June 11_ 2007 by wuyunyi


									                                                                      June 11, 2007

This is bne's Russia equity capital markets weekly newsletter, a list of the top stories
in region last week. You can receive the list as a plain text or html email or as a pdf
file. Manage your delivery options here:

1. 300 buyers of VTB, Sberbank shares responsible for 88% of IPO proceeds this
2. Kostin promises government support for VTB share price
3. New RTS Index target of 2,086 suggests 20% upside following the recent
4. Russian companies to raise $44bn in IPOs this year
5. Dvorkovich says government funds not to affect domestic equity market
6. Government to set up 13 venture funds in this year
7. KES-holding will issue addition TGK-9 shares to blocking stake in OGK-5
8. Kudrin: Ruble attractive for buying securities
9. Mosenergo's state-owned shares may be sold at auction
10. Norilsk Nickel recommends record dividend for 2006
11. Pension funds to be invested into Russian stocks, bonds
12. St. Petersburg may purchase share issue by Lenenergo below the market price
13. United Aircraft Corporation to Pledge Stocks to Sberbank
14. Euroset prepares for IPO
15. First restaurant chain placement in Russia
16. PIK raises $1.8Bn in lukewarm IPO
17. Power Machines BoD approves additional share issue
18. ST Group plans IPO in May 2008
19. Sukhoi planning IPO
20. Uralkali to redo its IPO in autumn?
21. BONY holds 14.6% of VTB
22. VTB 24 shareholders OK 17.46bn rubles worth of new shares
23. Deutsche Boerse Opens Office in Moscow
24. MICEX Opens Far East Subsidiary
25. NYMEX to assist St Petersburg Oil Exchange
26. ENEL pays 60% premium over reserve price to acquire 25% UES stake in OGK5
27. Russia's MMK president buys back 6.7% of company's shares
28. UES may buy back shares in run-up to asset spin-off
29. Dragon becomes first Ukrainian developer listed on AIM
30. Motor Sich complete a 6% placement
31. TMM Completes Ukraine's Largest Ever Private Placement
32. Ukraine cancels auction for another Ukrtelecom stake on PFTS

33. Ukrsotsbank's Shares tumble after Emission

                                  TOP STORY
1. 300 buyers of VTB, Sberbank shares responsible for 88% of
IPO proceeds this year
June 11, 2007

Of the 153,000 legal entities and individuals that bought shares during the Sberbank
and VTB share placements this year 300 buyers accounted for 88% of the money
raised, or RUB436bn, according to the Central Bank of Russia.

It is expected that securities issued by banks and other issuers will be more equally
distributed amongst investors during the $40bn of IPOs slated to happen over the
rest of this year.

The number highlights the problems the government had in organising the IPOs and
also the Kremlin's ability to strong-arm oligarchs into supporting the state's plans
with their own money in times of difficultly.

2. Kostin promises government support for VTB share price
June 11, 2007

VTB Chairman Andrei Kostin said that the Russian government will not allow the
prices of shares in VTB to fall in value, while speaking at an international economic
forum in St. Petersburg over the weekend.

"The Russian government will not stand for a drop in VTB shares," he said.

The assets in Russia's banking system are expected to grow six-fold by 2020, Kostin
said. "We have calculated a growth for VTB of at least three to 3.5-fold by 2010," he

Kostin also mentioned an inflow of foreign capital to the Russian banking sector. "We
can keep the national banking sector. There will be a larger presence of foreign
capital and foreign banks in the sector and we welcome this," he said according to
reports by newswires.

3. New RTS Index target of 2,086 suggests 20% upside
following the recent correction
June 11, 2007

We lower our RTS Index end-2007 target by 7% to 2,086, following recent changes
in the fair value estimates for Rosneft, Gazprom and Surgutneftegaz; however, the
Russian market retains fundamental upside, following the recent decline. We believe
the correction could continue and see the next support level at around 1,550-1,650,
which would imply 25%-35% upside for our new RTS target. We would advise
investors to use the current weakness to buy selected blue chips: our top picks are
Norilsk Nickel, UES, Sberbank, X5 Retail Group, Novatek, MTS, and Vimpelcom.

