FGC to Make RUB14bn Additional Share Issue
OREANDA-NEWS. July 01, 2010. FGC held an AGM. Key highlights:
In September FGC will make a public offering of 28bn additional shares at RUB0.5 (par value) to attract RUB14bn of financing for investment. The state will purchase 75% of the issue, reported the press-centre of OTKRITIE Financial Corporation.
FGC will not pay dividends for 2009 due to accounting losses.
FGC filed a RUB954bn investment program for 2010-2014 to be reviewed by the Energy Ministry.
FGC intends to attract a strategic investors, though current legislation that requires the state to maintain a 75% stake remains a serious obstacle.
View: We believe that the news on dividends and capex plans are neutral, anticipated by the market. Earlier the company guided for a RUB900bn 5-year capex program. In 2009, it operated under the old tariff system, which did not provide sufficient returns to pay the dividends. The price of the additional shares issue is 50% higher than the current market price, although its size is only 2.2% of share capital, hence we find this marginally positive for FGC’s minorities.
Valuation: FGC trades at an EV/RAB multiple of 0.66x, which above the implied multiple for Holding MRSK (0.4x), but below the average multiple for comparable international transmission companies of 1.2x.
Action: We view the news as neutral for FGC’s shares, and expect an October/November decision on 2011 tariffs to be the next important trigger for the company.