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Year: Month: All releases Economy Sectors Companies
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Georgian Oil and Gas Corporation - 1H19 update

31 Oct, 2019

GOGC released 1H19 unaudited results. Revenue was up 17.8% y/y to US$ 160.4mn in 1H19, mostly due to a 19.8% y/y (US$ 106.7mn) increase in sale of gas. Revenue from electricity generation, second largest revenue category, was also up 21.6% y/y, while GEL-denominated gas pipelines rental revenues were down 7.1% y/y. Meanwhile, operating expenses increased 14.9% y/y to US$ 130.9mn in 1H19. Higher revenues helped adjusted EBITDA to grow by 21.7% y/y to US$ 36.5mn. Notably, more than 90% of the construction works on Gardabani II CCPP have been completed as of October 2019. GOGC’s strong financial position is attested by a one-notch rating upgrade from S&P in October 2019 to BB- outlook stable.

GOGC’s 1H19 revenue was up 17.8% y/y to US$ 160.4mn, driven by increased gas sales revenue (+19.8% y/y to US$ 106.7mn). Gas demand was mostly affected by increased demand from TPPs as well as from commercial sector. Notably, increased demand from TPPs was a result of reduced hydro generation in 1H19 (down 9.7% y/y) due to unfavorable hydrological conditions. Importantly, gas sales to commercial sector were recorded for the first time, and this new category lifted average gas sale price to US$ 126.6/mcm in 1H19 compared to 115.5/mcm in 1H18.

Gardabani TPP operated for 165 days during 1H19, compared to only 134 days in 1H18, as hydrogenation reduced. As a result, revenue from electricity generation was up 21.6% y/y to US$ 40.6mn in 1H19 (25.3% of total). Rent from gas pipelines is the only GEL-denominated revenue category for GOGC since September 2017, when an annual fixed GEL 42mn fee was introduced. Consequently, GEL’s 10% depreciation against dollar in 1H19 (vs. 1H18 average) reduced pipeline rental revenue in US-terms by 7.1% y/y to US$ 7.9mn, while in GEL terms income remained flat. Oil transportation revenue declined 15.1% to US$ 3.6mn, as crude oil throughput in WREP was down. Significant growth in revenue from crude oil sales (up 70.8% y/y to US$ 1.6mn), which makes up only 1% of total revenue, was partially driven by increased volumes (up 53.9% y/y) as well as higher global crude oil prices.

1H19 operating expenses were up 14.9% y/y to US$ 130.9mn. Cost of gas, largest expense category, which combines gas purchased for resale (85% of cost of gas) and gas used by Gardabani I, grew 19.6% y/y to US$ 114.5mn. Gas costs for resale increased in both, volume (+12.8% y/y) and price (+ 3.8% y/y) terms. As a result this category was up 16.7% y/y to US$ 97.9mn. Cost of gas used in electricity generation also grew 39.9% y/y to US$ 16.7mn as demand on gas from Gardabani I increased in the reporting period. Other expenses, accounting for 12.5% of total, decreased 9.9% y/y to US$ 16.4mn helped by GEL’s depreciation in the period.


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Regional Fixed Income Market Watch | September 2019

18 Oct, 2019

Highlights 

  • US real GDP growth was an annualized 2.0% (third estimate) in 2Q19, after 3.1% growth in 1Q19. Unemployment rate was 3.5% in September 2019, down from 3.7% in August 2019.
  • In August 2019, economic growth was 7.6% y/y in Armenia, 7.3% y/y in Kazakhstan, 5.8% y/y in Georgia and 2.2% y/y in Russia, based on preliminary data. In 8M19, real GDP growth was 2.4% y/y in Azerbaijan and 1.1% y/y in Belarus.
  • Annual inflation in the US was 1.7% in September 2019, unchanged from the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 0.8% in September 2019, down from 1.0% in the previous month.
  • In September 2019, annual inflation was above the target level in Belarus (5.3%), Georgia (6.4%), Ukraine (7.5%) and Turkey (9.3%); inflation was at targeted level in Russia (4.0%) and within the target range in Kazakhstan (5.3%); inflation was below the target in Armenia (0.5%). Annual inflation was 2.1% in Azerbaijan in September 2019.
  • Monetary policy rate increased by 50 basis points to 7.5% in Georgia on 25 September 2019 and has remained unchanged in other countries during end-September -1H of October 2019.
  • In October 2019, S&P upgraded Georgia’s sovereign credit rating to BB from BB- with a stable outlook and Ukraine’s rating to B from B- with a stable outlook. 



