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By Market News Video Staff, Monday, February 7, 11:49 AM ET
Article written by Max Blythe
PepsiCo’s (NYSE:PEP) recent multibillion-dollar acquisition of a two-thirds stake in Russia-based juice and dairy producer Wimm-Bill-Dann (NYSE:WBD) and BP’s (NYSE:BP) announced partnership with state-controlled Russian oil major Rosneft (LI:ROSN) could potentially bring Russia back onto investors’ radar screens. After being seen as the weak link among BRIC countries following the collapse of the Russian stock market in late 2008, Russian equities have made a strong comeback: the Market Vectors Russia (AMEX:RSX) exchange-traded fund of Russian stocks has outperformed the S&P 500 since mid-December 2010. In particular, Mechel and VimpelCom are two leading companies that are currently trading at a fairly steep discount to their peers.
Russia’s leading producer of coking coal, Mechel, (NYSE:MTL) boosted EBITDA by an astounding 233.0% in 9M 2010. The company, which is also one of Russia’s largest steelmakers, has successfully ridden out the previous bearish commodity market and is well set to capitalize on rising prices for steel and coal. Despite the strong performance, Mechel’s ADRs are trading with a P/E ratio of 19.03, compared to Companhia Siderurgica Nacional’s P/E of 57.75 and Nucor’s 114.40. Analysts at Bank of America - Merrill Lynch see Mechel stock at $42.20, a 26.60% upside from its current $33.49.
Russia’s number-two cellular provider VimpelCom (NYSE:VIP) also lists its ADRs in New York. The Russian telecom’s stock has been underperforming due to a shareholder battle with Norwegian mobile-service operator Telenor, which owns a 39% stake in VimpelCom, over the Russian company’s planned acquisition of Egypt-based Wind Telecom. Alexander Izosimov, VimpelCom’s CEO, recently announced that the Egypt deal will forge ahead despite ongoing turmoil in the region. While the dispute with Telenor with should be resolved within a year, the acquisition of Wind Telecom will make VimpelCom the world’s fifth-largest mobile-service company and analysts are bullish on VimpelCom’s prospects, with UBS setting $20.00 as target price for VimpelCom ADRs, a full 40.35% upside from the current price at $14.25. VimpelCom’s ADRs trade with a P/E ratio of 9.53.
For a complete list of holding of the Market Vectors Russia ETF, visit the RSX Holdings page on ETFChannel.com
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