Colour Investment

Colour Investment

PJSC Lenenergo - Forgotten Share of Dividend Investor

May 16, 2020, 08:15 PM • ☕️ 3 min read


Translations: EnglishРусский

PJSC “Lenenergo” is a unique company - its shares were not affected by the fall of the stock market in the second half of March 2020. It was at this time that trading in ordinary and preferred shares of the company on the Moscow Exchange was stopped. This was due to the reorganization of Rosseti Lenenergo in the form of merger of Kurortenergo JSC, CEK JSC, SPb ES JSC, PES JSC to it. This event was the final step in the consolidation of electric grid assets in St. Petersburg. This news was announced on Friday May 15th. For almost two months from March to May 15, 2020, the company’s shares were not traded on the Moscow Exchange, so their current price corresponds to the closing price of the last trading day - 120 rubles / share for preferred share and 5.66 rubles for ordinary share. The current price of prefs is not a historical maximum, which was reached in mid-February 2020 - 153 rubles / share. Thus, the growth potential to the February highs is about 30%.

For these two months, the company managed to publish its IFRS financial statements for 2019 and RAS financial statements for the 1st quarter of 2020. The company is one of the most promising, efficient and interesting grid assets for a long-term investor: annual revenue growth, stability and growth in net profit, transparent and stable dividends on preferred shares, high dividend yield.

Also, the Board of Directors of PJSC Lenenergo recommended dividends for 2019 - 13.62 rubles / share per 1 pref share. In March 2020, we already predicted the final dividends of Lenenergo PJSC by preferred shares in the article by link. Our calculations almost coincided with the recommendations of the Board of Directors - 14 rubles / share. Thus, the dividend yield per share is about 11.4%, which is one of the highest DDs on Russian shares for 2019.

For the investor, PJSC Lenenergo remains an interesting investment case for the long term - high dividends, quick closure of the dividend gap, transparent dividend policy and stable business. In addition, taking into account the consolidation of assets, the operational efficiency of the company can be increased and its revenue increased.

This year, for Lenenergo PJSC, the registry closing date was moved a month earlier - to June 11, 2020, as well as for Rosseti and FGC YEES. Thus, investors still manage to buy preferred shares of this company. It is possible that at the opening of trading on Monday May 18 there may be a high demand for shares of Lenenergo PJSC, in connection with which the paper may open with a gap up and grow in the moment by 15-25%. In addition, last year, stocks grew and in the last month before dividends - by 10-15%. As previously written, based on the company’s valuation by multiples and the DDM method, a fair valuation of these shares can be 180-200 rubles / share, which provides an upside of 50-67% of the current price.

Recently, PJSC “Lenenergo” issued financial statements for the 1st quarter of 2020 under RAS:

  • Revenue 21.6 billion rubles. (+ 2.6%)
  • Gross profit 6.28 billion rubles (+ 5.9%)
  • Net Income 4.32 billion rubles (+ 0.3%)

Thus, in the 1st quarter of 2020, the company’s business was not negatively affected by the coronovirus — growth in revenue, gross and operating profit, and net profit. Reporting of PJSC Lenenergo is available at link. However, the company’s results for the 2nd quarter (half year) of 2020 will be indicative, which will fully reflect the pressure caused by the coronovirus.

This 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.