Acknowledgment With great pleasure we want to express our gratitude to all those who assisted us in writing this Term

paper. First of all we sincerely want to thank our supervisor and mentor professor Dr. Sang Hoon Lee for giving us the valua le knowledge! his leadership! valua le advices and hints! guidance helped make the "aper more informative. We also want to express special thanks to our colleagues! friends! relatives for their regular interest in the progress of writing the Term "aper! for their support and encouragement.

Executive Summary

Should we invest money in securities# The decision depends on many factors$ the availa ility of funds! a willingness to take risks! economic knowledge and experience or the desire to give the money in trust stock market professionals. Some people invest money in securities without making examination on these securities. %s a result these people lose money. Smart investors make! on the other hand empirical research! provide some assumptions! predictions in order to compare the intrinsic value of the securities with market value. &nvestment decision making eventually addresses the issues of risk. So how to measure risk and relation etween expected risk and return# &s 'apital %sset "ricing (odel holds in )a*akhstan companies or contradict# The paper provides rief information on the ackground and o +ective of the report. There is some information a out companies ,-S' )a*akhtelecom! )a*munaiga* ." and /haikmunai LL"0! including its history! operations and usiness integration which are

descri ed in the literature review. &n (ethodology section! some asic theoretical aspects of empirical research and valuation methods will e discussed. Findings and analysis content shows our empirical tests and calculation process of valuation common shares and results. &n final section of 'onclusion12ecommendation! according to our experiment of regression analysis we interpret the regression output with conducting valid tests and ased on

comparison of intrinsic value with market value! we give recommendation on whether to invest or not in securities of the company. Table of Contents
2

%cknowledgement333333333333333333333333333.4 .xecutive Summary3333333333333333333333333335 I. Introduction.6 ! a. 6ackground33333333333333333333333333.7 . 8 +ective333333333333333333333333333.7 c. Scope333333333333333333333333333.......7 d. Limitation33333333333333333333333333....7 e. Significance of the issue333333333333333333333..9 II. "iterature #eview -S' )a*akhtelecom33333333333333333333333..9:; )a*munaiga* ."333333333333333333333333..9:; III. $et%odology..&' &( I). *indings and Analysis..&( +& ). Conclusion and #ecommendation.+& 2eferences333333333333333333333333333..44

I. ,ackground

Introduction

6ased on the availa le data and information of the companies )a*akhmys plc! /H%&)(<=%& LL" and )a*(unai>as E-! we would like to perform empirical tests and some valuation analysis of common shares in order to give guidance to investors with their choice of investing or not. There are many empirical examinations and valuation methods that exist at the present time. Some researchers make analysis ased on historical data and

information! and some of them +ust make critical assumptions and suggestions y not relying on historical data. .b/ective The main goal of this term paper is experiments on the application of the concept of ?risk:return@ and to determine its suita ility due to changes in country risk and markets and also comparison of three companies y valuing their common stocks. &n other words! we will e conducting regression analyses and tests of the 'apital %sset "ricing model and estimating each companyAs intrinsic values using Dividend Discount model and 'apital %sset "ricing (odel in order to compare them with the market values. %s a result we will define in which of these three companies! '%"( holds and as well as the findings of intrinsic values will decide which of these three companyAs common shares are most desira le for investors to uy. Sco0e The scope of the pro+ect covers mainly the running the regression analysis of three companies and providing some tests as well as the estimation of intrinsic values of common shares of )a*akhmys plc! /H%&)(<=%& LL" and )a*(unai>as E- covering Dividend Discount (odel. (oreover! our research group focuses attention of the reader on calculation of reBuired rate of return and risk for the companyAs stock through 'apital asset pricing model

,'%"(0 in order to assess its attractiveness for the investor. %dditionally! the estimation of 2eturn on .Buity through Du"ont analysis will e presented in order to find the expected growth rate. %ll necessary data for assessing stocks of these three companies is retrieved from financial reports placed on official we site of the companies! )a*akhstan Stock .xchange and investfunds.k*. &nformation for 'apital asset pricing model ,'%"(0 and estimation of such varia les as eta and market return and figure of risk free rate was o tained from bcc-invest.kz! )%S. we site. "imitation 8ne of the main limitations of this paper is an a sence of necessary data which may result in inaccuracy of estimations. (oreover! little information is availa le to the general pu lic regarding closing price of stocks in national currency for )a*akhstan oil and gas sector especially for /haikmunai. %ll these factors served as challenge for the research group to make a careful analysis. The empirical evidence of the 'apital %sset "ricing model is inadeBuate to negate the way that it is used in applications. The '%"(As empirical issues might reveal theoretical failures! the conseBuence of many simplifying hypotheses. %lso another reason of these pro lems of '%"( is that it might e performing some valid tests of the model. Caluation of common stock is very complex process. The stock reBuires a deeper analysis compared to preferred stock or de ts and without making some assumptions or predictions! the estimating the intrinsic value for the common shares is arduous in comparison with other securities. From this fact! our assessing of the security will e ased on the assumption concerning the excepted growth rate of dividends.

II.