Our new end-2007 target for the RTS Index of 2,086 implies solid 20% upside.
Following recent downward revisions to the individual fair values of Rosneft,
Gazprom, and Surgutneftegaz, we have recalculated our end-2007 target for the RTS
Index. Yesterday, we reduced our fair value for Gazprom from $12.3 to $9.71 per
share to reflect the expected increases in the mineral production tax for Russian gas
producers. We also lowered our estimates and fair value for Surgutneftegaz following
the publication of its weak full 2006 and 1Q07 RAS results; we reiterated Hold
recommendations for both stocks. Given these changes, as well as the recent
reduction in Rosneft's FV after weak 2006 results, we downgrade our end-2007
target for the RTS Index from 2,247 to 2,086. Still, the new fair value implies solid
upside of 20% (comparable to the 17% that we saw at the end of April), following
the latest correction.

A bullish scenario would suggest a target of 2,250-2,300. We note that we use a cost
of equity of 11.8% for Russian blue chips and 13%-15% for less liquid names in our
DCF models, which is arguably high. Using a slightly lower benchmark cost of equity
(for example, by assuming a Russian equity risk premium of 4.6%, 1 percentage
point less than the 5.6% that we use at present) would further increase our fair
values by an average of 10%, and thus the bullish case for the Russian market would
be an RTS target of 2,250-2,300.

We expect the correction on the Russian market to continue in the absence of major
positive news. The RTS is down 9.6% YTD and 10.3% this month, closing at 1,738
yesterday. We note that yesterday the market broke its 200-day moving average, an
important technical support level, which means that investors should be ready for
the correction to continue. We attribute the recent decline to the weak 2006 and
1Q07 results for oil companies, as well as the overhang following the recent large
share placements, including those by Sberbank and VTB. We believe that a further
slide in share prices is not fundamentally justified, as most stocks - including oil and
gas names - are now trading at substantial discounts to our end-2007 fair values.

We believe current weakness offers an opportunity for selective buying of quality
blue chips. We see the next support level for the index at 1,550-1,650, which would
offer upside of 25%-35% to our end-2007 fair value of 2,086 for the RTS Index,
which we believe long-term investors will find attractive. Any further weakness in the
market, in our opinion, should be an opportunity for investors to increase their
holdings in fundamentally sound blue chips, such as Norilsk Nickel, UES, Sberbank,
Novatek, X5 Retail Group, MTS, and Vimpelcom.

4. Russian companies to raise $44bn in IPOs this year
June 11, 2007

Deutsche Bank Russia says Russian companies are expected to bring in $44bn in
IPOs this, up from earlier estimates of $30bn.

Elena Khisamova, Vice President of Deutsche Bank Russia, told newswires that
Russian companies raised around $22bn between January and May this year, of
which $15.4bn was placed abroad by 12 companies and another $6.5bn was raised
on domestic markets by 4 companies.

The total raised by IPOs last year was $14.3bn, with foreign listing accounting for
$12.2bn, and domestic listing, for $2.1bn.

Amongst the bigger IPOs on the docket for this year are: insurance company RESO-
Garantia which says it will float in the second quarter of 2007, followed by
generating company OGK-2, Sibur, Rusal, Gazmetall, Paterson, Polus Zoloto, and
Sinergia, all slated to happen in the third quarter. Yandex, Gazprombank,
Transcontainer, Eurocement, Euroset and Bank Zenit are to hold IPO next year.

However, market conditions this year have been poor so far after state-owned banks
VTB and Sberbank floated a total of about $21bn sucking liquidity out of the market.
Analsyts estimated there has only been some $5bn of fresh inflows, which means the
rest was raised by selling out of existing positions and so knocking the stuffing out of
the market. Companies in the IPO pipeline are hoping that the market will have had
time to digest this two massive issues by the autumn and so win attractive prices in
their floats.

5. Dvorkovich says government funds not to affect domestic
equity market
June 11, 2007

Russian presidential advisor Arkady Dvorkovich, and about the only person in the
Kremlin who can be trusted to speak his mind frankly, said the suggested
government funds invested in domestic securities would not significantly affect the
Russian stock market, because of the number of IPOs in the pipeline.

Dvorkovich said the Kremlin expects the equities market capitalisation to grow by an
additional $10bn in July-December, thus decreasing the influence of the
government's expected equity investments.

He also said that only some of the government funds from the State Pension Fund
and Bank for Development and Foreign Economic Operations, which is currently
being created, might end up on the domestic stock market.

