Buy Gazprom shares as part of todays offering with a price target of 230 roubles

Gazprom units Gerosgaz Holdings BV and Rosingaz Limited are selling 693.6 mln of common Gazprom shares. Investors may submit bids through their brokers, orders are accepted until 5:00 pm Moscow time, the shares will be offered at the same price. We recommend buying the shares, if the price is below the current 218 roubles.

Gazprom shares have advanced 57% from 15 May to 7 July. Before July 15, the dividends cut-off date, Gazprom shares lost 12.5% and further 8% from July 17 to date. Ultimately, Gazprom gained 41% year-to-date. The shares declined over the past week was due to increase in global volatility (Moex index dropped 1.5% for the period), as well as possible circulation of information about the offering among certain insiders.

Gazprom retains strong upside potential: the nearest target price is 227 roubles (50-day moving average), 220 roubles is an important resistance level, which the price has been struggling to break. The current support level is 215 roubles. According to consensus forecast, the price will grow 20%, to 263 roubles in the next 12 months.

The inflow into Gazprom shares from passive funds may exceed $100 mln following the placement.

Gazprom’s weight in the MSCI Russia index is 16.7% as of 24 July; after the placement, the free-float may increase from the current 10,653,080,805 to 11,346,708,453, resulting in the weight’s growth to 17.7% and inflows of $100 mln in passive funds excluding funds from active investors (slightly below the average daily turnover for 30 days). The results of this corporate action will most likely be announced following the Semi-Annual Index Review on 7 November and will take effect on 27 November.

Искандер Луцко
25.07.2019