Research Notes

Finam Research is pleased to announce another Desk Note devoted to the valuation of regional energo stocks.

It’s an open secret that Regional energo prices have steadily outperformed the benchmark in recent months. Since we released our last study on regional energo valuations in November 2003, average gains in the securities we recommended back then have topped 60%.

The fact that investors were quick to zero in on these excellent options will limit their investment appeal, and we are cutting the list of recommended companies. It is noteworthy that there are now virtually no shares left with 100% or more upside potential, which underscores the waning investment allure of regional utilities.

That said, we believe there are still quite a few undervalued energo stocks, which points to more good things to come on the road to power industry reform. The point is that there are still some factors at work which have not been priced into current valuations, and which could exert a fairly sizeable impact on utility stocks.

The bottom line to this story is that regional energos still arguably offer better equity plays than mainstream investments in UES, GRES and GES.

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Dmitry Skryabin

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