Updated September 23, 2008

JSC TransContainer’s IPO planned for 2008-end should have become the acid-test ratio of the investors’ interest in the subsidiaries of Russia’s Russian Railways JSC (RZD). However, the dire condition of the stock market has made the company to put off the placement to 2011. The IPO of another RZD’s subsidiary – RefService – is put off as well. The experts are puzzled concerning the duration of the pause, since, in their opinion, the market will recover earlier. So, at the moment, RZD has to look for other ways of facilities attraction.

On September, 22, RZD CEO Vladimir Yakunin reported that the company had put off the stocks placement of its affiliates – JSC TransContainer and JSC RefService (specializes in transporting freights in insulated rolling stocks) – to 2011. According to him, the decision is a reaction to the situation at Russia and world’s stock market. “We are not targeted at selling these stock holdings for any price, and we are ready to postpone the transactions for the later term”, the senior Vice President of RZD Feodor Andreev added. He marked also that the decision on the sale would be taken on the basis of the situation at the Russian and international financial markets.

In TransContainer marked that they didn’t receive yet any official documents concerning this issue. Deputy CEO of RefService company Oleg Bogomolov reported that he wasn’t aware of the new decision of RZD’s management. “RZD directors’ board has ratified the sale of 25% plus one stock of RefService within the open auction that will take place at 2008-end. All documents are prepared already, and at the moment, we are waiting for Russia’s government authorization to hold this auction. Moreover, according to our data, as soon as we receive it, the auction will be held”, Mr. Bogomolov explained. In RZD refused to comment further.

TransContainer JSC should have become the first RZD’s affiliate to separate. Three stages of placing company’s stocks were announced: the private placement, the IPO on MICEX (Moscow Interbank Currency Exchange) and RTS (Russian Trading System) and the sale of additional issue of stocks and RZD’s stock holding (it should have reached 51% by this moment). The private placement has been held already: at the beginning of this year, about 15% of TransContainer stocks were sold to the EBRD (European Bank for Reconstruction and Development ), Moore Capital Management, LLC, GLG Emerging Markets Fund and Troika Dialog Investments Limited. Thus, Mr. Andreev said earlier that in 2009, TransContainer intended to place 14-19% of stocks at the London Stock Exchange (LSE). At the end of the previous year, the deputy head of the Ministry of Economic Development and Trade (MEDT) Kirill Androsov said that RefService would hold its IPO in 2008.

The experts were not surprised at Mr. Yakunin’s decision, and specified that there wasn’t any sense to hold IPOs considering the dire market situation, however, the suspension period was too long. So, Mikhail Sayno from BrokerCreditService supposes that the placement could have been postponed to the mid of 2010. According to his opinion, by this term, the market will recover fully. Ivan Zavadsky from Kapital Investment Company agrees that it is the reinsurance date. “RZD will have to find another way of receiving money, and probably, it may be one or several private placements”, the expert says. The head of InfraNews agency Aleksey Bezborodov adds that, probably, Mr. Yakunin has outlined the new direction of the company’s policy concerning assets sale. “I think that RZD both has suspended the IPOs and will put off other sales of its subsidiaries. It is hard to sell them under the good market situation to say nothing of the current condition”, the expert says.

Updated September 15, 2008

   Strikeforce Mining and Resources Ltd. (SMR) (owns mining assets of Basic Element Company and belongs to the top billionaire Oleg Deripaska) can become the first Russian company that will hold IPO at the Hong Kong Stock Exchange. Early in October, SMR will present the oncoming IPO in Hong Kong.

   The company plans to attract nearly $200 million, and to place 25% of stocks at the Hong Kong Stock Exchange (HKSE). Bank of China and Morgan Stanley act as managers of IPO.

   In the opinion of Veles Capital Company’s analyst Stanislas Fomenko, nobody will invest in the new stocks at the London Stock Exchange, where SMR could be placed. The core reason is the financial crisis in the USA. "Therefore, the company has decided to enter the Asian floors, where the investors will take probably more interest in the Russian player", the expert considers.

   Metropol Company’s analyst Maxim Khudalov considers that at the moment, it is the terrible period for the placement. "The securities of almost all companies are undervalued", the expert is convinced. "Obviously, Russia’s SMR faced the shortage of money. Probably, Basic Element’s subsidiary didn’t manage to take loans in the banks, therefore the only thing it had is to place stocks at a stock exchange".

