Case Study IR in a Large Conglomerate Investor
- Slides: 18
Case Study: IR in a Large Conglomerate Investor Relations Management in Russia and CIS September, 11 -12 2008 Pavel Kim Executive director, Investor Relations Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of Sistema Joint Stock Financial Corporation (“Sistema”). You can identify forward looking statements by terms such as “expect, ” “believe, ” “anticipate, ” “estimate, ” “intend, ” “will, ” “could, ” “may” or “might, ” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations. 10
Sistema Overview The largest public consumer oriented conglomerate in Russia and CIS Established, public companies Telecoms Wireless Technology • Telecom solutions • IT solutions • Microelectronic solutions Fixed-line Real Estate • Class A offices • Class A retail • Premium residential housing Fast-growing, private companies Banking Media Retail Telecoms Health Care Pay TV • Corporate banking • Retail banking Movie production Toys & children goods retailer Wireless in India Private health care facilities A balanced portfolio of established and fast-growing businesses Radar & Aerospace Radar and communication solutions for B 2 G and B 2 B Travel • Tour operator • Hotels • Retail 11
Corporate Structure Shareholders Board of Directors Audit Committee Corporate Governance Committee Strategy Committee IR Committee Nominations & Compensations Committee Telecommunications Consumer High Technologies and Industry Strategy & Development Functional Divisions Business Units President Finance Property External Relations Administrative Investor Relations Corporate Communications Public Relations Internal Control and Audit A solid corporate structure facilitates a smooth and efficient decision-making process 12
Long-term Incentive Programs General information • In Dec 2007 Sistema launched four incentive programs: 1. Sistema's Stock Bonus Plan (0. 1% of the issued shares) 2. Phantom Stock of Sistema (20, 000 phantom shares) 3. Phantom Stock of Sistema’s public subsidiaries 4. Stock Option plan for ordinary shares of Sistema's non-public subsidiaries • Up to 110 top and middle managers of Sistema’s headquarters • Option exercisable if Total Shareholder Return exceeds Cost of Equity for respective company over a vesting period • Three-year vesting period Public subsidiaries Phantom shares Business line Company Mobile telecom OJSC "MTS" Fixed-line telecom OJSC "Comstar UTS" 1, 190, 500 Real Estate OJSC "Sistema Hals" 37, 600 Hi-tech OJSC "Sitronics" 996, 000 45, 455, 000 Non-public subsidiaries Shares allocated for the stock option Business line Company Banking JSCB "MBRD" 2. 2% Retail OJSC "Detskiy Mir-Center" 2. 5% Pay TV OJSC "Sistema Mass-media " 2. 5% Travel & Hotels OJSC "VAO Intourist" 4. 0% Radars & Aerospace OJSC Concern “RTI Systems" 5. 0% Healthcare CJSC Medsi Group of companies 5. 0% Pharmaceuticals CJSC "Binnopharm" 5. 0% Sistema long-term incentive programs are linked to share price performance 13
IR functions Corporate strategy IR strategy Action plan Financial markets Political situation Macroeconomics Industry risks Internal documents Analytics Representative functions Regulations Stock market Meetings, conferences Business processes Bond market Press-releases, presentations Data products Financial models Q&A Feedback Clear and transparent functional structure enables us to increase efficiency 14
Data Products • Contact information • Geographical diversification • Investment style split • Peer analysis • News distribution Share ID Contacts • Conferences • Road-shows • Meetings • Information disclosure Plans Meetings • Invitations to events • Perception studies • Main topics and questions • Positive/negative points • Forecasts and projections Integrated data products improve investor relations activity significantly 15
Financial Models Market Cap Definition • NYSE, LSE, MICEX, RTS • US dollars Bloomberg, Reuters Calculation DCF • 5 year financial model of all subsidiaries WACC = Ce*E/K+Cd(1 -t)*D/K Ce=Rf+b(Rm-Rf) K=E+D Ce - cost of equity Cd - cost of debt t - tax rate Multiples • Comparative analysis using information of public peers and recent transactions EV/OIBDA EV/Sales P/E P/BVE Applicability Sistema uses DCF and Comparative analysis in order to evaluate its subsidiaries 16
Conglomerate Valuation: Sum of the Parts Net debt = Total debt – Cash – Short term investments • Public / nonpublic assets • Investment style • Controlling / relevant / trading stakes Discount or Premium Asset Value (Enterprise Value) Corporate Net Debt (Consolidated Net Debt) Net Asset Value Market Cap A discount/premium to Net Asset Value mainly depends on the portfolio structure 17
Investor Relations tel. +7 (495) 692 2288 www. sistema. com ir@sistema. ru 18
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