FOCUS: Analysts say investors believe in MTS’ divs, VK, Ozon’s potential

By Yekaterina Yezhova

MOSCOW, Jul 3 (PRIME) -- The January–June growth of the Moscow Exchange’s telecommunications index was secured by dividend-driven MTS, while the IT index was boosted by advancing VK as its foreign competitors fled the country and Ozon on expanding e-commerce, analysts said.

The telecommunications index, whose core elements are the ordinary shares of MTS and Rostelecom, gained 21.59% since the beginning of the year to close at 1,884.33 on June 30.

“As to MTS, the dividends is the key driver and factor of support for the company’s stock. MTS this year continued to increase payments to 34.29 rubles per share. The dividend yield at the ex-dividend moment amounts to about 10%,” Dmitry Puchkaryov, a stock market expert at BCS World of Investment told PRIME.

“Regardless of its excessive debt burden, MTS stays a conservative dividend story. The issuer can maintain the amount of the money distributed among its shareholders in the future.”

Cifra Broker analyst Daniil Bolotskikh said the investors also liked the company’s solid financial results for January–March. “The prospects for July–December are not as robust as in the first half of the year,” he said.

MTS’ ordinaries rose by 26.5% since the beginning of the year to 298 rubles on June 30. Bolotskikh set the target price at 330 rubles for the end of the year.

Promsvyazbank chief analyst Yegor Zhilnikov said the investors view the stock as a quasi-bond and a hedge security. “However, dividend yield of the stock is less than the yield of Russian long-term governmental bonds therefore the stock seems to be overpriced. Dividends most likely will not dramatically change this year due to stable financial results of the company, thus a fair price of the stock is less than 280 rubles,” he said.

“Rostelecom follows MTS’ dynamics with investors waiting for high dividends from the company and potentially interesting M&A deals. We assume Rostelecom’s prospects are similar to those of MTS, but ‘surprises’ may occur that will undermine the shares’ attractiveness,” Zhilnikov added.

The operator’s ordinary shares increased by 28.4% since the beginning of the year to 71.89 rubles on June 30.

“The key mid-term driver for Rostelecom is a decision on the 2022 dividends. The recommendation should give a clearer view on payments next year. The investors view the stock as a conservative dividend chip, although the dividend yield rarely climbs above the market average,” Puchkaryov at BCS said.

Bolotskikh at Cifra Broker thinks the quotes could be supported if Rostelecom’s management recommends dividends soon. He expects them at 5.5 rubles translating into a 7.5% yield at the current prices.

The IT index, whose main elements are the securities of Yandex, VK, and Ozon, rose by 34.75% since the beginning of the year to 2,381.38.

Yandex’s quotes, which have gained 34.3% to 2,439.40 rubles, are guided by the company’s division. “A lot depends on the format and price of the deal, starting from the offer and further prospects. The corporate news aside, Yandex showed high revenue growth in 2022 that the market ignored,” Puchkaryov at BCS said.

Bolotskikh at Cifra Broker said the company’s ordinary shares started rising after the split talk, but media said that the management was unwilling to sell the stake to the sanctioned businessmen.

“We should also take into account that the shares of the Dutch firm (Yandex N.V., the parent firm of Russia’s Yandex) are traded on the Moscow Exchange, and the minorities’ interests may be hurt during the business break-up,” he told PRIME.

VK, whose receipts have soared by 40.5% since the beginning of the year closing at 613 rubles on June’s last session, is one of the main beneficiaries of transformation of the country’s market of online advertising. “VK is a growth story, counting on a business scale-up for investors. The company’s reports will be the drivers, revenue growth and the margin will be in focus,” Puchkaryov said.

“VK is essentially the market of social networks and runs highly-promising segments in its business. Like Yandex, the company benefits from the retreat of foreign firms. We are highly enthusiastic about VK’s quotes that can rise by several times soon. We believe the company has the highest probability to get its business re-domiciled the first,” Zhilnikov at Promsvyazbank told PRIME.

Ozon, whose receipts leaped by 40.5% since the beginning of the year to 1,971.50 rubles, is one of the leaders among the marketplaces. “Investors are happy with the improvement of its financial results, and the company demonstrated positive EBITDA quickly,” Zhilnikov said.

The company’s growth driver is the increase of its gross merchandise value, which will rocket by 70% in 2023 as its management said earlier. “The company’s share on the e-commerce market is still at 15%, which leaves room for advancement. The company’s redomiciliation will enhance its quotes. Our target price is set at 2,200 rubles till the end of the year,” Bolotskikh at Cifra Broker said.

(88.3844 rubles – U.S. $1)

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