6. Government to set up 13 venture funds in this year
June 11, 2007

Economic Development and Trade Minister German Gref Russia said the government
will set up another 13 venture capital funds to support small businesses by the end
of the year.

Speaking at a Competitiveness and Entrepreneurship Council meeting in Moscow on
Tuesday, Gref said five Russian regions have already set up five venture funds
amounting altogether to RUB2.2 billion, "to finance small research enterprises," he

The regions that have already established funds are: Moscow, Tatarstan, the
Krasnoayrsk and Perm territories, and the Tomsk region, Gref said.

"By the end of 2007, we plan to complete the establishment of 13 more venture
funds to finance small businesses," he said according to newswires.

Among the regions that are about to get funds are: St. Petersburg, the Belgorod,
Voronezh, Volgograd, Moscow, Nizhny Novgorod, Saratov, Sverdlovsk, and Tyumen
regions and the republics of Bashkortostan, Udmurtia, and Chuvashia.

"Their capitalization will reach 6.4 billion rubles by the end of 2007, of which 50%
will be private business money and the other 50% money from the federal and
regional budgets," Gref said.

7. KES-holding will issue addition TGK-9 shares to blocking
stake in OGK-5
June 11, 2007

KES-Holding has refused to participate in the auction for the sale of a blocking stake
of wholesale generating company OGK-5 in order to take part in the buyout of an
additional share issue of territorial generating company TGK-9, the holding's
president Mikhail Slobodin said.

KES-Holding withdrew his application to the Federal Antimonopoly Service for the
purchase of the blocking stake of OGK-5 afraid to take a leading position in the
Sverdlovsk Region power generating sector.

KES-Holding is a private energy company that mostly consists of its management of
strategic share packets of TGK-9, TGK-5 and TGK-6.

It also manages shares of RAO UES electricity monopoly, Irkutskenergo, OGK-4 and
OGK-2. The company holds a 75% stake in the public joint-stock company Russian
Communal Systems (RCS).

8. Kudrin: Ruble attractive for buying securities
June 11, 2007

Russia's Finance Minister Alexei Kudrin said the ruble is an attractive instrument for
buying Russian equities at the moment, during a international investment forum in
St Petersburg.

"The Russian ruble has become very attractive for placing and buying securities," he

He also expect companies from the other countries of the CIS to start listing on the
Russian markets in the near future, most likely using the newly created Russian
depository receipts.

Kudrin said work harmonize CIS stock market legislation is ongoing, however there
are certain problems connected with the different levels of economic development
and "legislative standards" of various countries, Kudrin said.

In talking about the attractiveness of the Russian stock market, Kudrin said that
Russia overtook a number of countries last year in market size, such as India,
Mexico, Brazil and South Korea and is now the world's 13th largest market.

9. Mosenergo's state-owned shares may be sold at auction
June 11, 2007

The state-owned stake in Mosenergo will probably be sold at auction, the UES
financial director Sergei Dubinin said last week.

Mosenergo is owned by the state via UES, but has found itself in the cross hairs of
Gazprom that has been snapping up energy assets. Dubinin said Gazprom would
probably not buy this stake because after the placement of an additional issue of
Mosenergo's shares by closed subscription in favour of Gazprom, the company
already has a big stake in UES.

Mosenergo completed the placement of an additional share issue in favour of
Gazprom on May 24. After the placement, the share of the Gazprom group in
Mosenergo's authorised capital increased from 33% to 52% and RAO UES's share
dropped from 50.9% to 36.2%. The Moscow government's share in this capital
decreased from 7.5% to 5.4%.

10. Norilsk Nickel recommends record dividend for 2006
Friday, June 8, 2007

Norilsk Nickel's BoD yesterday recommended paying a dividend of R176 per share for
the past year, including the interim dividend of R56 per share already paid for 9m06.

This means a high 4Q06 dividend of $4.50 per share, compared with our forecast of
$3.80 per share, and implies a 28% payout from adjusted 2006 net income (net
income less income from Polyus Gold, which was spun off in March 2006). We
estimate the adjusted 2006 net income at $4.5bn, and had expected a 25% payout.

This could mean that our net income forecast for the last year was conservative.

