Daily analyst comments

The Interfax agency announced that the PIK group plans to place three bond issues to raise a total of RUB 12 billion. The sixth bond issue is intended to raise RUB 5 billion, the seventh RUB 4 billion and the eighth RUB 3 billion. All the issues have a five year maturity date. The securities are to be placed at their nominal value on an open subscription basis. One bond is to have a nominal value of RUB 1,000. Raiffeisenbank and the Bank of Moscow have been appointed to manage the issues.

We are generally neutral about the group’s plans to raise funds via bond issues and believe they should not have any significant impact on the company’s stock valuations in the short term. According to its spokespersons, the group first plans to register the issues with the Federal Service for Financial Markets, while the actual placement of the securities on a full scale could take place in the more distant future. In our view, PIK will likely wait for market conditions to improve in order to place the bonds on more lucrative terms as the company presently has enough cash assets, gained from residential property sales, to finance its projects by itself. In 1H 2008, the group practically doubled its revenues from real estate and the sale of development rights to USD 1,263 million, as compared with the same period of 2007, with 80% of the total revenue raised from sales on the primary market.

Our estimates put the fair price of PIK shares at USD 34 per share, which implies an upside potential of more than 75% to the current stock valuations.