   According to the analyst, as a rule, the mining companies are holding their IPOs at the European floors, since investors take major interest in them there. "Obviously, the HKSE has easier procedure of registration, therefore SMR has entered the Asian floor to accelerate the process of money receipt", Maxim Khudalov supposes. "However, on the background of the negative situation at the stock market, and in the light of the foreign policy statements of the US authorities over Russia, I fear that the company will not manage to attract the required sum".

Updated September 1, 2008

   The major Russia’s producer of steam coal – the Siberian Coal Energy Company (SUEK) – can hold IPO at the London Stock Exchange (LSE) already in 1Q of the next year. The extraordinary meeting of the company’s stockholders should approve the additional issue of stocks that will obviously take part in the IPO. The experts say that the industry situation is quite favorable, and estimate SUEK at $6-7 billion; still they don’t forecast the results of the placement because of the dire situation at the stock market.

   On Friday, August, 29, SUEK reported that the company’s stockholders would consider the conducting of the additional issue of stocks by the private subscription during the extraordinary meeting of stockholders on October, 6. The meeting will be held in lieu. The parameters of the future additional issue are not discussed. "They will be approved by the directors’ board about 20 days before the stockholders’ meeting", as the source in SUEK reported. The source in the company says that the additional issue is related directly to the plans of holding the IPO. He reminds that the managers are chosen: they are Citibank, Renaissance Capital and Morgan Stanley, and the mandates with them will be signed in September. Probably, the placement will be held at the London Stock Exchange (LSE), and the approximate date is 1Q of 2009.

   SUEK is the largest producer of steam coal in Russia, and the company occupies the 7th place in the Top-10 of the world companies belonging to this sector. In 2008 SUEK plans to extract about 95 million tons of coal. SUEK owns the coal assets, as well as the stockholdings in TGC-12 and TGC-13. Andrey Melnichenko and Sergey Popov control SUEK through Donalink Ltd pari passu.

   SUEK doesn’t expose the additional issue volume and the parameters of the placement. Still, the investment bankers name two possible schemes. The first one -a depositary bank that will place GDRs (Global Depositary Receipt) among the investors receives the additionally issued stocks. So, in this case, the stocks of the new issue will take part in the IPO. The second one – SUEK’s stockholders, Andrey Melnichenko and Sergey Popov, will bring old securities to the stock exchange, and then will transfer to the company’ balance sheet either some part or all received facilitates via the additional issue. In the last case, the stockholders can share the money flows between themselves and the company.

   The investment bankers estimate cautiously SUEK’s prospects. On the one hand, in 2009 the situation at the coal market will be less favorable as compared to this year. According to the director of UBS’s analytical department Alekesy Morozov, the steam coal market faces the structural surplus that would hardly disappear in the next year. The core reason is the move of People’s Republic of China to the net importers of coal. The spot prices are already higher than the contract ones, and this fact points at the surplus presented at the market. According to the forecasts of UBS, in 2008 the world price for steam coal attains $125 per ton, in a 2009 it settles at $160 per ton. SUEK takes advantage of the fact that now the stocks of only Russian companies specializing in the coking coal instead of the steam coal are traded at the market: Raspadskaya and Yuzhny Kuzbass. There are no valuable Russian securities of the steam coal sector at the market. The Bank of Moscow’s analyst Dmitry Skvortsov estimates SUEK’s fair value at $6-7 billion.

   Nevertheless, Aleksey Morozov states that the situation at the stock market is unclear. Dmitry Skvortsov reminds about the other possible risks. "Mechel’s case influenced on the overall mining and metallurgical sector and resulted in the quotations’ fall". Moreover, according to the expert, since the beginning of the year the securities of the energy companies, OGCs and TGCs foremost, fell twice or even trice on the background of the market fall of 30%. Finally, the political risks also influence negatively on the securities of the Russian companies – Russia’s participation in Georgia-South Ossetia war conflict and the confrontation with the West

Updated August 18, 2008

   N-Trans Group of Companies consolidated its port assets under the structure named Global Ports by analogy with the railway company Globaltrans, 29% of which the Group sold on the LSE in spring. But N-Trans has probably to put off Global Ports’s IPO because of the unfavorable market situation.

