Investment climate - Ukraine: international and domestic investor views. By Dorian Foyil

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Investment climate - Ukraine: international and domestic investor views. By Dorian Foyil

  1. 1. Investment Climate - Ukraine International and Domestic Investor ViewsDorian B. FoyilChairman and CEOFoyil Financial Group
  2. 2. Foyil SecuritiesStrong Local Presence in Ukraine- with International Reach Team of over 40 investment banking professionals Over 15 years as Ukraine’s leading independent brokerage firm Local network provides access to off-market deals Diversified business model with a broad network within Ukraine of both international and local companies Audited according to IFRS standards (Baker Tilley) International investment approach, experience and education. Team members have degrees from: Cambridge University (UK) Wharton School of Business (USA) Duke University (USA) Yale University (USA) New York University School of Law (USA) Texas A&M University (USA) UCLA (USA) University of San Francisco (USA) Duquesne University of Pittsburgh (USA) Westminster Business School (UK) Investment Banking Asset Management Real Estate Sales / Trading Research Custody Services
  3. 3. Foyil Organization Structure Foyil Corporate Finance is a part of the Foyil Group of companies engaged in financial services targeting the emerging markets of Eastern Europe, with special focus on Ukraine: Foyil Group Foyil is wholly owned by its directors and employees. Our employee restricted share plan provides for greater employee ownership over time  Foyil Focused Funds  Equity and fixed-income  Mergers and acquisitions (offshore mutual and 3 sales and trading advisory hedge funds)  On-line trading  Initial/Secondary Public
  4. 4. Milestones in Foyil Group’s Development Foyil begins local operations in Ukraine with first foreign owned full service brokerage, corporate finance and investment bankLaunch of Foyil Ukraine Realty Partners 1996 Foyil Corporate Finance launches Ukrainian OpportunityLtd; a private equity real estate fund Fund, a private equity fund involved in voucherfocused on distressed real estate inUkraine & CIS countries 2010 1997 privatization in Ukraine Launch of Foyil Eastern Europe & 1999 Russia Focused Fund Foyil Eastern Europe & Russia Focused FundFoyil Eastern Europe & Russia Focused Fund 2001 merges with Foyil Emerging Markets Fundrated as a 5-star fund by Morningstar 2008 Foyil Eastern Europe & Russia Focused Fund 2003 merges with Foyil Ukrainian New Europe Foyil Eastern Europe & Russia Focused Fund ranked top emerging markets fund by 2007 Opportunity Fund Morningstar, Bloomberg, CogentHedge, HFM Week and BarclayHedge 2006 2004 Foyil Eastern Europe & Russia Focused Fund ranked 6th in top 10 offshore hedge funds by Standard & Poor’s, April Foyil Eastern Europe & Russia Focused 2005 2004, and 2nd in top 10 offshore hedge funds, May 2004 Fund ranked 1st in Top Fund Scorecard by The Wall Street Journal Asia, Feb 2006 Foyil Eastern Europe & Russia Focused Fund ranked 2nd in Top Fund Scorecard by The Wall Street Journal Europe, May & July 2005 4
  5. 5. Foyil Investor Base Break-down by investor nationality During its history, Foyil has had more than 150 investors, coming from different countries and investment backgrounds. Most of these are long term, continuing relationships Among the notable institutional investors with Foyil are the following:  Deutsche Bank AG, JP Morgan Securities, Kredietbank Luxembourgeoise, Viking Fund Ltd, Lauer & Co, Banco Nominees, Technical Services of North America, Citibank, Free Market Capital, Shimoda Russia, Citco, The Castlestone Fund, Bank Brussels Lambert, Solar Group SA, NCB Trust, Mount Blanc Investments, Tarragona Fund, Deltec Panamerica, Capcor Pension Plan, John Templeton Foundation 5
  6. 6. Selected Corporate Finance Deals Zhydachiv Pulp and Paper PlantIssue of corporate bonds Private Placement Private Placement Investment Advisory Investment Advisory of shares of shares Services Services Financial advisory services Financial advisor on a sale on investment of minority stake opportunities in Ukraine Lead Manager and underwriter Lead Manager Lead Manager Financial Advisor Financial Advisor 2007 2 006 2006 2006 2006 Ukrainian Opportunity Fund Acquisition of Investment Advisory International Tender International Tender Private Placement Kryvyy Rig Cement Services of shares US$ 34,000,000 US$ 55,000,000 Sale of strategic stake Financial advisor Sale of strategic stake in Sale of 81.4% stake into Heidelberg Cement AG on investment and Volyn Cement Rogan Brewery development to Dyckerhoff to Interbrew strategies Lead Manager Sole Financial Advisor Lead Manager Lead Manager Sole Financial Advisor 2004 2003 - 2005 2001 2001 1997 6
  7. 7. Investment Climate - UkraineInternational and Domestic Investor Views
  8. 8. Economic recovery will continue in 2011-2012 Ukrainian economy should grow by 4.8% in 2011 (+5.2% in Q1) External demand for locally produced commodities (mainly steel and agriculture) and machinery should remain stable in 2011 (exports up 50% in Q1) Industrial production should grow by 7.9% in 2011 and remain the major driver of the economic revival Local consumption should additionally fuel the economic growth on the back of reinstating lending and growing disposable income Inflation should total 12% in 2011 and will mainly be driven by increase of utility tariffs for households, rise of excise taxes on alcohol and tobacco and growth of prices on dairy products 8
