The 2014 Emerging EMEA Research Team: Utilities, No. 1: Dmitry Bulgakov, Tomasz Krukowski & team

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Dmitry Bulgakov,
Tomasz Krukowski
& team
Deutsche Bank

First-Place Appearances: 4

Total Appearances: 4

Team Debut: 2011

Deutsche Bank remains undefeated on this roster, claiming first-place honors for a fourth straight year. Moscow-based Dmitry Bulgakov and Tomasz Krukowski, working out of Warsaw, direct the five-person squad, whose other members are headquartered in Dubai, Istanbul and London. “Their research is brief, concise and easy to read and interpret,” observes one loyalist. Apart from the geopolitics currently surrounding Russia, the main issue for that nation’s power companies is corporate governance, specifically increasing pressure on state-owned companies to boost their dividends, according to Bulgakov, 35. If governance improves, “it can make several state-owned names more investable from the standpoint of institutional investors,” he says. “However, the outcome of this development is unclear, as management frequently is interested in minimizing dividend streams and maximizing capital expenditures.” He singles out thermal power plant operator E.ON Russia, a long-standing team favorite, as the best player in that market, thanks to its solid cash flows, double-digit dividend yield and projected earnings expansion in 2015. The shares advanced 7.4 percent over the 12 months through May, to 2.76 rubles, while the sector was up 6.5 percent. Deutsche’s crew forecasts that they will rise to 3.49 rubles. Thirty-eight-year-old Krukowski — who also co-captains, with Athmane Benzerroug, the second-place squad in Construction & Engineering — notes that corporate governance is an issue for Central European utilities as well, “given high levels of government intervention, sometimes to the detriment of minority shareholders.” In addition, a tightening supply-demand balance and new market regulations are reversing that subsector’s negative trends, he says. Tauron Polska Energia is the researchers’ favorite name there. Markets are underestimating the Polish energy provider’s earnings resilience and the positive impact of regulatory changes, they contend. At 5.90 złoty, their price objective for Tauron implies a 10.5 percent upside to the stock’s late May value. “Their views are objective and unambiguous,” concludes another supporter.

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