"iterature review

KazMunaiGaz Exploration
5

)a*(unai>a* .xploration "roduction -S' is a su sidiary of =ational 'ompany )a*(unay>as! which elongs to =ational Wealth Fund DSamruk:)a*ynaE. )(> ." was founded in (arch 4FF5 y the merger of two hitherto +oint stock companies! <*enmunaigas and .m amunaigas. -S' ?." ?)a*(unai>a*@ is a leading company in the field of hydrocar on exploration and production in )a*akhstan! and among the leaders of the oil and gas sector in the 'aspian region. The main activities of oil and gas properties carried out in the 'aspian and (angistau asins of western )a*akhstan. -S' )(> ." has production ranches <*en(unaigas and .m a(unaigas! also )a*germunai LL"! '&T&' 'anada .nergy Limited ,holds ;5G in -S' )ara*han as(unai0 and )(> ")& Finance 6C ,holds HHG in "etro)a*akhstan &nc.0. The company is developing 5I oil and gas fields. <*en(unaigas develops two ma+or fields! .m a(unaigas : a group of H; fields. &n addition! the 'ompany owns shares in associated companies engaged in production oil and natural gas. )(> ." is one of the top three oil producers in )a*akhstan. The production volume of the 'ompany! including shares in companies LL" J-CJ )a*germunai! ''.L , )ara*han as(unai0 and "etro)a*akhstan! in 4FI4 was I4.4 million tons ,459 thousand arrels per day0. )(> ." mission is effective exploitation of hydrocar ons in order to maximi*e the enefits to shareholders! whilst providing long:term economic and social enefits for the regions of our operations. The main o +ective of )(> ." is the increase in shareholder value. )(> ." seeks to achieve value growth through growing reserves and production of hydrocar ons! improving profita ility of existing assets! and developing new opportunities. The total num er of )(> ." shares is 95!HK9!F54! of which 9F!44F!;HK are ordinary voting shares and 5!IH7!IF9 are preference shares. %lmost K9!;G of shares elongs to -S' usiness

=' )(>! others are treasury shares,L!I G0! free float ordinary shares ,HI!IG0 and preference shares ,4!LG0. Kazakhmys )a*akhmys is considered to e the largest copper producer in )a*akhstan and one of the leading copper producers all over the world. The shares of the company are traded in London stock exchange! Hong )ong and %lmaty. Due to fully integrated companyAs operations! )a*akhmys is not merely highly profita le company! ut also one of the copper producers! which has the lowest costs and flexi ility to serve many different customers. %s the copper is one of the key metals! which can e found in every new apartment or office lock! vehicle and electrical appliance! the demand for it is not falling! meaning the sta le supply for the corporation. )a*akhmys operates I7 underground and open pit mines across )a*akhstan. &n 4FI4! company mined H9.K million tonnes of copper ore and processed it in

IF concentrators. 'ompany also operates three coal:fired plants and heating plants that generate the necessary level of power for copper production and market excess capacity for commercial aims. )a*akhmys is also the largest domestic power provider in )a*akhstan with 4FG of market share. &n addition to corporationAs H captive power plants! company owns KFG of the countryAs largest power station ,.ki astu* >2.S:I0! which produced around I5!H7L >Wh of power in 4FI4! IHG a ove the previous year. a) Analysis of company performance %ccording to the information provided on )a*akhstan Stock .xchange! )a*akhmys shareholders are represented y following entities$ 'uprum Holding Limited M IHK ;55 H4K shares! 4K.H;G Fund of =ational Welfare ?Samruk:)a*yna@ -S' M KL L97 9;H shares! IIG

Harper Finance Limited M 4; 9F7 ;FI shares! K.KKG 'ommittee of State "roperty and "rivati*ation! (inistry of Finance of the 2epu lic of )a*akhstan M LF 4L7 FKF shares! IKG

>eneral pu lic M 4HF 7FH L;4 shares! 5H.F7G Total num er of stated shares eBuals to 9KF FFF FFF! out of them KHK 5I9 ;7I shares

are outstanding. (ore than 5HG of )a*akhmys shares are in hands of the pu lic! it means that there is interest from the general pu lic toward investment in eBuity of the company. Some portion of people prefers investment in stocks which is more risky in comparison with placement of deposits in second:tier anks. (oreover! even though the key financial indicators! which are illustrated elow! show that companyAs earnings are fluctuating indicating the riskiness of investment in companyAs shares! still 4; polled investment analysts examining the )a*akhmys "L' advise to investors to hold their position in the corporation. To e more precise! according to the analystsA forecasts company is going to outperform the market in the nearest future ,Financial Times LTD! 4FIH0. 4FF9 4FFL 4FF; 4FIF 4FII .6&TD% ,Nm0 ."S ,N0 Free 'ash Flow ,Nm0 'ash 'ost of 'opper ,<S cents1l 0O (aintenance spend per tonne of copper ,N1t0 4FI4

4!HH7 4!FK7 I!7H5 4!LHK 4!;4K I!;I4 H.F4 L;K HH 4.49 9IK II7 I.IH K9; 94 4.9; 9IL L; 4.LF L45 II5 F.;5 LK I95

794 I!FHL

755 I!F9K I!4H9 4!F7K

Furthermore! local analysts of %syl &nvest give the advice for investors on shares of )a*akhmys "L' to uy and hold securities of this company due to strong operating results and prospects for a recovery in demand for copper from 'hina and )a*(unai>as. %nalysts
8

also draw the attention of investors on the strong characteristics of the issuer in terms of its efficiency! profita ility and alance sheet indicators and lagging stock price indicators of the company from the overall market ,"rodengi.k*! 4FI40. &n accordance with analysis of related literature! investment in shares of )a*akhmys has following pros and cons respectively$ )a*akhmys is engaged in the cyclical usiness! conseBuently! its revenue and earnings are heavily influenced y aggregate usiness activity. &n terms of stocks! this company has high eta and its rate of return has greater changes than the overall market rate of return. This is negative side of the industry! it adds risk! ut at the same time return increases. )a*akhmys has differentiation competitive strategy which is explained y the fact that company is uniBue in the industry! thatAs why it is extremely important for the uyers of their product. This factor contri utes to high revenues. There is also influence of the cyclical usiness! ut nevertheless this factor may positively affect the dividend policy in the future. Zhaikmunai /haikmunai! a Limited "artnership ,the ?"artnership@ or ?/haikmunai@0 was esta lished in )a*akhstan in I;;9 for the purpose of exploration and development of 'hinarevskoye oil and gas condensate field in the Western )a*akhstan 2egion. The "artnership carries out its activities in accordance with the 'ontract for %dditional .xploration! "roduction and "roduction M Sharing of 'rude Hydrocar ons in the 'hinarevskoye oil and gas condensate field dated in 8cto er HI! I;;9 in accordance with the license (> =o. 4KHD for the exploration and production of hydrocar ons in 'hinarevskoye oil and gas condensate field etween the State 'ommittee of &nvestments of the 2epu lic of

