OREANDA-NEWS. August 20, 2010. Holding MRSK’s Board of Directors halted the placement of an additional share issue worth RUB8bn or 4.5% of its share capital (RUB4.14/share), reported the press-centre of OTKRITIE Financial Corporation.

The company had previously announced that 55% of this share issue had been purchased by the state under its preemptive rights, while the remaining new shares were on offer to investors. Yesterday was the last day for investors to participate in the share issue. The company has mulled prolonging the period of the placement offer to 26 November. Also, the Federal Financial Markets Service has a maximum of 30 days to account all changes, then the placement could continue. 

View: We view the news as negative for Holding MRSK’s shares, as we think that RUB4.14 served as an artificial support level for the stock. The news also has negative overtones in terms of corporate governance. We think that shortage of offers is the main reason that Holding MRSK has sought o prolong the placement period. Also the stock was not included into MSCI indices on 17 august which could provide further pressure.

Valuation: Holding MRSK trades at an EV/RAB of 0.49x (using our assumption that IRAB base will be cut by 15% vs. initial expectations), while EM peers trade at an average of 1.36x.

Action: We anticipate short-term negative market reaction in Holding MRSK, but reiterate our fundamental BUY rating. Inclusion into MSCI indices and a decision on 2011 tariffs in November 2010 may serve as strong triggers.