Novorossiysk Commercial Sea Port Still growing, despite the crisis

Full-year results in line with forecasts. The group has released cargo volumes for FY08. Overall, these were up 2.8% YoY to 81.663mnt, driven mostly by new grain, light petroleum and container capacity. The most notable development was in containers, where cargo volumes increased 46% to 381,000 TEUs. The results were broadly in line with our full-year forecast, which was for cargo volumes of 81.8mnt. Volumes of crude oil were marginally lower than we anticipated, but this was offset by a better result in grain and general cargoes.

 
__ December trends are encouraging. These results suggest that trading did not deteriorate significantly in December, despite the crisis. Container handling was down, but not materially, and some of the decline is likely to be due to seasonality, in our view. Elsewhere, new capacity additions allowed the group to continue growing. Petroleum volumes in December increased 25.6% MoM and grain handling was up 15% MoM, for example. This gives us confidence in our forecasts for 2009, which assume a fall in overall cargoes of 1.1% YoY.

 
__ Valuation is supportive. The stock is up 88% since our initiation on 2 Dec 2008, but valuation remains compelling, in our view. It trades on a 2009E EV/Sales of under 3x (vs the global average of 4x) and our DCF-derived target price of 0.16/share ($12/GDR) still leaves over 100% potential upside.