Recommendations of Millenium Capital for Ukrgasbank changed from “Accumulate” to “Hold”

Analysts of investment company Millenium Capital (http://www.mcapital.com.ua) changed the recommendation regarding Ukrgasbank shares (ticker UGZB) from “Accumulate” to “Hold”.

Change of the recommendation is connected with the fact that the price for Ukrgasbank shares reached the level of USD1.35 per share, which had been targeted by the company before, too rapidly and yet in the middle of July, thus demonstrating a 112% growth from the beginning of the year (yesterday no trading of the bank’s shares was held, but from the beginning of the week quotations of Ukrgasbank dropped to USD 1.25 for purchase and to USD 1.48 for sale). The recommendations of the investment company are confirmed by the fact that financial results of Ukrgasbank to some extent surpassed its expectations; net profit for six months of 2007 reached UAH 42.1 million, which is two-fold more than for six months of 2006, while for the banking system in general the profit rose by 1.7 times; assets of Ukrgasbank increased by 37.8% to reach the mark of UAH 6.145 billion for six months of 2007 as compared with a 29.5% growth of the banking system; credit portfolio of Ukrgasbank increased by 52.3% to reach UAH 3.297 billion for six month of 2007 (with growth of the banking system making up 31.2%). In credit sector, volumes of loans extended to individuals grew by 44.7% to UAH 855.5 million (with growth of the banking system making up 36.7%), and those extended to legal entities – by 55.2% to UAH 2.441 billion (with growth of the banking system making up 25.5%).

In addition, analysts of the company assert that ROE (return on equity; net profit/equity amount) of Ukrgasbank increased from 8.9% in 2006 to 14.1% based on the results of six months of 2007. Assessment of the investment company, contemplating the increase of ROE to reach the average European level of about 17% within the forthcoming five years, shows that price for Ukrgasbank shares has exhausted its potential of considerable growth in the short-term outlook. A new targeted price is USD 1.57. Taking into account the additional placement of shares to take place from 3 September to 5 October, the targeted price will make up USD 1.38, a 1% growth against the average price of USD 1.37.

Gleb Kabalnov, a leading analyst of Arta Investment Partners company, recommends buying shares of Ukrgasbank until their price has reached UAH 8 (USD 1.58). “The bank has good financial performance rates for the first half of 2007. Ukrgasbank is one of a few Ukrainian banks that have sufficient quantity of shares in free circulation”, the expert says. “Besides, this financial institution is connected with export operations, governmental structures.” According to the analyst, it is also expected that free float of Ukrgasbank shares will increase after the sale by NAK “Haftogaz Ukrainy” of the minority package of the bank’s shares owned by it.

Anastasiya Nazarenko, a broker of Concorde Capital investment company, considers that shares of Ukrgasbank are to be sold now since its securities are overrated as compared to shares of Ukrsotsbank and Raiffeisen Bank Aval which have higher liquidity. “But generally speaking, the bank’s shares are interesting since the bank has high standards of corporate culture”, the broker says. “Ukrgasbank is large and has not yet been acquired by a strategic investor. That means one can expect a share game at the stock exchange during merges and acquisitions.”

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