Market reviews and recommendations of BCC Invest JSC (Kazakhstan) analysts for September 27, 2011

/IRBIS, September 27, 2011/ - BCC Invest JSC has provided IRBIS with a survey of main events, market reviews and investment ideas for September 27, 2011. Analysts of JSC "BCC Invest" now expect positive opening of trades on positive external background. Further, during the day, according to analysts, on the local market dynamics will be mixed and multidimensional - number of losses will be played off, and the index of KASE, probably, will end the day with slight increase. Analysts of JCS "BCC Invest" note the following events on Kazakhstani market today: - S & P affirmed the ratings of "Norilsk Nickel", having withdrawn them from review. International rating agency Standard & Poor's confirmed the long-term ratings of "Norilsk Nickel" (RTS: GMKN) term foreign and local currency ratings at "BBB-" from "negative" outlook, according to a press release from the agency. Also confirmed the company's rating on a national scale "ruAA +". Forecast - "negative". Rankings are derived from CreditWatch, where there were from 3 August. "OK "Rusal" has rejected the offer of "Norilsk nickel" to buy back 15% of its shares for $ 8.75 billion, and the board of directors of "Norilsk Nickel" has decided to buy 7.7% stake from minority shareholders for $ 4.5 billion, we believe that in the near future, "Norilsk Nickel", most likely, will not make new proposals to buy back shares from OK "Rusal". Given the lack of new supply, "Rusal" and currently low levels of debt, "Norilsk Nickel", we believe that a large positive value free cash flow and lower costs to maintain a high credit rating, corresponding to a rating category of "BBB-", - the report of S & P says. "But in the long-term conflict between the major shareholders of "Norilsk Nickel"- the "Interros "(which owns almost 30% of shares ) and "RusAl" (25%) - will, in our opinion, the main negative rating factor because of its possible impact on the strategic development, financial policy and access to external finance, "Norilsk Nickel" - said in a news release. S & P placed the rating "Norilsk Nickel" on CreditWatch with "negative" outlook due to late disclosure of its financial results for 2010 and left the ratings on review after the company announced a proposal to buy 15% of its own shares from "Rusal" for $ 8.75 billion in December 2010, "Norilsk Nickel" made an offer to purchase a "Rusal" 25% of its shares for $ 12 billion, in March 2011 - a 20% stake for $ 12.8 billion, all these proposals have been rejected "RusAl". In September 2011 the board of directors of "Norilsk Nickel" approved the new proposal to buy back 7.7% of shares from minority shareholders for $ 4.5 billion (in addition to an existing package of treasury shares). The transaction will be financed primarily through the issuance of new debt. Analysts believe the agency that after the completion of the purchase of new shares the management of "Norilsk Nickel" did not want to buy additional shares, and probably will not be able to build up debt for this purpose in the near term, given the volatility of financial markets at present. "Rusal" has already rejected three offers to buy back shares from "Norilsk Nickel", apparently regarding them as a strategic investment, "- noted in the S & P." We believe that after completion of the transaction approved by the recently new repurchase the shares for $ 4.5 billion adjusted duty "Norilsk Nickel" has to remain moderate: in 2011 the ratio of adjusted debt to EBITDA ratio should be around 0.6, while the ratio of FFO to adjusted debt - well above 100%. In the absence of new large payments to shareholders in excess of the target company (25%) in our standardized price scenario, the price of nickel in 2011 is $ 8.5 / lb in 2012 - $ 8 in subsequent years - $ 6.75, and copper price in 2011 - $ 3.25 / lb in 2012 - $ 3.0 and in subsequent years - $ 2.25. Given our price scenario and the expected increase in capital expenditures, we believe that the ratio of adjusted debt to EBITDA will increase gradually, but remain at a moderate level - about 1 "- the report says S & P." Negative "outlook reflects the opinion of analysts of the agency about the possible consequences continuing the strategic differences between the companies "Interros" and "RusAl" for financial policy, management and strategic development of the "Norilsk Nickel", which can lead to a downgrade in the next 12-18 months. In addition, the forecast reflects a possible downgrade in the event that Company will not be able to attract long-term financing for the upcoming purchase of shares for $ 4.5 billion, which could put pressure on liquidity. This message is moderately positive for the equity securities of OJSC MMC Norilsk Nickel. Nevertheless, analysts of JSC "BCC Invest" believe that the main impact on the quotation of the company has uncertainty in commodity markets, where for just a week contracts for nickel and copper have fallen by more than 15%. At this time, guidance on equity securities of MMC Norilsk Nickel are reviewed, and soon we will release an updated review on this issuer. - Vale S.A. increases the size of dividend payments by $ 1 billion. Vale SA, the world's largest iron ore producer, said that the Board approved the proposal to increase the dividend for 2011 by $ 1 billion, and will soon make it to the Board of Directors. In our opinion, the message is positive for the stock price and the ADR of Vale SA. Previously, the company intended to pay the $ 8 billion dividend in 2011. Thus, the company soon intends to pay shareholders about $ 12 billion, based on the current program of share repurchases of $ 3 billion in 2011, analysts of JSC "BCC Invest" expect free cash flow of about $ 9 billion. Given that at the end of the second quarter the company had substantial cash reserves on the balance sheet ($ 13 billion), increasing the attractiveness of shares by increasing the dividend the company is quite acceptable. Analysts of JSC "BCC Invest" confirm their current recommendations on equity securities of Vale SA at the level of "buy" with target price of $ 34.00 per depositary receipt. Analysts of JSC "BCC Invest" expect the following developments on international markets today: - In the coming days in Russia is expected to publish data for fiscal balance. - Today in Germany at 12:00 (AST) GfK consumer confidence index will be published. At 14:00 (AST) to be published data on the Eurozone M3 money supply. In the UK, at 16:00 (AST) CBI will publish index of volume of retail trade. - In today's USA at 19:00 (AST) will be published house price index from S & P/CaseShiller, at 20:00 (AST) to be published the index on manufacturing activity and consumer confidence from Richmond Fed. 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 265 Review KKGBp 148 Review Halyk Bank HSBK 230 Review Bank CenterCredit CCBN 355 608 +71.27 Buy Tsesnabank TSBN 903 1,030 +14.06 Neutral KazMunaiGaz RDGZ 13,600 15,900 16.91 Buy Kazakhmys PLC GB_KZMS 1,825 3,450 +89.04 Buy ENRC PLC GB_ENRC 1,340 1,900 +41.79 Buy Kazakhtelekom KZTK 18,500 27,500 +48.65 Buy KZTKp 8,988 8,900 -0.98 Buy MREK MREK 1,714.70 1,130 -34.10 Hold -------------------------------------------------------------- The given material has exclusively information character and is not the offer or recommendation to make any transactions with the stocks. IRBIS Agency doesn't take responsibility for the opinions which are in given material. [2011-09-27]