OREANDA-NEWS. June 25, 2010. Holding MRSK CEO Nikolay Shvets made several key announcements, reported the press-centre of OTKRITIE Financial Corporation:

The company will not pay dividends for 2009, starting a 5% payout ratio dividend policy from 2010.

Holding MRSK’s FY10 net income guidance is RUB11bn.

In the next 6 months Holding MRSK will create a JV with the French firm ERDF, which will manage one of the MRSKs.

A smoother rise in distribution tariffs is expected next year, due to the recently announced tariff growth cap of 15%.

View: The market was not anticipating dividends for 2009, while the 5% payout ratio seems rather low, and we think could be revised upwards in the future since RAB tariffs allow enough cash flows to pay dividends. The 2010 net income guidance appears reasonable (we forecast RUB9.3bn). Management of an MRSK by a foreign company is a positive for the sector, as it will improve operating efficiency via the adoption of best practices. We believe that the lost distribution revenues from a smoothing of tariffs will be compensated to MRSKs in the future. We see a maximum 15% downside risk to the IRAB sizes to be approved by 1 July (23 regions) and 1 January (the remainder).

Valuation: Holding MRSK trades at an EV/RAB multiple of 0.41x, which is far lower than the 1.3x average of international peers.

Action: We find the news neutral for Holding MRSK shares and reiterate our BUY rating for the stock.