AFK Sistema, Russia’s largest publicly traded investment company, is seeking to emulate Blackstone Group and KKR & Co. and narrow the gap between its value and the sum of its holdings.
Sistema is modeling itself on the global investment funds to boost returns to shareholders, moving away from long-term investments to buy and sell assets in industries ranging from logistics to fertilizers, President Mikhail Shamolin said in an interview in Moscow.
Sistema has lost 3.7 percent in London trading this year through yesterday, while gaining 6.6 percent in Moscow. Blackstone has surged 42 percent this year and KKR has climbed 35 percent in New York, extending last year’s gains.
Billionaire Vladimir Evtushenkov’s Sistema has a market value of $9.6 billion, about half of the sum of its largest assets. Moscow-based Sistema’s 51 percent of Russia’s largest mobile operator OAO Mobile TeleSystems is worth about $10.4 billion and the value of 73 percent of oil producer OAO Bashneft is about $9 billion.
Sistema’s discount to those assets should narrow to a “fair” level of “no more than 20 percent” after it boosted dividends and promised shareholders to generate about $500 million every year from asset sales, said Shamolin, who previously served as chief executive officer of the mobile operator known as MTS.
Sistema is set to pay a dividend of 0.96 rubles a share for 2012, tripling the payout from 2011 to about $300 million.
Shamolin was promoted to head Sistema two years ago, seeking to transform it into an Western-style investment fund after five years of net losses from electronics maker OAO Sitronics and selling real-estate developer Sistema Hals after a credit squeeze in 2009. Sitronics was delisted in London last year.
Since Shamolin’s appointment in March 2011, Sistema has lost 14 percent, compared with a 24 percent drop in Russia’s benchmark Micex Index. In that time, Sistema has bought rail cargo carrier SG-Trans for more than $730 million, set up an agriculture venture with the Louis-Dreyfus family and sold the Bashkirenergo power generator for $360 million.
The stock gained for a sixth consecutive day today in London, rising 2.9 percent $20.01 at 1:46 p.m. local time. Sistema is rated buy by 14 out of 16 analysts, according to data compiled by Bloomberg.
Sistema is seeking to expand in industries where it has assets and enter areas such as warehouses, seaports and chemicals, Shamolin said. The company may buy assets on the market and from the state during planned privatization, he said.
“I prefer so called brick-and-mortar businesses where it’s clear how and why you’ll make profit under certain macroeconomic conditions,” Shamolin said. “Agriculture is one example. Land is set to increase in value as global population is growing and needs more food.”
Sistema is also interested in real estate in European countries hit by the financial crisis, and MTS will look at bidding for Telekom Srbija when the government sets terms for a sale, Shamolin said.