On the whole, 2006 will be a year of record dividends for Norilsk Nickel, with the
company's total outlay coming to $1.26bn, including $860m for 4Q06 alone.

The company is not sparing expenses on the dividend front despite significant M&A
expenditures (acquisition of OGK33 earlier this year and the possible takeover of
LionOre Mining), which in total may cost more than $12bn and appear to be a
manifestation of confidence in the stability of commodity prices in the near future.
We estimate Norilsk Nickel's free cashflow before M&A expenditures at over $7bn
this year.,, Nadezhda_Utenkova@troika.

11. Pension funds to be invested into Russian stocks, bonds
June 11, 2007

State-owned Vnesheconombank (VEB) will be granted the right to invest state
pension money in Russian corporate shares and bonds listed on domestic markets,
Russia's Finance Minister Alexei Kudrin said last week.

Kudrin says the change will be part of an effort to earn better returns for the pension
funds. The government will also reduce tax payments on profits earned from
investment for pension funds as part of the effort to to encourage voluntary pension

12. St. Petersburg may purchase share issue by Lenenergo
below the market price
June 11, 2007

News UES [Buy 2] valued Lenenergo (a distribution company covering St.

Petersburg and the region) at Rb22-35 bn ($0.85-1.35 bn) for the purposes of a new
share issue that is intended to be sold to the city of St. Petersburg, Interfax reports
citing the First Deputy CEO of the Federal Grid Company Alexander Chistiakov. St.
Petersburg is intended to accumulate a blocking stake in the company by purchasing
the share issue. The city is intended to pay for the stake with its own distribution
assets as well as cash.

13. United Aircraft Corporation to Pledge Stocks to Sberbank
June 11, 2007

The Russian government has a plan by aviation "national champion" United Aircraft
Building Corporation (UAC) to use the shares of three of its companies as collateral
for loans by Sberbank.

The shares are valued at marketing prices. No more than 4,477,073 shares of the
Moscow-based Sukhoi plant; no more than 509,209,129 shares of the Ilyushin
interstate company; and no more than 5,205,782 shares of the Yury Gagarin
research and production centre in the Khabarovsk Region have been committed to
the scheme.

Prime Minister Mikhail Fradkov has already signed off on the decision. UAC is one of
the many state companies that plan to finance its furture expansion through IPOs or
selling shares to strategic investors.

However, the arrangement will be closely watched as most of Russia's leading
oligarchs grabbed control of their best assets with a similar arrangement known as
the loans-for-shares scam in the mid90s, where they lent the government money in
return for shares that wound up in their hands.


14. Euroset prepares for IPO
June 11, 2007

Russia's leading mobile phone retailer Euroset has re-registering from a limited
liability company into an open joint-stock company in preparation for an IPO slated
to happen later this year.

Euroset has over 5,200 stores in 1,200 cities of Russia and also in 11 CIS countries.
It is 100% owned by Dutch company Euroset Holding that is in turn controlled by
Yevgeny Chichvarkin and Timur Artemyev. The estimated worth of the company
today is about $2bn, analysts say.

Analysts expect the company to float between 20% and 25% of its shares on a stock
exchange next year.

15. First restaurant chain placement in Russia
Alfa, Russia
Monday, June 11, 2007

Last Friday restaurant holding Rosinter held an IPO, placing shares at $32.0 per
common share, from an initial range of $31-43. The company placed 26% of its
shares, raising $100m and implying a post-deal market capitalization of $380m.

Rosinter was established in 1990 by Rostislav Ordovsky-Tanaevsky Blanco, whose
stake post-deal was reduced to 61.3% from 85.81%. The company utilizes Western
standards of service and operates several chains of popular brands, including Il
Patio, Planet Sushi and 1-2-3 Cafe. As of May 1, Rosinter operated 192 restaurants,
including 38 under franchises, throughout Russia and the CIS. FY2006 sales totaled
$218.6m with net profit of $0.8m.

Rosinter is the first Russian restaurant holding to go public, and therefore could be
an interesting opportunity for investors to diversify within the Russian consumer

Brady Martin

16. PIK raises $1.8Bn in lukewarm IPO
June 11, 2007

Property developer PIK Group raised $1.8bn in IPO that priced the offer at the
bottom of the price range to give the company a market value of $11.4bn.

