FESCO spokespersons confirmed addressing the Freight-2007 international conference in Moscow that the company views as its top priority to establish an intermodal operator. According to the company's First Deputy General Director Sergey Kozlov, FESCO "intends to merge its shipping, railway and port businesses". Investments scheduled by the company to achieve the targets are in excess of $1 bln over the next three years. The main investment targets will be infrastructural facilities, fleet and rolling stock.
Based on FY06 results, the company's investments topped $650 mln and the bulk of this amount was allocated to acquire domestic railway and terminal assets and upgrade the fleet. At present, FESCO Group is characterized by a holding structure and in the future it is to be integrated into a single company with three key units: terminal, shipping and railway.
We are upbeat on the company's strategy to establish a diversified transport operator. Taking into account the rapidly growing container market and unrivalled competitive edge of Russian transit routes, which FESCO plans to develop as a top priority, the company stands to gain the most from future growth of the transportation services market. We assign a Hold recommendation to FESCO with a target price of $0.73 per share and upside potential of 6% to current market valuations.
0.553
1.6
