Daily analyst comments

MRSK Holding has adopted a dividend policy, which obliges the company to earmark about 5% of net profit for dividend payouts in the future. It has also become known that MRSK Holding targets a net profit in 2010 of roughly RUB 11 billion.

In our view, the adoption of a dividend policy by the company shows evidence of growth in its corporate governance standards. Over the long term, MRSK Holding shares may become a reliable investment vehicle with an acceptable dividend yield. As distribution grid companies switch to a RAB tariff system, we expect their profit margins to widen and their cash flows to become more predictable. In our opinion, dividends will to a larger extent be paid out on preferred shares. Given MRSK Holding’s current stock valuations and its management’s expectations on net profit, a dividend yield on its preferred shares may reach about 10%. Over the short term, MRSK Holding shares will be under pressure from the Russian government’s intention to curb growth in the tariffs of electricity distribution companies.