Dniprovahonmash boosts income 2% yoy, suggesting high dividend yield

Dniprovahonmash’s (DNVM UK) 2012 net income rose 1.8% yoy to UAH 822 mln, according to preliminary results reported in the company’s AGM announcement on March 13. The agenda for the AGM, scheduled for April 18, contains an item for approving significant deals.

Roman Dmytrenko: Dniprovahonmash belongs to a short list of generous dividend payers among Ukrainian firms. For the last two years, it paid about UAH 18/share in dividends and it is most likely to continue this practice in 2013. At a DPS of UAH 18, the dividend yield would amount to 27%.

Another option that shareholders may use at the company’s AGM is exiting the stock by selling shares to the issuer at a price of at least UAH 65/share after voting against the significant deals item (please refer to our Feb. 19 note for more details).

The announced annual results imply Dniprovahonmash faced a 2x qoq drop in its bottom line to just UAH 99.7 mln in 4Q12, which we believe is the result of a bogie-casting deficit in Ukraine that may have forced the company to downsize its production. As the deficit continues to loom over Ukrainian freight railcar producers, prompted by restrictions imposed by the Russian government, there is a risk that this year will be the last in which the company pays high dividends. Given the worsening outlook and extremely low liquidity of DNVM shares, the option to sell shares back to the issuer should not be ignored by shareholders.