Bogdan Motors plans charter fund increase, sale of 13% stake

Bogdan Motors (UX: LUAZ UK) announced plans to increase its charter fund by 33%, the company announced Friday. Company shareholders will vote on the issue at an AGM on April 29. Following the charter fund increase, the company’s majority shareholder is planning to offer a 12.94% stake in the company on a local stock exchange. Vitaly Gorovoy: We believe the company’s plans are derived from a need for more working capital in anticipation of 3x y-o-y production growth. We deem the move to inject cash through a charter fund increase as value-additive for all shareholders, as the company’s capital structure does not allow for an increase in leverage. Should the cash injection take place, we expect risks associated with high leverage to be partially mitigated. In general, we confirm our view on Bogdan Motors is a classic recovery story, as the company acquired a big-ticket bus order in late 2010 and is seeing increased demand for cars assembled both from Russia and Ukraine. In 2011E, we expect 3.3x growth in Bogdan Motors’ revenue and 2.6x y-o-y growth in EBITDA.