KEGOC 2016 neutral results.

Altynay IbraimovaApril 24, 2017

On Friday, KEGOC held a meeting with investors, where 2016 total results were announced. 

By the end of 2016, KEGOC have increased its revenue by 18% to T130 bn, mostly due to increase of revenues from electricity transmission (+9% yoy, 61% of total revenue), which was a consequence of higher tariffs and growth in services volume.

Table 1. Financial results

 

 

 

KZT bn

2016

2015

yoy

Revenue

     130  

      110  

18%

Cost of  sales

-      79  

-      76  

5%

Gross profit

       51  

       35  

47%

General and administrative expenses

-      18  

-        9  

106%

Selling expenses

-     0.2  

-     0.2  

24%

Impairment loss/income

-     0.1  

-     0.1  

58%

Operating profit

       33  

       26  

27%

Financial income

         7  

         4  

69%

Financial expenses

-        6  

-        5  

27%

Currency difference

         2  

-      36  

 

Share of gain /(loss) of associates

      0.1  

       0.1  

-32%

Loss / gain on disposal of interests in associates and joint ventures

-     0.1  

-     0.2  

-60%

Other income

      1.4  

       0.9  

62%

Other expenses

-     0.3  

-     0.3  

2%

Expenses from depreciation of funds placed in JSC "Kazinvestbank"

-        1  

        -    

-

Profit before tax

       36  

-      10  

-

Income tax expenses

-        8  

         2  

-

Profit for the period

       28  

-        8  

-

Source: Company data

 

 

 

At the same time, there is an increase in cost in annual terms by 5% due to an increase in depreciation, amortization and labor costs. General and administrative expenses increased more than twice (+106%), also as a result of the growth of the wage fund.

According to the Company data, by the end of 2016, net debt declined by 9% to T83 bn. The residue of outstanding debt of KEGOC is represented by IBRD (53%) and EBRD (47%) loans and at the end of 2016 amounted to T122 bn.

Profit for 2016 amounted to T28 bn against T8 bn loss in 2015, due to which the Board of Directors proposed to allocate 50% of net income received for the last year to the dividend payment (T28/share), less dividends paid by the results of 1H2016. Recall, for 1H2016 KEGOC paid T6.5 bn of dividends (T25/share).

Our view

2016 results did not show significant deviations from our expectations. The proposal to pay semi-annual dividends also meet market expectations, in connection with which we consider the news neutral. From the beginning of the year KEGOC shares have substantially increased in price (+10%) and now exceed our 12M TP by 48%. On the threshold of publication of total financial results for 2016, we put our recommendation under review.