrack program, to be completed within 12 to 18 months, i.e.
by end 2013, involves the longawaited sale of equity in Sberbank, a 25% stake in VTB, cutting
the state’s equity position in Federal Grid Company to 75% and the disposal of a 25% equity
stake in Sovcomflot. It was recently indicated that this block may be sold for $780 mln. The first
deputy prime minister also said that he believes the state should divest all of its 50.9% stake in
ALROSA in this time period. An equity stake sale in spring last year implied a value of $6 bln for
the whole company, but there have been valuation indications as high as $12 bln in the interim. It
has also been disclosed that the state has accepted Summa Group and Rusagro as potential
bidders for a 49% stake in United Grain Company.
█
Listed equities in fasttrack program could bring in $12 bln. In total, and based on current
market valuations of the listed equity, the priority phase of the privatization program may bring in
just over $12 bln from the listed equities alone.
13
AUGUST 8, 2012
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
Fasttrack sale list (1218 months), $ bln
Market value*
Existing listed stocks
Sberbank
VTB
Sovcomflot
ALROSA****
Aeroflot
Federal Grid Company
60.90
16.60
3.10
6.00
1.40
9.20
State holding
Initial sale**
57.60%
85.50%
100.00%
50.90%
51.20%
79.10%
5.80%
25.00%
25.00%
50.90%
26.00%
4.10%
Potential from existing listed priority sales
Not listed***
Apatit
RosAgro Leasing
Russian Agriculture Bank
Russian Railways
Sheremetyevo Airport
United Grain Company
Murmansk Port
Arkhangelsk Port
Vanino Port
Value
3.50
4.20
0.80
3.10
0.40
0.40
12.30
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
25.00%
50.00%
* as of close on July 26
** the equity portion to be initially sold where disclosed
*** or, where the listing does not show an accurate valuation
**** based on the value implied by the last sale in early 2011
Source: Government, Troika
14
█
Ambitious longerterm plan. The more substantial part of the privatization program involves a
more significant reduction of equity in the state sector, including the full privatization of Rosneft,
according to reports from the president’s office and the cabinet.
█
State unlikely to sell out of most important companies. Assuming, however, that the state
retains a blocking strategic stake in companies such as Rosneft and Sberbank (i.e. rather than
selling out completely, as has been indicated), and a 50% controlling stake in Gazprom,
Transneft and the key utility companies, then the fiveyear program for existing listed equities
may yield over $80 bln, with extra coming from the sale of the state enterprises for which we
currently do not have an indication of market value.
TROIKA DIALOG
EQUITY STRATEGY – WHO OWNS THE EQUITY MARKET AND WHY IT MATTERS
AUGUST 8, 2012
Fiveyear privatization program, $ bln
Sberbank
VTB
Sovcomflot
ALROSA****
Aeroflot
Federal Grid Company
Rosneft
RusHydro
InterRAO UES
Transneft
Market value*
State holding
Initial sale**
Value
60.90
16.60
3.10
6.00
1.40
9.20
58.30
8.10
6.90
10.80
57.60%
85.50%
100.00%
50.90%
51.20%
79.10%
75.20%
57.90%
66.00%
–
32.60%
85.50%
100.00%
50.90%
51.20%
29.10%
50.20%
32.90%
41.00%
25.00%
19.90
14.20
3.10
3.10
0.70
2.70
29.30
2.70
2.80
2.70
81.10
Potential from existing listed priority sales
***
Not listed
Apatit
Rosagroleasing
RUSNANO
Russian Agricultural Bank
Russian Railways
Sheremetyevo Airport
United Grain Company
Murmansk Port
Arkhangelsk Port
Vanino Port
Zarubezhneft
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
–
25.00%
–
25.00%
–
49.00%
–
–
–
–
* as at close July 26
** the equity portion to be initially sold where disclosed
*** or, where the listing does not show an accurate valuation
**** based on the value implied by the last sale in early 2011
Source: Government information, Troika
TROIKA DIALOG
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