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Year: Month: All releases Economy Sectors Companies

Georgian Railway - FY16 update

26 June, 2017

GR released disappointing FY16 audited results. On the back of a steep decline in freight traffic volumes, the top line decreased 26.6% y/y, from an already low base, to US$ 185.9mn. Operating expenses, which are mostly GEL-denominated, declined 9.9% y/y to US$ 153.7mn, as GEL depreciated by 4.1% against the US$. Factoring in the US$ 61.0mn credit line and US$ 34.0mn one-off, non-cash income from transfer of land to the government, per the Eurobond prospectus, FY16 net debt-to-adjusted EBITDA came in at 3.1x, below the Eurobond covenant of 3.5x. Excluding the one-off income, adjusted EBITDA decreased 40.1% y/y to US$ 85.2mn. The modernization project is due to be finished in 2019, while the bypass project remains under review.

In FY16, freight traffic and logistic service revenues declined 29.8% y/y to US$ 146.0mn and 10.1% y/y to US$ 22.2mn, respectively. GR reclassified the revenue generated by its freight forwarding subsidiaries under logistic service, a new revenue line. Freight car rental revenue decreased 44.9% y/y to US$ 5.9mn, while passenger traffic revenue was up 11.5% y/y to US$ 7.6mn.

FY16 operating expenses declined 9.9% y/y to 153.7mn, with electricity, consumables and maintenance expense decreasing the most (down 25.6% y/y to US$ 20.0mn).

FY16 adjusted EBITDA was propped up at US$ 119.0mn (down 16.3% y/y) by the US$ 34.0mn one-off, non-cash income from transfer of land to the government. Excluding the one-off income, adjusted EBITDA dropped 40.1% y/y to US$ 85.2mn, which would imply a contraction of the adjusted EBITDA margin to 45.8% (56.2% in FY15). The weakening of GEL against US$ in FY16 triggered a large, albeit non-cash, FX loss of US$ 47.4mn, accounted for as a finance cost and weighing on the bottom line. In line with the newly enacted corporate income tax law, effective January 1, 2017, GR converted its deferred tax liability into a one-time gain of US$ 18.8mn, which led to the recognition of a significant income tax benefit (US$ 16.4mn) in FY16. As a result, FY16 net income came in at US$ 27.5mn.

FY16 operating cash decreased 40.0% y/y to US$ 79.2mn, while capital spending accelerated 22.4% y/y to US$ 84.6mn, largely due to modernization project expenditures. In FY16, dividends have not been declared, while the dividend payable of US$ 1.6mn from FY15, per the government’s decision, was set off with the US$ 0.7mn investment in the construction of the Batumi Passenger Station and the remaining part with the acquisition of long-term assets for a state-controlled entity.

FY16 debt was at US$ 536.0mn, while the cash balance was at US$ 105.0mn. Per the Eurobond prospectus, a US$ 61.0mn credit line has been added to cash and cash equivalents and one-off income (US$ 34.0mn) from transfer of land to the government was included in adjusted EBITDA when calculating the net debt-to-adjusted EBITDA ratio, which came in at 3.1x, below the Eurobond covenant of 3.5x.

In Jan-17, Fitch downgraded GR from BB- to B+ (Outlook Stable) after placing it on Rating Watch Negative in Sep-16. GR has also published its 2016 Management Discussion and Analysis. A full report with our detailed projections will follow shortly.


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Regional Fixed Income Market Watch | May 2017

