Daily analyst comments

Lenenergo posts FY 2008 IFRS results


	Lenenergo

Capitalization: 606 541 084,81 $

Common shares
Price	0,76 $

Price changing
week	month	year
1,7%	0,7%	32,5%

Preferred shares
Price	0,89 $

Price changing
week	month	year
5,0%	2,8%	49,5%

30.06.09 10:28

Lenenergo has released neutral FY 2008 IFRS results, which should not have any major impact on the company’s stock valuations.

On June 29, Lenenergo (RTS: LSNG) announced its FY 2008 financial report audited to IFRS.

Table 1. Lenenergo: key income statement indicators, USD million

	2007	2008	2008/2007
Revenue	483	720	49%
Opex	393	587	50%
EBIT	90	133	48%
Amortization	43	68	58%
EBITDA	133	201	51%
Net income	50	74	47%

Source: company data

Lenenergo’s FY 2008 revenue grew due to a number of factors; firstly, due to an upsurge in the electricity transmission rate. On average, the cost of electricity transmission through Lenenergo grids advanced by 36.9% y-o-y in Saint Petersburg city and by 6.5% in Leningrad Region. Secondly, Lenenergo’s revenue went up thanks to growth in operating indicators. Particularly, in 2008, the company’s electricity supply to the grid rose by 5.6% y-o-y. Thirdly, despite the crisis, Lenenergo’s revenue from connection fees jumped by 29% y-o-y.

Table 2. Lenenergo: key opex items, USD million

	2007	2008	2008/2007
Services of grid companies	144	225	56%
Labor costs	81	101	24%
Amortization	43	68	58%
Repairs	27	24	-11%
Other	97	169	74%
Total opex	393	587	50%

Source: company data

Lenenergo opex grew quicker than revenue by 1%. The largest expenditure item was Services of Grid Companies, which advanced quite significantly due to an appreciation of electricity transmission services rendered by the FGC and regional grid companies. Amortization was the second largest expenditure item, which was due to Lenenergo’s intense investment activity.

The company’s operating, EBITDA, and net profit margins did not change much in the reporting period.

Table 3. Lenenergo: margins

	2007	2008	∆
Operating margin	18.66%	18.46%	-
EBITDA margin	27.61%	27.96%	+0.35 pp
Net profit margin	10.42%	10.26%	-

Source: company data

In general, we are neutral about Lenenergo’s FY 2008 IFRS report. At the same time, though very insignificantly, outrunning growth in operating expenses compared with revenue is a negative factor. In our opinion, the FY 2008 Lenenergo financial report should have a neutral impact on the company’s stock valuations.

The fair value of Lenenergo commons is USD 0.74 per share with a BUY rating. The fair value of the company’s preference stock is USD 0.62 per share with a HOLD rating.

Kruglov Denis

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