Futures Gain as CTC Jumps on Expansion Outlook: Russia Overnight

Futures Gain as CTC Jumps on Expansion Outlook
United Co. Rusal, the world’s largest aluminum producer, rose 2.7 percent to HK$6.84 in Hong Kong trading as of 11:32 a.m. local time. Photographer: Andrey Rudakov/Bloomberg

CTC Media Inc. climbed the most in four weeks after the U.S.-listed Russian television channel owner signaled it may seek to bolster advertising revenue by buying stations in neighboring Ukraine and Belarus.

CTC Media, whose main television channel is the fourth most-watched in Russia, gained as much as 6.5 percent yesterday after interim Chief Executive Officer Boris Podolsky said in an interview that the company may spend $500 million to $600 million on acquisitions in 2012 and has sold about 80 percent of its advertising capacity for the year. Futures expiring in March on Russia’s dollar-denominated RTS index added 0.9 percent to 172,150 in U.S. trading.

The Moscow-based company is seeking to revive its advertising fortunes as it seeks to become Russia’s third-biggest channel while its audience share stalls. CTC reported a fourth-quarter net loss yesterday of $25.5 million, from a profit of $75.3 million a year earlier as it paid a $17.9 million impairment charge. Stock in the company, which is also paying a smaller-than-expected dividend, slumped 63 percent last year as CEO Anton Kudryashov stepped down.

“We are planning some regional purchases in Russia and looking at neighboring countries, such as Ukraine and Belarus,” Podolsky, who is also CTC’s chief financial officer, said by phone from Moscow yesterday. “It’s possible that we can buy a TV channel in Russia, or a TV production company.”

CTC stock jumped 5 percent to $10.54 in New York yesterday, the biggest advance since Feb. 1, data compiled by Bloomberg show. The company was the biggest gainer on the Bloomberg Russia-US 14 Index of Russian companies traded in New York, which was little changed at 113.54.

‘Different’ Vision

CTC, which has no outstanding debt, may sell Eurobonds, including ruble-denominated notes, or negotiate syndicated loans to finance acquisitions within or outside of Russia, Podolsky said. The company has no interest in assets in other former Soviet states except for Ukraine and Belarus, he said.

The suggestion of asset purchases sets a different tone for CTC, said Svetlana Sukhanova, an analyst at UBS AG in Moscow.

“It’s different from the vision of the previous leadership of the company, which was interested in only a license for broadcasting in Ukraine,” Sukhanova said by phone yesterday. “When we hear about a $500 million to $600 million potential purchase, it signals a big asset and not just a license.”

UBS rates CTC Media a “buy” with a 12-month price target of $16 a share, according to client note released yesterday.

Ad Sales ‘Relief’

Podolsky became interim CEO after the company lost Kudryashov to mobile-phone provider VimpelCom Ltd. in December. CTC is interested in new media and Internet assets as that is where growth in advertising is the greatest, he said. Internet ad spending climbed the most of all advertising in Russia last year, expanding 56 percent, according to the Association of Communication Agencies of Russia.

“It’s a relief that they have sold 80 percent of their 2012 advertising inventories, because there had been some concerns that their ad contracts were delayed,” Iouli Matevossov a senior analyst at Alfa Bank in Moscow said by phone. He rates the stock “overweight” with a target price at $17 per share.

CTC’s average daily share of television viewers of four years and older rose to 7.7 percent in the week to Feb. 19, from 7.3 percent the week earlier, according to data released by TNS-Global on Feb. 27. Renaissance Capital reiterated its “buy” recommendation on the stock yesterday.

Russia ETF Drops

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, fell 0.3 percent to $33.21 yesterday. The fund has gained 25 percent this year, compared with a 7.5 percent advance in the same period a year ago. The RTS Volatility Index, which measures expected swings in the index futures, declined 0.7 percent to 32.35 yesterday.

Oil futures rose today after falling for a second day yesterday. Crude oil for April delivery gained 0.3 percent to $106.88 a barrel. The contracts slipped 1.9 percent to $106.55 a barrel yesterday on the New York Mercantile Exchange. Brent oil for April settlement dropped 2.1 percent to $121.55 a barrel on the ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, dropped 1.8 percent to $120.39.

American depositary receipts of OAO Lukoil, Russia’s biggest independent crude producer, fell 0.5 percent to $63.52 in New York yesterday, boosting the premium over its shares traded on Moscow’s Micex to 0.5 percent, the most since Feb. 16. Lukoil fell 1.8 percent to 1,833.40 rubles, or $63.29, on the Micex yesterday.

Bull Market

United Co. Rusal, the world’s largest aluminum producer, rose 2.7 percent to HK$6.84 in Hong Kong trading as of 11:32 a.m. local time. The MSCI Asia Pacific Index climbed 1.1 percent today after data showed factory output in Japan and South Korea gained. The MSCI gauge has risen 20 percent from its low on Oct. 5, meeting the definition of a bull market.

The 30-stock Micex slipped 1.2 percent to 1,574.10 in Moscow yesterday, the biggest drop since Feb. 22 and reducing its gain this month to 4 percent. The RTS slid 1.2 percent to 1,708.16.

The Micex has strengthened 12 percent in 2012 and trades at 6.2 times analysts’ earnings estimates for member companies. That compares with a 16 percent advance for Brazil’s Bovespa Index, which trades at 11 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index trades at 10 times estimated earnings, and the BSE India Sensitive Index has a ratio of 16.

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