Rusagro sweetens stock value by 50% with sugar acquisitions

By bne IntelliNews November 16, 2015

GDRs of the Russian agricultural group Rusagro have surged 50% since early October as it moved to acquire the sugar assets of its indebted rival Razgulay.

The increase is primarily linked to the 32% stake sought in Razgulay, which was approved by Russia’s Federal Anti-Monopoly Service on November 16 and will reportedly boost Rusagro’s market share from 15% to 25%. However, final deal terms for any debt and equity transfers between the participants have yet to be announced.

Since early October, Rusagro’s GDR 50% spike in value brought the ytd advance to 140% compared with the 5% growth from the RTS index. The company's record high Ebitda  generation of RUB 24bn in 2015F is regarded as sustainable in the medium term and became the main driver for the strong performance, VTB capital analysts wrote in a research note.

The deal is expected to see Rusagro assume Razgulay's debt to its main creditor, the state development bank Vnesheconombank (VEB), in return for its sugar plants and connected land plots. Meanwhile, Rusagro's fellow shareholder AVG Capital Partners is to acquire the company's plant-growing complex including land, elevators and rice assets, Kommersant newspaper reported in September, citing sources.

VEB estimates puts the value of its 20% Razgulay stake and debt at around RUB35bn ($525 million), one source said.

Rusagro is likely to divest the target's non-core assets, leaving only exposure to sugar refineries in central Russia, according to VTB. The final terms could be announced before YE15 and might be a key trigger, it added.

Meanwhile, the bank's financial forecasts for Rusagro remain intact, with its record high Ebitda generation in 2015F regarded as sustainable in the medium term.

"The reduction of the risk-free rate (9.5% vs. 11% before) increases our 12-month Target Price 16% to $14.5/GDR, while our other valuation inputs remain unchanged. Our new 12-month Target Price implies 17% upside potential, so we downgrade our recommendation to Hold," VTB Capital wrote.

Meanwhile, Rusagro's operating results and continued upbeat pricing environment for sugar (up 50% YoY, 10% QoQ) and meat (flat YoY and QoQ from a high base), create a strong outlook for the 3Q15 IFRS results due on November 27.

Meanwhile, with inflation in Russia having crested and visibility on the pace of monetary easing now improved, the bank expects Rusagro’s 10Y OFZ yield to gravitate to 9.5% by late 2016.


  2014 2015E 2016E 2017E
Financials, $ mln      
Revenues 1,541 1,144 1,151 1,195
EBITDA 471 377 332 335  
EBITDA margin 31% 33% 29% 28%
Net income 526 347 284 269
EPS (adj), $ 4.38 2.89 2.37 2.24
Div/share, $ 0 1 1 0
Valuation, Gearing and Yield        
EV/EBITDA 3 3 3 3
P/E 2.2 3.4 4.1 4.3
P/CF 2.3 3.3 3.5 3.3
Net debt/EBITDA 0.1 neg neg neg
Dividend yield 0.00% 6.80% 7.30% 4.40%
Revenues 34% -26% 1% 4%
EBITDA 121% -20% -12% 1%
EPS (adj) 431% -34% -18% -5%
Sector Valuation      
EV/EBITDA 6.4 8.8 8 6.9
P/E 10.6 16 14.3 11.7
P/CF 7.5 11.4 9.4 8
Sector Growth      
Revenues 1% -25% 8% 15%
EBITDA 9% -29% 9% 14%
EPS 24% -34% 12%  
Main Shareholders        
Moshkovich family 75.00%      
Management 6.50%      
Treasury shares 1.80%      
Free float 16.70%      

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