Ukraine Markets Daily (February 14, 2017)

Market news

  • Ferrexpo considers no attraction of additional funds under the current market conditions

Market comment

The UX index increased by 4.5% on Friday, and the PFTS index grew by 0.7% (in UAH term). The WIG-Ukraine index was down by 0.8%. On the interbank exchange market, the USD/UAH was up by 0.8% to UAH 27.44 (mid price), according to Bloomberg. The official exchange rate reported by the NBU was UAH 27.16


Ferrexpo considers no attraction of additional funds under the current market conditions

The CEO and major stakeholder of Ferrexpo Kostyantin Zhevago positively assesses the achievements of the company over the recent years. Lately, the quotations on Ferrexpo’s shares have been falling due to the uncertain situation in Ukraine, related to the eastern Ukrainian conflict, The Ferrexpo’s CEO said in an interview with the Ukrainian ‘Novoye Vremya’ (New Time) information media. Additionally the global commodity index, computed by Bloomberg since 1991, reached a record low in 25 years, Zhevago noted. Currently, however, the trend has reversed, thanks to robust action by the Chinese government to boost the country’s economy. In the meantime, the development in Ukraine contributed to improvement in the operating environment, the businessman affirms. Though still remaining unpredictable, the political and military situation has relatively stabilized, Zhevago says. Despite the loss of deposit funds in the insolvent Finance and Credit Bank, Ferrexpo remained financially resilient, and avoided initiating a restructuring of its indebtedness, in opposite to many Ukrainian issuers. The company is proud about the standing of its Eurobonds on the securities markets. The prices on the company’s Eurobonds are the highest amongst Ukrainian peers – DTEK, Metinvest, MHP, Kernel - while the yield is the lowest, Zhevago notes. Despite a potential absorbing capacity of USD 1 bn under the current market rates, Ferrexpo does not plan to attract new debts, given the absence of large scale multi-billion projects, and the remaining uncertainties with the Ukrainian economy and politics. The company’s investors support this position, calling to wait and see for further development. The company will finance all projects from its current cash flow, the Ferrexpo’s CEO says. The standoff between the businessman and the NBU does not affect the shares of Ferrexpo, as only the own enterprises of the businessman are pledged against the liabilities of the insolvent bank. Moreover, any NBU action against Ferrexpo cannot be legally enforced, Zhevago stresses.

Our view:

The statement of Ferrexpo’s major stakeholder is moderately POSITIVE, expressing an immunity of the company against the current political risks of Ukraine, and an optimistic assessment of the current market development. Nevertheless, we note the lack of long-term vision in the businessman’s statement, indicating the likelihood that the company may follow a conservative or defensive business strategy, driven by concerns about the near-term prospects.