Ukrainian Equity Market: Weekly Overview 18 - 22 October, 2010

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UX index lost 0.32% during the week UX Index 2300 UX ’s major electricity generators and distributors last week: report 9m10 financial results 2100 -0.32% Agroton announces its IPO price: PLN 27 1900 Russia suspends poultry imports from Ukraine 22-Oct-10: 1,832.92 1700 Ukrainian banks triple their monthly losses in September Jul Aug Sep Oct

Forum, Raiffeisen Bank Aval and post 9m10 UAS results

In the previous week the UX, the major Ukrainian equity market indicator, declined to its local minimum, after which it resumed its growth. On Tuesday its value dropped below 1800 points mark for the first time in the last five months. However, on Wednesday- Thursday it managed to wipe away most of the losses. As a result, during October 18-22, the UX index lost only 0.32%.

In the energy sector, Ukraine’s major GenCos published strong 9m10 financials on the back of higher electricity demand. Donbasenergo, however, remained the only GenCo that continued to work at a loss (in 3Q10 the company’s net loss was at UAH 3.9m), extending its 9m10 net loss to UAH 199.3m, up from a UAH 100.6m net loss in 9m09. Its revenues stood at UAH 2.2b (+28.7% y/y) in 9m10 and its EBITDA was negative at UAH 27.9m (vs. negative EBITDA of UAH 0.5m in 9m09).

Centerenergo reported a 36.4% y/y surge in net sales to UAH 4.2b in 9m10, EBITDA of UAH 222.7m (vs. negative EBITDA of UAH 27.7m in 9m09) and a net income of UAH 82.9m (vs. a net loss of UAH 216.5m in 9m09). The company's net earnings for 3Q10 were at UAH 8.5m vs. net income of UAH 162.3m in 2Q10 and a net loss of UAH 88m in 1Q10.

Zakhidenergo announced 9m10 net sales of UAH 3.4b (+5.6% y/y), EBITDA of UAH 157.8m (vs. negative EBITDA of UAH 178.9m in 9m09), but a net loss of UAH 36.2m (vs. a net loss of UAH 339.1m in 9m09). In 3Q10, the company earned UAH 37.1m in net income, following a UAH 78.1m profit in 2Q10 and a UAH 151.4m loss in 1Q10.

Dniproenergo posted a 50.9% y/y increase in 9m10 net sales to UAH 4.4b, EBITDA of UAH 576m (vs. negative EBITDA of UAH 38.9m in 9m09) and a net income of UAH 226.3m (vs. a UAH 256.8m net loss in 9m09). The company disclosed 3Q10 net income of UAH 35.3m, worse than UAH 204m in 2Q10, but better than -UAH 13m in 1Q10.

Electricity distribution companies also started issuing their 9m10 results. The reports show that almost all major domestic electricity distributors remain profitable. The exception was Zaporizhiaoblenergo, whose YTD loss amounted to 1.8m (vs. a UAH 29m net income in 9m10). At the same time, Kyivenergo reported 9m10 net earnings of UAH 641.6m (+21% y/y), Kharkivoblenergo of UAH 33.4m (-35.2% y/y), Poltavaoblenergo of UAH 55.3m (+7.9% y/y), Prykarpattyaoblenergo of UAH 19.7m (-70.1% y/y), Odesaoblenergo of UAH 3.7 (+21.5% y/y), Vinnytyaoblenergo of UAH 32.9m (+57.9% y/y), Cherkasyoblenergo of UAH 51.8m (+42.6% y/y) and Khmelnytskoblenergo of UAH 28.9m (+8.8% y/y). It should be also noted that all companies of the sector reported increased y/y sales for 9m2010. The vast majority of companies increased their sales by 12-39% y/y, with the exception of Khmelnytskoblenergo, which increased its 9m10 revenues by mere 1% y/y.

In the agricultural sector, Ukrane’s agricultural company Agroton announced an offer price of PLN 27 (EUR 6.79) per share for its IPO on the Warsaw Stock Exchange that is below the price of Agroton’s private placement in November 2009 of EUR 7.07 and 10% below the maximum price stated in the offer prospectus (PLN 30 per share). Based on the offer price, the company expects to raise gross proceeds of around PLN 153m from the public offering. 90% of new shares are planned for allocation among institutional investors while the remainder of 10% is intended for retail ones. The subscriptions for the company's 5.67m new shares will be held on October 22-27 and allocation will occur by October 29.

Russia imposed a temporary ban on imports of poultry meat from a number of countries including Ukraine. The ban comes into effect on November 4. The restriction, however, is expected to have no material impact on 2010FY results of Myronivsky Hliboproduct (MHP), Ukraine’s largest poultry producer, as the company had no plans to export significant volumes to Russia this year (only 10- 15ths tonnes of chicken meat or around 3-5% of poultry output in 2010E). In the banking sector, the National Bank of Ukraine (NBU) reported preliminary data on the Ukrainian banking sector for September 2010, posting net losses of UAH 1.05b (+228% m/m). The main reason behind such poor performance was a 48% m/m boost in loan loss provisions to UAH 4.4b in September. For 9m10, the Ukrainian banks derived a UAH 10b loss, down 52.3% y/y. The sector’s 3Q10 loss totaled UAH 1.7b (-56.4% q/q).

Of the three blue-chip banking stocks, Forum Bank disclosed a net loss of UAH 600.7m in 3Q10 (-50.4% q/q), expanding its 9m10 loss to UAH 2.1b, down from UAH 424.3m loss in 9m09. The major culprit behind the huge losses is the growing loan loss reserves: Forum’s end-9m10 loan loss provisions (LLP) ratio stood at 22% (+4 pp q/q) vs. 10% as of end-2009.

Raiffeisen Bank Aval reported 3Q10 net loss of UAH 1m (vs. net income of UAH 13.9m in 2Q10 and UAH 22m in 1Q10), shifting its 9m10 bottom-line to UAH 34.9m vs. a UAH 1.6b net loss in 9m09. The bank’s end-9m10 LLP ratio stood at 26% (+3 pp q/q) vs. 20% as of end-2009.

Ukrsotsbank posted a net income of UAH 5.9m for 3Q10 (-63.9% q/q), bringing its 9m10 profit to UAH 23.7m (-72.1% y/y). The bank’s end-9m10 LLP ratio reached 16% (+2pp q/q) vs. 11% as of end-2009.

According to the NBU, banking NPLs increased by 1.5% over September to UAH 86.5b while the NPL ratio remained unchanged m/m at 11.6%.

Weekly Leaders / Laggards Largest Gainers Largest Losers Largest Turnover Turnover, Issuer Change Price Issuer Change Price Issuer USD Landkom International 5.26% 0.08 GBP MCB Agricole -13.52% 1.57 EUR Ferrexpo 21.3m

AgroGeneration 4.78% 2.19 EUR Interpipe Nyzhnodniprovsk Pipe -10.83% 8.15 UAH Regal 11.7m

Centerenergo 4.76% 12.22 UAH Agroton Public Ltd -7.79% 7.10 EUR Kernel Holding 11.1m

KDD Group 4.00% 0.26 GBP TMM Real Estate -6.42% 2.90 EUR MHP 6.8m

Mriya Agro Holding 3.39% 6.71 EUR Kernel Holding -5.63% 61.15 PLN 6.2m

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