OAO Gazprom (OGZPY), Russia’s gas export monopoly, is poised to lose ground on the stock exchange to smaller rival OAO Novatek (NVTK) on prospects the government will open the market up to competition.
American depositary receipts of Gazprom fell 0.4 percent to $9.63 in New York yesterday, after Prime Minister Dmitry Medvedev said in an interview with Bloomberg Television in Davos, Switzerland that the company may lose its exclusive right to ship the commodity abroad as long as that doesn’t lead to lower prices or damage the nation’s economic interests. Novatek, second to Gazprom in Russian natural gas production, jumped 2.4 percent to $117.30 in London.
“People are very optimistic about Novatek and very pessimistic about Gazprom,” Mattias Westman, who helps oversee about $4 billion in Russian investments, including Gazprom shares, as chief executive officer of Prosperity Capital Management Ltd. in London, said by phone yesterday. “We are in favor of the de-monopolization and restructuring of Gazprom.”
The Bloomberg Russia-US Equity Index (RUS14BN) of Russian companies traded in the U.S. closed unchanged at 103.27, while futures on Moscow’s RTS Index slid 0.5 percent to 159,750 in New York hours. Gazprom, whose ADRs have slipped 1 percent this year, trades for 3.07 times estimated earnings, 80 percent below the 15.7 ratio for Novatek’s London stock. The Tarko Sale, Siberia- based company has lost 2.1 percent in 2013 on the London International Stock Exchange.
Gazprom’s monopoly could be scrapped “because there are other, independent gas producers,” Medvedev said in the interview yesterday on the sidelines of the World Economic Forum. “But we mustn’t lose money, that’s the most important thing. Money comes first.”
The world’s biggest natural gas producer, state-controlled Gazprom was granted the monopoly by President Vladimir Putin in 2006. It is Europe’s single biggest supplier of gas. Novatek has been seeking to weaken Gazprom’s grip by gaining an exemption for liquefied natural gas, which is shipped by tanker rather than through Gazprom’s pipelines.
“Some investors may want to sell Gazprom and buy Novatek as an alternative, so the discount between the two may widen,” Ilya Balakirev, an analyst at UFS-Finance Investment Co. in Moscow who rates Gazprom hold and is reviewing his position on Novatek, said by phone yesterday. “Novatek has potential for growth, while it’s hard to imagine Gazprom falling much further down. Gazprom’s valuations are already ridiculously cheap.”
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, increased 0.4 percent to $30.43, the highest level since Jan. 4. The RTS Volatility Index, which measures expected swings in the stock futures, declined 0.4 percent to 21.04. Gazprom’s ADRs fell to the lowest level since Jan. 16 yesterday, settling at a 0.9 percent discount to the company’s Moscow-listed shares. The company’s stock increased 0.5 percent to 146.63 rubles, or the equivalent of $4.86. One ADR equals to two shares.
Novatek stock will climb another 19 percent in London this year to about $140, according to Ilya Kravets, who helps manage $100 million of assets at Daniloff Capital LLC in New York, including London-listed shares of Gazprom and Novatek.
“It may make sense to short Gazprom and buy Novatek longer term, although details on how exactly the government plans to end Gazprom’s monopoly rights remain to be seen,” Kravets said by phone yesterday. “Novatek has a lot of potential for growth.”
Novatek, controlled by Chief Executive Officer Leonid Mikhelson and Gunvor Group co-founder Gennady Timchenko, gained 2.3 percent to 341.44 rubles, or $11.3 yesterday in Moscow.
The company, looking to boost its domestic and overseas market base, agreed on Jan. 10 to form a joint venture in the northern Yamal region to liquefy natural gas for shipment by tanker to foreign markets. A month earlier, Novatek signed a contract with Gazprom-controlled OAO Mosenergo and bought control of a regional distributor in Kostroma from the larger producer for about $18 million.
Vladimir Tikhomirov, chief economist at Otkritie Financial Corp., said Gazprom will oppose any attempt to change his status as the monopoly gas exporter.
“If Novatek gets rights to export gas, it would be a big win for them,” Tikhomirov said by phone yesterday from Moscow. “Gazprom however won’t give up easily. They have every reason and all the means to fight such decision.”
The Russia Direct Investment Fund, the Kremlin’s private equity fund, has invited Chinese Investment Corp. to flow money into the Moscow Exchange, fund Chief Executive Officer Kirill Dmitriev said in an interview in Davos yesterday.
OAO GMK Norilsk Nickel (NILSY), the world’s largest nickel and palladium producer, fell 0.1 percent to $20.01 in New York yesterday. The company’s dollar-denominated Moscow-listed stock rose 6.7 percent to $197.70 when it last traded on Jan. 22. That was the highest level since Oct. 24, 2011. One ADR represents one-10th of the Moscow-traded, dollar-denominated share.
Russian billionaire Alisher Usmanov’s Metalloinvest is increasing its 4 percent stake in Norilsk Nickel and is ready to sell it if offered a good price, Elena Martynova, a spokeswoman, said by e-mail from Davos yesterday.
Crude oil for March delivery declined 1.5 percent to $95.23 a barrel on the New York Mercantile Exchange, the largest drop since Dec. 21. Brent oil for March settlement rose 0.3 percent to $112.80 a barrel on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, added 0.3 percent to $112.12.
The ruble gained 0.2 percent to 30.1620 yesterday, the highest level since May 11. Ruble futures showed the currency little changed at 30.413 per dollar.
United Co. Rusal, the world’s largest aluminum producer, lost 1 percent to HK$4.88 in Hong Kong trading as of city’s midday break. The MSCI Asia Pacific Index sank 0.2 percent.
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