Colour Investment

Colour Investment

FGC YEES - Is there an interesting case for a long-term investor?

May 18, 2020, 04:55 PM • ☕️ 3 min read


Translations: EnglishРусский

On April 10, the Board of Directors of PJSC FGC YEES approved the final dividends for 2019 in the amount of 0.0094943 rubles per share. The current share price is 0.18694 rubles The weighted average price since January 2020 is 0.1933 rubles / share. Thus, the dividend yield to current payments will be 4.9%. The registry closing date is May 29, 2020. The total dividend yield for 2019 is 9.5%.

Shares of PJSC FGC YEES are a good alternative to bonded loans: the company has a stable business, adheres to strict dividend payments, which grow every year in ruble terms and average 8.5-10.0% per annum.

Previously, the company paid only the final dividends, which were approved in April-May of the following calendar year for the reporting year. However, in 2019, PJSC FGC YEES decided to make additional positive and reward investors - a recommendation for payments for 9 months of 2019 in the amount of 0.0088096 rubles per share, in connection with which the demand and interest in shares increased, as did their quotes .

Below is a chart with the dynamics of dividend payments over the past 7 years. As you can see, after 3 years the dividends of PJSC FGC YEES continue to grow on average by 8-14% yoy.

Dynamics of dividends payment ПАО

PJSC “FGC YEES” is an electric grid company whose activities are related to the transmission of electricity through the Unified Energy System of Russia (UNEG) and owns transmission lines and substations. The company pays stable dividends of 50% of net profit from RAS or IFRS (whichever is the greater). The main shareholder of the company is PJSC Rosseti (80.13%), while in May the Board of Directors decided to transfer the functions of the executive body from FGC UES to Rosseti. In this regard, FGC YEES may increase operational efficiency and reduce operating expenses in the future, which may lead to an increase in net income.

The company is operational, its reporting under RAS is close to reporting under IFRS, however, investors are mainly focused on reporting according to Russian standards for this company. , PJSC FGC YEES has already published financial statements for the 1st quarter of 2020 under RAS, and it is available at link. In general, all financial indicators of the company remained at the level of 2019, that is, for 3 months of 2020, the influence of the coronovirus on the operational and financial activities of the company is not traced. Therefore, reporting for the 1st half of 2020 will be most interesting.

We have analyzed the dynamics of the shares of PJSC FGC YEES since 2019, and it is illustratively presented in the chart below:

The company’s shares were on the sidelines almost until May 2019, but then, in anticipation of the payment of dividends in mid-July 2019, they began to grow significantly. In May-June, the share increased by 25% to 0.21 rubles / share, after which a dividend cutoff occurred.

After that, in the fall of 2019, the stock began to close the dividend gap on the news on the payment of interim dividends. Maximum shares - 0.243 rubles / share was reached at the end of February 2020, after which the decline began together with the Moscow Exchange Index.

PJSC FGC YEES (share dynamics since 2019

After the fall of most stocks and markets in March 2020, the shares of PJSC FGC YEES did not reach February highs. Current growth potential up to 0.24 rubles. about 30%. Moreover, since April, stocks have grown by only 4.3%. Taking into account the final approval of the final dividends for 2019, positive reporting for the 1st quarter of 2020 and the position of the management “not to postpone the payment of dividends”, the stock may still have an upside potential of 15-20% and higher by the register closing date for dividends . At the same time, paper trades relatively cheaply to peers with a multiplier P / E = 2.0-2.2x.

The article is not an individual investment recommendation: everyone makes a decision based on their own risk level and forecasts regarding the future potential of the company.