1 Russian ecm November 6, 2006 1. Investment banks index wars 2. 35 companies will raise $19bn in 2007, Deutsche Bank 3. RTS to launch a Russian NASDAQ 4. Market players to be licensed 5. Gazprombank finally to sell off media, petrochemical assets in IPO 6. Owner of the Chelyabinsk zinc plant (CZP) will sell 3% of their shares 7. Chemical firm share price collapses after dilutive share issue 8. Dymov Sausage to IPO 9. Eastern Property Holdigns increases capital by $125m 10. Far Eastern Sea Shipping Company will IPO 11. Mosenergo places in favour of Gazprom 12. OGK-5 sale a big success 13. Pharmaceutical producer to IPO 14. Pipemaker TMK IPOs 15. Russian commodity exchange plans to launch wheat futures 16. Severstal sets IPO price 17. Sistema-Hals IPO price range set 18. Uralkaliy decreases 9-month dividends by a third following flood 19. Uranium company to IPO 20. WBD owners sell small stake Investment banks index wars Monday, November 6, 2006 A veritable war of indexes is breaking out as Two of Russia's top investment banks launched new indexes, better to track Russia's increasingly sophisticated growth, that will compete with the proliferating number of indexes tracking Russia. Renaissance Capital has teamed up with emerging market gurus Morgan Stanley that puts together the widely quoted MSCI index - a benchmark for emerging market stock market preformace - to produce the MSCI http://businessneweurope.eu 2 Renaissance Index of TOP Liquid Russian Stocks (the MSCI Rencap Index, for short). Likewise, Troika Dialog launched a third tier index that tracks 50 companies that are on the up and up but currently fall below all the investment bank's radar screens. The new indices come in the wake of several new indexes launched on international exchanges that are becoming increasingly interested in Russia. A battle is developing to become the market currency when it comes to a shorthand way of expressing just how Russia's stock markets are fairing. For example, the RTS index is still the most widely quoted index number this is to ignore the fact that Russia's other leading exchange MICEX has long since outgrown the RTS in terms of size and volumes of trading. At the end of last month the London Stock Exchange launched the FTSE Russia IOB Index that also tracks liquid Russian stocks that are traded both on international and domestic markets. And in August the Deutsche Boerse, Germany's Frankfurt-based stock exchange, launched the DAXglobal Russia index, that tracks the performance of the 17 most-liquid domestic blue-chips that trade in American Depositary Receipts, or ADRs, on various international exchanges. Troika will have an easier time. Second and third tier stocks have been fashionable several times in the past and dubbed "the great unpronounceables" by the doyen of the small cap company Eric Kraus (now running the Nikitsky Russia/CIS Opportunities Fund). Kraus pioneered the Sovlink second tier index, which consistently out performs the bluechips during Russia's period equity booms, such as that of the start of this year. However, the second tier has a tendency to tank spectacularly during the periodic down turns and the Sovlink index has never really caught on. Troika's decision to focus analyst attention on third tier stocks is indicative of a fundamental change developing in the way investors invest in Russia. for almost all of the 1990s it didn't matter what you invested into in Russia, but when. Returns were spectacular, but ephemeral and prone to political risks. However, after the run up to Russia's all time high on the RTS this May of over 1,700 the consensus is that the valuation of Russian companies has almost caught up with their international peers and the huge "catch up" gains of simply investing in bluechips are gone and banks and funds are hunting for new strategies. http://businessneweurope.eu 3 The fact that these two banks have focused on opposite ends of the indutrial spectrum suggests the debate is still on, but also that the investment pool is broadening to include more conservative investors who think that 10% return is also pretty spectacular - something that most veteran Russian investors would sniff at. 35 companies will raise $19bn in 2007, Deutsche Bank Monday, November 6, 2006 Deutsche UFG President Ilya Shcherbovich told an investment conference last week that he believes 35 companies will IPO next year raising a total of $19bn. This year a total of 19 companies are expected to float on domestic and international markets raising a total of $18bn by the end of the year. As of the end of October a total of 13 companies had already debuted their shares on the exchanges, raising a total of $14bn, including the OGK-5 float