Mariupol Heavy Machinery plans massive charter fund increase

Mariupol Heavy Machinery (UX: MZVM UK), part of Azovmash group, added to the agenda of its April 15 AGM consideration of a 21.8-times charter fund increase to UAH 83.8 mln. Mariupol Heavy Machinery shares plummeted by 20.61% to UAH 8.5 per share yesterday after the news. Vitaly Gorovoy: Back in December 2010, Azovmash announced it planned to lease Mariupol Heavy Machinery’s production assets to Azovzahalmash (UX: AZGM UX), but did not provide further details. We believe there is a potential yesterday’s news of a charter fund increase isn’t targeted at wiping out minorities but could be part of the restructuring process. For investors willing to take on high risk, the timing presents a buying opportunity at the current low, with a view to subscribe to the additional issue. We note liquidity risk (only 480 deals totaling UAH 2.9 mln in March 2011) and do not rule out dilution risk – management has historically ignored minorities’ rights.