Why I Chose to Invest in Mosenergo PJSC (MSNG.MOEX)
As an investor with a preference for robust balance sheets, I constantly seek value in various stock markets worldwide. Towards the end of 2021, my focus increasingly turned towards Hong Kong and Russia, primarily because my stock market screeners identified numerous potential candidates in these regions.
Although I was still gaining familiarity with the Hong Kong market — having only started investing there in mid-2022 — my past involvement with Russian stocks, notably Gazprom, left me impressed by their management. Furthermore, the relatively low debt levels of the Russian government, when compared with most Western nations, appeared attractive to me. I saw this as a factor that could potentially boost the long-term value of the ruble against major currencies such as the dollar and euro.
From my time as a Gazprom shareholder, I was aware of the Russian law mandating corporations to distribute 50% of their profits to shareholders. This reinforced my interest in investing in Russian companies.
When analyzing Mosenergo, I was intrigued by its near-monopoly in the Moscow region, an attribute that I considered favorable for investment. Their ongoing project, developing a network of charging stations for electric vehicles, signaled potential for future growth.
As expected, Mosenergo’s balance sheet fit my investment preference, given its conservative structure and low debt levels. With Gazprom Energoholding LLC and The City of Moscow owning about 54% and 26% of the shares respectively, I felt a sense of security that the dividends for the remaining 20% minority shareholders could be consistently maintained.
However, my investment thesis was formulated prior to the onset of the Ukraine “conflict”. Despite hoping that the situation would soon be resolved, I decided to invest aggressively in Mosenergo during the last few days my broker permitted trading in these shares. Currently, I can only hope that the “conflict” will be resolved swiftly and that the imposed sanctions will be lifted. Naturally, my thoughts are with everyone affected by these events.
Disclaimer: This is not financial advice. Always conduct thorough due diligence before making any investment decisions.
Financial Data Analysis
The following financial data were relevant at the time of my latest purchase, which determined my average buying price for Mosenergo’s shares (further details about my trading activity are provided below). The calculated “Key Metrics” provide a window into my approach to valuation. For a deeper understanding of this approach, as well as comprehensive explanations on what these revealing ratios truly signify, I encourage you to read the following article.
For my due diligence, I primarily focus on the most recent annual Cash Flow and Income Statements to gauge the company’s performance relative to the previous years. However, when reviewing the Balance Sheet, I always refer to the most recent quarterly statements. This allows me to accurately understand the present state of the company’s assets and liabilities, essentially giving me a snapshot of what I’m investing in at that moment.
|Selected Quarterly Balance Sheet Data as of December 31, 2021||Key Metrics|
|Total Inventory||14.587,00||Current Ratio||92,931.00 / 27,851.00 = 3.34|
|Total Current Assets||92,931.00||Quick Ratio||(92,931.00 – 14.587,00) / 27,851.00 = 2.80|
|Total Goodwill||N/A||Book Value per Share||315,964.00 / 39,749.36 = 7.95|
|Total Intangibles||1,110.00||Tangible Book Value per Share||(315,964.00 – 1,110.00) / 39,749.36 = 7.92|
|Total Assets||379,058.00||Price to Book Value||1.81 / 7.95 = 0.23|
|Total Current Liabilities||27,851.00||Price to Tangible Book Value||1.81 / 7.92 = 0.23|
|Total Equity||315,964.00||Total Equity / Total Assets||315,964.00 / 379,058.00 = 0.83|
|Total Common Shares Outstanding||39,749.36||Total Tangible Equity / Total Tangible Assets||(315,964.00 – 1,110.00) / (379,058.00 – 1,110.00) = 0.83|
|Selected Annual Income Statement Data as of December 31, 2021||Key Metrics|
|Diluted Net Income||2,894.00||Diluted Normalized EPS||2,894.00 / 39,749.00 = 0.07|
|Diluted Weighted Average Shares||39,749.00||Price to Earnings Ratio||1.81 / 0.07 = 25.86|
|Selected Annual Cash Flow Data as of December 31, 2021||Key Metrics|
|Total Cash Dividends Paid||7,074.00||Dividend per Share||7,074.00 / 39,749.00 = 0.18|
|Dividend Yield||0.18 / 1.81 * 100% = 9.94%|
Catalysts for Future Revaluation
While comprehensive news updates from Mosenergo have been scarce since the onset of the “conflict”, they did report in early 2022 that their electricity production remained flat year-on-year for the first three months. Additionally, the IFRS Profit for Q1 2022 saw an increase of 38.6%.
Should I ultimately receive the dividend announced on June 29, 2022, my dividend yield would surge to 12.32% (calculated as 0.22308 / 1.81 * 100%). Considering that the profit for Q1 2022 increased by 38.6%, this yield could potentially rise further for the full year 2022.
It’s worth mentioning, however, that discussing catalysts is arguably futile as long as the current sanctions persist. Consequently, I plan to update this section in the future, once the prevailing circumstances have normalized.
Mosenergo, belonging to Gazprom Energoholding LLC, is the largest regional power generating company in the Russian Federation. It operates 15 power plants with an installed electrical capacity of 12.3 GW and a heat capacity of 43.8 thousand Gcal/h. This significant capacity enables Mosenergo to produce approximately 6% of the total electricity generated in the Russian Federation, including nuclear power plants.
Mosenergo plays a vital role in the energy supply of the Moscow Region, which includes two constituent territories of the Russian Federation—the City of Moscow and the Moscow Region itself. In this capacity, Mosenergo’s power plants are responsible for supplying around 60% of the electricity consumed in the Moscow Region. Additionally, they are the primary provider of heat energy, satisfying over 90% of Moscow’s heating needs.
Company Website: https://mosenergo.gazprom.com/
Trading Activity – When I Bought These Shares
- November 23, 2021 – RUB 2.20
- November 26, 2021 – RUB 2.14
- January 24, 2022 – RUB 1.96
- February 21, 2022 – RUB 1.91
- February 24, 2022 – RUB 1.62
- February 24, 2022 – RUB 1.35
- February 24, 2022 – RUB 1.30
- (Average price – RUB 1.81)
Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to buy or sell these Russian holdings for as long as the imposed sanctions last.
Dividend Activity – When I Received Any Dividends
- Date of the general meeting of shareholders: June 29, 2022. Payout per share – RUB 0.22308 (Full Year Dividend for 2021)
- Ex-dividend date: July 3, 2023 – RUB 0.18652 (Full Year Dividend for 2022)
Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to collect any dividends on these Russian holdings for as long as the imposed sanctions last.
Trading Activity – When I Sold These Shares
- Not Applicable Yet
Recommended Resources to Start Conducting Your Own Research
Due to sanctions related to the Ukraine “conflict”, accessing information about Russian companies through western media resources is limited. This limitation also applies to the Reuters link mentioned above. Alternatively, you can use the Russian search engine Yandex.com to find better search results concerning Russian companies, including Mosenergo.
Note: Although I have provided the following price chart for Mosenergo from Stockdio.com, prices haven’t been recently updated. This discrepancy, I believe, may be attributable to the ongoing sanctions. Meanwhile, you can stay informed about the ongoing stock price by utilizing the Reuters link provided above.