Russian stock market rises amid mixed external signals

Central Telegraph has decided on dividends for 2021

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Russian stock market rises amid mixed external signals

MOSCOW, May 25 - PRIME, Sergey Astakhov. The Russian stock market is growing on Tuesday in terms of major stock indices, despite mixed external signals, as follows from trading data.

By 16.07 Moscow time, the Moscow Exchange ruble index increased by 0.43%, to 3678.19 points, the RTS index - by 0.58%, to 1580.03 points.

Meanwhile, the dollar exchange rate for “tomorrow” calculations decreases by 14 kopecks, to 73.35 rubles, the euro increases by 12 kopecks, to 89.87 rubles.

August futures for Brent crude oil decreased by 0.25% to $68.2 per barrel.

Futures for major stock indices in the US are generally growing slightly, while European stock indices are trading in different directions.

REALIZING THE DEMAND FOR RISK

On Tuesday, the Russian market opened upward against a positive external background, the RTS index updated its two-week high, after which the market experienced a moderate pullback due to the deterioration of the situation on global markets, notes Dmitry Babin from.

World stock indices have been rising since the beginning of the day, the expert continues. “At the same time, after the morning growth, oil began to lose ground, accelerating its decline shortly before our opening. Despite this, after a short-term pullback, we returned to the peaks we had achieved,” says Babin.

The Russian stock market continued to rise on Tuesday, winning back the overall favorable situation with demand for risk on foreign exchanges, states Igor Dodonov from Finam Group of Companies.

In his opinion, investor optimism is fueled by expectations that the surge in inflation observed in the United States and the world will be short-lived and will not force policymakers to begin tightening monetary policy.

“Russian shares are receiving additional support from a slight weakening of sanctions risks ahead of the meeting between the Russian and US presidents scheduled for next month, while a certain deterrent is the correction in oil prices,” the analyst says.

LEADERS OF GROWTH AND FALL

The leaders in growth by the middle of the session were quotations of Lukoil (+1.94%), which rose ahead of the publication of financial results according to IFRS for the quarter on Wednesday, and shares of TGK-2 (+1.55%), which rose in price ahead of the board’s recommendation directors on the payment of dividends, draws the attention of Elena Kozhukhova from Veles Capital Investment Company.

Transneft's preferred shares added 0.5% on the news that the company's board of directors recommended paying dividends based on last year's results in the amount of 66.87 billion rubles, at the rate of 9,224.28 rubles per ordinary or preferred share.

The growth leaders on Tuesday were also shares of TRK (common shares by 4.4%, preferred shares by 10.63%), Petropavlovsk (+2.02%), Uralsib (+1.63%), M.Video "(+1.56%), Central Telegraph (common shares rise in price by 1.4%, preferred shares - by 1.53%), Sberbank (common shares by 1.48%, preferred shares - by 1.02%), OVK (+1.15%), En+ group (+1.12%), Ozon receipts (+1.08%).

VSMPO-Avisma shares are falling in price by 2.37% after the board of directors recommended that shareholders not distribute net profit based on the results of last year and not pay dividends on ordinary shares.

Why is America “drowning” the dollar and accelerating inflation?

Mechel's ordinary shares are falling in price by 1.04%, preferred shares by 0.37% after the recommendation of the company's board of directors to pay dividends on preferred shares based on last year's results in the amount of 1.17 rubles per security and not accrue dividends on ordinary shares.

Preferred shares of Bank St. Petersburg (−4.8%), ordinary HSCI (−2.57%), AFK Sistema (−2.2%), Russneft (-1. 71%), FGC UES (−1.62%), RBC (−1.18%), RusHydro (−1.1%).

FORECASTS

The Moscow Exchange and RTS indices tried to develop an increase in the first half of the session, and the dollar index rose to a new peak since January 2020, 1584 points, also due to the weakness of the American currency in the world market, Kozhukhova notes. Russian stock exchanges are not retreating from a short-term upward trend, which they may well develop if the main political, internal and external factors are stable, she predicts.

The nearest resistance for the Moscow Exchange index remains at a two-week high of 3700 points, for the RTS index - in the area of ​​the unclosed gap of 1584-1594 points, formed at the end of January last year, Babin estimates. “If the active growth of world markets resumes, these technical obstacles can be tested for strength today,” the expert suggests.

Igor Dodonov from Finam Group expects the Moscow Exchange index to continue to rise to the area of ​​3,720 points.

The ruble strengthens on news of the meeting between Biden and Putin

Alfa Bank's John Walsh believes the Russian stock market will continue to rise on Tuesday on positive news after US Federal Reserve officials downplayed the risk of continued inflation by telling markets that economic growth and inflation were under control can be implemented without tightening monetary policy.

