Investment Conclusion:

East Mill Capital conducted a thorough research of Naftna Industrija Srbije AD in order to determine the potential value of an investment in its publicly traded shares. Based on our research we cannot with confidence declare a Buy rating currently for this company, and will not be making an immediate position. While NIS boasts several attractive traits of an investable company, there remain reporting issues, and inconsistencies within the information found by our team. Additionally, it has come to our attention that although NIS holds the largest market capitalisation within the energy sector of the Republic of Serbia – other players within the South Eastern European remain better placed in the market with competitive advantages.

At this time East Mill Capital will explore alternative positions.

NIS a.d. DD Report (no position)

Executive Summary:

Naftna Industrija Srbije AD (NIS) is one of the largest vertically integrated energy companies in Southeast Europe. Its principal activities are exploration, production and refining, sales and distribution of a broad range of petroleum products, as well as the implementation of energy projects. The head office of the Group is in Novi Sad, and its main production capacities are located all over the Republic of Serbia, which is, owing to its geographical position, the centre of trade and investments in the Balkans. Russian company Gazprom Neft owns 56.15 % of the share capital of NIS, while 29.87% of NIS shares are held by the Republic of Serbia. The remaining outstanding shares are attributed to citizens, employees, former employees and other minor shareholders. NIS shares are listed on the Belgrade Stock Exchange (BELEX).

The main activities of our company are exploration, production and refining, sales and distribution of a broad range of petroleum products, as well as the implementation of energy projects. The sales structure consists of export and domestic wholesale deliveries of crude, gas and petroleum products, as well as retail sales of finished petroleum products, liquefied petroleum gas and a series of related products. NIS owns the largest retail network in Serbia which has been expanding across the region since 2012.