   On August, 17, N-Trans Group of Companies (former Severstaltrans) reported about the completion of its port assets’ consolidation. Global Ports Investments (GPI), incorporated in February on Cyprus, became the owner of the second and the third largest container terminals in St. Petersburg’s seaport – Petrolesport and Moby Dik; Yanino in the Leningrad area, the logistic container terminal; the Vostochnaya Stevedore Company (VSC), the largest container terminal in the Far East; as well as two terminals in Finland (Multi-Link Kotka and Multi-Link Helsinki) and five land terminals in Finland and Poland. The co-owners of such terminals as Moby Dik, Yanino and the Finn Multi-Link are the Finn-Norwegian operator Container Finance Oy (50% in each) and the Arab Dubai Ports World that owns 25% in VSC. Moreover, GPI’s assets comprise 50% of N-Trans’s stocks in the Estonian oil products transshipment terminal Vopak E.O.S (VEOS).

   "The successful placement of the railway business has obviously inspired N-Trans’s stockholders", the head of Ingosstrakh-Investments analytical department Evgeny Shago says. In May, the Group held Globaltrans’ IPO on the London Stock Exchange (LSE) that consolidated the part of its railway assets. On the background of the unfavorable market situation, 29% of Globaltrans’s stocks were sold for $449,5 million, and the placement became the largest Russian IPO since the early year. However, the intentions about placing Global Ports in N-Trans are not announced. "We consider various options of our projects’ funding, and stocks placement is only one of them", N-Trans press secretary Anna Vostrukhova said, and added that the decision about IPO holding would be based on the analysis of the current market situation.

   Head of Infranews research agency Aleksey Bezborodov is sure that N-Trans’s container terminals have the highest industry indices by capacity and the company doesn’t have any obstacles for entering the stock exchange. "But the company managers will not make any statement till the war in South Ossetia ends", as the expert supposes. Evgeny Shago adds that on the background of the world financial crisis the Russian assets go down, though the ports are "fundamentally" attractive for investors. "A year ago one could estimate the Group’s port assets at $300 million, but now they cost about $100 million", the analyst says. He also reminded that after the stocks of Novorossiysk Commercial Sea Port (NCSP) were placed in October of the previous year, they were stably falling, and now they are traded 58,6% lower of the placement price. In Mr. Shago’s opinion, Global Ports’s IPO takes place sooner or later, as the company has available facilities, and it can wait till the market situation improves.

Updated August 5, 2008

Metalloinvest Holding controlled by Alisher Usmanov has first published the consolidated reporting by international standards. Financial indices have coincided with analysts’ expectations who consider that the reporting publication is the first Metalloinvest step to IPO. It takes place in autumn, and judging from the forecasts of the holding management, according to 2008 results Metalloinvest can be estimated at about $34 billion.

On Augusts, 4 Metalloinvest for the first time published its consolidated reporting by IFRS (International Financial Reporting Standards) for 2007. As per the holding data, its net income grew 2,4 times to RUR 29,5 billion (judging by average annual 24,7 dollar rate in 2007 – $1,2 billion), EBITDA tripled to RUR 59,48 billion ($2,4 billion), revenue tripled as well – to RUR 164,7 billion ($6,67 billion). The company net debt totaled $4, 2 billion. In 2007 the volume of iron ore output reached 41 million tons, thus Metalloinvest took 4th place by this index among the world mining companies.

On the whole, Metalloinvest information has coincided with the analysts’ expectations. Dmitry Smolin from Uralsib Financial Corporation considers that the reporting is "good", and debt load level (net debt ratio to EBITDA is under one) of Metalloinvest is low. Analysts were surprised to find out that the reporting was published at all. "The fact Metalloinvest has revealed its financial information confirms the company prepares to enter the capital market. It is the first step to IPO and mergers and acquisitions transactions", as Uralsib analyst Dmitry Smolin says.

At May-end Metalloinvest controlling owner, Alisher Usmanov, confirmed the holding was considering the opportunity of the public offering. Moreover, Metalloinvest is involved in talks on two mergers transactions at once – with Kazakhmys and MMC Norilsk Nickel. Alisher Usmanov’s Gallagher Holding has agreed a deal with Vladimir Potanin’s Interros (he owns around 30% Norilsk Nickel stocks) about strategic partnership in mining projects. Metalloinvest needs public assessment for any of these merging. Therefore, the holding prepares to hold IPO at the same time. As it has been already reported, IPO will be held on the Russian stock exchanges and on London Stock Exchange. It is planned to sell no less than 10% Metalloinvest stocks to investors, and IPO has been preliminary set to October-end – early November. However, as sources in investment banks say, The terms can be put off because of the market collapse.

