Research Notes

Spetsgazavtotrans is rated among Russia’s biggest construction companies in the oil & gas sector. As our estimates show, the company stands to gain from the growth of investments in the oil & gas industry, and a strong position in the industry.

Our recommendation is to buy Spetsgazavtotrans common and preferred shares with a respective fair value of USD 156 and USD 62 and upside of 56% and 61%.

We single out the following key factors that would contribute to the company’s attractiveness for investors:

• With the expansion of a major Gazprom investment program to upgrade and repair gas pipelines, the company has an important source of revenue;
• Projects to develop gas & oil and deposits on the Yamal peninsula, an important part of Russia’s resource base in the coming decades, enable the company to expand production and improve finances ;
• Gazprom’s stake in the company gives it a competitive edge in the distribution of contracts;
• Gazprom’s building contracts are to diversify the company’s client base and reduce its reliance on external sources of financing;
• The ratio between the market and book values of the company’s capital is far below the market average: 1.4 versus 5.6 for undeveloped country peers.

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Vladimir Sergievskiy

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