OREANDA-NEWS. On July 23, 2008 Investment company Dragon Capital confirmed the target price of shares of a steel making company "Azovstal" at the level US1,75 per share, which suggests 92% growth potential over the current cost of shares and complies with the "Buy" Recommendation, reported the press-centre of SCM.

In addition, Dragon Capital confirmed the target price of shares of Yenakiyevo Metal Plant (YEMZ) at the level US108,90 per share, which suggests 80% growth potential over the current price. The shares were given "Speculative Buy" Recommendation.

The Dragon Company's press release of July 11, 2008 states:

"The key factor, which allows the Dragon Capital analysts to see positive outlooks for the companies, is the unprecedented growth in world prices for steel: Since the beginning of 2008 the prices have grown by 74% having exceeded the average indicator by 119% over the last 5 years and by 327% over the last 30 years.

In addition, there are such factors as no further use of transfer price formation; improvement of Metinvest companies’ standards of financial reports and corporate governance while preparing for the upcoming placement of euro-bonds in the second half of the year and possible IPO in 2010-2011; continuous shipments of raw materials within the framework of the holding improve investment attractiveness of the companies.

“Azovstal” is the only Ukrainian steel making company, which has issued euro-bonds. As international rating agencies keep an eye on the activity of "Azovstal" it is by right considered one of the most transparent metal companies of Ukraine.

Last year “Azovstal” showed the best financial indicators in the industry by increasing the net revenue by 31% to US3,243 mln., EBITDA - by 52% to  US 595 mln and the net profit - by 92% to US 420 mln.

Full vertical integration structure of Metinvest protected Azovstal from the recent rise in prices for coke coal and iron ore and thus provided certain additional competitive advantages.

To the Dragon Capital analysts' forecast, in 2008 net revenue of the company will amount to US 5,396 mln.(+66%), EBITDA - US 1162 m. (+95%), net profit - US 834 m. (+98%) and EBITDA margin is to grow by 3.2 to 21.5%.

The program for modernization and expansion of steel making and rolling facilities for 2009-2013 suggests investments in the amount of US 5bn. This will allow the company to increase the share of high value-added products.

Yenakiyevo Metal Plant is one of the leading producers of metal products in Ukraine. Despite the increase in the cost of coke coal and iron ore this year YeMZ can purchase raw materials from Metinvest daughter companies with a small discount in relation to market prices.

As the result the company has an advantage over its competitors, which proves a positive effect of vertical integration within the framework of the holding.

In addition, the rise in prices for metal billets (by 131% to US 1,090 per ton in June 2008) will allow the company to significantly improve financial indicators in 2008. In particular, YeMZ net proceeds are expected to grow by 76% US 1,781 m. in 2008, EBITDA -by 80% to US 100 m. and net profit - by 114% to US 64 m. In the third quarter of this year YeMZ is expected to merge with JV Metalen (another link of the metal and mining holding) which will improve transparency of account settlements between the companies".

Short profile of the companies
Dragon Capital – the biggest investment company of Ukraine, which provides a whole range of brokerage and investment and banking services. The company was established in 2000. The management of the Company also owns the company; the minority share belongs to an investment bank Goldman Sachs.

The brokerage department of Dragon Capital is the largest share trader at the key Ukrainian Stock Exchange PFTS with the share market in 2007 being equal to about 30%. Since the beginning of 2006 investment and banking division of Dragon Capital has carried out 24 IPOs and private placements of shares of Ukrainian companies and banks for the total amount US 1.7 bn.

 The company manages more than US 1bn. In 2002 and 2004-08 Euromoney declared Dragon Capital "The best investment company of Ukraine". In 2007 and 2008 analytical team of Dragon Capital was recognized as one of the best in Ukraine according to international ratings Thomson Extel and Institutional Investor.

Metinvest Group is the regional leader in mining and metals sector and one of the key players at world’s iron and steel market. Metinvest Group companies produce 10.5 million tonnes of steel and more than 40 million tonnes of iron ore raw materials annually. Metinvest not only satisfies its own raw material needs but is also a key supplier for many other Ukrainian and European companies, as well as Asian businesses.

Metinvest Holding, LLC  is the managing company of Metinvest Group. The owners of the METINVEST HOLDING are Metinvest B.V. (Netherlands) with 51.15% and ZAO SCM with (48.85%).