Centerenergo reports UAH 234 mln profit, may pay dividends yielding 3.2%

The most liquid power GenCo Centerenergo (CEEN UK) reported a preliminary 2012 bottom line of UAH 234 mln (USD 29.2 mln), which is a 6.6x improvement yoy, according to the company’s AGM announcement on Feb 12. Centerenergo plans the AGM on Apr. 6, with one of the agenda items being the preliminary approval of significant deals.

Alexander Paraschiy: The full-year result looks disappointing as the company posted 9M12 income of UAH 468 mln (USD 57.2 mln). While the 4Q usually brings losses and we estimated a UAH 118 mln loss for 4Q12, the reality turned out to be even more damaging at a UAH 224 mln loss. However, we are not drawing any long-term implications from this result before seeing the losses’ nature. We believe the company has good prospects in mid-term, given that bills for energy sector are currently registered in parliament (refer to our news from Nov. 21, 2012).

The “significant deals” item in the AGM agenda opens up a speculative opportunity for minorities: by law, those who vote against this item at the AGM will receive an option to sell their shares back to Centerenergo at a price of about UAH 6.08/share (2.1% above yesterday’s close). Refer to our note from Mar. 21, 2012 for more details on this opportunity. While this kind of arbitrage can be an interesting option, especially if the stock will continue falling, we do not think there will be much interest for that, as Centerenergo is one of the few local value stocks with visible growth prospects for the mid-term.

The company is pursuing a dividend payout policy that’s standard for state-controlled utilities: 30% of income. Based on this, we estimate the company would pay UAH 0.19/share in dividends yielding 3.2% (based on the Feb. 12 closing price).