PIK said it was Europe's largest-ever IPO by a real estate firm and the largest
placement by a private sector company in the former Soviet Union. The share prices
was $25 per share, at the bottom of the $25 to $31 range.

Kommersant quoted banking sources as saying the offering was rescued at the last
minute by two large Asian funds, which committed $500m each. "It was a tough
placement," one source told Kommersant newspaper. PIK said four investors would

each buy more than 5% of the offering, together accounting for approximately
62.9% of the offering.

Shares in real estate company AFI Development slid 20% since it raised $1.4bn last
month, becoming the country's most valuable developer, with a market capitalization
of $7.3bn. The PIK and AFI offerings dwarf previous placements by other Russian
construction and real estate firms Open Investments and Sistema-Hals.

PIK CEO Kirill Pisarev and chairman Yury Zhukov each hold 42.5% in the firm post-
IPO leaving a 15% free float.

17. Power Machines BoD approves additional share issue
Rencap, Russia
Monday, June 11, 2007

Event: The board of directors of Power Machines, the largest producer of power
engineering equipment in Russia, has approved an additional share issue of 1.492bn
shares (about 20% of its current shares), with the total amount at a par value of
RUB14.92mn. Power Machines currently has approximately 7.22bn shares in
circulation. The additional share issue is planned to fund the company's $1.2bn
investment programme through 2013. The major portion ($1bn) will be spent during
2007-2010. In addition to this share issue, Power Machines plans another one in
order to finance its investment needs. The company's current shareholders are
Interros (30.4%), UES (25%), and Siemens (25% plus one share). Minority
shareholders control about 19.5%.

Action: We maintain our HOLD rating.

Rationale: Power Machines has yet to release its investment plan. We believe that
the company could be one of the principal equipment suppliers to utilities in Russia.
However, it needs to implement its investment programme soon in order to continue
to be a competitive supplier of power equipment.

Marina Alexeenkova

18. ST Group plans IPO in May 2008
June 11, 2007

News According to Vedomosti, the Moscow-based development company ST Group
controlled by Alexander Chigirinsky plans to sell c15% shares on AIM in May 2008.
The company's portfolio is c1.5mn sq m and includes big projects in Moscow as well
as the regions.

19. Sukhoi planning IPO
June 11, 2007

Jet fighter maker Sukhoi plans an IPO, Mikhail Pogosian, the company's general
director told reporters during the international economic forum in St Petersburg over
the weekend.

"There are plans [to hold an IPO] and I think we will implement them step by step,"
said Pogosian.

Sukhoi subsidiary Sukhoi Civilian Aviation placed a well received bond earlier this
year. "Of course, the next stage is an IPO, but it's too early to talk about a
schedule," said Pogosian.

20. Uralkali to redo its IPO in autumn?
June 11, 2007

News Interfax quotes an unnamed source close to the company, saying that Uralkali
will do a foreign listing (IPO) in October or November. "The company believes that
this is a good moment for the placement now, and that Uralkali will finally get a good
price; good financial results will help this", the source was reported to say.

                              BANKS' IPO, SBO
21. BONY holds 14.6% of VTB
June 11, 2007

The biggest depository holder in Russia, the Bank of New York (BONY) holds
14.625% of VTB shares in nominee accounts following its IPO earlier this year.

The bank placed a total of 1,513bn shares with a nominal price of 1 kopeck each, out
of which 65% were placed in London as GDRs, which consisted of 2,000 shares each.
The remaining 35% of the additional issue were floated in Russia. The placement
price was 13.6 kopecks per share, or $10.56 per GDR.

VTB raised RUR57.685bn and $5.749bn (which makes a total of about $8bn) and
now has a capitalisation of $35.5bn.

22. VTB 24 shareholders OK 17.46bn rubles worth of new
June 11, 2007

Shareholders of state-owned VTB's retail subsidiary, VTB-24 approved a decision to
increase the bank's charter capital by RUB17.459bn by placing additional shares, the
bank said in a statement last week.

The bank will place about 17.46m shares with a par value of 1,000 rubles each in a
closed subscription in favor of VTB and VB-Service. The placement price for the
additional common shares will be 1,479 rubles a share.

