Translation by Sim Kih
UNITED CO RUSAL (486) is truly one stock that has turned around from the depths of its troubles.
The more I observe this world, I more I believe that a hero is but a by-product of the times and chance. When the tide is against you, even one inch of progress is tough.
However, one is like a dragon unleashed when riding on a favorable macro trend. Even if Zhu Geliang himself had dabbled in Hong Kong retail or real estate before 2003, the deflationary recession would have limited his success.
On the other hand, those who set up factories in China at that time reaped huge gains from low costs of raw materials, cheap labor and expansionary economic policies. Several years later, the boom experienced by mainland Chinese factories spilled over to Hong Kong’s retail and real estate sector. Only then was Hong Kong’s bleak economy transformed to life and vibrancy.
United Co Rusal is a stock that has risen from its miry pit. During the peak of 2007’s global stock market boom, United Co Rusal had exhausted its credit lines in order to acquire 25% in MMC Norilsk Nickel (MNOD.LI) for US$1.32 billion.
As luck would have it, the financial tsunami overwhelmed the world a year later. Commodity prices were not spared. As a producer of nickel, copper, palladium and platinum, Norilsk’s net earnings of US$5.2 billion in 2007 was decimated to US$550 million in 2008. Its stock price plunged from US$30 to US$4.
The huge gamble to acquire Norilsk had depended on the latter’s dividends to pay down the debt financing. With the plunge in commodity prices, United Co Rusal found itself up to its ears in debts and had to restructure its loans and resort to equity financing. Things only turned around when the commodities market recovered. Finally last year, Norilsk managed to pay out US$300 million of dividends to United Co Rusal. With the surge in palladium prices, Norilsk became a stockist of a rare commodity.
Apart from the recovery in Norilsk’s earnings, United Co Rusal itself also benefited from the global recovery in commodity prices. At Alcoa’s first quarterly analyst briefing, the company attributed the surge in aluminum prices to an increase in orders for aviation aircraft, a recovery in North America and Europe’s automotive sector, and strong demand from Japan, Vietnam, Brazil and Australia. Global aluminum demand is set to grow 8% to 43.8 million tons, according to United Co Rusal’s internal estimates.
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The price of aluminum was also held up because of low inventory levels. Other than demand arising from industrial applications, the emergence of aluminum exchange traded funds (ETFs) will also have to be backed by physical inventory.
The company estimates that as much as two to three million tons of aluminum inventory will be locked up to back new ETFs. The new trading instrument will have significant impact on aluminum production as well as its demand and supply balance. Any surge in demand arising from an influx of funds can cause a spike in aluminum prices.
Palladium is a case in point. Prices shot up by 72% in one year after ETFs were launched for the previously little-known metal. United Co Rusal earnings will triple for every doubling of aluminum prices, according to Deutsche Bank forecasts.
The next question would naturally be: how does United Co Rusal compare with Aluminum Corp of China? I personally prefer United Co Rusal for four reasons.
Firstly, both the 2014 Winter Olympics and the 2018 World Cup will be held in Russia. Public infrastructure is under construction at breakneck speed, and domestic output is expected to growth 22% this year.
Secondly, United Co Rusal owns a portion of the world’s bauxit mines and alumina. This vertically integrated business structure shields it from any rise in raw material prices. Secondly, it is more cost competitive than Alcoa or Aluminum Corp of China, as its smelting factory utilizes hydropower.
Thirdly, Aluminum Corp of China is subject to restrictions imposed for environmental friendliness, while United Co Rusal, on the other hand, is supported by the state.
Lastly, in event that United Co Rusal is adopted into MSCI Russia Index, more funds will also start buying the stock.
Having said that, United Co Rusal nonetheless has a huge gearing, has a very volatile stock price and is a risky investment. At the point of writing (12 Jan), the stock price of HK$11.58 was fair and worth a bet on. Like Vitasoy (345), this is a choice stock.
The author has a vested interest in United Co Rusal (486), Vitasoy (345) and ETF (PALL). This article appeared in Quamnet in Cantonese. It has been translated by NextInsight and is republished with the kind permission of the author.
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用兩句詩，來形容俄鋁(486)，應不離「山窮水盡疑無路，柳暗花明又一村」。
閱世越深，越信時勢做英雄。逆勢時，寸步難行。順大勢，自會「頓開金鎖走蛟龍」。03年前，做本地零售，或揸地產物業，受制衰退、通縮，縱是孔明再生，作為有限；反而國內開廠，受惠原料價賤、人工平、國家政策相就，好景到不得了。時移勢易，幾年過後，廠家變成萬事唔就；而本地零售、地產，隨國內經濟騰飛，則東成西就。往日困坐新野，空對山川；今日逐鹿中原，乘雷上天。
現時俄鋁，也是一隻否極泰來的股票。話說07年底，環球股市大盛，俄鋁借到盡，斥鉅資132億美金，購入MMC Norilsk Nickel(MNOD.LI) 25%股權。
08年，海嘯淹至，商品亦難倖免。主業為生產鎳、銅、鈀金、鉑金的Norilsk，受創極深，由07年賺52億(美金，下同)，到08年轉蝕5.5億，股價由$30跌到$4。
大注買Norilsk，原本可以股息還債，但如意算盤不響，變成重債纏身，唯有侷住先重組債務，再上市集資填數。但歷劫渡來，大勢再轉，貴金屬牛氣重現。Norilsk敗部復活，去年派番三億美金股息俾俄鋁。鈀金怒升，Norilsk更變成奇貨可居，其他股東日日撩俄鋁賣股，俄鋁吊高嚟賣，不在話下。
坐擁Norilsk外，全球鋁業復甦，亦利俄鋁。據美國鋁業(AA)首季業績分析員會議，預期鋁需求復甦，原因是全球商用航機訂單抽升、歐美汽車業步出寒冬、以及日本、越南、巴西、澳洲的強勁需求。據俄鋁估計，全球鋁需求按年會增長8%至43.8百萬噸。
此外，庫存下跌，有利鋁價。實質需求外，預期今年首季或次季，會有大量實物支持的鋁ETF面世。據公司估計，新ETFs會鎖死 2-3 百萬噸鋁存貨，「對鋁需求及平衡供應產生重大影響」。
萬一資金洪潮引發大量投資需求，鋁價隨時暴升。鈀金便是一例，之前乏人問津，ETF一出(PALL)，一年內鈀金大升72%。假如鋁價上升，大利俄鋁，據德銀估計，如鋁價按年升一成，盈利可升兩成。
下一問題，自然是：「買俄鋁好，定中國鋁業(2600)好？」自己寧取俄鋁，有四大原因：
* 2014冬運會、2018世界杯，皆在俄羅斯舉行。基建工程，如火如荼，2011年內銷預期增長22%。
* 俄鋁全球坐擁大量鋁土 (bauxite) 礦、氧化鋁(alumina)礦，垂直整合，遠比中鋁能抵禦原材料價格上升。
此外，公司的精鍊廠 (smelter)， 依賴水力發電，生產的現金成本，比美鋁、中鋁低，競爭力更強。
* 中鋁受制國家減排節能政策，俄鋁則獲國家扶持，際遇雲泥。
* 萬一最終入選MSCI俄羅斯指數，有基金襄助。
當然，俄鋁負債仍甚高，股價極波動，風險頗高，必須嚴限注碼，控制風險。但近來大勢相就，執筆時(12/1)股價$11.58，估值合理，具極博率，與維他奶(345)一樣，是近來的心水股份。
本人客戶持有俄鋁(486)、維他奶(345)及鈀金ETF(PALL)