)a*akhstan and the "artnership. The registered address of the "artnership is$ K;14! "rospect .vra*ia! <ralsk! the 2epu lic of )a*akhstan. The 'hinarevskoye field covers approximately 495 sBuare kilometers and is situated in the West )a*akhstan "rovince! near the order etween )a*akhstan and the 2ussian Federation! and close to several ma+or pipelines. The West )a*akhstan administrative center of <ralsk ,or 8ral! in )a*akh0 is located approximately LF kilometers southwest of 'hinarevskoye field. /haikmunaiAs other assets at this time include the 2ostoshinskoye field! the Dar*hinskoye field! and the Pu*hno:>remyachenskoye field! which are all situated in the vicinity of the 'hinarevskoye field! proposing direct operational synergies. /haikmunai controls the marketing! pricing and transportation of its liBuids through the transport of its crude oil and sta ili*ed condensate from the 'hinarevskoye field to its loading rail terminal in 2ostoshi near <ralsk through its own I4F:kilometer pipeline and through the road transport of its L"> production in ullet trucks from the 'hinarevskoye to the rail terminal. /haikmunai is an independent oil and gas enterprise presently engaging in the production! expansion and exploration of oil and gas in north:western )a*akhstan. &ts >lo al Depositary 2eceipts ,>D2s0 are listed on the London Stock .xchange ,LS.0 ,Ticker sym ol$ /)(0. /haikmunaiAs main o +ectives are Deliver 8rganic >rowth which includes Dou le production to achieve over IFF!FFF oepd y 4FI7 and "ursue efficiency developments throughout all operations. .xpand and (oneti*e the 2eserve or 2esource 6ase which are Fully develop the 'hinarevskoye field 4" reserves of K44 million oe! Target the 'hinarevskoye field H" reserves of KK; million oe and Develop and appraise the newly acBuired ad+acent fields ,2ostoshinskoye! Dar*hinskoye and Pu*hno:>remyachenskoye0 with 4" reserves of IL9 million oe and H" reserves of IL9 million oe. Develop a (ulti:Field (odel to Drive Future >rowth which includes Leverage the existing 'hinarevskoye infrastructure to treat gas:
10

condensate from neigh oring fields and "ursue the Buest for further reserves at low finding costs. Focus on Delivering Shareholder Calue which includes "ursue a alanced approach to investment in growth over the long:term! .nsure strong operating cash flow generation guaranteeing the expenditure programme and maintain a sound capital structure! a clear financial policy and a regular dividend payout. III. $et%odology

%n empirical research is a scientific study which is ased on facts. %ny scientific research starts with the collection! classification and generali*ation of the facts. The concept of JfactJ has the following ma+or meanings$ I0 Some fragment of reality! o +ective events! the results that ased on either to the o +ective reality ,Jfacts of realityJ0! or to the realm of consciousness and knowledge ,Jfacts of consciousnessJ0Q 40 )nowledge of any event! phenomenon! which credi ility is provedQ H0 %ny assumptions or suggestions that fixing empirical knowledge which received during experiments and o servations. The internal structure of empirical level is formed into two su levels$ a0 Direct o servation and experiments which result are referred to these o servationsQ 0 6y means of cognitive procedures! transition from o servations to empirical dependences and facts is carried out. The activity: ased nature of empirical research at level of o servation is most distinctly shown in situations when o servation is carried out during real experiment. 6y tradition! the experiment is opposed to o servation which is out of experiment. LetRs note that a core of empirical research is an experiment M test of the studied phenomena in controlla le and managea le conditions. The distinction etween an experimentation and o servation is

11

that experimental conditions are controlled and managed! ut in o servation the processes are given ased on the natural course of events. Without denying specifics of these two types of cognitive activities! it is necessary to pay attention to their common generic features. First of all we need to consider in more detail what the feature of experimental research as practical activity is. .xperimental work is a specific form of natural interaction! and interactive fragments of the nature in the experiment always appear as o +ects with functionally allocated properties. Ca0ital Asset -ricing $odel 8ne of the main pro lems that can e encountered when assessing the value of the assets is to determine the relationship etween risk and return. The market pattern Jthe higher the risk! the higher the rate of returnJ is not in dou t. &n this case! each investor forms its own forecasts of relatively marked parameters. However! the market tends to keep moving in the direction of a certain eBuili rium valuations of risk and return on assets. &n a well:developed market! new information is Buickly reflected in the market value of assets! so for these conditions! there is a model that would adeBuately descri e the relationship etween risk and return of assets. Such a model is developed in the mid 7Fs. y William Sharpe and -ohn Lintern and was named the valuation of financial assets ,capital asset pricing model : '%"(0. ,6essonova! 4FF90 'apital %sset "ricing (odel ,'%"(0 M a model for the economic evaluation of shares! securities! derivatives and 1 or assets y relating risk and expected return. '%"( is ased on the idea that investors demand additional expected return ,risk premium0 if they are asked to take on additional risk. ,6essonova! 4FF90 &n I;;F! William Sharpe won the =o el "ri*e in the realm of economics for his contri utions to the theory of pricing financial assets! that is so:called the 'apital %sset "ricing (odel ,'%"(0. This is a single:factor model! the key factor is a risk.
12