VTB has the right to acquire 17.31m shares (99.1% of the additional issue) and VB-
Service can acquire 149,571 shares. The government reduced its stake in VTB to
77.47% from 99.9% as during an IPO in May. The Bank of New York (BoNY) holds
another 14.6% in the form of GDR. Foreigners owned 12% of VTB following the IPO,
according to the Central Bank of Russia.

                     EXCHANGES, REGULATIONS
23. Deutsche Boerse Opens Office in Moscow
June 11, 2007

Germany's Deutsche Boerse AG is about to open an office in Moscow, the company
said last week.

Foreign exchanges are battling it out to win more Russian business, with about
$44bn in Russian IPOs slated to happen this year. The London Stock Exchange, and
its junior market, the Alternative Investment Market (AIM), is by far the most
popular foreign exchange for Russian companies, but in recent months
representatives from Euronext, NYSE and NASDAQ have all been speaking at a
recent round of Russian investment conferences in an effort to boost their presence.

DB will be the first foreign stock exchange in Russia and is presenting itself as a
serious rival to both Russian domestic listing and London Stock Exchange.

"The chief purpose of establishing the office is to give Russian issuers access to the
European capital market," Walter Allwicher, head of DB's corporate communications
department told newswires.

24. MICEX Opens Far East Subsidiary
June 11, 2007

MICEX has opened a branch in Vladivostok in Russia's Far East as part of the MICEX
Group programme to set up regional exchange centres across the country and
provide regional settlement services for all exchange-based markets.

The new Maritime branch, as the branch is known, will start operating in July.
MICEX's first regional branch was established in Rostov-on-Don in March this year.

25. NYMEX to assist St Petersburg Oil Exchange
June 11, 2007

New York Mercantile Exchangem, home to international oil trading, signed off on a
deal with the Russian government to set up an oil exchange in St. Petersburg by the
end of this year, last week.

The Russian export blend of crude oil, (REBCO) is sold at a discount to Brent, the
international benchmark blend, of about $5. President Vladimir Putin has said on
several occasions he didn't see why Russian oil should be sold at a discount.

"These are huge losses not only for Russian oil companies but for our federal
budget," Economic Development and Trade Minister German Gref said last week.
"The state is now moving toward real market mechanisms for trading oil."

Putin approved a proposal Tuesday allowing state agencies to organize the sale of oil
and oil products on exchanges from August 1.

"Right now there is not a market place that is concentrating on Russian products,"
said NYMEX chairman James Newsome on Friday. "We'll now have a marketplace
that will concentrate on Russian products flowing primarily into Europe."

26. ENEL pays 60% premium over reserve price to acquire 25%
UES stake in OGK5
Rencap, Russia
Monday, June 11, 2007

Event: Italian utility ENEL yesterday (6 June) paid UES $1,516mn for a 25.03%
stake in OGK5 - 60% above the reserve price and 18% above the market price for
OGK5 shares. We calculate that ENEL paid $640 per installed kW, while the
company's market capitalisation implied a value of $541/kW. Local media reported
that RusAl and German utility E.ON had also completed in the auction, with E.ON the
last bidder to drop out. Later in the day, an E.ON spokesman was reported as saying
that E.ON is now intended to participate in the slated August sale of a controlling
stake in OGK4. In March, Norilsk Nickel paid a headline price of $624/kW for a 32%
stake in OGK3.

Action: We reiterate our BUY rating on UES.

Rationale: If E.ON was prepared to pay almost $624/kW for what was only a blocking
stake in OGK5, it seems rational to assume that the company will be prepared to pay
a higher price for the controlling stake in OGK4. Meanwhile, our $1.55 per share
valuation of UES includes an average $405/kW valuation for UES shareholder
interests in generation. This valuation does not distinguish between UES's hydro and
fossil-fuel plants. However, if we were to apply the average value of today's
$640/kW to UES's fossil-fuel plants and allocate zero value to UES's hydro plants,
our UES fair share price would rise to $1.92.

Derek Weaving

27. Russia's MMK president buys back 6.7% of company's
June 11, 2007

Viktor Rashnikov chairman and president of Russian metals producer Magnitogorsk
IRONand Steel works, or MMK, bought back 783m common shares, or 6.7%, in MMK,
last week.

The shares were bought through his vehicle Mintha Holding Limited from Deutsche
Bank, which increased the holdings ownership in MMK to 44.28%, or a total of
5,168,708,498 outstanding shares. The price of the deal was not disclosed.

