Research Notes

Vysochaishy is to launch an IPO on February 1, 2007.

In line with the announced data, Vysochaishy's placement price range as part of its initial public offering (IPO) will be $85.5 - $103 per share. The price range of one Global Depositary Receipt (GDR) will equal $8.55 to $10.30 (with one share to be equal to 10 GDRs). Thus, the company's market capitalization is estimated at $428-515 mln.

As we already wrote about Vysochaishy in our Desk Note dated January 22, 2007 the announced IPO range turned out to be close to the company's fair price than the figures ($520-580 mln) earlier announced by the company's appraisers.

According to our estimate, at present Vysochaishy's capitalization is some $430-490 mln or $86-98 per share.

Meanwhile, we would advise investors who are interested in short-term investments (around 12 months) to participate in the IPO at the lower end of the IPO range, proceeding from the company's value of $430 mln or $86 per share.

Acquisition of Vysochaishy's shares in the middle of the price range is economically justified for those who are eager to make long-term investments, i.e. at $86-96 per share. Vysochaishy's plans to ramp up output should help it generate $88 mln in sales or 73% higher than the expected results for 2006 and $35.6 mln in net profit (+116% against the 2006 figure).

Such earnings could promote a spike in Vysochaishy's fair value, which was calculated using 2008 forecasts (for the company itself and its peers) compared to the price determined on the basis of 2006 and 2007 data.

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Nataly Kocheshkova

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