Invest in Odesa Region. January 2016

Transcription

1 Invest in Odesa Region January 2016

2 Contents 2 I. Ukraine economy... 3 II. Odesa region overview III. SP Advisors at a glance

3 I. Ukraine Economy 3

4 Reforms started to take hold in The effect of many not immediately visible. Ukraine s Ease of Doing Business Ranking positions since Clean up of banking sector (over 60 insolvencies) Abolishment of hundreds of bureaucratic regulations Procurement reform Overhaul of corporate governance at state-owned enterprises 60 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: World Bank

5 The economy is returning to growth Ukraine s quarterly real GDP, chg. yoy 5 10% 5% 0% -5% -10% -15% +2.5% Economy structure changed due to loss of industrialized areas Long-term growth drivers are still to be found (hopefully SMEs) Return to growth in % yoy (vs. -10% in 2015) -20% 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15E 1Q16E Source: UkrStat

6 Pace of recovery will be subdued Factors restricting a more rapid short-term recovery: 6 A. Elevated inflation still weights on household income -20% yoy in real income in 2015 but material decrease in social tax in 2016 (from over 40% to 22%) may trigger more substantial salary growth B. Trade tensions with Russia new embargo on food and agri imports from Ukraine revoked FTA

7 Inflation pressure will easy slow down to 15% in 2016 CPI, yoy 70% 61% 60% 50% 40% 43% 30% 20% 10% 0% -10% Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Source: UkrStat 15% eop CPI in 2016 (vs. 43% in 2015) as lion s share of structural adjustments have already taken hold (hryvnia depreciation, increase of utility tariffs) 7

8 Current account improves despite drop in exports Monthly balance of payments, USD bln Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Source: UkrStat Financial account (F/A) balance Current account (C/A) balance C/A + F/A 2015 C/A deficit smallest in over a decade c. $1 bln (1.1% of GDP). Adjustment in imports (- 34% yoy) outweighed the fall in exports (-32% yoy). Export was hit by loss of export-oriented production in the east, a slump in commodity prices, and trade tensions with Russia. Import hurt by a drastic hryvnia depreciation and related drop in real household incomes. 8

9 Maintaining C/A balanced in 2016 seems impossible Export of goods and services by regions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1Q11 4Q11 3Q12 2Q13 1Q14 4Q14 3Q15 Russia EU Other Depreciation-driven adjustments in imports have already taken place, but exports are at further risk, for two reasons first, further trade tensions with Russia, which share in Ukraine s exports fell from 25% to 12%. 9 Source: UkrStat, SP Advisors

10 Maintaining C/A balanced in 2016 seems impossible (continued) Commodity prices 12M performance, 100% = Jan % 100% 80% 60% 40% 20% 0% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Source: Bloomberg Wheat Corn Steel Series4-9% -27% -40% second, additional downside risk in commodity prices. Commodities account for near 75% of Ukraine s exports. All in, we expect C/A deficit will widen to $ bln in 2016 (3.2% of GDP) 10

11 Cooperation with IFIs remains key to financial stability NBU gross international reserves, USD bln May-12 Feb-13 Nov-13 Aug-14 May-15 Source: NBU NBU international reserves at $13.1 bln at end-2015 (3.2x of import). Likely to be replenished by $3-5 bln. Cooperation with IMF was halted by delays in adoption of fiscal legislation. We expect IMF program will return to normal functioning in Feb. up to 3 loan tranches in Renewal of IMF program unlocks additional credits - $1 bln from US and over EUR 1 bln from EU.

12 Prudent fiscal policy in Major tax reduction for State budget balance '08 '09 '10 '11 '12 '13E '14 '15E '16E UAH bln % of GDP, rhs Source: MinFin, SP Advisors 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% State budget deficit came in below 2% of GDP in Smooth budget execution thanks to inflation driven surge in revenues (e.g. consumption linked indirect tax collections increased 30-50% yoy). Budget plan for 2016 looks realistic even despite a material reduction in social tax rate (to 22% from over 40% before). Declared tax deficit of 3.7% is a challenge but can be achieved if no popular social aid increases. 12

13 II. Odesa Region Overview 13

14 Odesa region: key facts Located in southwestern part of Ukraine on the shore of the Black Sea. Largest region by its area and top-5 by population (2.4 mln people). Odesa administrative center of the region and 3 rd largest city in Ukraine (1.0 mln people). Odesa is one of biggest educational hub with over 30,000 graduates annually. Main sea gate and export-import hub of Ukrainian economy. Major sectors: agriculture, transport infrastructure, retail trade, tourism. Selected cities by population, mln people Source: UkrStat Kyiv 14 Odesa

15 Kyiv city Donetsk Dnipropetrovsk Kharkiv Odesa Kyiv Lviv Poltava Zaporizhzhia Luhansk Crimea Vinnytsia Ivano-Frankivsk Cherkasy Mykolaiv Sumy Kirovohrad Khmelnytsk Zhytomyr Chernihiv Volyn Zakarpattia Rivne Kherson Ternopil Chernivtsi Sevastopol city Odesa region: top-5 regional economy Share of each region in total GRP 20% 15% 10% Odesa region - 5% 5% average 0% Source: UkrStat Top-5 most economically developed region in Ukraine Lowest unemployment rate - 6.7% vs. 9.3% Ukraine s average. #3 by per capita expense, although #7 by per capita income. #3 in transport and warehouse sector (by output). #4 in retail trade. #4 in hospitality & catering sector. #9 in agriculture sector. #5 in exports. 15