Metalloinvest published reporting forms positive background for IPO. In the meantime, as analysts say, last year indices are more important for IPO, and moreover, the holding revenue will obviously grow of a boom at the iron ore market. According to a source close to Metalloinvest, in 2008 the holding plans to receive $11 billion profit, EBITDA – $5,2 billion. Dmitry Smolin says it is quite possible. "In 2008 prices for iron-ore raw materials and steel will grow by 50% at the internal market of Russia", as an analyst explains. As per UBS estimations, if to use EV/EBITDA multiplier of the company VALE (6,6), Metalloinvest is estimated at $34 billion without net debt.

Metalloinvest has to receive high public assessment of one more aspect: on the background of raw material companies growth MMC Norilsk Nickel capitalization falls of nickel prices drop. When Alisher Usmanov and Vladimir Potanin had been signing their memorandum, Norilsk Nickel capitalization totaled around $55,3 billion, and on Augusts, 4 – $41,9 billion. So, in terms of possible merging, Mr. Usmanov can expect getting larger stake in the amalgamated company (at May-end it has been going about 25%). Moreover, Mr. Potanin, who wanted to purchase 25% Metalloinvest stocks, should pay the partner $8,5 billion, while his stake in Norilsk Nickel is estimated at $12,57 billion now.

Updated August 4, 2008

   JSC TransContainer business, the largest Russia’s container railway operator, is rather attractive for investors, therefore they will be interested in the company initial public offering (IPO). Such was the opinion of Troika Dialog analyst Kirill Kazanli, who commented the decision of JSC Russian Railways (RZD) directors’ board to hold TransContainer IPO in October current year.

   According to him, this company is engaged in containers transportation by railways, and this business continues to demonstrate favorable growth dynamics. "According to the data of FESCO transport group, container transportations grow by around 20% a year. And one of the largest transporters in Russia will for sure take part in this growth", as Kazanli said.

   He marked that unfavorable market situation will certainly influence IPO results, and this year it goes not as smoothly, as it would have been in autumn last year, but still the business interest will be quite high.

   Analysts do not eliminate that many companies that have infrastructure funds and focus on infrastructure projects will participate in TransContainer stocks purchase. This will be the second Russian railway asset proposed to IPO, after Globaltrans company that has successfully held IPO at London Stock Exchange this year. Judging by this placement, the western companies take great interest in such assets. Therefore, foreign investors as well can take active part in a deal of TransContainer stocks sell.

   As reminded Mr. Kazanli, RZD management had more than once declared that IPO would be held in two stages: first – in autumn current year on the Russian stock exchange, second – in 2009 on one of the foreign stock floors. "If not this year, than next one the foreign investors will take active part in TransContainer IPO", is sure Troika Dialog analyst.

   We will remind that on Friday, August, 1, JSC Russian Railways directors’ board affirmed sale of TransContainer stockholding within October current year. As reported in RZD before directors’ board meeting took place, would be considered parameters according to which no more than 20% of stocks of TransContainer authorized capital would be sold.

   Within press-conference held on July, 31, JSC RZD president Vladimir Yakunin confirmed that stocks of the subsidiary company could be proposed for IPO in 2008-2009. "We will examine the market situation and offer stocks when we find this rational from economic viewpoint", as he said. IPO managers are already chosen: Morgan Stanley, Troika Dialog Investment Company and TD Investments Limited. This decision was taken during annual stockholders’ meeting on June, 28, and its protocols were signed on July, 11, as it was said in TransContainer report. It is planned that within IPO the company can offer up to 2 778 955 stocks (20%) at RUR 1 000 nominal value. Minimal price per one stock totals RUR 2 974, and as a result the overall sum can attain no less than RUR 8 264,6 billion (around $ 350 million).