The main result of '%"( is the esta lishment of the relationship etween return and risk of the asset for the eBuili rium of the market. 8ne of the most important things is the fact that in the making choice! the investor must take into account not the entire risk of the security! ut the only systematic or non:diversifia le. This part of the risk of an asset is closely linked to the overall market and Buantitatively represented y coefficient beta which was introduced y William Sharpe in his one:factor model. ,6essonova! 4FF90 '%"( can e determined in the following way$
RM R f Ri = R f + 4 M iM

,I0

Where Ri =expected return on eBuili rium of the securityQ RM M return on the marketQ
4 M M the variance of the market or its riskQ

R f M risk free rateQ iM M the covariance

etween the return of financial asset and return of the market. "articular attention should e paid to S coefficient model! which characteri*es the sensitivity of the asset to market changes. The coefficient S of '%"( is the ratio of$

iM 4 M

This ratio is used to measure the market risk and the relationship etween the return of the financial asset and the return of the asset market. We can rewrite the formula ,I0 y the following way$
Ri = R f + , R M R f 0

,40

Hence! it clear that the '%"( is ased on following key varia les$ 2f :the risk:free rate of an investment
13

2m : the overall stock market risk S : the stockRs eta The capital asset pricing model '%"( : is single:factor model. &t is Buite widespread.

6ut like any other models! it has oth advantages and disadvantages. The main advantage is that this model clearly descri es the relationship etween return and risk. %s well as its main draw ack is that it is one factor and! therefore! cannot take into account all the factors affecting the return. (S%ar0e, Alexander, ,ailey1 +''23 .mpirical evidence was in favor of '%"( and the model ecame extremely famous in the modern portfolio theory. Things were clear$ stocks with eta lower than I were considered passive stocks and stocks with eta higher than I were considered aggressive and risky. Depending on their appetite toward risk! investors would choose the stocks in their portfolio according to the value of eta. Though! some criticisms of '%"( appeared. 8ne very known critic in literature elongs to Fama and French. &n I;;4! they discovered a negative relationship etween risk and return. Since then! a very important Buestion is eing asked$ ?&s 6eta dead# @. %nd if the answer is yes! what is the true nature and measure of risk# Fama and French came up with the conclusion that a more realistic approach of the risk in the market is the multi:index models. They argued that si*e of the firm and the ook to market value have a significant influence on the performance of a stock. 4ividend 4iscount $odel 544$3 % lot of stock exchanges allow investors to invest in several securities including stocks. To find necessary information a out stock! investors employ different types of investment analyses including fundamental analysis. (any methods for calculating the intrinsic value of a stock is used. &nvestors freBuently apply the dividend discount model to

14

estimate the intrinsic value of a stock. 6ased on this model! they uy! hold or sell the stock. ,>8TTW%LD! 4FI40 The dividend discount model provides a method of ela orating an explicit expected return for the stock market. &t is a means of assessing ased on theory that a stock is eBual to the discounted sum of all its future dividend payments. &n other words! the intrinsic value of a stock is determined similar to the present value of future dividends. The stocks are valued ased on the net present value of the future dividends. The predicting of future dividends is sometimes rather pro lematic. ,>8TTW%LD! 4FI40. Several methods of the dividend discount model are employed y the financial analytics. The easiest method is that the value of a stock eBuals to the value for a perpetual annuity with a constant level of payments. "F T DivI 1 ,k M g0 8ther methods are ased on increasing! stagnation or decreasing of dividends. The increasing or decreasing of dividends can e in two ways$ linear or nonlinear. Financial analytics usually consider possi le increase rate of dividends with the aid of financial statements of companies or historical information analysis. &n order to examine historical data! we should discover the existence of such data. The possi le growth rate of dividends relies on factors like dividend policy! profit margin! return on eBuity and inde tedness. ,>8TTW%LD! 4FI40. %ccording to 6lackwell! >riffiths and Winters ,4FF90! stocks are divided y stocks that pay dividends and stocks that do not pay dividends. %n investor who chooses the stock which gives dividend looks forward to take part in two sets of future cash flows$ a stream of future dividends and a sales price when the stock is sold. 6y assessing a dividend paying stock! we should make some hypothesis a out dividend growth$ no growth in dividends! constant growth in dividends or non:constant

15

growth in dividends. However! the hypothesis a out no growth in dividends could appear insu stantial. The speculation of constant dividends is appropriate for the peculiarities of preferred stock! which contains a stated dividend of a fixed amount. %ll preferred stock dividends have to e fully dis ursed efore any dividend on common stock can e dis ursed. Supposition of constant growth in dividends is accepta le for the ig! sta le! dividend:paying companies! which are usually named as ? lue chip@ firms. % more general kind of assumption is the non:constant growth in dividends which says that dividends are supposed to go down to a rate of growth that is sustaina le over the long run. There are often three:stage! four:stage non:constant growth models in dividends are employed in practice. ,>8TTW%LD! 4FI40. The price of a share of stock is the present value of all expected future dividends per share discounted at market capitali*ation rate$

Vj T value of common stock +Q Dt T dividend during period tQ k T reBuired rate of return of stock j or cost of eBuityQ t T the holding period. The model was initially developed y Williams ,I;HL0 and afterwards expanded y >ordon ,I;7H0 ,6realey U(yers ,4FFF$ 75: 770.0 &n order to apply the a ove eBuation! an investor has to predict all future dividends. %nd additionally specific assumptions have to e made! these assumptions are ased on dividend growth rates. Thus! the dividend per share at any time t can e expressed as the dividend per share at time t:I times the growth rate of gt ,Sharpe! I;;;0$ Dt T Dt:I O ,I V gt0

