Market reviews and recommendations of BCC Invest JSC (Kazakhstan) analysts for July 13, 2011

/IRBIS. July 13, 2011/ - BCC Invest JSC has provided IRBIS with a survey of main events, market reviews and investment ideas for July 13, 2011. The analysts expect negative opening of trades amid decrease of stocks and depository shares of Kazakhstani issuers in London the day before. But, during the day, on the forecast, the dynamics of quotations of most stocks included into KASE index will be positive, and KASE index will end the day with increase. Analysts of JSC "BCC Invest" expect the following developments on Kazakhstani market today: - Fitch affirms ratings of EP "KMG" at "BBB-", outlook "stable." Fitch Ratings affirmed the ratings of "Exploration Production "KazMunaiGas" (KMG EP, subsidiary of "National Company "KMG"): Long-term Issuer Default ratings (" IDRs ") to foreign and local currency ratings at "BBB-"and short-term foreign currency IDR: "F3". The forecast on long-term issuer default rating - "Stable", rating agency reported on Tuesday. Fitch Rating of KMG EP as an independent company and believes that both positive and negative aspects of support from the parent structure is an integral part of the business and financial profile of RD EP. At the same time, the ratings are limited to ratings KMG its majority shareholder, the national company "KMG" ("BBB-" / forecast "Stable"), with the increasing communication between parent and subsidiary structures. This is evidenced by the acquisition of KMG bonds to 221.5 billion tenge ($ 1.5 billion), which were released "KazMunaiGaz" in 2010, to support the liquidity of the parent structure.'s rating reflects KMG EP's strong financial performance of the issuer in comparison with comparable oil and gas companies. Fitch expects the company will maintain the positive financial performance in 2011-2012, which will contribute to better performance of the oil industry. A positive factor for KMG EP is the low absolute level of debt with recourse, which amounted to 8.1 billion tenge ($ 55.3 million) at the end of 2010. Fitch does not expect any significant negative impact on the financial performance of KMG EP from the proposed acquisition of three oil and gas assets (producing assets Mangistaumunaigaz, Kazakhoil Aktobe and Kazahturkmunaya) from "EP KMG" for about $ 750 million in the current year, as KMG intends to finance the these acquisitions from domestic sources. If these acquisitions will be made, then Fitch is likely to consider debt associated with the production assets Mangistaumunaigaz as non-recourse debt. KMG EP has significant liquidity (at end 2010 cash position stood at 393.5 billion tenge, or $ 2.7 billion), but most of the cash and deposits placed with local banks and access to such funds may still be limited. Therefore, the agency in its analysis continues to focus more on overall levels of leverage, rather than net figures. Fitch will continue to closely monitor the company's financing arrangements in respect of potential future acquisitions. According to the agency, the current strong financial position of KMG EP, especially its large cash position, provides a substantial margin for asset acquisitions in the future. However, the approach with funding through debt means (for example, in the event of unavailability of funds to accounts in local banks) can easily reduce this margin and lead to poor credit. Fitch considers strong financial position as a mitigating factor for its less favorable business profile when compared with comparable issuers. KMG operates relatively small scale, with higher production costs and a low rate of multiplicity of resources in comparison with Russian peers with similar ratings. The potential of the company's growth depends on successful implementation of acquisition strategy. According to analysts of JSC "BCC Invest", the message will not have impact on share prices of depositary receipts of Exploration and Production KMG JSC, since it corresponds to the expectations of market participants. "BCC Invest" analysts are expecting the following events on international markets today: - Today in Russia the publication of data on budget surplus and PPI is expected. - Today in Germany at 12:00 (AST) will be published data on the index of wholesale prices. In the UK, at 14:30 (AST) to be published data on the level of applications for unemployment benefits, to change the number of unemployed, the average wage and the unemployment rate from the ITO. At 15:00 (AST) to be published data on euro area industrial production. - Today, in the United States in 17:00 (AST) to be published data on applications for mortgages from an MBA, at 18:00 (AST) - on the price index for imports, and at midnight - at 00:00 (AST) will be published monthly report on the budget. Today reports of ASML Holding NV, POSCO, Yum! Brands Inc, and others will be heard. Analysts of BCC Invest JSC are giving the following advice for investors in securities of issuers in internal market: ------------------------------------------------------------- Closing Target Potential, Issuer Code price price % Recommen- dation ----------------- ------- ------- ------ ---------- --------- Kazkommertsbank KKGB 400 545 +36.25 Hold KKGBp 188 168 -10.64 Neutral Halyk Bank HSBK 320.00 415 +29.69 Hold Bank CenterCredit CCBN 499 608 +21.84 Buy Tsesnabank TSBN 942.85 1,030 +9.24 Neutral KazMunaiGaz RDGZ 17,600 20,500 +16.48 Buy Kazakhmys PLC GB_KZMS 3,001 3,500 +16.63 Hold ENRC PLC GB_ENRC 1,849 2,200 +18.98 Buy Kazakhtelekom KZTK 19,600 Review KZTKp 9,210 9,300 +0.98 Hold MREK MREK 1,100 1,130 +2.73 Hold ------------------------------------------------------------- The given material has exclusively information character and is not the offer or recommendation to make any transactions with the stocks. Agency Irbis doesn't take responsibility for the opinions which are in given material. [2011-07-13]