Департамент торговых идей

This year in Kazakhstan, there has been a significant revival in the residential real estate market, which manifested itself in accelerated growth of housing prices (+7% in 9M2019). Investments in housing construction increased by more than 20%, and housing construction volumes increased by 11.5%. Since the beginning of the year, the number of real estate transactions has increased by 22.5% yoy, and the size of the mortgage loan portfolio has grown by more than 20%.

Inflation in October rose by 0.6% after an increase of 0.3% in September. In annual terms, inflation increased by 0.2pp to 5.5%. For almost the whole year, the main driver of price growth was food products, among which basic food products (bakery, cereals and meat) showed an increase of over 10%. Since the beginning of the year, price growth amounted to 3.9%, which is slightly higher than 3.7% for the same period last year. Nevertheless, we do not expect further serious acceleration of price growth until the end of this year.

Company demonstrated a strong increase in income by 90% yoy to 298.6bn tenge. The main growth effect is provided by the provision of mobile services and fixed telephony. Positive results of Kazakhtelecom are somewhat offset by a one-time increase in expenses due to consolidation. We reiterate our Buy recommendation on Kazakhtelecom.

In the context of a declining subscriber base (-8.6% yoy) and stagnation of revenues from voice services, Kcell significantly reduced its expenses, mitigating a decrease in operating profit by 3% yoy.

The company continues to increase gold equivalent production thanks to the Kyzyl project in Kazakhstan, where in 9M2019 the design capacity was exceeded by 11%. As a result, gold equivalent production grew by 7% yoy to 476ths ounces.

The company transported 33.3mn tons of crude oil on a separate basis, which is 1.7% lower than in the previous year. Consolidated turnover of KTO for 9M2019 decreased by 0.9% yoy and amounted to 34.2bn ton-kilometers. Separate turnover amounted to 28.3bn ton-kilometers, showing a decrease of 0.8% yoy. The company believes that the decline is due to low oil volumes.

Yesterday at EGM, the Board of Directors of Lukoil recommended interim dividends for 9M2019 in the amount of 192 rubles per share with fixing the register of shareholders on December 20, 2019 and payment no later than January 20, 2020.

At the same time, the company approved the “new principles of dividend policy”, radically changing the terms of dividend payment.

We recommend to Buy Lukoil's shares with 12M TP 6317rub. per share. We remain confident about the stability of cash flows generated by Lukoil amid continued uncertainty in the global oil market and note strong catalysts for stock growth in both the short and long terms. We expect shares to rise in the coming month due to the announcement of interim dividends and see the potential for further stock growth during the buyback period. We note the company's strong financial performance, ensured by a highly profitable oil production and a wide geography of exports, as a guarantee of a stable increase in Lukoil's market capitalization in the long term.

According to Central Asia Metals, 9M2019 copper and lead production declined slightly.