Galnaftogaz boosts net revenue by 27% y-o-y in 1H11 by IFRS

Galnaftogaz (UX: GLNG UK, HOLD) increased its net revenue by 27% y-o-y to USD 619 mln in 1H11, according to IFRS results released by the company yesterday. Net income dropped by 40% y-o-y to USD 13 mln (net margin fell by 2.09 pp y-o-y to 6.75%) and EBITDA declined by 7% y-o-y to USD 35.4 mln (EBITDA margin was 5.7% vs. 7.8% in 1H10). Net debt was down 4% y-o-y to USD 269 mln. Antonina Davydenko: Galnaftogaz’ half-year results were spoiled by poor margins in 1Q11 (when net margin was a meager 5% due to high global oil prices on the cost side and governmental price controls). In 2Q11, margins improved substantially to partially offset the lackluster 1Q11: the company recorded a net margin in 2Q11 of 7.9%, which boosted net profit tenfold q-o-q. We reiterate our 12M target price of USD 0.027, recommendation HOLD.