UC Rusal shares soared 43%. Are they worth buying?

Shares of sanctions-affected UC Rusal soared on news of easing, and possibly even a complete lifting of sanctions by the US Treasury. On the Hong Kong stock exchange, UC Rusal papers soared by 43.4%, on the Moscow Exchange the day before - by 15%, today - by another 9%.

Details

On April 23, the US Treasury issued a directive that allowed American citizens and companies to conduct transactions with UC Rusal under already concluded agreements for another six months - until October 23, 2018, and not until June 5 - such a restriction was established when sanctions were imposed.
But the main news was something else: the United States admitted that they could lift sanctions from UC Rusal if Deripaska “gives up control” of the company. This development is more than likely. Since last week, the government has been discussing the nationalization of the company, and Rusal's shares have already shown rapid growth on this news.

What will happen to Rusal shares

Now the two main problems of UC Rusal are the inability to export aluminum and the ban on US companies and citizens from owning its shares. They can be solved in two ways: either by changing the owner, as the US Treasury suggests, or by changing the chain of buyers - UC Rusal will have to prove to investors that it has found new markets, analysts interviewed by The Bell say. The second way is longer and less obvious.
In both cases, UC Rusal quotes will grow, but are unlikely to return to the pre-sanction level: investors are very scared, and these fears will put pressure on the share price for a long time to come, believe Alfa Capital Managing Director Eduard Kharin and Freedom Finance CEO Timur Turlov . Even after today's rise, UC Rusal has only recovered half of the fall - now the company is worth $4.22 billion, and on the eve of the imposition of sanctions, it was worth almost $9 billion.
Vadim Bit-Avragim from IFD Kapital admits that quotes may return to pre-sanction values - if the supply problem is resolved, nothing will hold back the price of shares.

Is it worth buying

For a short time - no: "nervous" growth can be replaced by a sharp drop after any statement by the Russian or American side.
In the long term, it depends on whether you believe in the lifting of sanctions or in the fact that UC Rusal will be able to quickly establish a new distribution chain. It is almost impossible to predict this, experts interviewed by The Bell agree. It is also unclear how long the transition period will take in the event of a change of ownership.
While there is no clarity, you can take a closer look at UC Rusal Eurobonds: due to the easing of sanctions, the company will avoid technical defaults, and this is great news for holders of its Eurobonds, says Timur Nigmatullin from Otkritie Broker.

Anastasia Stogney

The material uses the comments of the portfolio manager of Alfa Capital Management Company Eduard Kharin, CEO of Freedom Finance Investment Company Timur Turlov, senior portfolio manager of Capital Management Company Vadim Bit-Avragim, Otkritie Broker analyst Timur Nigmatullin.