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Norvik Research 22.05.2017

22/05/2017 16:22

Global developments

Markets calmed down after the risk-off sentiment in the previous week. S&P 500 futures are marginally higher today while Eurostoxx 600 is slightly lower. Chinese CSI 300 is 0.2% higher while Nikkei 225 is up 0.5%. The dollar index is 0.1% lower after falling about 2.0% in the previous week. US 10Y Treasury yields are 1 bp higher today at 2.25% declining 10 bps in the previous week.

Oil prices climbed to the highest level in a month after Saudi Arabia’s energy minister said that all producers participating in a deal cut agree on extending the cut for the next 9 months. Meanwhile drilling activity continues rising: the number of active rotary rigs in the US increased by 8 to 720 in the previous week. Brent prices are up 1.8% today at $54.1/bbl.

Russia and CIS area developments and market colour

The ministry of Economy may upgrade the rouble’s FX forecast if OPEC will extend production cuts this week. According to Mr Oreshkin, if oil prices will remain at current levels MinEc likely forecasts the rouble’s exchange at 62-63 against the dollar at the end of 2017 vs. 68 in the basic scenario assuming oil prices at $40/bbl at the year-end.

The rouble is up 0.4% against the dollar at 56.6. OFZ yields are 2-4 bps tighter today. Russia’s and Kazakhstan’s longer term sovereign yields are 4-5 bps lower today.

Corporate news

Telecommunication holding Vimpelcom, owned by Veon Ltd., has published financial results for 1Q 2017. Net income rose 1.5 times compared to the same period last year, and stood at 9.7 billion roubles. Revenue also increased and currently amounts to 82 billion roubles (+6.7% YoY). It has to be noted that EBITDA margin is substantially higher than in 1Q 2016: an increase from 24.9x last year to 34.1x now.

Long-term debt stood at 146 billion roubles at the end of March, which is 11% lower than during the previous quarter. Short-term debt also declined and stood at 148.4 billion roubles (-5% QoQ). Debt metrics of the company remained at moderate levels. Debt to EBITDA ratio stands at 2.78x. Debt to capital stands at 66.4%.

A positive factor for the company’s liquidity is the deal between Veon and Sberbank, according to which the bank will grant a 5-year loan of 110 billion roubles. The funds will be used to refinance current loans as well as on general corporate needs.

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