Record Dividend Lifts Cheapest Stock Gazprom: Russia Overnight

Record Dividend Lifts Cheapest Stock Gazprom
OAO Gazprom is the world’s biggest natural gas producer. Photographer: Andrey Rudakov/Bloomberg

The prospect of a record dividend payout is bolstering OAO Gazprom, the world’s biggest natural gas producer and the cheapest Russian stock traded in the U.S.

State-controlled Gazprom climbed the most this month in New York yesterday, as futures expiring in June on Moscow’s RTS Index rose 0.6 percent to 158,020. Russia’s gas export monopoly traded for 3.6 times estimated earnings on April 11, the least since Feb. 1 and three times cheaper than the valuation for American depositary receipts of PetroChina Co., China’s second-largest oil refiner.

Gazprom’s ADRs sank 6.3 percent last month as the government floated the prospect of boosting taxes on the gas industry to pay for election promises made during President-elect Vladimir Putin’s campaign. Management of the Moscow-based company yesterday recommended doubling its 2011 dividend from the previous year. The 8.97 ruble (30 cents) payout, the most ever according to six years of data compiled by Bloomberg, compares with an average 2.22 rubles between 2006 and 2011.

“This is a good sign that it has increased because Gazprom has been paying nothing in dividends,” Hawk Sunshine, who manages $300 million in assets, including Gazprom stock, at brokerage IFC Metropol in Moscow, said by phone yesterday. “Maybe this is a sign of things to come. It’s a small sign but a noticeable signal of potential improvement.”

Gazprom’s ADRs gained 1.6 percent to $11.98 yesterday, the most since March 30. The stock traded at a 0.2 percent premium to the Moscow shares. Gazprom lost 0.1 percent to 175.91 rubles, or $5.98, on the Micex index yesterday.

Gazprom Valuation

The Bloomberg Russia-US Equity Index of Russian companies traded in the U.S. rose 1.4 percent to 105.51 yesterday, the highest level since April 5. Gazprom, Russia’s biggest company, is the cheapest stock on the Bloomberg Russia-US Equity measure, with OAO Lukoil trading at 4.4 times estimated earnings and OAO Mechel at 5.3 times.

Putin, who will take up his third term as president in May, has pledged to increase government spending by as much as 4.8 trillion rubles, or 5 percent of economic output, through 2018, according to estimates by London-based Capital Economics Ltd.

The new government should consider “drawing additional revenue from the gas industry through the increase, and by evening out, domestic prices and foreign prices,” Finance Minister Anton Siluanov told reporters on Feb. 18. The Russian government gets about 50 percent of revenue from the energy sector and oil and gas make up around 17 percent of gross domestic product.

Gazprom’s tax burden may increase by as much as $22 billion a year over the next five years, analysts from Alfa Bank, Russia’s biggest private lender, said in a report on March 19.

No Rally Ahead

While the prospect of a record dividend is “good news” for Gazprom investors, it won’t translate into a rally for the stock, according to Ronald Paul Smith, an oil and gas analyst at Citigroup Inc. in Moscow.

“The stock will remain under pressure until we find out what’s going on with the taxation side,” Smith said by phone yesterday. “Until we have clarity on that, it’ll be difficult for the stock to move up very much.”

United Co. Rusal, the world’s largest aluminum producer, climbed 3.4 percent to HK$5.77 in Hong Kong trading as of 11:19 a.m. local time. The MSCI Asia Pacific Index gained 0.8 percent today as concerns eased over a rocket launch by North Korea after the projectile broke up and fell into the sea.

Russia ETF Gains

Oil, Russia’s biggest export earner, rose for the second day yesterday on speculation central banks will stimulate economic growth with supportive monetary policies. Crude for May delivery gained 0.9 percent to $103.64 a barrel on the New York Mercantile Exchange. Brent oil for May settlement added 1.3 percent to $121.71 on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, climbed 1 percent to $118.30.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, climbed 1.8 percent to $30.34. The RTS Volatility Index, which measures expected swings in the index futures, lost 0.2 percent to 32 points in U.S. trading.

VimpelCom Ltd. the world’s sixth-largest wireless operator by subscribers, climbed 1.4 percent to $10.75 in New York, the biggest advance since March 28.

VimpelCom’s subsidiary, Orascom Telecom Holding SAE, North Africa’s biggest mobile phone company, is disputing the $1.3 billion fine imposed by an Algerian court against its local unit for allegedly violating foreign-exchange regulations and submitted an arbitration notice against the North African nation, according to a statement e-mailed yesterday.

RTS Advances

Algeria is in talks to buy a stake in the Djezzy unit from VimpelCom, which merged with Orascom last year. It is still discussing a purchase price for the 51 percent stake, Finance Minister Karim Djoudi said in an interview on March 29.

Russia’s 30-stock Micex Index lost 0.3 percent to 1,501.63 in Moscow yesterday, while the RTS gauge advanced 0.3 percent to 1,620.19.

OAO Mobile TeleSystems, Russia’s largest mobile operator, gained 2.5 percent to $18.30 in New York, the most since March 13. The company said yesterday its board recommended paying 72 percent of net income as dividends for last year.

MTS, as the company is known, said its board recommended paying a total of 30.4 billion rubles ($1 billion) in an e-mailed statement yesterday. It may pay 14.71 rubles a share or $1.01 per American depositary receipt, the company said.

MTS’s shares on Russia’s Micex Index fell 0.3 percent to 230.55 rubles, or $7.83. The ADRs were at a 17 percent premium over the company’s Moscow-listed shares, the most since April 5, data compiled by Bloomberg show. One ADR is equal to two ordinary shares.

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