ANALYSIS: Transstroimost JSC (Kazakhstan) activity results for 9 months of 2008

/IRBIS, Renat Temirbekov, February 24, 09/ - October 20, 2008 Transstroimost JSC (Almaty region) informed in official letter to Kazakhstan Stock Exchange (KASE) that the company didn't pay the fifth coupon interest to holders of its bonds KZ2CKY05B950 (KASE official list, the first sub-category of category "Non- rated debt securities"; TSSMb1; KZT100, KZT5.0 bn.; 06.04.06 - 05.04.11, semiannual coupon indexed to inflation rate, 12.00 % APR for the reporting period). Coupon interest payment should be made within October 6 through October 16, 2008. The company notified KASE on partial maturity of mentioned debt: - November 13, 2008 - KZT150.0 m.; - January 26, 2009 - KZT252,618,665.00 (including income tax). According to company's message, the remainder in KZT47,381,335.00 is planned to be paid in February 2009. The following is the analysis of financial status of Transstroimost, conducted by IAFM IRBIS and based on data, provided in financial statements of the company for 9 months of 2008. By the results of analysis, we may distinguish the list of main tendencies of company's development during the year, beginning Q3, 2007 through Q3, 2008. Positive tendencies are: - growth of reserves by 48.00 %; - growth of income by 12.00 %; - growth of value of fixed assets by 2.00 %; - growth of company's current liquidity ratio from 0.95 at the beginning of reporting period to 1.46 at it end. This shows company's optimum control over its assets; - growth of accumulated surplus by 70.00 %; - reduce of accounts payable by 7,40 %. But during the specified period we may observe negative tendencies as well: - fall in monetary funds by 87.00 % (of current capital sum) - from KZT1.63 to 0.20 bn.; - fall of term liquidity indicator from 0.49 at the beginning of specified period to 0.23 at its end; - growth of borrowed assets in 14.5 times from 0.58 to KZT8.66 bn.; According to the analysis, fall in total assets sum of Transstroimost for the specified period made KZT1.16 bn., what occurred only because of fall in monetary funds and their equivalents by 87.00 %. Fall of assets tells on reducing of economic turnover, what may result in non-solvency. Note that on reduce of current capital inventory reserves grew by KZT2.89 bn. (48.00 %) and volume of construction in progress in 3.1 times from KZT0.24 to 0.75 bn. Increase of construction in progress may affect company's financial and economic activity. The stake of fixed assets in joint assets as of the end of Q3, 2008 makes 44.00 %, the indicator tells on significant burden costs and high perceptibility to proceeds change. Total sum of company's liabilities reduced by KZT1.4 bn., what was conditioned by decrease of short-term liabilities sum from KZT6.5 to 2.6 bn. Nevertheless, we note increase of borrowed assets sum in 14.5 times - it tells on company's financial instability and growing financial risks. Company's gross proceeds increased by 49.00 % at the expense of income growth from products realization in 2008. Operating profit of the company increased by 71.00 %, what is the effect of administrative charges reduce. Moreover, Transstroimost increased net income by 95.00 % at the expense of decreasing charges on financing. DETAILED ANALYSIS OF TRANSSTROIMOST FINANCIAL RATIOS IS REPRESENTED BELOW: Analysis of company's liquidity Current liquidity indicator shows the degree of requirement satisfaction of company's current liabilities by its current assets. The level of current liquidity grew by 54.00 % on short-term loans decreasing. In 2008 Transstroimost managed to cover its liabilities at the expense of current assets. But, the company shows very low term liquidity indicator, what tells on extremely high importance of reserves in company's balance. Analysis of assets` management In 2008 inventory turnover ratio made 2.38, and in 2007 - 3.14, the result shows double in 2008 and triple in 2007 realization and reserves stock. Low inventory turnover admits abovementioned current liquidity ratio. What comes to the indicator of activity of assets use, the value of fixed assets turnover ratio of Transstroimost at 2.1 in 2007 and 2008 shows that charges on long-term assets were covered by net proceed. Analysis of financial stability High correlation of borrowed assets to shareholders equity tells on company's high dependence on foreign funding. If borrowing tendency continues, the company will likely to have difficulties with new loans or creditors will provide loans at higher interest rates. Analysis of profitability indicators In 2008 interest profit from sales increased over the year by 74.00 %. ROA indicator grew to 4.49 % on increasing profitability of selling products. But the level of this indicator is rather low. ROE indicator grew twice, at that ROE privilege over ROA tells on company's huge debt. ------------------------------------------------------------- Q3 Q3 2008 2007 ----------------------------------------- --------- --------- Main indicators (KZT th.) Gross proceeds 2,974,749 1,996,864 growth (12 months) 49.00 % 164.00 % EBIT 2,173,809 1,270,503 growth (12 months) 71.00 % 106.00 % Net income 930,564 476,129 growth (12 months) 95.00 % 33.00 % ----------------------------------------- --------- --------- Liquidity indicators Current liquidity ratio 1.46 0.95 Fast liquidity ratio 0.23 0.49 ----------------------------------------- --------- --------- Assets` management indicators Inventory turnover ratio 2.38 3.14 Total assets turnover ratio 1.03 0.87 ----------------------------------------- --------- --------- Financial stability indicators Stake of borrowed assets ratio 81.49 % 83.53 % Borrowed assets shareholders equity ratio 4.40 5.07 ----------------------------------------- --------- --------- Profitability indicator Return on assets (ROA) 4.49 % 2.17 % Return on equity (ROE) 24.25 % 13.21 % ------------------------------------------------------------- IRBIS agency gives a notice that the material given above is not an offer or a recommendation to sell or buy any financial instruments on KASE. Nobody using the material while taking investment decisions makes IRBIS agency responsible for possible losses resulting from such decisions. [2009-02-24]