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Norvik Research 13.04.2017

13/04/2017 16:02

Global developments

The dollar declined after Trump criticized its excessive strength. The dollar index is down 0.4%, US 10Y Treasury yields are flat at 2.24% after going down 5 bps yesterday. S&P futures and Eurostoxx 600 is 0.4% up.

Russia and CIS area developments and market colour

Russia’s current account surplus in Q1 2017 was higher than market expectations. Preliminary estimate from the CBR shows the Q1 surplus at $22.8bn, compared to a $18.8bn consensus according to Bloomberg. On a 4-quarter rolling basis, the surplus widened to $37.2bn (2.3% of GDP) in Q1, from $22.2bn (1.7% of GDP) in Q4 2016. The pace of declines in USD values of exports moderated to 2.8% YoY in Q1 2017, from 16.3% in Q4 2016, while import values rose by 2.3% YoY in Q4, after falling 5.6% YoY in Q4. At the same time, net private capital outflows rose to $22.8 bn on the 4-quarter basis from $15.4bn in Q4.

Bank of Russia First Deputy Governor Ksenia Yudaeva said that the rouble’s strength is due to trade inflow not carry trade. She added that Q1 2017 balance of payments does not confirm strong inflow of carry trade. The rouble is 0.4% stronger at 56.4 against the dollar today.

US Secretary of State Tillerson’s trip to Moscow has not added optimism to into Russia’s stock market. The parties have not managed to agree on the facts involving the chemical attacks in Syria. MICEX was 1.5% down yesterday and is 0.3% lower today.

Corporate news

On 11 April the X5 Retail Group issued RUB 20 bn of 3-year Eurobonds with a coupon of 9.25%. The company has entered the Eurobond market for the first time, even though it first considered such issuance some 10 years ago. The deal was the biggest offering of rouble-denominated Eurobonds over the past two years. The book exceeded RUB 30 bn, with 80% of the amount issued bought by Russian investors. Funds received from the offering will be used to refinance current liabilities. The retailer does not exclude the possibility of using rouble Eurobonds for refinancing purposes in future.

X5 Retail Group is gradually reducing its debt burden. The company’s management team intends to reach Net debt/EBITDA level of 1.0x, from 1.8x at the moment. EBITDA margin has been relatively stable, at 7.0-7.6% during the past several years. Another positive point is the substantial increase in revenue in 2016, to RUB 1.03 tn (up 27.8% YoY), coming close in this respect to the market leader, Magnit.

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