OAO Surgutneftegas slumped for the third time this week in New York after Barclays Plc recommended selling the Russian oil producer’s preferred stock as a rebound in the ruble erodes its dividend yield.
American depositary receipts linked to Surgut’s preferred shares slid 1.1 percent to $7.72. ADRs tied to the common stock, which Bank of America Corp. cut to the equivalent sell, slipped 1.1 percent to $7.04. Both banks also cited a Bloomberg report that the company may use part of its $34 billion in cash to buy a 19.5 percent stake in state-run OAO Rosneft as a potential drag on the shares.
The ADRs linked to Surgut’s preferred shares, whose owners receive larger dividends than those who hold the common stock, peaked in April at an eight-year high of $8.55 amid speculation the company would increase payouts after the ruble’s 46 percent slump in 2014 boosted the value of its foreign-currency cash hoard. Barclays cut the stock from the equivalent of hold, saying the investment case driver is “speeding in reverse” as the currency posts the biggest rally in the world this year.
While they remain confident in Surgut’s projected dividend yield of 22 percent for 2014, Barclays analysts led by Matthew Thomas said they’re estimating a seven-fold reduction “to sector-lagging levels” after the stock outperformed peers this year. The price already reflects the payout for 2014 and current ruble and oil levels would place the dividend for this year “near the sector bottom,” Thomas said by e-mail Thursday.
In a research note to clients, Barclays also cited “heightened market concern over the risk of corporate activity that could affect preferred share sustainability.”
Bank of America cut the common shares from hold, saying a 65 percent rally this year has pushed their valuation to levels that aren’t justified given the common stock’s relatively low dividend yield of around 2 percent and a lack of corporate transparency.
The ruble weakened 1.6 percent against the dollar Thursday as Russia’s central bank started buying foreign currency. The drop reduced this year’s gain to 21 percent.
Qiwi Plc surged 16 percent to $34.64, an eight-month high. The stock rallied after the the electronic-payment services provider said it is buying Otkritie Financial Group’s money-transfer and payment-processing systems and reported first-quarter earnings that exceeded analysts’ estimates.
The Bloomberg Russia-US Equity Index rose 0.5 percent to 65.29 in its third straight gain. Futures on the dollar-denominated RTS Index expiring in June added 0.6 percent to 105,690 in U.S. hours.