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Norvik Research 10.04.2017

10/04/2017 17:16

Global developments

Global stocks are mixed. Nikkei 225 is up 0.7%, CSI 300 is down 0.4%. S&P futures are 0.1% lower, while Eurostoxx 600 is marginally lower. The dollar index is up 0.1%, US 10Y Treasury yields are 1 bp lower at 2.37%.

Oil prices are rising despite increased drilling activity. Baker Hughes rotary rigs number increased by 10 to 672. Brent prices are up 1.0% today at $55.8/bbl gaining 5.4% from the start of the previous week.

Russia and CIS area developments and market colour

Secretary of State Rex W. Tillerson is visiting Moscow on 11-12 April. This visit is very important for US-Russia relations after US bombed the Syrian military base. Mr. Tillerson was holding a hard line against Russia criticizing the Russian politics in Syria and accusing Russia of trying to influence elections in Europe.

Ukraine’s central bank governor Gontareva resigned from May 10 at own will. Gontareva took office about 3 years ago and her tough anti-crisis measures were favoured by the IMF but opposed by local businessmen and lawmakers. Gontareva stressed the importance of NBU’s independence and cooperation with IMF but warned that resistance to changes and reforms would grow stronger.

Corporate news

Last week, AFK Sistema published its operational and financial results for 2016, which can be assessed as moderately positive. In 2016, sales reached 697.7 billion roubles, a 2.8% increase compared to 2015. Adjusted OIBDA also went up (+5.7% YoY) reaching 183.7 billion roubles with OIBDA margin at 26.3%. The group’s adjusted net income amounted to 1.7 billion roubles compared to losses in 2015.

Net debt/OIBDA metric at the end of 2016 stood at 2.2x, which is slightly higher than during the previous quarter (2.1x). Corporate center’s net debt stood at 83.5 billion roubles, which is 3.6% higher than in 3Q 2016, while net debt to consolidated OIBDA remained unchanged at 0.4x.

AFK Sistema’s Eurobond maturing in May 2019 and a coupon of 6.95% is currently trading with YTM at 3.2%. Spread to government bonds stands at 165 bps. It is also worth noting that on March 31, the company has issued 5-year rouble-denominated bonds with a coupon rate of 8.9%.

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