Shareholders of TMK (RTS: TRMK) adopted a decision at the June 27 AGM to approve FY06 dividend payouts of Rub 4.3 ($0.16) per share. The BoD was fully reelected and Dmitry Pumpyansky was reappointed as chairman.
The company's 2006 dividend payouts will amount to about Rub 3.754 bln ($ mln). By comparison, TMK allocated Rub 546.1 mln ($21.13 mln) to FY05 dividend payouts, taking into account interim dividends. Thus, the dividend payouts will be 6.9-fold higher y-o-y for 2006 and the dividend yield ratio is 1.8%.
The pipe maker's FY06 IAS consolidated net profit amounted to $461 mln, up 81.2% y-o-y. After the February IPO, TMK's BoD approved a new dividend policy which provides for allocating at least 25% of annual IAS net profit. According to estimates, the company will allocate at least 30% of net profit to FY06 dividend payouts. We attribute such strong dividend payouts to the company's intention to share profit with core shareholder Dmitry Pumpyansky.
We do not rule out either that Pumpyansky will earmark part of these assets to a transaction with Interpipe, after numerous announcements by TMK's management about negotiations with this Ukrainian company. In the event that the parties clinch an agreement, the merged company with annual output of 4.2 mln tons of pipes will outpace the current global leader Luxembourg-based Tenaris.
In our opinion, the fact that the BoD was reelected in full sends a signal that the shareholders are satisfied with the company's current policy.
We have no formal recommendation on TMK shares. However, based on industry average multiples, the share price is $7.50 which is slightly below current market valuations.
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