   Analyst of Renaissance Capital Investment Company, Edward Pharitov, had earlier commented the decision of the annual stockholders’ meeting, and marked that TransContainer had all opportunities to realize the task of getting such sum in terms of the current situation. Meantime, the analyst answered the question, whether the company could expect capitalization increase to $3,2-3,4 billion within IPO, as RZD representatives had declared earlier, and earnings growth to $680 million respectively, as saying that everything would depend on the market terms and on investors "appetite".
JSC TransContainer is JSC Russian Railways subsidiary, container operator. The company was established in March, 2006 on the basis of JSC RZD branch – the Center for Container Transport (TransContainer). Currently, the company operates the largest rolling stock in Russia (owns 23 000 container platforms) and park of multi-tonnage containers (48 000 units). Also, the company owns 47 terminals in all freight traffic centers of Russia.

Updated July 14, 2008

Vysochaishy OJSC, gold-mining company, has twice tried to hold IPO, but gave the idea up. And it has made the right option: now the company securities are more expensive.

Vysochaishy stocks’ placement at LSE was set to early 2007, but then it was put off to May. However, it never took place. Then Vysochaishy stockholders were afraid of the competitor – Polyus Gold OJSC – that could purchase the major issue part through agents. At that moment, according to calculations of MDM-Bank analysts, the company cost $350-450 million. And one and a half year on Vysochaishy OJSC was already estimated at $650 million.

However, there is some ambiguity with the current gold-miner attempt to hold IPO. The company chief executive Sergey Vasiliev marks that within stockholders’ meeting has been taken a principle decision to enter a stock exchange, and the owners currently discuss IPO volume, additional issue opportunity, terms and placement location.

The company owners comprise: Sergey Dokuchaev, Natalia Opaleva and Valerian Tikhonov own in 22,08% stocks, and they come from Lanta-Bank CJSC. Lenzoloto OJSC (Polyus Gold structure) and Brishurt Limited (Tatyana Zotova owns 95%) own the same interests – in 6,72%. And 5,76% more owns Vladimir Kochetkov.

Vysochaishy is holding talks with the international company SRK to order the technical audit of mineral resources. Such audit conduct is an obligatory condition to enter the western stock market. Reporting of supplies is valid six months, thus, if estimation is due by year-end, Vysochaishy should hold IPO within first months 2009.

According to Federal Service for Financial Markets act that has come to force recently, non-strategic issuers can place no more than 30% stocks for circulation abroad. But Vysochaishy owners would hardly place more, and in this case there is a serious risk of control loss over the company.

Will Russia’s gold-miner securities be in demand? "Quite often investors abroad prefer to invest into the Russian coal, oil and gas assets or fertilizers’ producers", considers UniCredit Aton analyst Marat Gabitov. "Quotations of the Russian gold-miners have fallen, but the American companies’ indices have grown. It is hard to explain why it happens so". On the other hand, the world liquidity crisis can play into the hands of precious metals’ producers. "Investors reassess the whole range of investment risks, and on the background of expected high inflation an opportunity to invest into "the eternal" metal can be a prospective idea", reasons head of Otkrutie FC analytics department Khalil Shakhmametiev. "Troy ounce is already traded at $930 level at mercantile exchanges of New York and London and it is quite possible that in future the price grows".

   Alisher Usmanov mining and metallurgical holding Metalloinvest JSC has chosen banks-managers of the coming IPO. As it became known, VTB Capital, VTB Bank subsidiary that has been established three months ago, is listed among them. Metalloinvest stocks placement becomes the first full IPO held by VTB Investment Bank.

   Top-managers of some banks told that Metalloinvest Holding JSC had chosen managers to place stocks. "Merrill Lynch, Credit Suisse and Deutsche Bank have been chosen as global deal coordinators, and VTB Capital and Renaissance Capital become joint deal book runners (placement managers engaged in bid book maintenance)", says large investment bank top-manager. According to investment department head of another bank, "Alisher Usmanov had meetings with Renaissance Capital chief executive and VTB Bank president, and after these talks a decision to appoint these companies as joint deal book runners had been taken, although their participation was not planned at first". "We consider all options of investments attraction", commented the information about forthcoming IPO in Metalloinvest press-service. In press-services of VTB Capital, Renaissance Capital, Merrill Lynch, Credit Suisse and Deutsche Bank refused to comment.

   As sources say, placement of Metalloinvest securities is planned to October-end – early November. According to head of investment bank, IPO will be held at the Russian stock exchanges, and at London Stock Exchange as well.

