Seeking Alpha: Gazprom's Discount Seems Extreme

I can understand why investors may not be elbowing each other aside to buy shares of Gazprom (OGZPY.PK). Gazprom is controlled by the Russian government, and while it is a major source of Europe's natural gas supplies, Western oil and gas companies are hard at work boosting production in areas like the North Sea to reduce that dependence. It also doesn't help matters that Gazprom reports financial results on "Russian time", with March quarterly IFRS results only just reported in the first week of September.

And yet, we're talking about a company that produces 17% of the world's natural gas and holds a similar percentage of the world's natural gas reserves. We're talking about a company that literally monopolizes Russia's gas exports and represents a major source of energy to Europe. We're also talking about a company that will likely begin exporting natural gas to China in the future, and could ultimately supply even more of the world's gas needs.

Trading at approximately 2.6x 2014 EBTIDA estimates, Gazprom's valuation seems to already incorporate some rather sizable doubts about the company's ability to improve domestic pricing, control production costs, and support rising dividend payouts. While Gazprom shares are not appropriately for investors with low appetite for risk, the shares do seem undervalued even by the stressed standards of Russian energy companies and offer more than 40% upside from today's levels.

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Gazprom's Discount Seems Extreme