Agriculture

The Creativ Group is a vertically integrated agricultural holding and a leading manufacturer of oils and fats in Ukraine. It should significantly improve its financial state showing in 2010 and thereafter due to a threefold increase in production capacities in 2H2009. The growing sales (+40% YoY in 2010) and the increasing margins (EBITDA +2.6 p.p YoY) indicate that Creativ is an attractive investment target. Additionally, the stock’s liquidity should improve soon as the Holding has recently announced plans to take a listing at local Ukrainian Exchange. We reiterate our BUY recommendation with a target price of USD 23.1 per DR.

Astarta already has benefited from the 2009/10 season’s sugar price rally. However, we project that no significant slump should occur in the market and Astarta will benefit fully from its leadership position in the sugar market. The company’s ongoing investment, diversification and vertical integration will continue to enhance its value. With this report we present updated coverage on Astarta.

Coming back from Landkom’s operations, we decided to update our recent valuation of Landkom because of our improved outlook on financing availability and 2010–2011 operational results. We consider that stocks in Landkom though risky provide investors with high yield investment opportunity. We recommend BUYing stocks in Landkom with a fair price at USD 0.19 per share.

With this report, we decided to update the valuation of Ukrainian grain producing companies that, in our view, have a winning combination of the strongest positions in the Ukrainian market, together with good corporate governance and a well-built business structures.

The Creativ Group is the most dynamic agricultural holding in Ukraine and a leading manufacturer of oils and fats. The Company’s sales have shown an impressive growth of 63% CAGR for the last three years and are expected to grow 44% in 2010. Such an improvement is due to a three-fold increase in production capacities in 2H2009. The growing sales, increasing margins and Company’s fit financials – all indicate that Creativ is an attractive investment target. We issue a BUY recommendation with a target price of USD 26.2 per DR.

The Kernel Group, one of the top Ukrainian bulk sunflower oil and grain traders, has recently entered into an option agreement to acquire a controlling interest in the Allseeds Group, another major Ukrainian producer and exporter of sunflower oil with an 11% market share. The acquisition, which we believe will occur, should lead to the establishment of an undisputed leader on Ukraine’s sunflower oil market with a 24% share of sunflower oil production and 25-28% of sunflower oil exports. Thus, we present you updated estimate on Kernel.

Myronivsky Hliboproduct (MHP) is a vertically-integrated holding and one of the leading companies in the consumer and agricultural sectors. It’s number one in the domestic poultry segment, with a 40% production market share, and is one of the largest Ukrainian agricultural holdings in terms of its land bank under lease. MHP’s fully closed business cycle, increasing diversification, quality control are factors that maintain the Company’s profitability at a stable level. We issue a HOLD recommendation for MHP’s shares with a fair value of USD 12.4.

As a fast growing, diversified and vertically-integrated agro-holding with a stronghold on the sugar business, Astarta has already benefited from the sugar price rally on the domestic market. The aggressive growth of its land bank, excellent corporate governance, strong financial results and expanding operational margins are constantly enriching the value of the Company. Furthermore, Mr. Korotkov, one of Astarta’s major shareholders recently announced that it will be selling 5% of its shares on the WSE. Thus, we present you updated coverage on Astarta.

With this report, we decided to introduce the most promising Ukrainian agricultural companies that, in our view, have a winning combination of the strongest positions on the Ukrainian market, together with good corporate governance and a well-build business structure.

Earlier this week the ESGroup hosted a conference with all the major players in the agricultural sector of Ukraine’s economy. Among the participants were Anatoly Kinakh, the President of the Ukrainian Union of Manufacturers and Entrepreneurs, and Yuriy Luzana, the Deputy Minister of Agriculture.