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Norvik Research 13.03.2017

13/03/2017 18:09

Global developments

Global bonds are higher before FOMC meeting on Wednesday, while global stocks are rising. US 10-year Treasury yields are little changed at 2.59%. German and France 10-year government bonds yields are both 3 bps lower at 0.45% and 1.06% respectively. S&P 500 futures are 0.3% higher, Eurostoxx 600 is 0.2% up. CSI 300 is 0.9% up on positive macroeconomic statistics from China.

Oil prices fell further amid increased drilling activity in the US. Baker Hughes active rotary rigs number rose by 8 to 617 in the previous week. Brent prices are slightly lower at $51.4/bbl falling 5 trading sessions in a row (8.4% down from the start of the previous week).

The Republic of Croatia aims to issue 10-year EUR-denominated Eurobonds today. Spread guidance is around 230-235 bps over swaps.

Russia and CIS area developments and market colour

The rouble is flat today at 59.0 versus USD, reflecting oil prices dynamics. OFZ yields are 1-3 bps tighter today. Russia’s and Kazakhstan’s Eurobond yields are 1-2 bps tighter.

Corporate news

Evraz is placing 6-year USD-denominated Eurobonds today, to refinance existing debt. Coupon guidance is in 5.25-5.375% area.

Rostelecom announced positive Q4 2016 results last week. Free cash flow increased 72% YoY to RUB 15.6bn in 4Q 2016, extending the turnaround from Q3 (FCF was negative both in Q1 and Q2). In FY 2016, Rostelecom’s FCF reached RUB 13.3 bn, down from RUB 22.0bn in 2015. Sales totalled RUB 80.4 bn in 4Q 2016, a 10% QoQ increase. Full-year sales amounted to RUB 297 bn.

EBITDA declined marginally in Q4 to RUB 24.4 bn, or by 3% QoQ. On the year-on-year basis, EBITDA also declined slightly, falling 4% to RUB 96.8 bn. This modest declines in EBITDA was primarily due to lower reimbursements under the Bridging the Digital Divide project. On a positive side, the company continued to improve operational efficiency. During 2016, Rostelecom reduced its headcount by 5%, while Sales per worker increased to RUB 2.1 mn, compared to RUB 2.0 mn in 2015 and RUB 1.7 mn in 2012.

On 3 March the company’s board appointed M. Oseevskiy, formerly a senior executive at VTB, as the new president. Media reports link this appointment with the company’s objective to gain a controlling stake in T2 Holdings (a joint venture with Tele2). According to statements by the company, development of digital services will remain Rostelecom’s key focus.

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