last week (but not TMK's IPO). There have also been 16 secondary offers, raising a total of $2.5bn. And the number of comapies floating at home is slowly rising. Next year a third of the companies' IPOs will take places on Russian exchanges, compared with 13% in 2006, in terms of number of IPOs, and 4% in terms of cash raised. Deutsche bank estimates Russia has a total of 80 private companies with capitalisations of more than $500m, most of which are not listed. Alfa Bank listed the immient IPOs in a note: The issues that are currently known to be either about to close, are in the midst of preparing an IPO, or are in the midst of active marketing to investors include: • OGK-5; • Chelyabinsk Zinc; • Wimm-Bill-Dann - placement of existing shareholder equity; • Sistema-Hals (real estate); • TMK (Russia's largest pipe manufacturer); • Severstal - existing shares; http://businessneweurope.eu 4 • Raspadskaya (coal producer); • Pharmstandard (pharmaceutical company); • Kazkommertsbank. "The two largest issues will be Severstal (about 15% of its equity, today valued at around $1.5 bln) and pipe maker TMK. The latter company is thought to be targeting about $1.1 bln. The last planned issue of that size, Uralkaly, was pulled when management was made aware that investors would only support the issue at a sharply reduced valuation. Both Severstal and TMK are currently in the midst of that dialog process," Alfa said in a note. RTS to launch a Russian NASDAQ Monday, November 6, 2006 As part of the ongoing effort to deepen the Russian equity capital markets the RTS plans to set up a NASDAQ of Russia, a platform to trade shares in high tech companies with small capitalisation. The new platform will be launched sometime next year and is designed to dovetail with the Kremlin-backed programme to launch a venture capital industry that will unlock Russia's intellectual richest. The state has earmarked $500m to provide the seed capital for a dozen venture capital funds that will finance high tech ideas and bring them to market. The first of this money was due to be disbursed this month. RTS CEO Oleg Safonov has rolled out a number of initiatives in the last year but says don't expect any Russian high tech IPOs anytime soon. The platform will launch with about a dozen companies. There are about 60,000-80,000 small companies with capitalisation between $60m and $100m according to official statistics. However, high tech has been almost totally ignored for most of the last ten years with a handful of high profile exceptions. Market players to be licensed Monday, November 6, 2006 The stock market watch dog, the Federal Service for the Financial Markets (FSFM) wants all investors on the Russian stock exchanges to be licensed, the service said last week. The FSFM has been working hard to improve the market infrastructure and will introduce draft laws to licenses professional investors by the end of this year, a spokesman said. http://businessneweurope.eu 5 The regulation covers all licenses, excluding the licenses for the collective investments market, where amendments to the existing legislation are needed, Vladislav Streltsov, deputy director of the FSFM said. At the moment market participants receive a three-year license which is replaced by an indefinite licenses on renewal. The new system would add more teeth the historically toothless watchdog. Gazprombank finally to sell off media, petrochemical assets in IPO Monday, November 6, 2006 When the newly elected President Vladimir Putin put the kybosh on media tycoon Vladimir Gusinsky in 2000 it was Gazprom that did the dirty work. The state-owned gas giant unexpected called in two small loans to commercial television station NTV, effecting the take of the biggest and most influential broadcaster in Russia and bringing down a storm of international protest. Gazprom is a gas company and freely admitted that it knew nothing about the media business, however, repeated promises to sell off the specially created media arm Gazprom Media failed to appear time and time again. Until now. The company's bank said last week it would sell off both Gazprom Media and Sibur, a petrochemical concern the company retook after Putin's election. Gazprombank said it was preparing both companies for IPO sometime in the new year, Deputy CEO Alexander Sobol said last week. Sobol said that the both companies were strategic assets and they would account for between 25% and 30% of the bank's consolidated profit this year. He also said the bank planned to increase the capitalisation of both companies before they were floated, probably in London. Currently Gazprombank owns 95.13% of Gazprom Media and 75% of Sibur, with the parent company owing the rest.