Sumy Frunze wins USD 94 mln Turkmen contracts

Sumy Frunze (SMASH: BUY) announced yesterday it was selected to fulfill a USD 94 mln contract to supply compressors and gas transmission units to state-run companies Turkmengaz and Turkmenneft by August 2009. The equipment will be used to construct compressor stations for each company that are due to come onstream in June 2009 and July 2009. Inna Perepelytsya: The management said in April they plan to boost revenues by 81% yoy to USD 586 mln in 2008, and to USD 1 bln by 2010-2012. SMASH remains a fundamentally strong stock with development programs in Russia (Gazprom is undertaking an over USD 300 bln program by 2030), Iran, Turkmenistan and Uzbekistan dependent on equipment from Sumy Frunze. The creation of a new management group by majority shareholder Energy Standard overseeing Sumy Frunze, Zaporizhtransformator (ZATR: BUY) and other smaller, unlisted companies, will benefit Sumy Frunze in terms of joint participation in such foreign equipment tenders. Our 2008 sales forecast is more modest than management’s at USD 495 mln. The stock’s current price offers 265% upside to our target. We reiterate BUY.