16

We made the valuation of common stock ased on ?Two:stage Dividend Discount (odel@. The model consists of two stages of growthQ an expected growth rate that lasts ?t@ years and a steady state growth rate that lasts infinitely$

Where

T the intrinsic value of common stockQ

DF T Dividends per share at year 4FI4Q g T expected growth rate that lasts t yearsQ r T cost of eBuity "= T "rice or Terminal value at the end of year = %ccording to our assumption! the expected growth rate which we are going to estimate y formula ! " Ret#rn on e$#ity % Retention Ratio, will last for the next five years and after five years it will e eBual to >D" growth rate of )a*akhstan which are KG until eternity ,4FI40 ,KG >D" growth rate is taken from the official we site0 'ost of eBuity will e estimated according to the 'apital %sset "ricing (odel$
Ri = R f + , R M R f 0 !

in this eBuation risk free rate will e taken from )a*akhstan official c:invest.k* that eBuals to the K.KGQ we will calculate the market

we site which is called

return ased on )%S. &=D.W of monthly data starting from 4FFL till 4FI4! as oth )a*(unai>as ." and -S' )a*akhtelecom are listed in this indexQ the will e estimated ased on the historical stock prices of two companies also referring to the monthly data. From historical prices we will o tain annual returns and use formula for finding the $ & " 'ovariance (()' *azak+telecom, *A), -.D,/) 0 Variance (*A), -.D,/) & " 'ovariance (*azM#nai1as , , *A), -.D,/) 0 Variance (*A), -.D,/).

17

%s mentioned a ove! the formula for calculating the expected growth rate that we are going to use$ ! " Ret#rn on e$#ity % Retention Ratio For estimating 2eturn on eBuity we will employ Du"ont analysis and Financial Statement of the two companies for 4FI4$ R2, " rofit Mar!in ( rofit0)ales) % 3otal Asset 3#rnover ()ales0Assets) % ,$#ity M#ltiplier (Assets0,$#ity) 2etention ratio will e estimated y the following formula$ Retention Ratio " (4 5 D ) for 67460, ) (or .et -ncome) for 6746) " (4 5 ay2#t ratio) %fter that we will compute the present value of all expected future dividends per share discounted at the cost of eBuity. The terminal value will e computed after five years y this formula$ "= T .xpected dividends per share at end of year =1,'ost of eBuity M >D" steady state growth rate0 I). *indings and Analysis

The data that examined here are the monthly returns for the three companies. The data cover for )a*munaiga* and )a*akhmys Decem er 4FF9 through Decem er 4FI4 and for /haikmunai (arch 4FFL through Decem er 4FI4. The market return is measured for three companies using the London Stock .xchange. Here are the values$
Kazakhmys Date Close 31-Dec-2012 778 30-Nov-2012 713.5 31-Oct-2012 709 28-Sep-2012 692.5 Return 0.090399 0.006347 0.023 27 0.167791 Date 31-Dec-2012 30-Nov-2012 31-Oct-2012 28-Sep-2012 LSE Close 1088 977.5 975.5 943 Return 0.113043 0.00205 0.034464 !0.050 3

18

31-Aug-2012 31-Jul-2012 29-Jun-2012 31-May-2012 30-Ap -2012 30-Ma -2012 29-!e"-2012 31-Jan-2012 30-Dec-2011 30-Nov-2011 31-Oct-2011 30-Sep-2011 31-Aug-2011 29-Jul-2011 30-Jun-2011 31-May-2011 28-Ap -2011 31-Ma -2011 28-!e"-2011 31-Jan-2011 31-Dec-2010 30-Nov-2010 29-Oct-2010 30-Sep-2010 31-Aug-2010 30-Jul-2010 30-Jun-2010 31-May-2010 30-Ap -2010 31-Ma -2010 26-!e"-2010 29-Jan-2010 31-Dec-2009 30-Nov-2009 30-Oct-2009 30-Sep-2009 31-Aug-2009 31-Jul-2009 30-Jun-2009 29-May-2009 30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 31-Jul-2008 30-Jun-2008 30-May-2008 30-Ap -2008

593 705 721.5 665 861 908 1109 1136 927 925 927.5 793 1091 1348 1380 1314 1379 1394 1444 1506 1614 1386 1316 1452 1156 1216 994 1185 1404 1527 1341 1219 1328 1233 1089 1074 988.5 856.5 630 690.5 535 371 261.5 223.75 231 259.75 285.5 580 1292 1499 1592 1690 1582

!0.15 7 !0.022 7 0.0 4962 !0.22764 !0.05176 !0.1 124 !0.02377 0.22545 0.002162 !0.0027 0.169609 !0.27314 !0.19065 !0.02319 0.05022 !0.04714 !0.01076 !0.03463 !0.04117 !0.06691 0.164502 0.053191 !0.09366 0.256055 !0.04934 0.22334 !0.1611 !0.1559 !0.0 055 0.13 702 0.1000 2 !0.0 20 0.07704 0.132231 0.013966 0.0 6495 0.154116 0.359524 !0.0 762 0.290654 0.442049 0.41 73 0.16 715 !0.03139 !0.1106 !0.09019 !0.50776 !0.5510 !0.13 09 !0.05 42 !0.05799 0.06 26 !0.00939

