Oil and gas shares arrived – Newspaper Kommersant No. 229 (7430) dated 12/09/2022

Shares of a company from yet another “friendly” country, Kazmunaigas, began to be traded on the SPB Exchange. The day before, the company completed an IPO, designed primarily for local investors, but with the participation of Russian ones. As the list of securities of Kazakh companies traded on the stock exchange expands and liquidity increases, portfolio managers will also begin to show interest in them, experts say.

The SPB Exchange began trading shares of Kazmunaigas (KMG), the leading oil and gas company in Kazakhstan and an issuer from a “friendly” country. Until now, only “friendly” Hong Kong stocks have been available on the exchange (see “Kommersant” of December 6). Such securities can be bought without restrictions by unqualified investors, while shares, depositary receipts and bonds of US and European issuers are available without restrictions only to qualified investors.

KazMunayGas completed its IPO a day earlier with a listing on the Kazakh stock exchanges AIX and KASE. Investors were sold 3% of shares at a price of 8.4 thousand tenge for a total of 153.8 billion tenge (about $330 million). About 96% of the allocation fell on Kazakh investors, retail and institutional. According to Freedom Finance Global analyst Daniyar Orazbaev, investors from 30 countries bought shares worth 6.6 billion tenge. Russian players also participated in the placement, such an opportunity was provided, in particular, by BCS and Tinkoff Investments. The companies did not disclose the volume of demand.

Trading in shares began in Russia and Kazakhstan at the same time. Moreover, at the beginning of trades on SPB Exchange quotations fluctuated in the range of 7.66-8.98 thousand tenge. As a result of the day, the price stopped at the level of 8.6 thousand tenge (2.3% higher than the placement price). The trading volume amounted to slightly less than 60 million tenge. At the KASE stock exchange, the volume exceeded 4 billion tenge, and the closing price amounted to 8.3 thousand tenge (1.1% lower).

The admission to trading on Russian platforms of securities of companies from friendly countries is positive for Russian investors, who are currently severely limited in investment opportunities.

“KMG shares are denominated in tenge, and investors do not have sanctions risks, unlike dollar securities,” notes Daniyar Orazbaev. Investments in KMG can be considered as a variant of geographic diversification of the portfolio outside the Russian Federation, notes Dmitry Skryabin, portfolio manager at Alfa Capital Management Company.

The oil company’s shares may be of interest to private investors who want to benefit from favorable conditions in the oil market, but cannot take full advantage of the Russian market due to restrictions on the supply of goods and a high tax burden. “KMG continues to publish regular reports. Together with the new dividend policy, this increases the predictability of returns for the investor,” says Vasily Karpunin, Head of Information and Analytical Content at BCS World of Investments.

However, Dmitry Skryabin notes that the company does not look cheap at the placement price: according to forecasts for 2023, the EV / EBITDA ratio is 3, P / E – 3.2 (whereas LUKOIL shares are traded cheaper).

“Most of the company’s value lies in the successful implementation of new mega-projects, which account for 2/3 of the total production. But the lack of operational and shareholder control over the largest projects creates risks of receiving dividends from them. In addition, the possible growth of CAPEX significantly changes the financial model and valuation of the company,” says Mr. Skryabin.

Market participants do not rule out that other Kazakh companies will appear on the stock exchange in the near future. According to Daniyar Orazbaev, one should expect the placement of ordinary shares of Kaspi.kz (now traded in the form of depositary receipts) and Kazatomprom (previously traded in the form of receipts) on the SPB Exchange. In addition, he does not exclude new IPOs and SPOs of national companies that are part of the Samruk-Kazyna fund and which may attract Russian investors. “Among the potential placements are the following companies: Air Astana, the electric grid operator KEGOC and the railway operator Kazakhstan Temir Zholy,” lists Mr. Orazbaev.

As the number and liquidity of Kazakhstani companies traded on the SPB Exchange expand and grow, portfolio managers will show interest in them. But so far, the manager of a large Russian management company notes, “liquidity and infrastructure risks do not allow us to talk about the prospects for creating new instruments.”

Vitaly Gaidaev, Ksenia Kulikova