Mostobud wins four tenders in Romania: POSITIVE

Mostobud [MTBD UZ, BUY] has won four tenders in Romania for the expansion of a 4-lane section of the ‘South Bucharest’ bypass and for the rehabilitation of national roads at the ‘Vyrfule – Stey’ site. The total monetary value of the collective work for these projects is more than EUR 95 mln.

This information was revealed by Vladimir Prodivus, the Chairman of Mostobud’s Supervisory Board. He noted that these deals are the result of three months of intense nego-tiations held in Romania and Poland during various international consortia.

During one international consortium in September, Mostobud also pre-qualified to participate in the construction of the road for the North Bridge in Poland and is now awaiting the final decision and technical drawings for the second phase of the tender.

Next week, the company will also partake in a tender in Romania to undertake work for a road rehabilitation project at the ‘Deva – Oradea’ road.

Our view:

This development is POSITIVE for Mostobud, which is continuing to diversify its strategy. While it holds the dominant market position in Ukrainian bridge construction, with a market share above 80%, the company’s management is making efforts toward the gradual diversification of its project portfolio beyond focusing solely on the less lucrative bridge-building segment. At the same time, it certainly has not shied away from bridge-related pro-jects that have come its way (see today’s related story in the Sokrat daily).

For one, the company is placing an increased focus on commercial real estate projects. Pre-Euro 2012 projects will boost the company’s net sales by 80%, implying a CAGR of 37%. Mostobud’s order volume will be enhanced by USD 3.4 bln over the next five years, increasing the company’s net sales and net margin. After 2012, we expect sales to slow down before a growth at 2% CAGR until 2018, supported by planned expansion abroad.

Secondly, Mostobud has begun to actively seek out opportunities to participate in international contracts, as demonstrated by the above news about Romania and Poland. Company officials have been trying to attract the attention of foreign players to the company’s capacities and have begun exploring areas for cooperation with potential contractees in Rus-sia, various Asian states, with Baltic and Western European companies, as well as those from both North and South America. We see optimistic prospects for MTBD in the coming years and recommend BUYing shares in Mostobud, with a target price of 521 USD per share.