OAO GMK Norilsk Nickel, whose rally this month has sent shares to the most expensive level since 2010, is poised to rise further as a new dividend plan lures investors, OAO Sberbank and UFS-Finance Investment Co. say.
American depositary receipts of the world’s largest nickel and palladium producer jumped 3.8 percent yesterday in New York to trade at 10.1 times estimated earnings, the highest valuation since May 18, 2010. The ADRs have surged 16 percent in December, the steepest gain on the Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S.
Norilsk has climbed as the entrance of a new investor spurred a truce between the company’s biggest shareholders, aluminum producer United Co. Rusal and billionaire Vladimir Potanin’s Interros Group. Potanin, named Norilsk’s new chief executive officer yesterday, said the company will target dividends equivalent to at least 50 percent of its annual earnings before interest, tax, depreciation and amortization. Norilsk posted Ebitda of $7.2 billion in 2011.
“The company is about to finally get a vector for its development,” Ilya Balakirev, an analyst at UFS-Finance in Moscow, who rates Norilsk’s shares listed on Russia’s Micex Index hold, said by phone yesterday. “They seek an unbelievably high dividend yield and therefore have to increase free cash flow, including expanding share in their current markets and winning new ones.”
Futures due March on Russia’s RTS Index added 0.3 percent to 149,580 during U.S. hours yesterday. The Micex Index climbed 0.2 percent to extend its 5 percent gain this year. The ruble-denominated gauge goes from 30 to 50 stocks today, making its composition identical to the RTS, which will remain priced in dollars.
The Bloomberg Russia-US measure climbed 0.5 percent to 97.72 yesterday, bringing its advance in the year to 7.9 percent. The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.5 percent to $29.45, while the RTS Volatility Index dropped 3.3 percent to 22.32 points.
Norilsk’s ADRs rallied to $18.30 yesterday, the highest level since April 3, and traded at a 1.7 percent premium to the company’s Micex shares, data compiled by Bloomberg show. That was the biggest gap since Jan. 10. The company’s stock in Moscow gained 3.7 percent to 5,573 rubles, or $180, the highest level since March 19. One ADR represents a 10th of a Micex share.
The company will target about $9 billion of dividends in 2012 through 2014, three people with knowledge of the owners’ agreement said last week.
“They promise very high dividends and have to focus on generating free cash flow,” Mikhail Stiskin, an analyst at Sberbank Investment Research who has a buy rating on the stock, said by phone from Moscow yesterday. “That also means they have to look at their costs.”
Rusal, controlled by billionaire Oleg Deripaska, and Potanin are settling a more than four-year battle over control of Moscow-based Norilsk Nickel by balancing their representatives on the board. As part of the accord, Roman Abramovich, the billionaire Chelsea Football Club owner, will control voting rights on a 20 percent stake to help quash shareholder disputes, the parties said in a statement last week.
Norilsk got 55 percent of revenue from Europe last year and 23 percent from Asia. It will earn $5.1 billion this year, according to the median of nine analysts’ estimates.
“They will now have to concentrate on controlling costs and spending overall, and may have to look at Asia, particularly China, for potential increases in supplies to the region,” Ivan Manaenko, the head of research at Veles Capital LLC that has a hold rating on Norilsk, said by phone from Moscow yesterday. “Demand in Europe will be suppressed by the economic crisis.”
VimpelCom Ltd. jumped 3.5 percent to $11.39, the highest level in a month, extending 2012 gains in New York for Russia’s third-biggest mobile provider to 20 percent.
Amsterdam-based VimpelCom will pay a dividend of 80 cents per American depositary share, including 35 cents per ADS related to 2011 results, according to a PR Newswire statement issued yesterday. The company, whose total dividend payout will reach $1.3 billion, is free to pay returns to investors after Russia agreed to withdraw legal claims against shareholder Telenor ASA over the Norwegian phone company boosting its stake.
ADRs of OAO RusHydro fell 0.8 percent to $2.34 yesterday, the lowest level since Dec. 7. The Moscow-based company’s stock retreated 1.2 percent to 73.76 kopeks, or 2.4 cents, on the Micex yesterday. One ADR is equal to 100 shares.
RusHydro is in talks with OAO Rosneftegaz to sell 5 percent of OAO Inter RAO UES to the gas company, RusHydro’s chief executive office Yevgeny Dod told reporters in Moscow yesterday, according to Reuters. Russia’s biggest hydropower producer no longer plans to acquire a 40 percent stake in Interrao, the RIA Novosti newswire reported Dod as saying. RusHydro also plans to “significantly” increase dividends, Dod said, according to the report.
Preferred ADRs of oil producer OAO Surgutneftegas slipped 2.2 percent yesterday in the U.S. to $6.60, the steepest one-day drop since Nov. 14. The drop followed a 2.1 percent slump in the company’s Micex-listed preferred shares.
Ruble futures showed the currency weakening 0.1 percent to 30.78 per dollar yesterday. The ruble fell 0.7 percent to 30.94 per dollar in Moscow.
United Co. Rusal, the world’s largest aluminum producer, dropped 0.8 percent to HK$4.76 in Hong Kong trading as of 10:30 a.m. local time. The MSCI Asia Pacific Index gained 0.5 percent.