Research Notes

According to our estimates, Novorossiysk Marine Company (NovoShip) is one of the most promising, rapidly growing and, at the same time, undervalued Russian shipping companies. NovoShip's robust investment appeal is underpinned by the following factors:

• Novorossiysk Marine Company is Russia's second-largest tanker company after state-owned SovKomFlot, its fleet consists of 61 vessels with total deadweight capacity of 3.8 mln tons;

• The current situation on the global tanker freight market is quite favorable and the outlook also looks bright;

• NovoShip is one of the world's top 15 tanker companies by total deadweight and is one of the most promising players on the shipping market;

• The current market value of NovoShip's fleet is over $2.5 bln.

• Fleet renewal strategy and increasing focus on crude and products opens broad expansion vistas;

• NovoShip operates at steadily high margins;

• The company has stepped up its efforts to improve corporate governance and transparency.

We assign a Buy recommendation to NovoShip's common and preferred shares with year-end 2007 target prices of $2.75 and $1.60, respectively.

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Vladimir Sergievskiy

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