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Infrastructure. Bridge Construction In Ukraine

  • Publication Date:May 2008
  • Publisher:Concorde Capital
  • Product Type: Report
  • Pages:32

Infrastructure. Bridge Construction In Ukraine

We estimate spending on bridge construction in Ukraine will total USD 4 bln over 2008-12, triggered by preparation for the Euro 2012 Football Championship. We initiate coverage of two companies that will benefit most from this trend:

  • Mostobud - a near-monopoly bridge construction company
  • Dnipropetrovsk Babushkin Steelwork Plant (DZMK) - the largest Ukrainian manufacturer of structured steelwork

The Ukrainian government is planning to build ~30 km of new bridges, reconstruct ~10 km of existing bridges, and construct ~200 new overpasses and viaducts as part of a mass road infrastructure program over 2008-2012, in the runup to co-hosting the UEFA Euro 2012 football championship. Currently, about half of Ukraine's bridges are out of date and significant part of them require immediate overhaul. At the same time, domestic transportation is constantly rising, resulting in increased load on bridges; passenger and cargo transportation have increased by 66% and 32% since 2000.

Overall spending on road and bridge infrastructure development will require USD ~10 bln over 2008-12, according to our estimates. This represents ~2% of GDP, a fairly achievable amount, in our view. The Ukrainian government is set to attract private investments to cover two thirds of the necessary amount.

With its near-monopoly standing on the local market, bridge builder Mostobud is the only publicly traded Ukrainian company with direct exposure to the infrastructure segment. In our most likely scenario, Mostobud will receive about third of overall orders over 2008-12.

Forthcoming bridge and overpass construction projects will require significant supply of structured steelwork to complete. This, coupled with the logistics and retail sectors' fast development and industrial premise renovation, should trigger growth in the structured steelwork market until 2012.

We project that Dnipropetrovsk Babushkin Steelwork Plant (DZMK), the largest Ukrainian manufacturer of structured steelwork, will increase sales significantly over the next five years, driven by the boom on the steelwork market. DZMK's parent company, Fercon Holding, is likely to go public in 2009, which we expect to be a stock price catalyst.

We applied DCF and peer comparison approaches to value Mostobud and the Dnipropetrovsk Babushkin Steelwork Plant.

  • 1. Investment thesis
    • 1.1 Investment summary
      • Bridge Construction in Ukraine Is Poised for Renewal
      • USD __ Bln Will Be Spent on Road Infrastructure by 2012
      • Mostobud Is Set to Receive USD __ Bln worth in Orders over 2008-12
      • We Expect An Upsurge of Demand for Steelwork over The next 5 Yrs
      • Dzmk Sales Will Grow at __% Cagr until 2012
      • Sector Performance, 12m - Chart
      • Stock Performance, USD - Chart
      • Trading Volumes, USD Mln - Chart
    • 1.2 Investment cases
      • Mostobud Valuation Summary, USD/Share - Chart
      • Dnipropetrovsk Babushkin Steelwork Plant (Dzmk) Valuation Summary, USD/Share
  • 2. Industry overview
    • Infrastructure on the radar
    • Massive investment in road infrastructure
    • Euro 2012 preparation budget - chart
    • Sources of financing for bridge and overpass projects
    • Major highway development projects for 2008-12 - chart
    • Highway network density, km/km2 - chart
    • Bridges by type of material - chart
    • Motorway transportation dynamics - chart
  • 3. Company profiles
    • 3.1 Mostobud (MTBD UZ)
      • Investment Case
      • Market Information
      • Stock Ownership
      • Corporate Governance
      • Key Financials, USD Mln
      • Net Sales, USD Mln
      • Share Price Performance*
      • Business Overview
      • Mostobud's Completed Projects
      • Valuation
      • Valuation Summary, USD/Share
      • Dcf Valuation
      • Scenario Analysis for Mostobud
      • Key Assumptions
      • Dcf Output (Base Case), as of May 1, Uah Mln
      • Comparative Valuation
      • Peer Valuation
      • Mostobud Income Statement Summary, USD Mln
      • Mostobud Balance Sheet Summary, USD Mln
      • Mostobud Cash Flow Statement Summary, USD Mln
      • Uah/USD Exchange Rates
    • 3.2 Dnipropetrovsk Babushkin Steelwork Plant
      • Investment Case
      • Market Information
      • Stock Ownership
      • Corporate Governance
      • Key Financials, USD Mln
      • Net Sales, USD Mln
      • Business Overview
      • Steelwork in High Demand
      • Ukrainian Construction Steelwork Market, USD Mln
      • Import/Export of Construction Steelwork, USD Mln
      • Demand Drivers
      • Logistics Market
      • Retail Market
      • Steelwork Assembly for Bridge in Zaporizhya, 2006
      • Alchevsk Iron & Steel Reconstruction Project, 2006
      • Fercon Holding Ownership Structure
      • Valuation
      • Valuation Summary, USD/Share
      • Dcf Valuation
      • Key Assumptions
      • Dcf Output, as of May 1,
      • Uah Mln
      • Comparative Valuation
      • Peer Valuation
      • Dzmk Income Statement Summary, USD Mln
      • Dzmk Balance Sheet Summary, USD Mln
      • Dzmk Cash Flow Statement Summary, USD Mln
      • Uah/USD Exchange Rates
  • 4. Appendices
    • Appendices
      • Appendix A: Road and Bridge Reconstruction Projects for 2008-12
    • Budget of major bridge and overpass construction projects, USD mln
    • Budget of major road construction and reconstruction projects, USD mln
      • Appendix B: Major Transit Motorways
      • Appendix C: Mostobud Current Projects
    • Podil bridge, Kyiv
    • Overpass on Trukhaniv island, Kyiv
    • Bridge across the entrance of Gavan, Kyiv
    • Bridge across Desenka bay, Kyiv
    • Motor highway across the Dnipro river
      • Appendix D: Dzmk Completed Projects
  • 5. Investment Ratings
  • 6. Disclaimer
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