Deutsche Bank Says Gazprom to Rally: Russia Overnight
OAO Gazprom (OGZPY), Russia’s biggest company, will extend a rally from a four-year low as increasing exports to Europe bolster its dividend outlook, said Tim Wiswell, head of Russian equities at Deutsche Bank AG.
American depositary receipts of Gazprom, which provides a quarter of Europe’s gas, jumped 2.7 percent to $8.75 last week, bringing its surge since June 20 to 35 percent. The advance erased its discount to the Moscow-listed shares. The Bloomberg-Russia-US Equity Index of the most-traded Russian companies in the U.S. posted a two-week rally, led by OAO Mechel. (MTLR) RTS Index futures expiring this month rose 0.4 percent to 140,170 in U.S. hours Sept. 13.
Russian gas shipments to Europe and Turkey in the first eight months of this year rose to the highest level since at least 2010, according to data from Gazprom Export. The euro area expanded by 0.3 percent in the second quarter, snapping six quarters of contraction. Russia’s Finance Ministry has been pushing to increase payouts by state companies to 35 percent of net income from 25 percent.
“Exports to Europe have been strong and should continue to be as Europe recovers,”Wiswell said in an interview in New York Sept. 12. “Gazprom (GAZ) has potential to gain as the dividend play is becoming more attractive.”
The company will also benefit from Russia’s exports to China, he said. The two countries are seeking to complete a deal that would see Russia supply as much as 68 billion cubic meters of gas a year, helping to meet the energy needs of Asia’s biggest economy. Gas-supply talks between Russia and China started in 2004, and have dragged on as the countries disagreed over price.
PetroChina Co. (857), the publicly traded unit of state-owned China National Petroleum Corp., is interested in spending at least $10 billion for a minority share of eastern Siberian gas fields operated by Gazprom and OAO Rosneft (ROSN), three people with knowledge of the matter said last week. Gazprom and CNPC plan to sign a contract for Russian gas supply to China by the end 2013, the Russian producer said on Sept. 5.
Eleven out of 19 analysts tracked by Bloomberg recommend buying Gazprom’s Moscow-listed shares, the most since January. On average, analysts predict a 38 percent surge for the stock over the next 12 months.
The Bloomberg-Russia-US gauge added 2.2 percent to 95.23 for the week. The benchmark Micex Index (INDEXCF) rose 1.2 percent to 1,440.74, capping a two-week rally. Russian equities have the cheapest valuations among 21 emerging countries tracked by Bloomberg, with shares trading at 3.8 times 12-month estimated earnings, compared with a multiple of 10.5 for the MSCI Emerging Markets Index.
“Russia has bottomed out,” Wiswell said. “Cheap valuations in quality liquid names excite me about the market.”
The Market Vectors Russia ETF (RSX), the biggest U.S.-traded exchange-traded fund that holds Russian shares, increased 3.5 percent last week to a six-month high of $28.16. The RTS Volatility Index, which measures expected swings in the stock futures, fell 0.2 percent to 22.10 in U.S. hours Sept. 13.
Mechel (MTL), the worst-performing stock among Russian companies traded in New York this year, surged 9.9 percent to $3.66 last week. The ADRs closed at an 8 percent premium to the company’s Moscow-listed shares.
CTC Media Inc. (CTCM), the Nasdaq-listed Russian television network, sank 1.7 percent to $10.80. The decline trimmed this year’s advance to 39 percent.
West Texas Intermediate crude will probably rise this week on concern tension in Syria will disrupt Middle East supplies, a Bloomberg survey shows. Eleven of 25 analysts, or 44 percent, forecast crude will gain through Sept. 20. Eight respondents, or 32 percent, predicted a slide. Six projected no change. WTI capped the biggest weekly drop since July on Sept. 13.
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