MOSENERGOSBYT: Downgrade on Deteriorating Corporate Governance and Financials

Target price reduced, downgrade to SELL. We have incorporated into our model all of the recent decisions made by Mosenergosbyt’s board of directors. We also use the most recent information on net cash (as of 1Q12), and deduct the RUB3.6bn transfer of funds (discussed in this note), and the RUB3.8bn dividend pay-out (record date set at 15 May). Our DCF valuation suggests a 12M target price of $0.0128 (a decrease of 48% from our previous 12M TP) and potential downside of 5%. We see no potential strong stock drivers for the company in the near term and lower our rating from Buy to SELL.

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