Gazprom Passes GE, China Mobile, Becomes World No. 3OAO Gazprom overtook China Mobile Ltd. and General Electric Co. to become the world’s third-largest company by market value after its chairman, Dmitry Medvedev, became Russia’s president.
State-run Gazprom, the world’s biggest gas producer, rose 6 percent in Moscow today, pushing its value to 8.28 trillion rubles ($347.4 billion). China Mobile Ltd., which has more users than the U.S. has people, declined 1 percent to 2.63 trillion Hong Kong dollars ($337.3 billion). Gazprom overtook GE yesterday after the Fairfield, Connecticut-based company fell 1.3 percent to $325 billion in New York.
Medvedev may continue dismantling domestic price caps for natural gas designed to contain inflation and reduce costs for households and industry. The government has said it wants to increase prices so that sales in Russia are as profitable as European exports by 2011. Russia, supplier of a quarter of Europe’s gas, is the world’s second-biggest gas consumer.
A Medvedev presidency is the perfect political cover for Gazprom,'’ said James Fenkner, principal of Moscow’s Red Star Asset Management LP, which manages about $100 million, including Gazprom shares. “He’s going to help push through domestic price increases for gas, and that will be the next great positive catalyst for this company.'’
During Medvedev’s six-year tenure as chairman, Gazprom’s value climbed more than 32-fold as fuel prices rose and the company gained oil, electricity and coal assets.
Sibneft Acquisition
Gazprom’s expansion, including buying OAO Sibneft from billionaire Roman Abramovich in 2005, helped Russia’s government increase its control over national oil production to more than a third from about 6 percent at the start of Vladimir Putin’s first presidential term in 2000.
Gazprom shares rose 4.3 percent yesterday after Medvedev, 42, was sworn in as Russia’s third and youngest president, and nominated Putin, 55, to be his prime minister. Medvedev will quit as Gazprom’s chairman next month after a new board is elected, spokesman Sergei Kupriyanov said.
GE gained 2 cents to $32.59 in New York Stock Exchange composite trading.
Deputy Chief Executive Officer Alexander Medvedev, 51, said in a Moscow interview last year that Gazprom, which has a quarter of Europe’s gas market, expects to be the world’s biggest company and reach $1 trillion in value as soon as 2014. The two Medvedevs aren’t related.
$1 Trillion Goal
Gazprom’s market value may well be $1 trillion before Russia gets a new president,'’ said Chris Weafer, chief strategist at Moscow-based UralSib Financial Corp. “Overtaking GE and China Mobile is not temporary.'’
All 16 analysts whose Gazprom recommendations are compiled by Bloomberg have a “buy'’ or equivalent recommendation on the stock. The average price estimate is $19.66, or 34 percent more than today’s close. Exxon Mobil Corp., at $469 billion, is the world’s most valuable company, followed by PetroChina Co., China’s largest oil producer, at $446 billion.
The government this week approved a plan to allow natural- gas producers to charge 25 percent more for sales to households next year, 30 percent more in 2010 and 40 percent in 2011.
Russia’s RTS Index is off to its worst start since 1998, when the government’s $40 billion default sent equities around the world tumbling. The 50 companies in the RTS, dominated by energy producers, through yesterday traded at an average 9.52 times estimated earnings, the lowest among Europe’s 10 biggest stock markets and a 29 percent discount to the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
Oil Taxes, Inflation
The combination of the quickest inflation in five years and a 45 percent increase in oil taxes spurred the benchmark RTS Index’s 0.3 percent decline this year.
Russian stocks surged today, with Lukoil and Rosneft rising the most in more than a year, after Putin said the country should cut taxes on the oil industry as production falls.
GE stunned investors on April 11 when CEO Jeffrey Immelt said 2008 earnings will fall short of his previous forecast and first-quarter profit dropped at four of its six biggest units. The world’s largest maker of locomotives and jet engines retreated the most in 20 years that day.
Immelt blamed the results on weakening credit markets and their effect on the U.S. economy. GE on April 23 raised its cost- cutting goal by 50 percent and said it will sell underperforming units.
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