VTB Capital eyes return to dividends at Evraz, reiterates 'Buy'

Analysts at VTB Capital reiterated a 'Buy' recommendation on shares of Evraz following the sale of its Nakhodka Trade Sea Port subsidiary which, they said, may give the steel-maker the financial power to pay dividends.

Dmitry Glushakov, Boris Sinitsyn and Nikanor Khalin highlighted how the $354.4m finally paid for the assets by the company's largest shareholder, Lanebrook Lmtd. was above the $260.0m which had been bandied about in the Russian press and being 18% above Evraz's current 2018 price-to-earnings multiple of 5.6 was "fair".

Net proceeds from the transaction of $295m equate to 6% of its year-end 2016 net debt and 7.8% of its market capitalisation, which in turn raises the possibility that it will be able to lower its net debt to EBITDA ratio below 2.0 by the end of the first half of 2017.

That, the analysts said, would allow Evraz to pay dividends. A pay-out policy set at 35% of net income might see the company start paying a dividend yield of between 7% and 8%.

The analysts stuck to their 340.0p target price on the stock.