Editor’s Note: The Kyiv Post and leading Kyiv-based investment bank Dragon Capital got together to pick the top 10 companies for investors to keep an eye on in 2012.
Centrenergo
Centrenergo is Ukraine’s second largest thermal power generator by capacity, with three plants in Kyiv, Kharkiv and Donetsk oblasts. Centrenergo’s January-September sales in 2011 grew 22 percent, to $645 million, and net income jumped sixfold to $63 million. The Ukrainian State Property Fund plans to auction off a controlling stake in Centrenergo later in 2012. Rinat Akhmetov’s energy holding DTEK is expected to lobby for the liberalization of the energy market, which carries positive implications for the company and the sector. With $1.1 million in average daily turnover in 2011, Centrenergo is one of the most liquid names on the Ukrainian Stock Exchange.
MHP
Poultry giant MHP accounted for 50 percent of Ukraine’s industrially produced chicken meat in 2011. Sales of chicken meat and related products represent around 80 percent of the company’s annual revenues. MHP’s most recent results for January-September 2011 show a 30 percent year-on-year increases in revenues to $880 million and 27 percent growth in net income to $201 million. The company has shares listed on the London Stock Exchange and $585 million in Eurobonds maturing in 2015.
Motor Sich
Motor Sich equips 90 percent of medium and heavy helicopters and more than 30 percent of all aircraft in the former Soviet Union. The January-September period in 2011 saw the Zaporizhia-based company’s revenues rise 22 percent year-on-year to $494 million, while net income grew 23 percent to $109 million. A full order book may drive sales above the $900 million mark in 2012. The most liquid stock on the Ukrainian Exchange, Motor Sich is also a gateway for investors seeking exposure to Russia’s massive defense budget and benefits from generous tax exemptions domestically.
Ukrsotsbank
Owned by Italy’s UniCredit Group since early 2008, Ukraine’s sixth-largest bank had $5 billion in assets as of the end of 2011. It operates a network of 430 branches nationwide. While Europe’s debt crisis may put pressure on the bank in the short-term, its current price-to-book valuation is 75 percent lower than that of regional peers, making it a cheap buy. Unicredit recently denounced speculation it could exit the market. Ukrsotsbank is listed on the Ukrainian Stock Exchange with an average daily turnover of $650 million in 2011.
Metinvest
Metinvest is a vertically integrated steel and mining group controlled by the country’s richest person, Rinat Akhmetov. In 2010 Metinvest was one of the world’s top 10 producers of iron ore concentrate and ranked sixth in Deloitte’s Top 500 ranking of the largest Central and Eastern European companies. January-June 2011 statements show revenues up 72 percent to $7 billion and net profit jumped 118 percent to $1.1 billion. Its highly integrated structure is expected to cushion the blow of the global slowdown. Metinvest has two Eurobonds traded on the secondary market: $500 million maturing in 2015 and $750 million due in 2018.
Avangard
Majority-owned by Ukraine’s youngest billionaire, Oleh Bakhmatiuk, Avangard dominates the country’s egg market, accounting for 40 percent of shell eggs and 90 percent of dry egg products. In the first half of 2011, Avangard reported revenues of $224 million (up 35 percent year-on-year) and net income of $67 million. Its ambitious expansion strategy should boost its annual production capacity by 3 billion to 8.2 billion eggs in 2013. Avangard shares are listed on the London Stock Exchange, and the company has $200 million in Eurobonds maturing in 2015.
JKX Oil & Gas
JKX Oil & Gas explores for and extracts hydrocarbons in Ukraine, Russia, Romania and other countries, with Ukraine generating 90 percent of the company’s revenues. Lost exemptions from oil and gas royalties last year and lower production hit the company’s profits in the first half of 2011. This, however, should be offset by rising energy prices and reduced royalties for domestic oil and gas producers in 2012. JKX Oil & Gas is listed on the London Stock Exchange and saw an average daily turnover of $850,000 last year.
DTEK
DTEK is a giant energy holding controlled by Rinat Akhmetov’s System Capital Management whose operational line runs from coal production to electricity distribution. Last year’s energy sector privatizations saw DTEK cement control over two thermal power producers and Kyiv’s electricity and heat supplier Kyivenergo. Together with the recently awarded long-term concessions for two top state-owned coal mines, this may allow DTEK to double revenues in 2012. DTEK’s results for January-June 2011 show 74 percent growth in revenues to $2.3 billion and a 71 percent increase in net income to $277 million. DTEK has $500 million of Eurobonds maturing in 2015.
Raiffeisen Bank Aval
Ukraine’s fourth-largest bank, with $6.7 billion of assets at the end of September, Raiffeisen Bank Aval serves more than 5.5 million private and 245,000 corporate clients and has a national retail network of over 900 outlets. Setting aside a quarter billion dollars in January-September 2011 to cover potential bad loans hurt the lender’s profits over the period (57 percent of the bank’s loan book of $5.7 billion is in foreign currencies). Cheaply valued, it trades at a 60 percent discount compared to regional peers, and is listed on the Ukrainian Exchange.
Oschadbank
State-owned Oschadbank, the second largest bank in Ukraine by assets ($9.3 billion at the end of 2011), and largest by number of outlets (almost 6,000), increased its net profit by 15 percent to $67 million last year. Its high exposure to state oil and gas monopoly Naftogaz Ukrainy, which accounted for 45 percent of the bank’s total loan book as of end-June 2011, is balanced out by its sound liquidity position and capital adequacy, low external risk exposure, and availability of state support. Oschadbank has $700 million of Eurobonds maturing in 2016.
Source: Dragon Capital
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