31-Aug-2012 31-Jul-2012 29-Jun-2012 31-May-2012 30-Ap -2012 30-Ma -2012 29-!e"-2012 31-Jan-2012 30-Dec-2011 30-Nov-2011 31-Oct-2011 30-Sep-2011 31-Aug-2011 29-Jul-2011 30-Jun-2011 31-May-2011 28-Ap -2011 31-Ma -2011 28-!e"-2011 31-Jan-2011 31-Dec-2010 30-Nov-2010 29-Oct-2010 30-Sep-2010 31-Aug-2010 30-Jul-2010 30-Jun-2010 31-May-2010 30-Ap -2010 31-Ma -2010 26-!e"-2010 29-Jan-2010 31-Dec-2009 30-Nov-2009 30-Oct-2009 30-Sep-2009 31-Aug-2009 31-Jul-2009 30-Jun-2009 29-May-2009 30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 31-Jul-2008 30-Jun-2008 30-May-2008 30-Ap -2008

993.5 969.5 1004 1000 1088 1034 902 870 795 860.5 900 815 920.5 997 1061 980.5 871.5 832.5 900 846 838 758.5 734 681 660.5 647 563.5 642 685 710.5 665 641.5 718 752.5 851 856 805.5 712 702.5 689.5 749 565.5 434.25 481.25 510 609 558.5 863 793 831 780 1027 1077

0.024755 !0.03436 0.004 !0.0 0 0.052224 0.146341 0.0367 2 0.09434 !0.07612 !0.043 9 0.104294 !0.11461 !0.07673 !0.06032 0.0 2101 0.125072 0.046 47 !0.075 0.063 3 0.009547 0.104 12 0.033379 0.077 27 0.031037 0.020 66 0.14 1 1 !0.12227 !0.06277 !0.035 9 0.06 421 0.036633 !0.10655 !0.045 5 !0.11575 !0.005 4 0.062694 0.13132 0.013523 0.01 54 !0.07944 0.324492 0.302245 !0.09766 !0.05637 !0.16256 0.090421 !0.352 4 0.0 272 !0.04573 0.0653 5 !0.24051 !0.04643 !0.10 44

19

31-Ma -2008 29-!e"-2008 31-Jan-2008 31-Dec-2007

1597 1546 1215 1371

0.0329 0.27242 !0.11379 #

31-Ma -2008 29-!e"-2008 31-Jan-2008 31-Dec-2007

1208 1359 1691 1979

!0.11111 !0.19633 !0.14553 #

Kaz"una#$as Date Close 31-Dec-2012 18 30-Nov-2012 18.7 31-Oct-2012 17.75 28-Sep-2012 18.45 31-Aug-2012 18 31-Jul-2012 18.12 29-Jun-2012 16.9 31-May-2012 18.58 30-Ap -2012 20 30-Ma -2012 20.28 29-!e"-2012 17.9 31-Jan-2012 15.8 30-Dec-2011 14.95 30-Nov-2011 16.1 31-Oct-2011 16.98 30-Sep-2011 14.66 31-Aug-2011 16.95 29-Jul-2011 18.5 30-Jun-2011 19.9 31-May-2011 21.55 28-Ap -2011 22.65 28-Ma -2011 23.22 28-!e"-2011 23 31-Jan-2011 21.5 31-Dec-2010 19.83 30-Nov-2010 19.2 29-Oct-2010 17.2 30-Sep-2010 17.67 31-Aug-2010 17.64 30-Jul-2010 19.56 30-Jun-2010 18.6 31-May-2010 21.45 30-Ap -2010 24.6 31-Ma -2010 24.67 26-!e"-2010 24.14 29-Jan-2010 25.4 31-Dec-2009 24.9 30-Nov-2009 24.1 30-Oct-2009 23.65 30-Sep-2009 22.38 31-Aug-2009 22 31-Jul-2009 21.55 30-Jun-2009 19 29-May-2009 21.99

Return !0.03743 0.053521 !0.03794 0.025 !0.00662 0.0721 9 !0.09042 !0.071 !0.013 1 0.132961 0.132911 0.056 56 !0.07143 !0.051 3 0.15 254 !0.1351 !0.0 37 !0.07035 !0.07657 !0.04 57 !0.02455 0.009565 0.069767 0.0 4216 0.032 12 0.116279 !0.0266 0.001701 !0.09 16 0.051613 !0.132 7 !0.12 05 !0.002 4 0.021955 !0.04961 0.0200 0.033195 0.019027 0.056747 0.017273 0.020 2 0.134211 !0.13597 0.23 176

Date 31-Dec-2012 30-Nov-2012 31-Oct-2012 28-Sep-2012 31-Aug-2012 31-Jul-2012 29-Jun-2012 31-May-2012 30-Ap -2012 30-Ma -2012 29-!e"-2012 31-Jan-2012 30-Dec-2011 30-Nov-2011 31-Oct-2011 30-Sep-2011 31-Aug-2011 29-Jul-2011 30-Jun-2011 31-May-2011 28-Ap -2011 31-Ma -2011 28-!e"-2011 31-Jan-2011 31-Dec-2010 30-Nov-2010 29-Oct-2010 30-Sep-2010 31-Aug-2010 30-Jul-2010 30-Jun-2010 31-May-2010 30-Ap -2010 31-Ma -2010 26-!e"-2010 29-Jan-2010 31-Dec-2009 30-Nov-2009 30-Oct-2009 30-Sep-2009 31-Aug-2009 31-Jul-2009 30-Jun-2009 29-May-2009

LSE Close 1088 977.5 975.5 943 993.5 969.5 1004 1000 1088 1034 902 870 795 860.5 900 815 920.5 997 1061 980.5 871.5 832.5 900 846 838 758.5 734 681 660.5 647 563.5 642 685 710.5 665 641.5 718 752.5 851 856 805.5 712 702.5 689.5

