Kyivenergo's AGM Approves 2006 Net Income Increase of 106% yoy

Electricity company Kyivenergo’s (KIEN: HOLD) AGM approved the company’s 2006 financials: net revenue of USD 650 mln (+71% yoy), EBITDA of USD 38 mln (+36% yoy) and net income of USD 19.6 mln (+106% yoy). Shareholders also decided to pay USD 0.64 mln as dividends (div. payout is 16.6%; DPS is USD 0.006; dividend yield 0.1%), approved changes into the company’s charter and elected a new supervisory board – the majority shareholder, the National Energy Company of Ukraine (NC ECU), lost its majority in the board (now it occupies only three positions out of seven). Alexander Paraschiy: In its dividend policy Kyivenergo continues to not tie payouts to net income, but to a round number of local currency per share: this time DPS is exactly UAH 0.03 per share. Kyivenergo’s unexpectedly high 2006 net income is explained by changes in the company’s balance sheet: Kyivenergo decreased its allowance for bad receivables by USD 39 mln in 4Q06 and this allowed the company to increase reported operating profit by the same amount. At the AGM, we did not hear any news on the future of Kyivenergo’s lease, and we believe Kyiv’s city authorities will retain the status quo vis-à-vis the company. We support our 2007 forecasts for Kyivenergo and re-iterate our HOLD recommendation for the stock.