Nikopol Ferroalloy Approves Share Issue Subscription

At their EGM today, Nikopol Ferroalloy shareholders approved the additional share issue, which increases Nikopol’s charter fund five times to UAH 388 mln (USD 76.8 mln). The new number of shares outstanding is 1,551.5 mln (vs. the previous 303.5 mln). Eugene Cherviachenko: As a result, Privat and Interpipe have secured control of the company. The 50%+1 stake sold to Interpipe-related Concern Pridneprovie in 2003 and disputed by Tymoshenko has now been diluted to 10%. This is in line with our expectations (see our note of January 15). We think the market should react to the news with spreads shrinking to their pre-issue level of 5-10%, adjusting closer to bids. Presently, the stock trades within a wide spread of 59%; the bid price is at USD 0.89 per share. We maintain our target price of USD 1.35 per share and HOLD recommendation.