Return 0.113043 0.00205 0.034464 -0.05083 0.024755 -0.03436 0.004 -0.08088 0.052224 0.146341 0.036782 0.09434 -0.07612 -0.04389 0.104294 -0.11461 -0.07673 -0.06032 0.082101 0.125072 0.046847 -0.075 0.06383 0.009547 0.104812 0.033379 0.077827 0.031037 0.020866 0.148181 -0.12227 -0.06277 -0.03589 0.068421 0.036633 -0.10655 -0.04585 -0.11575 -0.00584 0.062694 0.13132 0.013523 0.018854 -0.07944

20

30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 31-Jul-2008 17-Jun-2008 30-May-2008 30-Ap -2008 31-Ma -2008 29-!e"-2008 31-Jan-2008 31-Dec-2007

17.76 14.9 12.27 12.7 12.6 13.41 14 15.5 23.15 25.5 30.22 32.45 29.4 25.05 24.7 26.1 31

0.191946 0.214344 !0.033 6 0.007937 !0.0604 !0.04214 !0.09677 !0.33045 !0.09216 !0.15619 !0.06 72 0.103741 0.173653 0.01417 !0.05364 !0.15 06 #

30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 31-Jul-2008 30-Jun-2008 30-May-2008 30-Ap -2008 31-Ma -2008 29-!e"-2008 31-Jan-2008 31-Dec-2007

749 565.5 434.25 481.25 510 609 558.5 863 793 831 780 1027 1077 1208 1359 1691 1979

0.324492 0.302245 -0.09766 -0.05637 -0.16256 0.090421 -0.35284 0.088272 -0.04573 0.065385 -0.24051 -0.04643 -0.10844 -0.11111 -0.19633 -0.14553 #

%ha#kmuna# Date Close 31-Dec-2012 10.7 30-Nov-2012 11 31-Oct-2012 10.7 28-Sep-2012 10.2 31-Aug-2012 9.7 31-Jul-2012 8.25 29-Jun-2012 8.5 31-May-2012 9.75 30-Ap -2012 10.75 30-Ma -2012 11.19 29-!e"-2012 11.4 31-Jan-2012 10.8 30-Dec-2011 9.71 30-Nov-2011 9 31-Oct-2011 8.28 30-Sep-2011 7.4 31-Aug-2011 8.2 29-Jul-2011 9.9 30-Jun-2011 9.95 31-May-2011 11 28-Ap -2011 11.87 31-Ma -2011 12.4 28-!e"-2011 12.99 31-Jan-2011 12.27 31-Dec-2010 12 30-Nov-2010 11.5 29-Oct-2010 10.6 30-Sep-2010 8 31-Aug-2010 7 30-Jul-2010 7.4

Return -0.02727 0.028037 0.04902 0.051546 0.175758 -0.02941 -0.12821 -0.09302 -0.03932 -0.01842 0.055556 0.112255 0.078889 0.086957 0.118919 -0.09756 -0.17172 -0.00503 -0.09545 -0.07329 -0.04274 -0.04542 0.05868 0.0225 0.043478 0.084906 0.325 0.142857 -0.05405 0

Date 31-Dec-2012 30-Nov-2012 31-Oct-2012 28-Sep-2012 31-Aug-2012 31-Jul-2012 29-Jun-2012 31-May-2012 30-Ap -2012 30-Ma -2012 29-!e"-2012 31-Jan-2012 30-Dec-2011 30-Nov-2011 31-Oct-2011 30-Sep-2011 31-Aug-2011 29-Jul-2011 30-Jun-2011 31-May-2011 28-Ap -2011 31-Ma -2011 28-!e"-2011 31-Jan-2011 31-Dec-2010 30-Nov-2010 29-Oct-2010 30-Sep-2010 31-Aug-2010 30-Jul-2010

LSE Close 1088 977.5 975.5 943 993.5 969.5 1004 1000 1088 1034 902 870 795 860.5 900 815 920.5 997 1061 980.5 871.5 832.5 900 846 838 758.5 734 681 660.5 647

Return 0.113043 0.00205 0.034464 -0.05083 0.024755 -0.03436 0.004 -0.08088 0.052224 0.146341 0.036782 0.09434 -0.07612 -0.04389 0.104294 -0.11461 -0.07673 -0.06032 0.082101 0.125072 0.046847 -0.075 0.06383 0.009547 0.104812 0.033379 0.077827 0.031037 0.020866 0.148181

21

30-Jun-2010 31-May-2010 30-Ap -2010 31-Ma -2010 26-!e"-2010 29-Jan-2010 31-Dec-2009 30-Nov-2009 30-Oct-2009 30-Sep-2009 31-Aug-2009 31-Jul-2009 30-Jun-2009 29-May-2009 30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 30-Jul-2008 30-Jun-2008 30-May-2008 30-Ap -2008 31-Ma -2008 28-Ma -2008

7.4 7.9 8.54 8.75 7.85 8.25 8.5 6.5 4.7 4.75 5 4.4 5.5 4.5 4.15 2 2.35 2 2.75 4.63 4.75 8 13.7 14.5 15.9 15.1 11.95 10.5 10.4

-0.06329 -0.07494 -0.024 0.11465 -0.04848 -0.02941 0.307692 0.382979 -0.01053 -0.05 0.136364 -0.2 0.222222 0.084337 1.075 -0.14894 0.175 -0.27273 -0.40605 -0.02526 -0.40625 -0.41606 -0.05517 -0.08805 0.05298 0.263598 0.138095 0.009615 #

