On March 24, an auction was held for Gazprom’s non-core assets. Shares in the gas monopoly’s six subsidiaries, largely construction and service companies, were put up for auction. According to a Gazprom source, all of the lots, except for a 99.99% share in Gazmash, were sold at prices close to the initial ones. The assets sold included 63% in Lengazspetsstroy and 51% in Spetsgazremstroy. The official results of the auction have not yet been disclosed.
In our opinion, the auction results are expressly positive for Lengazspetsstroy, as the company, with a P/E 2007 multiple of 22.5, could have remained unclaimed. By law, the buyer is required to make a buyout offer to its minority shareholders at the same price at which the share were bought (USD 6,500 per share).
As for Spetsgazremstroy, the results were expected. No serious competition was expected in this auction and there were no doubts that the company, estimated below its book value, would be sold off. In our view, valuation of Spetsgazremstroy at a P/E 2007 of 1.6 (the starting price) does not correspond to actual prospects for its development. We believe that investors overestimate the risks involved in the change of the company’s owner, which is reflected in the unreasonably low stock valuations. The company’s future strategy may become clearer as soon as its new owner is known. In our opinion, large dividend payments to the company’s shareholders are still a highly possible scenario, and we turn investors’ attention to the company’s preferred shares in this regard.
Our fair valuation for Lengazspetsstroy is USD 6,800 per share with a 15% upside. The fair value of Spetsgazremstroy is USD 848 per common share and USD 424 per preferred share, with upside potentials of 182% and 156%, respectively.
3.888
11.862
