The FINANCIAL — LSE-listed blue chip Bank of Georgia (BGEO LI) shares added 3.1% in the week to US$ 16.50. On the Georgian Stock Exchange, Bank of Georgia (GEB GG) and Liberty Bank (BANK GG) shares were actively traded, closing at GEL 28.75 (up 5.6%) and GEL 0.03 (down 13%), respectively.
Georgia Top News
Georgia to tap Eurobond markets in 2011
Georgia’s PM Nika Gilauri revealed the country plans to return to public debt markets in 2011 with a Eurobond issue, but did not provide additional details on size or timing. Georgia’s outstanding 5-year US$ 500mn Eurobonds (GEORG) mature in 2013 and currently trade at 104.4 of par, implying YTM of 5.55%.
Georgian Railway reports record net profit in August
Georgian Railway (GRAIL) posted record high monthly net profit of US$ 10.8mn in August, with an 8M10 bottom line of US$ 32.8mn. 8M10 net revenues grew 27% y/y to US$ 145mn on a surge in sales in the freight transport segment, and operating expenses declined 7% y/y. 8M10 EBITDA almost doubled y/y to US$ 74mn, implying a 51% EBITDA margin. On the heels of the strong performance, the company upgraded its 2010E EBITDA guidance by 18% to US$ 106mn. Georgian Railway’s US$ 250mn Eurobond maturing in July 2015 currently trades at 107.3-107.8% of par value, implying YTM of 7.85-7.98%.
Teliani Valley improves 3Q10 EBITDA 35% y/y
Georgian winery and beverage distributor Teliani Valley (WINE GG) improved 3Q10 revenues 46% y/y to GEL 4.9mn (US$ 2.7mn) and EBITDA 35% y/y to GEL 0.8mn, and posted a positive bottom line of GEL 0.3mn (US$ 0.2mn) vs. a small net loss in 3Q09. 9M10 EBITDA was up 19% y/y to GEL 2.1mn (US$ 1.2mn), while the EBITDA margin slipped 2ppts y/y to 17% as COGS advanced faster than revenues.
Liberty Bank sells GEL 19mn in conditional notes
Liberty Bank (BANK GG), Georgia’s 6th largest lender by 1H10 assets, sold GEL 18.6mn (US$ 10.4mn) in 2-year Conditional Capital Participation Notes. The notes pay an annual coupon of 15%, and will be redeemed at nominal value, converted into equity, or converted into subordinated debt depending on the bank’s capital position at the maturity of September 2012. The notes were purchased by the bank’s shareholders, including its controlling shareholder Liberty Capital.
Ukraine and Int Market Comment
Jathan Tucker
Local stock and bond markets overlooked last week’s slew of 3Q10 corporate earnings reports and took their cues more from the possible implications of the additional US monetary stimulus expected to be announced this week. Awaiting further signals of the scope of the asset purchase plan, investors and traders adopted a more cautious stance, which was reflected in both thinner volumes and lacklustre market direction, with the UX Index flat through 5 trading sessions. Regional credit markets continued to see some weakness last week after the monetary stimulus-fuelled highs of previous weeks, with prices for most liquid Ukrainian Eurobonds down a few notches.
Int Market Comment
Stocks in Europe and the UK rebounded thanks to better than anticipated third quarter earnings reports as corporate earnings have generally exceeded expectations. In United States FTSE, the CAC and the DAX all gained few percentage points. Currently, investors are obsessed with the expected results of the Federal Reserve's next meeting along with the mid-term elections and remain focused on the Fed’s expected stimulus program, anticipated to be announced on Wednesday.
Top International News
Microsoft sales rise 25% to $16 billion
Microsoft’s first-quarter sales of $16.2 bn rose 25% from last year, due to strong showings from Office 2010, Windows 7 and Xbox 360. Microsoft's net income jumped 51% from last year, to $5.41 bn, or 62 cents per share. Some of the gain came from Microsoft's move to exclude sales of $1.5 bn from last year's results because of a Windows 7 upgrade program. The company waited until after Windows 7 shipped to recognize revenue from those sales.
Shell pledges new growth as profits jump
Royal Dutch Shell reported a significant rebound in profits for the third quarter and rising production. Third-quarter profit rose 18 per cent to $3.5 bn on a current cost of supplies basis, a post-tax measure that removes the effect of price changes on inventories. The results were driven by higher oil and gas prices and greater cost efficiency. Underlying CCS profit was $4.9bn, compared with $2.6bn in the third quarter last year. It announced a third-quarter dividend of 42 cents a share.
GM to repay taxpayers $2.1 billion as prepares for IPO
General Motors said it would repay $2.1 bn to U.S. taxpayers and make early payments to pension and retiree health plans. The announcement was made days before bankers are expected to begin a road show for potential investors in an initial public offering. GM said that after its IPO it would contribute at least $4 bn in cash and $2 bn of common stock to a pension fund for U.S. hourly and salaried workers and buy back the preferred shares at a 2 percent premium.
Commodities and FX
Gold eased in Europe as the dollar rose against a currency basket ahead of U.S. growth data later in the session, but traders remained cautious ahead of the anticipated Federal Reserve policy meeting.
Oil fell to below USD 82 as investors, anxious about the form and scale of an expected monetary easing by the U.S. Federal Reserve, took profits at the end of a month of commodity price gains.
US dollar found a steadier footing against major currencies early in Asia last week, one day after posting its biggest fall in over a week as a fickle market turned its attention to looming U.S. growth data.
Top Investment Idea
DPW GR
Transportation | International
Company Description: Deutsche Post
Deutsche Post DHL provides mail delivery, including domestic mail delivery, international parcel and mail delivery services, as well as freight delivery and logistics services to the public and businesses. The company provides European mail through Deutsche Post and Express and Logistics through DHL.
Analysts’ view
In Mail, Deutsche Post (DP) is the dominant operator. With liberalisation, the market is set to become more competitive and electronic communication substitution continues to rise. In Express, a significant restructuring has taken place and improving financial results are becoming evident. DP's logistics and Express activities have been adversely affected by the weaker economic backdrop.
Recent news
Deutsche Post acquired nugg.ad AG, Europe's largest targeted online ad platform for an undisclosed sum. With this investment, the Group has consolidated new areas of growth in online marketing fully in accordance with its 2015 strategy. As a subsidiary, nugg.AG will continue to be an independent targeting service provider for marketers and advertising agencies.
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