Research

Last week, Ukrainian CDS quotations continued to decline, this time by 71.2 b.p., from 982.1 b.p. to 820.9 b.p. Stabilization in the political arena of Ukraine continue to positively influence investors’ assessment of Ukrainian sovereign risks. The spread between Ukrainian CDS and those of Argentina and Venezuela widened to 249.1 b.p. and 200.1 b.p. respectively.

Zaporizhtransformator is the CIS leader and one of the global leaders in the sphere of transformer manufacturing, supplying its products to 83 countries. Near 80% of all power transformers in operation in the CIS are made by ZATR. Given such a high level of penetration and the CIS countries’ strong need to invest in electricity infrastructure, coupled with the Company’s impressive margins and huge discounts at which ZATR shares are trading, we see its stock as a unique opportunity for investors.

Last week, Ukrainian CDS quotations declined by 51.8 b.p. from 980.2 b.p. to 928.4 b.p. The main influence on investors’ attitudes to Ukrainian risks was news from the political arena, including the new President’s inauguration (held February 25) and a decline in investors’ apprehension about further political destabilization in Ukraine.

Turboatom, one of a few state-owned high-margin enterprises, is the largest CIS producer of turbines for all main types of power plants. The Company’s capacities enable the production of 8 GW of steam power turbines and 2.1 GW of hydro turbines per year. The Company has delivered more than 900 turbines with a total power of nearly 150 GW to more than 35 countries and it occupies the fourth place in the world in terms of turbines installed at nuclear power plants.

Last week, Ukrainian CDS quotations declined by 1.7 b.p. from 980.8 b.p. to 979.1 b.p. Investors’ apprehension about further political destabilization in Ukraine after the second ballot of the presidential election has begun to decline. In our view, this should result in a lowering of Ukrainian CDS again next week.

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.

Ukraine’s coke sector appears to be ahead of the whole domestic metallurgy sector. Increased coke consumption per tonne of pig iron, which should remain at the same level for at least one year, and further steel sector recovery should boost coke output by 5.4% in 2010. At the same time, driven by the global coke shortage and increased raw materials’ prices, the average domestic coke price in 2010 should increase by 25-30%. These factors should help Ukraine’s coke makers to boost FY2010 net revenues, making the coke sector a most attractive investment target.

Last week, Ukrainian CDS quotations took a 50.4 b.p. jump from 919.8 b.p. to 970.2 b.p. Such an increase occurred due to investor apprehension in relation to further political destabilization in Ukraine after the second ballot of the presidential election. Despite such a jump, Ukrainian CDS are still trading lower than Argentina’s and Venezuela’s CDS.

On the cold winter day of February 07, Ukrainians voted for their next president. All polls and preliminary data from the Central Elections Commission point to the victory of Viktor Yanukovich, who heads the Party of Regions, the largest party in the Ukrainian Parliament. International observers confirm the absence of material fraud that could principally affect the election results. As a result, Ukraine should enter a period of relative political stability, with a new president who has majority support in the parliament, who will put in place a prime minister who is loyal to him. Ukraine’s next parliamentary elections should only be at the end of 2012.

Last week, Ukrainian CDS quotations showed a decline of 37.3 b.p. from 956.7 b.p. to 919.4 b.p. Thus, Ukrainian CDS quotations moved to occupy the third place in the world, after Venezuela’s President reported about the nationalization of its retail network.