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PostNL N.V. Message Board

  • dennisldunn1 dennisldunn1 Nov 8, 2005 9:26 PM Flag

    Profits Top $1 Billion

    Moscow Times 11/09/05

    "Oil producer Tatneft said net profit in the first nine months rose by 53 percent to 29.5 billion rubles ($1 billion) as surging oil prices boosted sales." (Bloomberg)

    It's nice to see profits up to what they should be. This indicates that TNT's PE will be somewhere between 5-6 at the beginning of 2006.

    Those who are just starting to look at this stock need to be aware of the following:

    1. Yukos factor (the chance the government will take over the company).

    2. Best new oil well sites are going to national govenment controlled companies (TNT is close to being state controlled with over 1/3 owned by local govenment but has not drilled anywhere other than locally).

    3. TNT profits going forward will be largely influenced by tax rates on high sulfer crude that HAVE NOT been published yet (as far as I know).

    4. TNT has been restricted on its ability to use Russian pipelines to export crude because of its low quality crude (high sulfer), starting in 2006.

    5. TNT profits would have been over $2 billion this year (my guess, and I'm probably low) if not for 85% excise tax rate on all prices above $26 per barrel. (The government has basically decided to take 50-65% of the profit rather than just nationalize the company.)

    Prices have fallen in the last month, but I have not seen any reduction in the governments tax rate on the crude. (This suggests the govenment has become addicted to high excise taxes and they will go down slower than they went up.)

    6. TNT also has a tire company, refining assets, and gas stations that add value.

    7. Primary reason for owning TNT (other than high profits) is that there are 6 billion barrels of oil reserves owned by the company.

    8. I'm willing to give the company until January to publish the financials (I may be naive). I can understand the auditors taking longer where they were 18 months behind.

    I continue to be a Hold (but I've got too much TNT in my portfolio).

    9. The last time financial were late it was because the government stole $144 million.

    MKKart2 what has happened? Two weeks ago you were a strong buy? Now a strong sell? Fickle love?

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    • Some great points, thanks! TNT also controls some local banks, retailers and a mobile phone company in Tartaria.

      I have to disagree on the so-called "Yukos factor". TNT is a different play. It's very pro-government on both federal and local levels. The federal government won't touch TNT because it's a Tartar entity. It would be a disaster to make a Chechnya out of Tartaria. That's why for the past 10 years Kazan' has enjoyed preferential treatment from Moscow in exchange for Tartaria's allegiance to federal line.

      You are writing that the government "stole" 144 mln. from TNT. Which government - local (Tartaria) or the federal one? I'm sure huge funds were stolen by the owners and managers. But that's the way things go in Russia. (Less so recently then before, thanks to a well-publisized Khodorkovsky's affair.)

      To sum it up, the company is awash in cash, well-connected on both local and federal levels, and quite diversified. The management can and should be improved, though.

      • 2 Replies to great_stox
      • You asked about the "stolen" $144 million.

        I had to go back to my own post on 7/18/05.

        The Moscow Times reported (7/18) that TNT admitted that $145 was "loaned" to the local government at a rate of 0.01% to be paid back whenever (i.e., not at all).

        Another $41 million was "loaned" to a state company for "social expenditures" and written-off.

        (Other press reports said the same as the above.)

        These transactions occurred in 2003. It appears that TNT's financial results were delayed for over 18 months and the company came within a whisker of being delisted on the NYSE because they failed to come clean.

        You are probably right that TNT is "pro-government" -- judging by who they let steal from them, I guess that would qualify as pro-government.

        But if stealing is how the government treats companies they favor, then don't ever invest in one they hate (Yukos). And, of course, you seldom know which is which until after your money is gone.

        My mentioning the theft was designed to warn any new investors of the true risks. Sometimes investors on this board get too effusive with their praise.

        The government has found a better way to take the money -- Excise Taxes. And, truth be told, it is better. It was voted on in the light of day. And, governments have the right to tax (and change tax rates).

        The reason that "freedom of the press" is part of America's Bill of Rights, is that the press exposes wrongs, so that we are encouraged to do right (and so mistakes can be corrected and the guilty held accountable).

        My board is as close to owning a press as I have. I want to expose corruption. And call theft, theft.

        The Government stole for TNT and they stole from me. If I was at the shareholders meeting I would like to ask the following: "Did anyone get fired for approving this?"; "If not, why not?"; "What steps are being done to keep it from happening again?"; and "Are you a bunch of theives?" (I might be polite enough not to ask the last question.)

        Yes, theft once happened on a regular basis in Russia. The time has come for it to stop.

      • Results seem to have a supporting effect for the market: TNT trading over 66$ in germany.

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