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Ukraine Strategy Weekly: Better Sentiment Following Selling Pressure

Although global equities recovered strongly last week (see below), Ukraine performed poorly due to disturbing local news flow (Russian naval aggression and introduction of martial law). The KP-Dragon index lost 4.0% w-o-w and the local PFTS index fell 1.2% in USD terms but rose 0.4% in UAH. In November, the KP-Dragon index dropped by 3.6% m-o-m but was up 2.4% q-o-q (quite the opposite of global stocks’ performance). Most Ukrainian stocks traded abroad suffered heavy losses. The worst performer was Milkiland, very illiquid and with an already tiny capitalization, plunging by 37% w-o-w. IMC lost 15% w-o-w, JKX was down 13%, Ferrexpo, the volume leader, shed almost 9%, Astarta was off 7.6%, Kernel declined by 4.1%, and MHP managed to close flat. Among domestically traded stocks, Centrenergo rebounded by 6.1%, probably on news of its upcoming privatization auction attracting a number of potential bidders and remaining on track despite the imposition of martial law. Raiffeisen Bank Aval lost 2.5% and Donbasenergo fell 2.1%. Kernel completed the latest round of quarterly results from local agricultural stocks, reporting strong financials. Sales more than doubled y-o-y to $1,140m on record high grain sales, EBITDA swelled to $101m (+119%) on stronger grain & infrastructure and farming segments. Quarterly net profit jumped by 231% y-o-y to $75m, supported by EBITDA growth. Kernel also confirmed its 2019FY farming EBITDA target of $160m, up 80% y-o-y on record crop yields, as well as 2019FY and 2020FY CAPEX targets of $330m and $200m, respectively (incl. maintenance).
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