Vedomosti (Moscow), - July 19, 2007

The company sets high price on its additional share issue

Armada announced its offering price of USD 14.9 per share yesterday. Based on this price, the company's capitalization currently stands at USD179.2bn. The dynamics are quite surprising: back in May, market participants appraised Armada - which was created just a month earlier - as nearly twice as cheap. RBC's revenue from IT business, which was divested into Armada, amounted to USD 81.1m in 2006, EBITDA stood at USD 11.2m, and net profit at USD 7.7m. The sale of computers and servers generated roughly USD 40m in revenue, development and software implementation - USD 36.5m (including USD 14.6m by business applications and tailored software design, USD 12.775m by web systems, and USD 9.125m by system integration). The remaining USD 4.6m was generated by IT services. The company employs nearly 450 people, 200 of whom concentrate on software development and IT services.

Investors will be offered the opportunity to purchase 16.7 percent of Armada's increased share capital at RUB 380 (USD 14.9) per share. The company's Board of Directors approved this price yesterday. Aton Broker is acting as the lead manager for Armada's flotation. The record date was set for July 31. Armada expects to raise about USD 29.8m, and the capitalization to amount to USD 179.2m.

Armada's shares have been trading on both RTS and Micex stock exchanges since May 23. Over this period, the trade volume in the company's shares reached USD 1.9m on the RTS and USD 3.2m on Micex. Meanwhile, the cost of securities rose 1.5 times from USD 10 to USD 15.3 (on the RTS). "You could see them rise so quickly from USD 10 to USD 15 in such a brief period, even though the trade volume was quite low," said head of Fim Securities' trading department Ilya Matushkin. Mr. Matushkin says he personally did not trade Armada's shares, but according to his data, Aton and Maxwell Capital were the most active traders in the company's shares.

"This is not surprising at all," chief trader for Aton Denis Sarantsev agreed. "Aton was the lead manager of RBC's IPO, and we know this company a bit better than the others." He pointed out that some of Aton's former employees were currently working for Maxwell. Sarantsev also noted that the low price of Armada's shares in May could be attributed to certain psychological reasons - the owners of RBC's shares paid for them at their par value, while they saw that the price was slightly higher after trade in additional share was launched on the stock market. He added that many people started selling shares, and Aton was one of the few companies to buy them. Later, however, the company issued a report and set the target share price at USD 19.2 per share at the end of 2007. In early July, as part of the preparations for the flotation of the additional share issue, Aton and Armada itself began explaining to investors the company's prospects, which, according to an Aton representative, resulted in an immediate surge of securities' prices.

At the moment, Armada is not considered one of the largest IT companies in Russia. According to Aton, Merlion was the largest IT company in 2006, with an annual revenue of USD 1.376bn, while i-Teco was ranked last in the top ten companies with a revenue of USD 295m - three times as much as Armada's.

Despite these figures, Armada's General Director, Alexei Kuzovkin, expects the company to account for 3-5 percent of the Russian IT market within three to five years thanks to proceeds from the IPO. He observed that Armada was poised to use the proceeds from the flotation to purchase an IT company with an annual turnover of USD 20m and a staff of about 200 people. Kuzovkin insists that Armada was hoping to retain its net profit increase at 9 percent, and EBITDA margin at 15-18 percent. He stated that Armada was acting quite independently from RBC, and mutual payments between the two companies stood at roughly USD 3m - USD 5m and would not increase.

How Armada appeared

RBC's IT business was divested into Armada in April 2007. The company's share capital is split into 10m shares with a par value of RUB 1. RBC's shareholders were offered the opportunity to buy 95 percent of Armada's shares at the par value in the amount corresponding with their shares in RBC, while the remaining 5 percent were allocated for the senior management stock option program. Currently, 49 percent of Armada's shares are owned by RBC's key shareholders - Germam Kaplun, Alexander Morgulchik and Dmitry Belik, while RBC holds 4 percent of shares (they were not purchased by shareholders) and 42 percent are outstanding.