London, UK, 20 September 2017

Edison issues outlook on TransContainer (TRCN)

Our increased three-year EBITDA CAGR of 20% for TransContainer is driven by rising rates of 'containerisation' in Russian rail freight, a gathering pace of economic rebound in Russia and strong operating efficiency delivered by company management. Our increased forecasts are the main driver behind an increase in fair value to RUB4,900, which implies 23% upside to current levels. The stock offers investors unique exposure to attractive structural and cyclical growth factors in Russia as well as a management team that has shown its ability to manage the business and cash flows during difficult macroeconomic conditions.

We use an average of EV/EBITDA multiples and DCF models in arriving at our fair value of RUB4,900 per share vs RUB3,580 before. Our three-year EPS CAGR is 25%, which looks undemanding given the stock trades on 9.0x FY17 earnings and should be supported by a 4.5% dividend yield. Our fair value offers investors 23% upside to current levels and is supported by strong post-period data from the Russian rail network showing that supernormal growth in rail-container volumes has accelerated since H117 (July 2017 was up 21.3% y-o-y).

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