   "No less than 10% from the authorized capital will be offered to investors, and IPO volume can reach $3 billion depending on the company estimation", confirms another investment banker. According to calculations of UBS analytical department head Aleksey Morozov, current Metalloinvest capitalization is $25 billion. "By year-end the company can be estimated at $30 billion taking into account prices for raw materials", adds Bank of Moscow analyst Dmitry Skvortsov. Investment bankers mark that additional issue will not be conducted within placement, and current stockholders will place their interests.

   Metalloinvest Holding JSC comprises Lebedinsky GOK (Mining and Processing Plant), Mikhailovsky GOK, Oskol electrometallurgical plant and Ural Steel. They produce around 6 million tons of steel and around 40 million tons of iron ore raw materials (40% of the Russian production). Metalloinvest earnings is around $5 billion. Alisher Usmanov owns 50% in the company through Gallagher Holdings Ltd, fund of Andrey Skoch, State Duma deputy, owns 30%, and Vasiliy Anisimov owns 20%.

   "Metalloinvest JSC has to hold IPO to estimate the company business in the run-up to a possible amalgamation deal with Norilsk Nickel JSC", supposes Dmitry Skvortsov. As it has been already reported, Gallagher Holdings Ltd and Interros have agreed on joint mining and metallurgical company establishment on Metalloinvest and Norilsk Nickel basis (around 30% at Interros). Interros has already applied to Federal Antimonopoly Service to purchase 25% plus one stock of Metalloinvest. Thus, sources close to both businessmen did not eliminate Metalloinvest securities’ buy-off by Interros within pre-IPO process. "Metalloinvest did not make an offer yet concerning pre-IPO", said Interros representative Larisa Zelkova.

   Market participants are not surprised with VTB Investment Bank participation that has been established only three months ago in deal of Metalloinvest placement. "As a rule, the banks that give loans acts then as IPO managers", marks Aleksey Morozov. Alisher Usmanov has been VTB Bank client for long. In 2005 VTB Bank gave him a $1 billion loan to purchase Mikhailovsky GOK. The businessman paid his loan off in time, and that allowed the bank not only to extend a credit line, but to double its volume. Last year VTB Bank has taken a decision to open RUR 50 billion credit line for seven years term to Gazmetall CJSC, where Alisher Usmanov is the core stockholder.

   Metalloinvest IPO becomes the first full placement with VTB Capital Bank participation. Around two weeks ago VTB Bank president Andrey Kostin declared, "We have already signed two mandates to participate in deals as a book runner, and three mandates to participate as a joint-lead manager". According to data of sources in investment banks, within participation as joint-lead manager, VTB Capital Bank experts prepare analytical researches to place stocks of agroindustrial holding Razgulay OJSC and UralChem OJSC.

   Andrey Kostin also marked that VTB Bank was ready to spend $500 million for VTB Investment Bank development. However, according to sources, it has been planned that investment bank reaches its return within second or third year of work, though this can happen even earlier. "Now heads of many investment banks fear a competition from VTB Capital Bank part, as except for high skilled specialists and extensive corporate clients’ base, VTB has large opportunities of lending", sums up investment department head of one large bank.

   Naspers Holding that owns around 33% of Mail.ru has exposed the portal financial results for 2006-2007. As it turned out, Mail.ru profitability by EBITDA margin had exceeded almost twice Google index and almost six times – Rambler’s one. Banks, with which Mail.ru had been holding talks about IPO organization, estimated the portal at $2 billion. Judging by the company reporting this value corresponds the unprecedented multiplier – 56 EBITDA.

   Mail.ru financial results were published in the reporting posted on Naspers website, the South African media holding. As it is stated in the reporting for 2008 fiscal year (ended on March, 31), in 2007 calendar year Mail.ru earnings grew by 90% to $55,8 million (see Table 1). And EBITDA grew by 94% and totaled $36 million for the same period. Rapid earnings growth did not influence the profitability drop – if in 2006 EBITDA margin was at 63,1% level, in 2007 – 64,5%. Mail.ru revenue is rather high as compared to the analogical indices of its competitors: Google EBITDA margin – 35,9%, Rambler – 11% (see Table 2).

   As it is said in the reporting, 68% of Mail.ru earnings falls to media advertising and only 14% – to context one. The rest 18% falls to various partnership projects, fee-based services etc.

