Avangard May Announce Dividend in Late 2013

News
UkrLandFarming (ULF), the parent group of egg producer Avangard, conducted a June 27-28 presentation for investment community, the major takeaways from which are as follows:
- The shareholders of Avangard will consider the question of a dividend payout in late 2013. No details on the timing or amount of the payout were disclosed;
- The group’s management is planning an IPO for ULF for 2014, and the company does not rule out the option of a buyback of Avangard shares as an alternative to a swap offering of AVGR shares for those in ULF;
- Instead of the repayment of Avangard’s outstanding 2015 bonds at maturity, the company may: a) exchange them for the additionally issued bonds of UkrLandFarming, or b) restructure the 2015 bonds according to the pattern of MHP/Mriya, i.e. repaying part of the outstanding bonds with funds raised via a new longer-duration issue;
- Avangard’s management expects egg production at 6.8-7.0bn pieces in 2013 (6.2bn in 2012) and “more than 7.0bn” in 2014;
- Avangard expects sales in 1H13 at about USD 300mn (+6% YoY), with the EBITDA margin slightly higher than in 1H12 due to higher export sales of shell eggs (240mn pcs in 1H13 vs. 154mn in 1H12);
- ULF targets the expansion of its land bank to 750,000-800,000 hectares in the long term, up from 532,000 ha as of end-2012.

Commentary
A decision on a dividend payout, if approved, should improve the investment attractiveness of Avangard’s stock, although the impact will be rather moderate, in our view. The probable dividend will likely raise a limited interest among short-term investors, given the rather low turnover of the AVGR issue in London. We doubt that Avangard will be viewed by the market as a long-term dividend play in light of the planned IPO of UkrLandFarming, which strongly implies that the AVGR stock will cease to exist. Thus, the primary interest in the stock, in case of the approval of a dividend, will stem from those investors who see a high probability of an eventual stock buyback engineered by ULF.

Источник: Eavex Capital