Rusal May Be Worth $26.7 Billion, Post 2009 Profit, Banks Say

Dec. 29 (Bloomberg) -- United Co. Rusal, aiming to become the first Russian company to go public in Hong Kong, may be worth as much as $26.7 billion and will swing to an annual profit in 2009, according to banks arranging the share sale. Bank of China International Holdings Ltd., one of the arrangers of the $2 billion initial public offering, values the world’s largest aluminum producer at $21.1 billion to $26.7 billion. Liberum Capital Ltd., another bank involved in the sale, estimated the Moscow-based company controlled by billionaire Oleg Deripaska to be worth $20 billion to $26 billion. Rusal is selling shares in Hong Kong to help repay $17 billion of debt. The IPO, now scheduled to begin marketing in January, has been delayed as regulators in Hong Kong sought more information on its debt restructuring. Rusal, which booked $5.95 billion of losses in 2008, may post a full-year profit of $505 million this year, BOCI said in its report. “We anticipate UC Rusal’s earnings will turn around in 2009” following a recovery in global aluminum prices, higher cost efficiencies and successful debt restructuring, said BOCI analysts Belle Chan and Le Yukun in the report. They estimate Rusal’s profit to double to $1.04 billion in 2010. The company last had a profit in 2007. BOCI’s valuation for the company is based on one times Rusal’s net asset value. Liberum’s valuation prices Rusal at 14.1 times to 18.3 times 2010 estimated earnings per share, said its report. ‘Competitive Advantage’ Rusal deserves a valuation between those commanded by Aluminum Corp. of China Ltd., the nation’s largest maker of the metal, which is trading at 25 times next year’s estimated earnings, and Western peers, Liberum said. Macquarie Group Ltd. gave Rusal a value of $21.3 billion to $25.9 billion. Renaissance Capital Ltd. in London values the Russian company at $20.4 billion to $24.4 billion, or 20 times to 24 times its estimated earnings in 2010. Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-largest stock market, has been wooing international companies to list amid competition with peers and as the flow of mainland Chinese state-owned industry leaders and private-sector firms is thinning. “UC Rusal’s low cost gives it a competitive advantage in overseas market expansion,” BOCI said in its report. “The company has increased its negligible 2008 sales in China to 5 percent of the company’s revenue in 2009.” BNP Paribas SA, Bank of America Merrill Lynch, Credit Suisse Group AG and Russia’s VTB Bank OJSC are among banks arranging the share sale. --Editors: Andreea Papuc, Malcolm Scott. To contact the reporter on this story: Bei Hu in Hong Kong at +852-2977-6633 or bhu5@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at +852-2977-6641 or apapuc1@bloomberg.net