  9. 9. Exchange rate stable at near UAH 8.00/USD 1.00 Exchange rate will remain stable: National currency (Hryvnia) should remain unchanged in 2011 thanks to stable exports and support of the National Bank of Ukraine USD 38bn of international reserves will smooth fluctuations: Currently, the National Bank of Ukraine possesses USD 38bn of the international reserves. This level is secured by IMF’s USD 15bn stand-by credit arrangement and will suffice to smooth the fluctuations on the local FX market. UAH/USD 9
  10. 10. Government debt at a manageable 36% of GDP Government debt at a manageable level: As of September 2011, Ukraine’s total government debt (direct and guaranteed) was USD 47.1bn, or 30% of 2011e GDP. Ukraine has enough resources to meet maturing obligations in 2011 being additionally supported by USD 15bn loan from the IMF Source: Bloomberg, Foyil est. Gross external debt equals USD 123bn or 76.6% of GDP: 66% of gross external debt pertains to the private sector: USD 27bn belong to banks and USD 54bn to the non-banking corporate sector. Reduced risks have helped Ukrainian banks and companies to reinstate borrowing on the Eurobond market starting from 2011 and to continue the debt restructuring process 10
  11. 11. Ukraine Stock Market Performance Ukrainian stock market was one of the best performing markets in 2010: Ukraine’s benchmark UX index grew by 68% in 2010 However, UX index underperformed its peers in January-September 2011 11
  12. 12. Why hasn’t Ukraine’s Capital Market Developed More? Can you Guess Which Country this Describes? Problems Legal Structure & Credibility Lack many regulations and many Solutions regarding capital markets regulations out-of-date compatible with EU Standards Capital Market Infrastructure Lacking Complete Institutional Infrastructure Domestic Capital Very Limited Permanently growing strength of Institutional Investors Pension funds Investment Funds Modest growth in Individual Investors Foreign Capital Lacking due to low creditability of the Creditability of the country at the country ‘investable’ level of S&P “A” Capital Market Specialists Limited number of persons with good Relative surplus of brokers, analysts and experience most having only theoretical other experienced market specialists knowledge 12
  13. 13. Why hasn’t Ukraine’s Capital Market Developed More? Both are POLAND…Surprised? Problems POLAND - 1989 POLAND - 2011 Legal Structure & Credibility Lack many regulations and many Solutions regarding capital markets regulations out-of-date compatible with EU Standards Capital Market Infrastructure Lacking Complete Institutional Infrastructure Domestic Capital Very Limited Permanently growing strength of Institutional Investors Pension funds Investment Funds Modest growth in Individual Investors Foreign Capital Lacking due to low creditability of Creditability of the country at the the country ‘investable’ level of S&P “A” Capital Market Specialists Limited number of persons with Relative surplus of brokers, analysts good experience most having only and other experienced market theoretical knowledge specialists 13
  14. 14. Poland’s use of Mandatory Pension ContributionsCould Ukraine Benefit as well? Assets under Management US$bn – Polish Pension Funds 40,0 30,0 20,0 10,0 0,0 2001 2002 2003 2004 2005 2010 Assets under 3,1 6,7 9,8 11,6 19,0 40,0Management US$bn 14
  15. 15. Ukrainian Company Public and Private Placement update Over the past six years, Ukrainian companies did 66 share placements raising US$3.8bn  80% of placements were by foreign-registered holding companies of Ukrainian entities  Most placements were listed in Warsaw and London followed by Frankfurt Most Ukrainian placements were done prior to 2009; however, a number of larger IPOs have happened in the last two years 15
  16. 16. Major 2008-2009 placementsDominated by AgricultureCompany Sector % $ Date MarketMyriya Agriculture 20.0% $90.0m June 2008 FrankfurtSintal Agro Agriculture 15.0% $34.5m August 2008 FrankfurtMHP Agriculture 19.4% $322.5m May 2008 LondonLandkom Agriculture 5.4% $22.0m March 2008 LondonLandkom Agriculture 10.0% $3.5m March 2009 LondonMCB Agricole Agriculture 24.4% $56.0m March 2008 FrankfurtAgroton Agriculture 25.0% $42.0m November 2009 Frankfurt 16
  17. 17. Major Ukrainian Foreign Placements - 2010 and 20112010 Placements – Just three… Company Sector % IPO size $ EBITDA Date Market Kernel Agriculture 6.3% $81.4m 9.9x April 2010 Warsaw Avangard Agriculture 20.0% $188.0m 6.8x April 2010 London Agroton Agriculture 26.0% $54.0m 5.9x October 2010 Warsaw2011 has been activeCompany Sector % IPO size $ Comment MarketCoal Energy Mining 25% $78m WarsawIndustrial Milk Agriculture $30m WarsawKSG Agro Agriculture 33% $40m WarsawMilkiland Agriculture $70m WarsawOvostar Agriculture 25% $33m WarsawSadovaya Mining $31m WarsawValinor Public Agriculture CANCELLED WarsawViOil Agriculture CANCELLED WarsawWesta Industrial 25% $47m Warsaw 17
  18. 18. The Greek Default?…what does the Market Say?Greek 1 Year Government Bond Yields 1 Year Greek Gov’t yields now at 131% 18
  19. 19. Dorian Foyil – Chairman & CEOFoyil SecuritiesVerkhniy Val 4A04071 KyivUkraineTel: +38 (044) 393 2313Fax: +38 (044) 393 2314 www.foyil.com 19

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