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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Georgian Railway - 1H19 update

8 Oct, 2019

GR released 1H19 unaudited results together with Management Discussion and Analysis. Revenue was up 5.7% y/y to US$ 85.1mn supported by increased freight traffic. Operating expenses, which are mostly GEL-denominated, decreased 14.8% y/y to US$ 65.2mn (-6.6% y/y in GEL). Consequently, adjusted EBITDA improved and reached US$ 35.9mn (+25.4% y/y). Adjusted EBITDA margin also hiked to 42.2% from 35.6% a year ago. GEL’s 17% depreciation against dollar in 1H19 led to a non-cash FX loss of US$ 31.7mn, which dragged down net income to a negative US$ 15.3mn. 

GR’s freight transportation revenue, traditionally the most important revenue category, was up for the first time in the last four years. Revenue stood at US$ 85.1mn up 5.7% y/y. Freight transportation revenue, up 15.4% y/y to US$ 54.1mn, had the largest positive impact on the overall revenue growth in 1H19. Freight handling revenue also increased 10.1% y/y to US$ 11.1mn, while logistic service revenue dropped 35.8% y/y to US$ 8.5mn. Passenger traffic revenue, mostly generated in GEL, also continued growing, up 9.2% y/y to US$ 4.2mn (+19.8% y/y in GEL). Other revenue was up 26.5% y/y to US$ 2.1mn driven by sale of scrap.

GR recognized significant impairment loss in 2018 as a result of impairment testing of its Property, Plant and Equipment (PPE). Due to 5 consecutive years of decline (cumulative drop of 56.1% in 2018 vs. in 2014) in its main revenue stream – freight transportation, GR assets’ value in use was re-assessed and was found to be US$ 272.8 (GEL 691.4mn) lower than the carrying amount. This led to a recognition of the large impairment loss in 2018. 

1H19 operating expenses, which are mostly GEL-denominated, declined 14.8% y/y to US$ 65.2mn. This was mostly caused by significant drop in asset-base (PPE) and related reduction in depreciation expenses (down 36.4% y/y to US$ 15.3mn). On the other hand, employee benefits and electricity and other consumables expenses increased, 8.0% y/y and 7.1% y/y, respectively in GEL terms. However, they still reduced in dollar terms as GEL depreciated.


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Regional Fixed Income Market Watch | August 2019

20 Sept, 2019

Highlights

  • US real GDP growth revised down to an annualized 2.0% (second estimate) in 2Q19, from an annualized 2.1% (advance estimate). Unemployment rate was 3.7% in August 2019, unchanged since June 2019.
  • In 2Q19, real GDP increased by 1.2% and by 1.4% in the EU19 and the EU28, respectively. In July 2019, unemployment rate was 6.3% and 7.5% in the EU19 and the EU28, respectively.
  • Turkish economy contracted by 1.5% y/y in 2Q19 after falling 2.6% y/y in 1Q19.
  • In July 2019, economic growth was 8.1% y/y in Armenia, 6.1% y/y in Georgia, 5.1% y/y in Kazakhstan and 2.6% y/y in Russia, based on preliminary data. In 1H19, real GDP growth was 2.5% y/y in Azerbaijan and 1.3% y/y in Belarus.
  • Annual inflation in the US was 1.7% in August 2019, down from 1.8% in previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 1.0% in August 2019, unchanged from the previous month.
  • In August 2019, annual inflation was above the target level in Russia (4.3%), Georgia (4.9%), Belarus (5.7%), Ukraine (8.8%) and Turkey (15.0%); inflation was within the target range in Kazakhstan (5.5%), and below the target in Armenia (0.6%). Annual inflation was 2.4% in Azerbaijan in August 2019.
  • As of 17 September 2019, monetary policy rate increased by 0.25bp to 9.25% in Kazakhstan and by 0.5bp to 7.0% in Georgia, while it was cut by 0.25bp to 5.5% in Armenia, to 7.0% in Russia and to 8.0% in Azerbaijan, by 0.50bp to 16.5% in Ukraine and by 3.25bp to 16.5% in Turkey. The key rate has remained unchanged in Belarus.
  • As of 17 September 2019, Fitch upgraded Ukraine’s rating to B from B- with a positive outlook and Moody’s upgraded Armenia’s rating to Ba3 from B1 with a stable outlook.


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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