9 June, 2017

Highlights

  • GDP growth in the USA in 1Q17 was revised up from an annualized 0.7% y/y to an annualized 1.2% y/y. The Russian economy expanded 0.5% y/y in 1Q17, while GDP was up 2.4% y/y in Ukraine and 3.4% y/y in Kazakhstan.
  • Inflation in the USA retreated to 2.2% y/y in April 2017 after a 2.4% y/y price increase in the previous month. Inflation in the Eurozone was down from 1.9% y/y in April 2017 to 1.4% y/y in May 2017.
  • In May 2017, the Central Bank policy rate was lowered in Ukraine (from 13.00% to 12.50%) and Russia (from 9.75% to 9.25%) and increased in Georgia (from 6.75% to 7.00%).
  • According to short-term rapid estimates, economic growth in April 2017 came in at 7.1% y/y in Kazakhstan, 3.4% y/y in Armenia, 3.1% y/y in Russia, and 2.1% y/y in Georgia. 4M17 GDP was up 0.5% y/y in Belarus and down 1.2% y/y in Azerbaijan.
  • In April 2017, inflation was flat at 14.4% y/y in Azerbaijan, while it accelerated in Turkey (to 11.9% y/y), Georgia (to 6.1% y/y), and Armenia (to 1.2% y/y). Inflation slowed in Ukraine (to 12.2% y/y), Kazakhstan (to 7.5% y/y), Belarus (to 6.3% y/y), and Russia (to 4.1% y/y) in April 2017.
  • JSC Bank of Georgia, BGEO Group PLC’s banking business subsidiary, successfully placed an inaugural GEL 500mn offering of 11.00% notes due June 2020. J.P. Morgan and Renaissance Capital acted as joint bookrunners, while Galt & Taggart acted as a co-manager. The notes are listed on the Irish Stock Exchange. The issuance was the first international local currency bond offering from the wider CIS region (excluding Russia) in the past ten years and represents a landmark transaction for Georgia.
     

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Regional Fixed Income Market Watch | April 2017

4 May, 2017

Highlights

  • GDP growth in the USA in 1Q17 came in at annualized 0.7% q/q, well below expectations, while growth in the Eurozone was at 1.7% y/y, in line with estimates. Meanwhile, growth in China, at 6.9% y/y, slightly exceeded analyst estimates.
  • Inflation in the USA came in at 2.4% y/y in March 2017, slightly below expectations, while Eurozone inflation was at 1.2% y/y in April 2017, above consensus forecasts.
  • Central Bank policy rate was lowered in Belarus (from 15.0% to 14.0%), Ukraine (from 14.0% to 13.0%), and Russia (from 9.75% to 9.25%) in April 2017.
  • According to short-term rapid estimates, economic growth in March 2017 came in at 6.8% y/y in Armenia and Kazakhstan and at 5.3% y/y in Georgia. 1Q17 GDP was up 0.3% y/y in Belarus and down 0.9% y/y in Azerbaijan.
  • In March 2017 inflation accelerated in Azerbaijan (to 14.4% y/y), Turkey (to 11.3% y/y), and Ukraine (to 15.1% y/y). Inflation slowed in Belarus (to 6.4% y/y), Russia (to 4.3% y/y), Kazakhstan (to 7.7% y/y), and Georgia (to 5.4% y/y), while prices in Armenia were down 0.1% y/y in March 2017.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Regional Fixed Income Market Watch | March 2017

4 Apr, 2017

Highlights

  • Inflation in the USA came in at 2.7% y/y in February 2017, up from 2.5% y/y in the previous month and well above the FED target rate. Following a 2.0% y/y increase in February 2017, inflation in the Euro zone retreated to 1.5% y/y in March 2017.
  • Growth in Turkey and Russia came in at 3.5% y/y and 0.3% y/y, respectively, in 4Q16.
  • According to short-term indicators, relatively strong growth continued in Armenia (+6.0% y/y), Georgia (+4.4% y/y), and Kazakhstan (+3.7% y/y) in February 2017.
  • In Azerbaijan growth retreated to 0.4% y/y, while in Belarus GDP contracted 1.0% y/y in 2M17.
  • In Ukraine growth likely weakened as industrial output turned negative (-4.6% y/y), agricultural output remained in negative territory, and construction production index increased marginally.
  • Compared to the previous month, inflation in February 2017 increased in Ukraine (+14.2% y/y), Azerbaijan (+13.0% y/y), Turkey (+10.1% y/y), and Georgia (+5.5% y/y).
  • Compared to the previous month, inflation in February 2017 was broadly flat in Kazakhstan (+7.8% y/y), while retreating in Russia (+4.6% y/y) and Belarus (+7.0% y/y). Armenia remained in deflationary territory, with prices down 0.2% y/y in February 2017.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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