Bloomberg News

Gazprom Jumps From Cheapest to Peers on Europe

August 06, 2012

OAO Gazprom (OGZPY:US), the world’s largest natural gas producer, is rallying from the cheapest valuation in nine months relative to Russian peers on prospects Europe, the company’s biggest market, will boost stimulus steps.

American depositary receipts of Gazprom, which ties its contracts to prices of crude, rose 2.4 percent to $9.68 yesterday in New York, rebounding from the cheapest valuation since Nov. 9 relative to the average multiple for companies on the Bloomberg Russia-US Equity Index. (RUS14BN) The measure for the most traded Russian companies in New York advanced to the highest level since May 11 while the RTS stock-index futures fell 0.2 percent to 142,370.

Oil, Russia’s biggest export earner, climbed to a two-week high yesterday after German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan, adding to optimism that the region’s debt crisis will ease. Russia, the world’s biggest energy exporter, counts Europe as its top trading partner and for about half of the revenue of state-run Gazprom. The company’s share of Europe’s gas supply rose to 27 percent last year.

“Many investors look at Gazprom as their gateway to Russia, so when risk appetite rises, the stock benefits,” Alexei Kokin, a senior analyst of oil and gas companies at UralSib Financial Corp. said by phone from Moscow yesterday. “There is some optimism about the debt situation in Europe and Gazprom gains. The stock remains particularly sensitive to risk appetite and oil price.”

Russia ETF Advances

The Market Vectors Russia ETF (RSX:US), a U.S.-traded fund that holds Russian shares, increased 1.5 percent to $27.53, the highest level since May 4. The RTS Volatility Index, which measures expected swings in futures, dropped 4.7 percent to 29.44.

Gazprom, based in Moscow, added 2.4 percent to 154.76 rubles, or $4.91, on the Micex yesterday. One Gazprom ADR is equal to two ordinary shares.

The ADRs climbed to the highest level since July 19, sending valuations to 2.89 times estimated earnings, up from 2.80 on Aug. 1, and almost half the 5.76 average multiple for companies on the Bloomberg Russia-U.S. Index. Gazprom traded at a 51 percent discount to the gauge on Aug. 1, the biggest gap since Nov. 9, according to data compiled by Bloomberg.

Gazprom links its prices to oil and refined products with a time lag, a method that dates back to the 1970s, when the fuels were more commonly used in power generation. The company has slumped 9.4 percent this year while oil dropped 6.7 percent during the same period.

CTC Gains

The Bloomberg Russia-US Index rose 1.6 percent to 93.63, as CTC Media Inc. (CTCM:US), owner of Russia’s fifth-most-watched television channel, climbed the most in six months.

CTC, based in Moscow, will report today that second-quarter revenue fell 6 percent to $192.3 million, according to the mean estimate of four analysts surveyed by Bloomberg. The ADRs jumped 5.2 percent to $7.66 yesterday after tumbling 5.8 percent last week.

“The stock was beaten down so much that expectations are at rock bottom and anything above the worst case can be a positive relief,” Ilya Kravets, a portfolio manager analyst at ED Capital in New York said by e-mail. “We have had the stock for some time and had not traded it recently.”

OAO Lukoil (LUKOY:US), the country’s second-biggest oil producer behind OAO Rosneft (ROSN), advanced 1 percent to $57.95 yesterday in New York, climbing to the highest level since May 3. The stock rose 0.7 percent to 1,844.60 rubles, or $58.51, in Moscow.

Top Producer

Russia, the world’s largest oil producer outside of the Organization of Petroleum Exporting Countries, received about half of its 2011 budget revenue from sales of oil and natural gas, according to the government data.

Oil for September delivery rose 0.9 percent to $92.20 a barrel on the New York Mercantile Exchange yesterday, the highest settlement price since July 19.

Brent for September settlement gained 0.6 percent to $109.55 a barrel on the London-based ICE Futures Europe exchange. Urals crude rose 0.2 percent to $110.05 per barrel yesterday.

United Co. Rusal, the world’s largest aluminum producer, was unchanged at HK$4.24 in Hong Kong trading as of 11:01 a.m. local time. The MSCI Asia Pacific Index gained 0.5 percent today.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • OGZPY
    (Gazprom OAO)
    • $4.82 USD
    • 0.45
    • 9.24%
  • RSX
    (Market Vectors Russia ETF)
    • $16.19 USD
    • 1.27
    • 7.84%
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