In April-May, MMK sold 1,042,603,423 additional shares with a face value of 1 ruble
per share in the form of shares and GDRs. Bfore the placemetn Rashnikov controlled
85.55% in MMK through Mintha Holding and Fulnek. Fulnek's current stake in MMK is
not clear.

28. UES may buy back shares in run-up to asset spin-off
Friday, June 8, 2007

For the purpose of a buyout offer for those UES shareholders who vote against the
completion of the utility's restructuring at its upcoming EGM, Deloitte & Touche has
valued the company's shares at $1.24 (R32.15) per common and $1.14 (R29.44) per
preferred, Vedomosti reports. Deloitte & Touche's report was approved by UES'
valuation committee on Wednesday, and the BoD may review the prices on June 22,
Vedomosti has indicated. The common share buyback price is equal to yesterday's
mid3market price, while the preferred buyback price is 4.2% higher. Currently, the
valuation of UES assets is being carried out in order to calculate the conversion ratios
for the swaps of different UES entities.

At end June, UES' BoD will schedule an EGM on UES' restructuring that will take
place in autumn, likely in September. Under the current plan, UES should be
unbundled by July 1, 2008.

The preferred buyback price is positive news for holders of those shares. The
preferred to common discount is UES' "standard" 8.42%. The buyback prices can be
seen as additional support levels for UES stock, in our view. We advise UES minority
shareholders to vote in favor of the restructuring, as holding on to shares will be
more value accretive in the longer run in light of UES' discount of more than 20% to
its NAV.

We reiterate our fair value of $1.72 per share and BUY recommendation on the

                             UKRAINE STOCKS
29. Dragon becomes first Ukrainian developer listed on AIM
June 11, 2007

Dragon Ukrainian Properties & Development has become the first Ukrainian real
estate company listed on London's AIM. The company raised $208mn by selling
104mn shares at $2/share. During the first day of trading, the stock was up around

We believe that the Ukrainian real estate market is attractive to investors given its
high investment yield and price appreciation potential, and we expect to see more
Ukrainian real estate companies conducting IPOs in the near future. The market
capitalization of Russian developers, for example, has reached around $20bn from
near zero in November 2006.

30. Motor Sich complete a 6% placement
Rencap, Russia
Monday, June 11, 2007

Event: Motor Sich has completed the placement of 6% of its treasury shares. The
deal was priced at $18.7mn, which translates into $150 per share. Earlier, the
company launched a GDR programme (10:1 ratio) for 5% of its shares via Deutsche
Bank Trust Company Americas, which will trade in Frankfurt.

Action: We view this as positive news for Motor Sich stock and as supporting our BUY

Rationale: Motor Sich initiated this private placement deal to replenish its working
capital in expectation of a strong order book for the new AN-148 regional jet, which
has been fully tested and certified. The Antonov bureau (responsible for the design of
this aircraft) earlier indicated strong demand for this new plane and expects an 18-
aircraft order book for the next two years. Provided this order book is filled, Motor
Sich's additional revenues from supplying new engines will be about $140mn. Motor
Sich's FY06 net sales grew 13.5% YoY to $252mn. Based on the placement price and
its FY06 results, Motor Sich was valued at an EV/EBITDA multiple of 7.6x and
EV/Sales of 1.27x Svetlana Dryhush

31. TMM Completes Ukraine's Largest Ever Private Placement
Concorde Capital
June 11, 2007

Ukraine's leading real estate development company, TMM placed a 13.11% stake
among foreign institutional investors for roughly USD 105 mln, giving the company
an MCap of USD 800 mln - the largest capitalization of any Ukrainian company that
has been floated to date. The book was closed on May 16. Shares were sold in the
form of global depositary receipts issued by the Bank of New York. The price of a
depositary receipt corresponding to one share of the company amounted to USD
15.45 at placement. The total number of placed depositary receipts was 6,792,165.
Concorde Capital acted as the sole transaction manager and book runner for the

Proceeds exceeded initial expectations by the company's management and
shareholders. The strong demand for TMM shares led to the company increasing its
initial offering from 10% to 13.11%.

In their first day of trading on the Frankfurt Stock Exchange on May 29, the
company's shares closed at USD 15.84 with a USD 255 ths volume.

