UTair Aviation (UTAR) aims to build on Russia’s best year for stock offerings since 2007 with an overseas equity sale as the airline and helicopter company’s shares beat the benchmark Micex (INDEXCF) Index and business grows.
UTair shares have rallied 12 percent this year in Moscow, while the Micex gained 0.3 percent. Chief Financial Officer Igor Petrov said in a phone interview Nov. 9 that the company is planning to sell shares on international markets in 2013 after recording a 43 percent jump in air passengers on domestic flights from January through September this year, more than double the pace of the local industry.
“Their timing seems to be right,” Ilya Kravets, who helps manage $100 million in assets including Russian shares at Daniloff Capital LLC and doesn’t own UTair shares, said by phone in New York on Nov. 9. “We expect more favorable conditions for such placements next year. The company is enjoying the Russian growth story in the transportation sector.”
Russia-domiciled companies have issued $6.64 billion of stock in 2012, the most since the $22.4 billion raised in 2007, data compiled by Bloomberg show. OAO MegaFon, Russia’s second- biggest mobile phone company, plans to resume as soon as this week an initial public offering postponed in October, people with knowledge of the matter say, while the central bank sold a $5.2 billion stake in OAO Sberbank (SBRCY:US) in September, the biggest Russian stock sale since before the global recession.
The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. dropped 0.3 percent to 91.42 on Nov. 9, bringing last week’s slump to 3.5 percent. Futures on Moscow’s RTS Index rose 0.7 percent on Nov. 9 to 140,250 in New York.
‘Go For It’
The Market Vectors Russia ETF (RSX:US), the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.2 percent to $27.12 on Nov. 9, trimming its retreat last week to 3 percent. The RTS Volatility Index, which measures swings in the index futures, dropped 4.5 percent to 25.57. Ruble futures rose 0.3 percent to 31.720 per dollar.
Russian companies are expected to raise about $20 billion in IPOs next year, including as much as $15 billion from the private sector, Chris Weafer, chief strategist at Sberbank Investment Research, a unit of Russia’s biggest lender, said in an interview at Bloomberg’s headquarters in New York on Nov. 7.
“When investors see the valuation is right, they go for it,” Weafer said.
UTair, Russia’s third-biggest domestic airline after OAO Aeroflot and OAO Transaero, is considering raising as much as $350 million in an overseas offering to finance new route costs and plane purchases, CFO Petrov said.
UTair is trying to win approval for the share-sale plan from its controlling shareholder OAO Surgutneftegas, which owns 60.7 percent of UTair, Petrov said in the interview. The company will probably choose an adviser for the overseas placement by the end of the first quarter, he said.
“We are poised to grow further and need money to expand,” Petrov said. “We are adding routes within the country and want to fly more abroad and we are expanding our helicopter business as demand for our services is on the rise.”
UTair, which is selling 3 billion rubles of three-year bonds this week, may also consider selling shares in a private placement, he said. The company is planning to purchase 88 planes, including 20 from Airbus SAS and 40 from Boeing Co. (BA:US), as well as 103 helicopters by 2017 as it upgrades its fleet, Petrov said.
The United Nations is UTair’s biggest customer for international helicopter services, while Russia’s oil and gas industry is the largest for domestic use, he said. One of the company’s turboprop planes crashed in Russia’s Tyumen region in April killing at least 31 crew and passengers after it tried to make an emergency landing.
Russia’s air-passenger traffic rose 15 percent from January through September this year, according to government data.
UTair shares trade for 17 times estimated earnings, about three times the average of 5.5 times for companies on the Micex.
“If they are not greedy and the valuation is right, they have a chance,” Igor Nuzhdin, an analyst at OAO Nomos Bank, said by phone from Moscow on Nov. 9. “Timing is as crucial as valuations for UTair, as many other Russian companies will try to sell shares next year, competing for investors’ money.”
MegaFon, which delayed its IPO on Oct. 22 to amend the prospectus, may decide today on a schedule for an investor roadshow after receiving approval from the U.K. Listing Authority for the stock sale, according to two people who asked not to be identified as the plan is confidential.
Lender OAO Promsvyazbank called off its IPO on Oct. 16, saying offers it was getting for shares to be listed in London didn’t reflect “fair value” for the bank.
Crude oil for December delivery slid 0.6 percent to $85.56 by 8:40 a.m. in New York, paring last week’s 1.4 percent gain on the New York Mercantile Exchange.
Brent oil for December settlement fell for the first time in three days, losing 0.3 percent to $109.06 on the London-based ICE Futures Europe Exchange, while Urals crude, Russia’s chief export blend, dropped 0.7 percent to $107.51 a barrel. It added 2.4 percent last week.
Oil may decline this week on concern Europe’s debt crisis will further reduce economic growth and demand for fuel in the region, a Bloomberg survey showed. Nineteen of 33 analysts, or 58 percent, forecast crude will decrease through Nov. 16. Seven respondents, or 21 percent, predicted that oil futures will gain and seven said there will be little change in prices.
American depositary receipts of OAO Gazprom (OGZPY:US), the world’s largest natural gas producer, added 2.9 percent to $9.19 on Nov. 9 in New York, the biggest one-day climb since Sept. 14. Volumes were three times the three-month average. Ten-day volatility on the ADRs rose to 38.79, the highest reading since Sept. 25.
The stock lost 0.4 percent to 144.93, or $4.58, on Moscow’s Micex today. One ADR is equal to two shares. The Micex gained 0.4 percent to 1,407.19, after falling 2.7 percent last week.
Sberbank advanced 1.4 percent to $10.93 in New York on Nov. 9, trimming its retreat last week to 6.2 percent. The stock jumped 1.2 percent on the Micex today to 86.77 rubles, after slipping every trading day last week. One Sberbank ADR equals four shares.
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