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Why are Russian stocks so cheap?


rukawa

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Sistema

 

Taking into account that the inistry of Land and Property Relations of Bashkortostan filed a lawsuit to recover 209 billion rubles ($5.8 billion) from Sistema.

 

6B is 41% of 14B that is the current stockholder equity in the balance sheet.

 

33% looks close enough from 41% if we think that there is about 1/5 probability for the lawsuit not to win.

 

What do you guys think about it?

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This is a very interesting case in many ways. Frankly, I have no idea how this will end but was invested in Sistema and bought yet more yesterday. It does look more and more like the arrest etc. is just to get Bashneft cheaply to other hands, although this naturally might be false. At the moment you can Sistema for less than their stake in MTS is worth. It might be the case though that this doesn't matter in the end, if they decide to take the whole Sistema then this will proove to be another Russian adventure where you're liquidated for basically nothing.

 

If it's Rosneft boss + Putin going for Bashneft, this will be another textbook example of what happens when you combine greed and power.

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I revisited my investment thesis for russia in the last days and came to the conclusion that a lot of things have gotten worse in the last six month. I freaked out in the end and sold all russia related investments (BP,Lukoil,RSXJ) because i have no trust that things get better again as long as Putin has the lead.

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I also think they want bashneft cheaply. They say to him, give as bashneft to this price and your free. But i think the share downturn is to much.

 

What makes you think they’ll offer a price? I think they’ll just take the assets for nothing and jail anyone they can get their hands on.

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I also think they want bashneft cheaply. They say to him, give as bashneft to this price and your free. But i think the share downturn is to much.

 

What makes you think they’ll offer a price? I think they’ll just take the assets for nothing and jail anyone they can get their hands on.

 

sorry to hear you jump ship, I will stay on the way John Templeton told us

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I also think they want bashneft cheaply. They say to him, give as bashneft to this price and your free. But i think the share downturn is to much.

 

What makes you think theyll offer a price? I think theyll just take the assets for nothing and jail anyone they can get their hands on.

 

i think they will give him a symbolic Price. not much, but a Price that they can say we bought this Thing legally. thereafter he is a free man or he not cooperate with Putin and co and he will lose everything.

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I also think they want bashneft cheaply. They say to him, give as bashneft to this price and your free. But i think the share downturn is to much.

 

What makes you think they’ll offer a price? I think they’ll just take the assets for nothing and jail anyone they can get their hands on.

 

sorry to hear you jump ship, I will stay on the way John Templeton told us

 

I think you quoted the wrong person, I’m just watching this from the sidelines.

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sorry to hear you jump ship, I will stay on the way John Templeton told us

 

When you meant me, there is nothing to be sorry about :). Look at the lukoil thread to see how the world in russia looked like 7-8 month ago before the Ukraine crisis. It looked like Putin would be a lot more business friendly in the future etc. And now look at the current dilemma. I see my investment in russia as a failure that cost me no money, so everythings fine.

Think about what will happen in russia with oil prices a lot lower than today. I doubt that any private asset in russia is safe from Putin in such a scenario.

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When you meant me, there is nothing to be sorry about :). Look at the lukoil thread to see how the world in russia looked like 7-8 month ago before the Ukraine crisis. It looked like Putin would be a lot more business friendly in the future etc. And now look at the current dilemma. I see my investment in russia as a failure that cost me no money, so everythings fine.

Think about what will happen in russia with oil prices a lot lower than today. I doubt that any private asset in russia is safe from Putin in such a scenario.

 

When I started that thread I wrote

A final variable well worth considering is the country-risk that Russia presents. The Russian Government has proved its ability to commit folly against Russian oil companies. Ten years ago the Russian Government brought down Yukos Oil swiftly and illegally. When I created a mathematical expectation of Lukoil’s stock performance over time, I did so with the assumption there was a 20% chance that the Russian Government would take Lukoil’s stock price to zero.

 

And then people responded by saying Putin is a maniac. And of course they were right. So I'm not sure what you're talking about.

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And then people responded by saying Putin is a maniac. And of course they were right. So I'm not sure what you're talking about.

 

On page 3 or 4 there is this stuff from Jim Rogers where he talks about russia, and i was at that point in time under the impression that the political situation gets better over time. But it has not improved, it got worse and this is just 10 months ago. So when you discounted the political system with 20%, don`t you think you now have to use a higher discount? And since this discount is not really quantifiable, why is the market wrong with the current discount?

The problem here from my point of view is that when the business gets under pressure the political system gets instable, too. Reminds me a bit of buying on margin.

 

But it was clearly my fault to not see this problems earlier, and i don`t want to blame anyone except me for that. So keep up the good work, i learned a lot!

At BP i underestimated the fines and open business claims, so again this was my fault not anyone else`s.

 

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We haven't seen Lukoil's profit materially decrease because of Putin's madness. So I don't yet see a reason to decrease my valuation. If all out war breaks out in Russia, the market price goes to hell, but Lukoil continues making 9+ billion a year, why should my valuation go down?

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==

JSFC Sistema, the largest publicly-traded diversified holding company in Russia and the CIS, said the acquisition of a 98% stake in OJSC United Petrochemical Company from the group's subsidiary, JSOC Bashneft, has not been completed.

 

It said Bashneft retained ownership of UPC.

==

 

 

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Sistema down another 20% today. Have to say that it's not pleasant to look at all. Now it's priced at 5bUSD EV, which is less than the value of their stake in MTS. There's all kinds of rumors that they need to pay back Bashneft dividends worth some billions, raise cash, Evtushenkov still being in home arrest etc. It certainly does feel at times whether it's a dumb thing to just hold on (not really cash to buy more) even though it looks worse and worse every week. I'm planning on staying with it though, I've got time to wait and see whether the whole thing gets taken away or what happens (looks like it's priced according to Bashneft stake being taken away). Would be very interesting to know who are the entities on the buying side of all these trades.

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