The Russian stock market will show growth across all sectors on Tuesday, with some bias towards growth stories and technology stocks, Walsh predicts. In his opinion, shares of oil and gas companies and banks also occupy an attractive position given the current market conditions. Metals stocks may face some pressure, he said.

Possible future offer at Central Telegraph

Good day to all Alyonkovites.

Earlier, I tried to give my assessment of the cost of the building of PJSC Central Telegraph on Tverskaya. If, as a result of its sale, Rostelecom decides to pay a one-time dividend, it may be comparable to the current purchase price of preferred shares. But in this post I want to consider another, even more likely scenario, in which the company’s minority shareholders will not be caught in the process of monetization of this architectural monument. Is it really that scary for the owners of central heating prefs to be left without a dividend from the sale of real estate?

It is likely that Rostelecom will first launch the procedure for merging Central Telegraph to achieve its intended goals and objectives, purchasing their shares from minority shareholders under an offer.

In the history of Rostelecom's development, there have already been offers when interregional communication companies were consolidated on its basis. An important issue is the attitude of the majority shareholder towards preferred shares. So, in 2010, the conversion rates of RTO shares into ordinary Rostelecom were as follows:

Thus, the discount of prefs to common stock was about 21.5%:

There are people in Alyonka who bought shares in RTOs several years ago and made good money from the last merger. It would be great to see their comments.

In order to determine target levels for preferred shares in the event of a favorable scenario, we need to understand at what price per common stock large minority shareholders will be willing to part with their stakes.

Net debt as of December 31, 2016 is 310,146,000 rubles. With AO = 25 ₽, AP = 10 ₽, the entire company with a profitable core business is worth 5 billion ₽! How much does the building on Tverskaya cost?…

2011 score:

According to a later “modest” assessment of Aversa, whose president was detained in 2013, among others. on charges of understating the value of state property, the central heating center in 2012 was already worth only 6.1 billion rubles, but TBK, which bought a large stake (Sergey Babintsev), took the building into account, which is more than reasonable. Judging by information from the press, she paid an average of 40+ rubles per paper for her share of common stock and preferred shares!

Now the question is: will Sergey Babintsev, who currently owns 10.77% of the capital (which means he has bought more), will exit the asset at current prices with large losses or will he wait for a fair price from Rostelecom?

I will give a graph of the dependence of the company’s value on the prices of JSC and AP, taking into account the discount, based on the established exchange practice in Rostelecom:

Where exactly we might end up on this diagram is not given to us to know.

There is a risk that representatives of the Republic of Tatarstan will “slow down” the consolidation process this time, contrary to official statements in the media about the ineffective use of existing district heating real estate and plans to split up the subsidiary company. However, in fact, work in this direction has already begun: a joint venture was created together with Sberbank for investing and managing real estate, the relocation of existing tenants represented by the Ministry of Telecom and Mass Communications from the building on Tverskaya was worked out, and, finally, the Board of Directors of the Central Telegraph was unscheduled, which included new members:

1. Kurakin Dmitry Aleksandrovich, responsible for the management of the property complex, as well as for the administrative and economic management of Rostelecom’s activities;
2. Truntsov Dmitry Ivanovich - Security Director.

Why carry out these actual actions and procedures WITHOUT previously reaching agreements on basic commercial terms with large minority shareholders who could hinder the implementation of Rostelecom's plan? It is clear that if we learn about this from the media, paper prices will be different.

The risk of an additional issue is very low due to Rostelecom having a tiny number of preferred shares, and in the event of dilution of share capital, the rights of pref holders in terms of dividend payments will be infringed - it is unlikely that the owners of 75% of preferred shares will vote against themselves.

If this reasoning can be called an idea, then it is similar to the investment idea for AvtoVAZ preferred shares, where the preferred holders have not received / most likely will not receive dividends, but have earned multiples from the increase in the price of preferred shares to the expected offer price. But with one caveat: here, according to the Charter, “symbolic” dividends for the pref for 2021 can be received based on the results of the company’s main activities, since it is profitable and all the necessary conditions for paying dividends exist.

PS The idea is definitely contraindicated for hypnotists of illiquid glasses. Personally, I upload stories with a growth potential of 100% min to IIS, since I will definitely choose type II benefit - non-payment of personal income tax, and the period for implementing the idea may be much less than 3 years. If events develop according to the scenario described above, we will probably subsequently be faced with a choice: whether to sell Central Telegraph prefs or exchange them for ordinary shares of Rostelecom. To do this, you must at least wait for specific conversion rates.