The FINANCIAL — “As the Ukrainian economy and capital markets enjoyed another memorable year in 2007, Dragon Capital again played an important role in giving a new boost to the country’s investment profile”, Viktor Luhovyk, Director of Communications of Dragon Capital, the other leading company in Ukraine engaged in stock markets says in interview with FINANCIAL.
“We confidently led the domestic stock market with a third of total trading volume, we completed half of IPOs/private placements in Ukraine over the past year, including USD 308 million raised for Dragon-Ukrainian Properties & Development on London’s AIM, and we maintained our leading profile in M&A advisory with respect to the booming banking and consumer sectors”.
“Our private equity business continued to demonstrate superior growth, and another important part of our group, Dragon Asset Management, expanded at a dizzying speed, bringing assets under management to USD 1 billion”.
Q. Dragon Capital is the largest broker on the Ukrainian stock market, with a 30% market share in 2007. Who are your direct competitors in the Ukrainian market and how developed is the field in the country?
A. Our main competitors in the brokerage business in 2007 were Sinkom, Sokrat, Concorde Capital, Troika Dialog Ukraine.
Ukraine became the best-performing market worldwide in 2007 as the KP-Dragon index, which tracks the performance of 20 leading Ukrainian stocks, rose by 132%.
In 2007, the total stock trading volume on the PFTS, Ukraine’s primary stock exchange, reached another all-time high of USD 2.0bn, or an increase of 66% over 2006. The figure reiterates the increased interest in Ukrainian equities from foreign investors and also rising activity among local players. Average daily trading volume on the PFTS in 2007 was USD 8.3m as compared with USD 5.0m in 2006. It should be noted that PFTS volumes include placements of new shares (IPOs/PPs) but do not include trades in Ukrainian ADRs and GDRs or over-the-counter deals, which together represent an estimated 66% of total turnover in Ukrainian stocks.
Q. The firm has completed 22 IPOs and private placements for Ukrainian companies since 2005, raising USD 1.5 billion. How impressive are the 2007 statistics in particular?
A. Please find below a table of all Ukrainian IPOs and private placements conducted since 2005. Deals lead-managed by Dragon Capital are highlighted. Overall we raised about USD 600 million in new equity capital in 2007.
Q. Could you name the top international and local companies that are Dragon Capital clients?
A. Please see companies in the table above for which we organized IPOs/private placements.
Q. Dragon’s asset management arm has nearly USD 1 billion under management. How long did it take Dragon Capital to establish itself as a leader of the market in the country?
A. Our pioneer fund, the Orange Opportunity hedge fund, was launched in mid-2005.
Today Dragon Asset Management features offshore hedge funds and pre-IPO funds, onshore mutual and pension funds, as well as alternative investment vehicles focused on property development and land acquisition.
Our flagship international fund, the Orange Opportunity Fund, added 79% in 2007, bringing its performance since inception to 216%. The pre-IPO Ukraine Virgin Fund, closed in April 2007, was up 40% by year end.
Our classic onshore mutual funds, Platinum, rose by 86% in 2007, bringing performance since inception to 148%. Expanding our family of domestic funds, we launched Aurum, a medium-risk closed-end fund, and Laurus, a pension fund.
Dragon AM’s property development vehicle, Dragon-Ukrainian Properties & Development, floated its shares on the London AIM in June 2007, raising USD 208 million in what became the largest Ukrainian real estate IPO to date. The company successfully raised another USD 100 million in a secondary private placement in November, its shares finishing the year 37% above the IPO price.
Q. Georgian Galt & Taggart is present in Ukraine as well. Do you regard the company as your direct competitor?
A. Primarily in the brokerage business.
Q. The financial magazine Euromoney has recognized Dragon Capital as the Best Equity House in Ukraine in 2002 and 2004-2007. What’s your international branding awareness policy and how generous is the company in this respect?
A. We participate in and sponsor all key investment conferences focused on Ukraine and hold our own annual conference in Kiev. We also advertise with leading international finance publications such as Euromoney and Institutional Investor.
Q. What’s been the reason for the company’s decision to sell a small minority stake to Goldman Sachs?
A. We’ve been approached by a number of western investment banks wanting to take a minority holding or strategic stake in Dragon. But we decided having Goldman Sachs as our shareholder would add the most to our business.
Q. What are your expectations about 2008 in terms of the company’s financial prosperity and international expansion?
A. All of our core businesses (brokerage, investment banking, asset management, private equity and property development) will continue to expand strongly. Asset management is of particular importance as the domestic mutual and pension funds industry is growing robustly as the local investor base strengthens.
Discussion about this post