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UBS named Rosneft shares the most preferable for investment

Rosneft shares are the most preferred for investment in the Russian market. This follows from the report on the oil and gas industry of the largest Swiss bank UBS. The bank's specialists confirmed the positive forecast for the securities of the oil company, noting that they see "a good entry point for investors."

“Among its competitors, Rosneft stands out for its high potential for increasing production – the average annual increase is expected to be at the level of 3% in the period 2022-2030. Overall, UBS expects strong financial results in the 4th quarter and a high average dividend yield for the oil and gas sector in 2021,” the company said in a report.

The largest American investment banks - Goldman Sachs, J.P. Morgan and Bank of America Merrill Lynch, as well as the Russian brokerage company BCS, have added Rosneft to their lists of the most investment-attractive companies in recent months. Analysts note that the main factor in the investment attractiveness of Rosneft is the implementation of its flagship project, Vostok Oil, which has not yet been taken into account by the market in the valuation of the oil company.

Thus, Goldman Sachs calls this project a "magnet for investors", and Bank of America Merrill Lynch assigned it the status of Rosneft's "development locomotive". Analysts emphasize that the project is practically not taken into account in the assessment of the shares of the Russian company, although Vostok Oil has a high IRR, which is estimated at 54% in the base scenario. Under favorable market conditions, the net present value of the Vostok Oil project could exceed $100-120 billion.

It is planned that in 2030 oil production at Vostok Oil will be up to 100 million tons. The project is one of the most promising upstream oil projects in the world due to low unit production costs as well as a low carbon footprint. Its resource base is more than 6 billion tons of oil (44 billion barrels) with a uniquely low sulfur content of 0.01-0.04%.

Analysts call the company's dividend policy another important factor in the investment attractiveness of Rosneft. An oil company's dividend payout ratio of at least 50% of IFRS net income is one of the highest in the industry.

According to BCS forecasts, by the end of 2021, Rosneft's net profit could reach $14.2 billion, which implies total dividends of 49 rubles per share.

Analysts believe that in 2022 the company's net profit may reach $21.5 billion, which will lead to an increase in dividends to 76 rubles per share.

“Rosneft's dividend yield for 2021 and 2022 should be very decent – ​​according to our estimates, at the level of 9% and 14%, respectively. We also believe that the consensus forecast for profit in 2022 will grow, ”the BCS notes.

UBS named Rosneft shares the most preferable for investment