According to Concorde Capital CEO Igor Mazepa, "Intensive cooperation with a wide
range of international investors allowed us to get a high valuation for the company,
whose shares were placed at a premium to other industry leaders. At the same time,
we tried to balance the interests of the company and investors, especially in
estimating the placement price."

The company intends to use the placement proceeds to implement existing projects.
By the end of the year, ___ expects to complete a USD 5 mln investment project -

an engineering center which will be used to guide construction projects from their
development stages to completion, in compliance with European standards.

___ views the placement as the first step of its long-term target to attract USD 300-
500 mln in equity capital and loans on international capital markets within the next
three years.

TMM CEO Mykola Tolmachev said, "We were driven to enter international markets by
the need for resources required to implement a new strategy that includes integrated
development, neighborhood construction and to strengthen the company's
construction capacities."

According to Tolmachev, the placement was enormously important to the company's
business. He also underlined, "Having placed an equity stake on a stock exchange,
we not only increased our financial resources but also acquired a reputation that has
improved TMM's standing with financial institutions. Thus, the company got the
opportunity to enlarge its number of creditors and improve relationships with clients
and contractors. The placement allowed us to draw attention to the company both in
Ukraine and abroad, which also strengthens our competitiveness."

TMM is a leading construction/development company in Ukraine's business and elite
property segments. For the last 12 years, the company has constructed a total of
325 ths sq. m of housing property. The volume of the company's current project
pipeline is 1 mln sq. m in Kyiv, Kharkiv, Yalta, and Zhytomir. TMM was founded in

Concorde Capital is a full-service investment bank offering services in Ukraine,
Russia and other CIS financial markets. Last year, Concorde Capital attracted over
UAH 1 billion in investments for Ukrainian companies. The company was founded in
2004 by Igor Mazepa, and in only two years of existence the company has become
one of the largest in terms on trading volume on Ukraine's primary exchange, the

32. Ukraine cancels auction for another Ukrtelecom stake on
June 11, 2007

Ukraine's State Property Fund cancelled an auction to sell 1% in state-owned fixed-
line monopoly Ukrtelecom on the First Securities Trading System (PFTS) on Friday
for the fourth time.

The sale was stopped due to a pending prohibitive court ruling, a spokesperson for
the fund told Prime-Tass. Some bids were already in but not new date has been set
for the controversial sale.

A court in Kiev last month upheld a claim by little-known Ukrainian company Dotrin-
2002 seeking to prevent the sale of Ukrtelecom stakes.

The fund failed three times - on May 22, May 29 and on Tuesday - to sell 1% in
Ukrtelecom on the Ukrainian Stock Exchange for various reasons.

In March, the fund approved splitting a 5% stake in Ukrtelecom into five 1% stakes
and selling them on Ukrainian exchanges. It also approved selling 37.86% in the
operator on international markets. The Ukrainian government, which currently has
around 93% in the operator, plans to retain a controlling stake following the share

33. Ukrsotsbank's Shares tumble after Emission
Sokrat, Ukraine
Monday, June 11, 2007

Ukrsotsbank's [USCB] share price has fallen by 55% over the last week, from $0.71
to $0.32. Such a sharp price reduction was mainly caused by the issuance of 6.5bn
new shares at a par value of $ 0.02, compared to only 3.71bn existing shares. The
ex-right date was determined to be June 4, 2007. The market reacted to the news
even before the additional shares emission occurred, taking into account the dilution
factor of 0.3812, which, theoretically, reduces the share price to $0.27.

Furthermore, the First Stock Trading System (PFTS) stock exchange, has decided not
to take securities issued by Ukrsotsbank into account when calculating the share
price index for June. This decision is directly linked to the very issuance of additional
shares by the bank. Earlier, PFTS had decided to take account of securities issued by
Ukrsotsbank when calculating the share price index.

Our view: the sharp price decline of Ukrsotsbank shares comes in line with our initial
forecasts of the postemission situation. The price is likely to continue falling to the
level of $0.27 in the near future, caused by the dilution factors depicted above.
However, it's essential to keep in mind that Ukrsotsbank is ranked fourth in terms of
assets among 173 Ukrainian banks and continues showing strong results in 2007.

Improvement in the bank's performance may cause the share price to rise, especially
when the market adjusts to the news on shares dilution. Back to page


To top