Stroygazconsulting, Russia's largest oil and gas infrastructure contractor, controlled by Ziyad Manasir, could acquire Yamaltransstroy, which specializes in railroad construction, and mainly carries out the construction of rail infrastructure for Gazprom.

In recent years Yamaltransstroy has had only one large contract - the construction of the Obskaya-Bovanenkovo-Karskoe railroad, which is almost completed. Recent results also indicated decrease in backlog: 1H 11 revenue fell by 71% y-o-y to RUB 1.44bn, while the company saw operating loss of RUB 56mn for 1H 11 compared to RUB 213mn operating profit for 1H 10.

Positive impact on shares. We note that Yamaltransstroy shares are illiquid. It trades at EV/S of 0.1 and EV/EBITDA of 0.9 for 2011, due to the large discount to bad corporate governance and low transparency. However, we believe that acquisition by Stroygazconsulting could result in better corporate governance and improved transparency for Yamaltransstroy. We believe Stroygazconsulting could make a mandatory buyout offer since we expect that it could buy at least a contolling stake in the Yamaltransstroy (Igor Nak and his affiliates control 88% of common equity). According to our estimates, the acquisition could be made at least at USD 1,100 per share, which would imply with P/B 1_.

We believe the news could have positive impact on Yamaltransstroy's share price.

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