Cherkasyoblenergo 71% starting price could be UAH ~600-700 mln

A State Property Fund official said that the starting price for the 71% stake in Cherkasyoblenergo (CHON) could be in the range USD 600-700 mln, Interfax reported yesterday. The official said the exact price has not yet been determined, but would be set by an independent appraiser. Local news outlets reported earlier this week that the Cabinet of Ministers issued an order to privatize the company by December 1, vs. by December 31, as was previously announced. Yegor Samusenko: UAH 600-700 mln for the 71% stake in Cherkasyoblenergo correspondents to UAH 4.04 – 4.72 per share. The stock is illiquid on both the PFTS and UX, but the SPF’s starting price estimate lies in the bid-ask range UAH 1.50 – UAH 10.50 as of October 15. The proposed price also implies that the company is valued ~0.3 EV/RAB and 0.9-1.0 EV/S ’08. We see this valuation as relatively fair, compared to previous privatization tenders held in April-May and expect a few bidders to appear. Since Energy Standard Group is believed to already be minor shareholder in Cherkasyoblenergo and the most likely buyer of controlling stake, we do not recommend entering a long position in this stock (for more details, see our note from August 19).