Daily analyst comments

Interfax reports that the Ninth arbitration court of appeals on Monday, December 3 upheld the decision of the Arbitration court of Moscow on the transfer of shares to the state of several Bashkir oil and energy companies which were held by Yuryuzan Invest and Agidel Invest. The court dismissed the appeals of Yuryuzan, Yuryuzan Invest, Agidel, Agidel Invest and AO Central Registry. The court also dismissed the motion from the fund to conduct an expert appraisal of disputed shares.

Later on December 5 and 10 the court will consider another two appeals related to the shares owned by the funds Ural and Inzer, companies OOO Ural Invest and OOO Inzer Invest.

At the end of summer, the Federal Tax Service (FTS) in filed a lawsuit in Moscow arbitration and recovered shares of Bashkir fuel and energy companies that belonged to four companies: Ural-Invest, Inzer-Invest, Yuryuzan-Invest and Agidel-Invest. In doing so, the state took over the controlling stake in Bashkir fuel and energy companies.

An indirect indication of an imminent defeat over the controlling owners of Bashkir fuel companies was the payment of considerable dividends in the amount of over RUB 10 mn for 2007H1.

We believe that state control is positive for the Bashkir companies. There are several possible scenarios. Most likely, the assets would either be sold to one of the state oil companies or they would be consolidated into a large petrochemical holding.

Both alternatives are positive for the Bashkir companies because their transparency and quality of management would improve, capacity utilization would be higher and most of the risks, namely, the risk of tax claims would be lower. These factors would increase their cash flows and attract stronger attention of investors.

Our fair value of OAO Ufimskij Npz (RTS: unpz) is USD 2.24 per share, OAO Novoil (RTS: nunz) is USD 1.91 per share, OAO Ufaneftekhim (RTS: UFNC) is USD 4.48 per share. These values correspond to a Buy recommendation.