Gazprom Neft OAO Sponsored ADR (US OTC:GZPFY) February 21, 2015

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Implied Price
NEUTRAL
9.94 22.69
BA
A Price as of Close Feb 19 14.09 USD
B CapitalCube Median Implied Price 15.53 USD * CapitalCube Price is over trading range * CapitalCube Price is below trading range
CapitalCube Estimate Range 12.06 - 19.00 USD NA
52 Week Range 9.94 - 22.69 USD
Fundamental Score
 0  100
BA
A Fundamental Score (GZPFY) 63
B Fundamental Score(Peer Median) 63
Dividend Score
 0  100
BA
A Dividend Quality Score (GZPFY) 50
B Dividend Quality Score (Peer Median) 50
Dividend Yield
1.70 7.30
BA
A Dividend Yield (GZPFY) 7.30
B Dividend Yield (Peer Median) 5.94
Analysis
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Fundamental Analysis

Capital Investment Strategy The company's level of capital investment seems appropriate to support the company's growth. Supporting Growth

Supporting Growth: Companies where 3 year changes in Capital and sustained Operating Returns (3-year average ROIC) are both above the peer median, suggesting that they are properly reinvesting in a strong performing business.
The company's level of capital investment seems appropriate to support the company's growth.

Earnings Leverage Compared with its chosen peers, changes in the company's annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.

Compared with its chosen peers, changes in the company's annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.

Leverage & Liquidity GZPFY-US might have enough interest coverage to take-on additional debt prudently. Some Capacity

Some Capacity: Companies that have some debt capacity based on interest coverage greater than a 2.5x threshold, even though D/EV exceeds a 25 % threshold, suggesting there is some additional borrowing capacity available.
GZPFY-US might have enough interest coverage to take-on additional debt prudently.

Relative Valuation Gazprom Neft OAO Sponsored ADR's current Price/Book of 0.48 is about median in its peer group.

Gazprom Neft OAO Sponsored ADR's current Price/Book of 0.48 is about median in its peer group.

Valuation Drivers GZPFY-US's operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.

GZPFY-US's operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.

Drivers of Margin The company's margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.

The company's margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.

Growth Expectations While GZPFY-US's revenues growth has been below the peer median in the last few years, the market still gives the stock a PE ratio that is around peer median and seems to see the company as a long-term strategic bet.

While GZPFY-US's revenues growth has been below the peer median in the last few years, the market still gives the stock a PE ratio that is around peer median and seems to see the company as a long-term strategic bet.

Operations Diagnostic GZPFY-US's relative asset efficiency and net profit margins are both around the median level.

GZPFY-US's relative asset efficiency and net profit margins are both around the median level.

Sustainability of Returns Over the last five years, GZPFY-US's return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.

Over the last five years, GZPFY-US's return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.

Likely Corporate Actions

Dividend Action

While GZPFY-US has a medium quality dividend and a moderate cash cushion, its relative operating performance is not strong enough to suggest an increase in the dividend.

Equity Action

While the company's share price is sufficiently below its 52-week high (currently about 37.92% below) a share buyback may not be justified by fundamentals as that would increase its leverage (debt to market capitalization), which is already higher than the peer median.

M&A Action Target

Target: The company could be potentially acquired because of its current size and valuation. For more information, please refer to the Corporate Actions report.
GZPFY-US's relatively small size (by book value) suggests that it would be tougher for it to be able to make meaningful acquisitions within this peer group.

Dividend Quality

Dividend Coverage Moderate

The ending cash balance, with a dividend coverage of 1.88x, provides a moderate cushion in case of a significant reduction of cash flows in the future.

Dividend Quality Medium Quality

Medium Quality: Dividends that are not fully covered from operating and investing cash flow and require an additional net cash inflow from issuance are categorized as medium quality. For more information, please refer to the Corporate Actions report.
Over the last twelve months (prior to September 29, 2014), GZPFY-US paid a medium quality dividend, which represents a yield of 4.49% at the current price.

Dividend Quality Trend

Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years -- of these 1 was high quality, 2 were medium quality and 2 were low quality.

Accounting Red Flags

Accounting Quality

GZPFY-US's net income margin for the last twelve months is around peer median, which combined with relatively low accruals suggests a possible overstatement of its reported net income.

Management of Reserves Modest Buildup

Modest Buildup: Company's percentage of Accruals is above zero but lower than peer median -- usually indicative of a Company building its Reserves in a modest manner relative to peers.
The company's accrual levels over the last twelve months are positive but less than the peer median suggesting the company is not only building reserves but doing so in a relatively modest manner compared to its peers.

Material Categories

Excluding the effects of change in revenue, the accounting categories causing the most impact on the movement of net income from the prior period to the current period are PP&E, SG&A and Accounts Payable.
Characteristics
Key Valuation Items

Price to Book (P/B)

0.48

Price to Earnings (P/E)

2.56

Price to Sales

0.36

Price / EBITDA

1.41

Price to Assets

0.29

Price / FCF

11.90

EV / EBITDA

2.99

EV / FCF

25.27

Dividend Yield

7.30

PEG Ratio

Profitability

Gross Margin

60.29

EBIT Margin

18.82

Net Margin

13.92

FCF Margin

2.99

Operating Margin

18.82

Pre-Tax Margin

16.90

ROE

18.27

ROIC

13.40

ROA

11.43
Efficiency

Debt / Equity

38.40

Debt / Market

45.07

Debt / Book

27.75

Debt / EV

33.83

Coverage Ratio

75.52

Interest Coverage

16.86

Cash Days

40.13

Working Cap. Days

52.71

Receivable Days

42.32

Payable Days

13.14

Inventory Days

25.82

Sales / Assets

0.82
Growth

Earnings Growth YOY

-6.93

Revenue Growth YOY

-0.21

Oper. CF Growth YOY

-10.27

EPS Growth YOY

-6.93

FCF Growth YOY

-62.46
Price History

Peers

FA Score

DQ Score

close

52 week range

14.09

9.94

22.69

USD

5.27

3.60

9.08

USD

108.35

98.88

135.10

USD

192.34

130.24

249.25

USD

Company Profile

Gazprom Neft OAO engages in the exploration, production, and sale of crude oil and gas. Its activities also include production of refined petroleum products, and distribution and marketing operations through its retail outlets. It operates through the Upstream and Downstream segments. The Upstream segment explores, develops and produces crude oil and natural gas, and provides oilfield services. The Downstream segment processes, purchases, sells, and transports crude and refined petroleum products. The company was founded on August 24, 1995 and is headquartered in St. Petersburg, Russia.

Closing Stock Price

USD 14.089

As of Date

February 19, 2015

One Year Performance

-31.7889%

One Month Performance

27.3524%

Industry Group

Integrated Oil

52 wk. Range

USD 9.938 - USD 22.694

Market Cap (Millions)

USD 13294.4

Total Shares Outstanding

943.6
Latest Filing Dates

Annual

December 31, 2013

Semi Annual

N/A

Quarterly

September 29, 2014

Next Release Date

May 13, 2015

Filing Currency

USD

Listed Exchange

US OTC
Peers


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Closing Stock Price

USD 14.089

As of Date

February 19, 2015

One Year Performance

-31.79%

One Month Performance

27.35%

Industry Group

Integrated Oil

52 wk. Range

USD 9.938 - USD 22.694

Market Cap (Millions)

USD 13,294.4

Total Shares Outstanding (Millions)

943.60
Latest Filing Dates

Annual

December 31, 2013

Semi Annual

N/A

Quarterly

September 29, 2014

Next Release Date

May 13, 2015

Filing Currency

USD

Listed Exchange

US OTC
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