16 Odesa region: a major country s trade gate Ukraine, and Odesa region in particular, possesses the most powerful port potential among all countries of the Black Sea region. 7 ports (out of 13 in Ukraine) located in Odesa region. About 75% of the entire cargo turnover in Ukrainian merchant seaports. Sea ports location in Odesa region 3 ports Odesa, Illichivsk and Yuzhnyi account for over 55% of cargo turnover of domestic seaports. Major exported items agriculture products, chemicals, fertilizers, oil and refining products 75% of total exports. 16 Odesa Yuzhnyi Odesa Illichivsk Bilhorod-Dnistrovskyi Reni Izmail Ust-Dunaiskyi

17 Key reasons to invest in Odesa region Ground floor opportunity o pro-western and pro-business o focused on implementing reforms o locomotive of changes in Ukraine Low-cost and highly skilled human capital o low average salary of $1.3 per hour, below Poland and China o 4 th most educated nation Proximity to key markets o main sea gate of Ukraine o delivery in days to European hubs o robust infrastructure Attractive entry valuations o severe 60% local currency devaluation squeezed companies margins o shift to export markets o bank financing virtually closed o increased demand for capital 17

18 III. SP Advisors at a glance 18

19 SP Advisors at a Glance SP Advisors is a full-service investment house with operations in Ukraine and Eastern Europe established in Our team has successful experience in closing equity and debt capital raising as well as M&A transactions, debt and corporate restructurings, corporate brokerage and investor relations for Ukrainian and Georgian companies. 19 Equity and Debt Capital Raising Over 10 years of experience financing corporates via IPOs, private placements, Eurobonds, private debt and bank agreements, IFIs (EBRD, IFC, OPIC). Corporate Finance Advisory M&A and debt restructuring services as part of strategic advisory through the development of long-term financial strategies for our clients Securities Brokerage Sales and trading for institutional and retail investors with Direct Market Access on all leading global exchanges, market-making and corporate brokerage for public companies, and investor relations services. Risk Management Commodities and currency risk analysis, development and execution of risk management strategies, including via hedging with market instruments. Research Ukraine s best analysts (Thomson Extel Surveys) provide extensive reporting services, including regular macro reports. Selected transactions: Corporate Brokerage Investor Relations Sole Advisor 2014 US$ 12,900,000 Private Placement of a 17.2% Equity Stake Sole Placement Agent Bookrunner October 2009 US$ 1,700,000 Private Placement of a Minority Equity Stake Placement Agent Bookrunner April 2011 EUR 27,000,000 Debt restructuring Sole Financial Advisor June 2012 GEL 25,000, % Coupon 2-Year Local Bonds Lead Manager Bookrunner December 2009 US$ 30,400,000 Initial Public Offering US$ 25,000,000 Debt capital raising US$ 36,000,000 EBRD loan facility US$ 46,200,000 Initial Public Offering Warsaw Stock Exchange Lead Manager Bookrunner June 2011

20 Experienced Western and Local Managers Nick Piazza, Chief Executive Officer The founder and CEO of SP Advisors, Nick previously turned BG Capital (Bank of Georgia) into Ukraine's leader in IPOs and private placements from ; the firm was recognized as the Best Investment Bank in Central and Eastern Europe by Euromoney in Before that he coordinated the sales, research, and corporate finance departments at Concorde Capital. Nick is a respected ex-pat in Ukraine and Georgia and a frequent contributor to prominent publications. He holds a degree from the University of Chicago in Lake Forest. 20 Oleg Pronin, VP, Investment Banking opronin@spadvisors.eu Oleg has over 10 years of international investment banking experience, including as Vice President at Dragon Capital, where he participated in the majority of the investment bank s milestone ECM and M&A deals in various sectors. Oleg holds a cum laude Master s degree in Banking from the Kyiv National University of Economics. Oleksandr Tsapin, VP, Sales & Trading otsapin@spadvisors.eu Oleksandr has more than five years of experience in investment banking and fund assets business. Before joining SP Advisors team in 2015, Oleksandr was involved in project management and private equity activities in Dragon Capital investment bank. Previously he was a portfolio manager of few funds in international group of SEB Asset Management and was working as equity analyst in BG Capital. Oleksandr Tsapin graduated from Ostroh Academy and Kyiv School of Economics (KSE).

21 SP Advisors 72 Chervonoarmiyska St. Office 17, 12th Floor Kyiv 03680, Ukraine This presentation has been prepared by SP Advisors and provided to you for information purposes only. This presentation and its contents are confidential and may not be transferred or disclosed to third parties or published, or reproduced in whole or in part, regardless of purpose. Any failure to comply with these restrictions may violate any applicable laws. Any part of the presentation, as well as the fact of its distribution can not be the basis for making an investment decision. This presentation does not constitute or form part of any offer to sell or the solicitation of an offer to buy any investment assets. Financial indicators referred to in this presentation may not necessarily serve as a guide for future investment performance evaluation. This presentation or part of it shall be the basis or inducement to enter into contractual relationships or to make any commitments orserve aninvitation orinducement to investment. SP Advisors makes no warranties or representations, and does not accept any responsibility for the financial results obtained on the basis of the information contained in this presentation.