   According to the reporting data, Mail.ru monthly audience totals 52 million unique users worldwide. Number of active email users attains 41 million people (in September, 2007 this index was 30,7 million). On comparison, "My World" online community audience is 13,5 million people.

   Offshore Netbridge Ltd (beneficiaries structure is not exposed) owns 100% of Mail.ru OJSC. It is only known that 33% of the offshore controls Naspers Ltd, the rest belongs to Digital Sky Technologies fund owned by businessman Yuriy Milnera and the US Tiger Global Management.

   In May Mail.ru stockholders were holding talks with Citibank, Goldman Sachs and Credit Suisse about stocks placement on the London Stock Exchange by the year-end. Sources in these banks stated that Mail.ru was going to sell stocks at all company value $2 billion. This price corresponds almost 56 EBITDA of the company for 2007. "Multiplier higher than 40 EBITDA is almost impossible. Even 25 EBITDA is much. Mail.ru can cost $1,2 billion at rough estimation", as considers Moorgate Capital chief executive Andrey Zubkov. But Uralsib Financial Company analyst Konstantin Belov is sure that Mail.ru costs more. "Rambler EBITDA was $7,6 million in 2007, thus, the company costs $400 million now, i.e. its multiplier is around 52 EBITDA. In this case Mail.ru can cost $1,8 billion", as calculates Mr. Belov.

   According to an analyst, dependence of Mail.ru earnings on one of its resources can discount a price, while new popular projects that can quickly take large stake at the advertising market appear in the Internet. "For instance, online communities that have become the most visited websites of Ru.net within the few months. And there is the risk that Mail.ru grows slower than the market", explained Konstantin Belov.

   However, currently Mail.ru demonstrates positive dynamics of users visits. According to TNS Gallup Media data, in March Mail.ru was leading in Ru.net by the daily all-Russian audience on weekdays (number of users that have only once a day visited this website): 5,85 million against 5,56 million people of Yandex. However, Yandex was still leading by weekly and monthly scope. In May Mail.ru already became the absolute leader: daily Mail.ru scope attained 6,48 million users, weekly – 11,54 million, monthly – 14,9 million. Yandex has the analogical May indices – 6,12 million, 11,45 million and 14,69 million of users respectively.

Mail.ru financial results

Source: Naspers Ltd.

Financial indices of the largest public Internet companies

* Enterprise value

Data of capitalization is given as of June 26, 2008, earnings and EBITDA – for the whole year ended on March 31, 2008.

Updated June 5, 2008

   By IFRS (International Financing Reporting Standards) Fesco transport group net income in 2007 totaled $103 million, and that is by 58% more as compared to the analogical index last year. Consolidated proceeds grew by 51% to $872 million, EBITDA – by 138%, to $267 million.

   In August Fesco plans to hold another additional emission of stocks. Parameters will be announced at the end of June or early July. Both current Fesco stockholders and institutional investors plan to take part in additional emission.

   "Las year driver of financial indices growth was the purchase of JSC Commercial Port of Vladivostok and National Container Company", as supposes Otkritie Brokerage House analyst Kirill Tachennikov. "In 2007 stake of marine transportations went by 60% down, though in 2006 it was 90%. Port and terminal services are at the forefront by profitability. Facilities attraction by means of additional emission saves the company from debt load increase and that is clearly a plus for the company, but capital watering will not provide with fundamental factors for capitalization growth and will result in decrease of stocks’ market value".

   UniCredit Aton company analyst Elena Myazina considers that reissued transport company stocks were quite attractive and would find the buyer. Mikhail Sayno from BrokerCreditService consents with her. "Fesco operating indices’ growth outstrips industry average rates, as the group develops the most prospective activity types – container transportations and terminal services. Transport assets are currently quite expensive, and investment projects in the container transportations area, as well as port infrastructure, promise high return of capital employed. Therefore, facilities attracted from additional emission will outweigh a negative effect related to stockholders’ stake decrease in Fesco capital".

   Fesco transport group, established on the basis of Far Eastern Shipping Company, is the leading intermodal operator specializing in marine, railway and truck transportations, as well as port services. In 2007 container operations’ total volume of all companies incorporated in the group exceeded 2 million TEU. Fesco transport group incorporates the range of large industry companies, such as Far Eastern Shipping Company, Transgarant, National Container Company, Commercial Port of Vladivostok. Fesco group market capitalization is $2,7 billion.