30-Jun-2010 31-May-2010 30-Ap -2010 31-Ma -2010 26-!e"-2010 29-Jan-2010 31-Dec-2009 30-Nov-2009 30-Oct-2009 30-Sep-2009 31-Aug-2009 31-Jul-2009 30-Jun-2009 29-May-2009 30-Ap -2009 31-Ma -2009 27-!e"-2009 30-Jan-2009 31-Dec-2008 28-Nov-2008 31-Oct-2008 30-Sep-2008 29-Aug-2008 31-Jul-2008 30-Jun-2008 30-May-2008 30-Ap -2008 31-Ma -2008 29-!e"-2008

563.5 642 685 710.5 665 641.5 718 752.5 851 856 805.5 712 702.5 689.5 749 565.5 434.25 481.25 510 609 558.5 863 793 831 780 1027 1077 1208 1359

-0.12227 -0.06277 -0.03589 0.068421 0.036633 -0.10655 -0.04585 -0.11575 -0.00584 0.062694 0.13132 0.013523 0.018854 -0.07944 0.324492 0.302245 -0.09766 -0.05637 -0.16256 0.090421 -0.35284 0.088272 -0.04573 0.065385 -0.24051 -0.04643 -0.10844 -0.11111 #

Here are the results of a regression fit$ 6a7muniaga7

Depen$ent#%a &a"le'#(A)M*N Met+o$'#,ea-t#S.ua eDate'#12/11/13###0&1e'#04'12 Sa1ple'#2008M01#2012M12 2nclu$e$#o"-e vat&on-'#60 (A)M*N34516745268,SA 4oe99&c&ent 4516 4526 <--.ua e$ A$=u-te$#<--.ua e$ S.:.#o9# eg e--&on Su1#-.ua e$# e-&$ ,og#l&>el&+oo$ !--tat&-t&c ; o"5!--tat&-t&c6 -0.002705 0.304331 St$.#: o 0.012604 0.110258 t-Stat&-t&c -0.214621 2.760171 ; o".## 0.8308 0.0077 -0.003682 0.102917 -1.783350 -1.713538 -1.756043 1.710942

0.116103####Mean#$epen$ent#va 0.100864####S.D.#$epen$ent#va 0.097588####A>a&>e#&n9o#c &te &on 0.552363####Sc+?a @#c &te &on 55.50049####Aannan-Bu&nn#c &te . 7.618541####Du "&n-Cat-on#-tat 0.007720

22

6a7ak%mys
Depen$ent#%a &a"le'#(A)MDS Met+o$'#,ea-t#S.ua eDate'#12/11/13###0&1e'#04'16 Sa1ple'#2008M01#2012M12 2nclu$e$#o"-e vat&on-'#60 (A)MDS34516745268,SA 4oe99&c&ent 4516 4526 <--.ua e$ A$=u-te$#<--.ua e$ S.:.#o9# eg e--&on Su1#-.ua e$# e-&$ ,og#l&>el&+oo$ !--tat&-t&c ; o"5!--tat&-t&c6 0.011164 0.683307 St$.#: o 0.021565 0.188654 t-Stat&-t&c 0.517678 3.622002 ; o".## 0.6067 0.0006 0.008971 0.183325 -0.709163 -0.639352 -0.681856 1.448329

0.184464####Mean#$epen$ent#va 0.170403####S.D.#$epen$ent#va 0.166976####A>a&>e#&n9o#c &te &on 1.617105####Sc+?a @#c &te &on 23.27490####Aannan-Bu&nn#c &te . 13.11890####Du "&n-Cat-on#-tat 0.000616

8%aikmunai
Depen$ent#%a &a"le'#)AA2( Met+o$'#,ea-t#S.ua eDate'#12/11/13###0&1e'#04'21 Sa1ple#5a$=u-te$6'#2008M01#2012M10 2nclu$e$#o"-e vat&on-'#58#a9te #a$=u-t1ent)AA2(34516745268,SA2 4oe99&c&ent 4516 4526 <--.ua e$ A$=u-te$#<--.ua e$ S.:.#o9# eg e--&on Su1#-.ua e$# e-&$ ,og#l&>el&+oo$ !--tat&-t&c ; o"5!--tat&-t&c6 0.018285 0.644823 St$.#: o 0.026377 0.236041 t-Stat&-t&c 0.693218 2.731821 ; o".## 0.4910 0.0084 0.019945 0.211908 -0.338854 -0.267804 -0.311178 1.780661

0.117594####Mean#$epen$ent#va 0.101837####S.D.#$epen$ent#va 0.200829####A>a&>e#&n9o#c &te &on 2.258604####Sc+?a @#c &te &on 11.82676####Aannan-Bu&nn#c &te . 7.462843####Du "&n-Cat-on#-tat 0.008409

23

The estimate of three etas is$ '.9':56a7munaiga731 '.62956a7ak%mys31 '.6::58%aikmunai3. %s we see stocks of 6a7akmys is dou le riskier than 6a7munaiga71 ut a little it riskier than 8%aikmunai. However all three companiesA stocks have less price volatility than the market and are less risky. &f we conduct t-test for the hypothesis $ 87 9 & " 7 849 & : 7 6a7munaiga7; *azm#nai!az ret#rn " -7.776;7< = 7.>7?>>4 Market Ret#rn
se (7.746@7?) (7.4476<A) (7.77;;)

R6 " 7.44@47>

p-val#e (7.A>7A)

t "&0se(&) "7.>7?>>407.4476<A" 6.;@

6a7ak%mys; *azak+mys ret#rn " 7.7444@?= 7.@A>>7;Market Ret#rn

se (7.764<@<) (7.4AA@<?) (7.777@)

R6 " 7.4A??@?

p-val#e (7.@7@;)

t "&0se(&) "7.@A>>7;07.4AA@<?" >.@66776

8%aikmunai; B+aikm#nai ret#rn " 7.74A6A<= 7.@??A6>Market Ret#rn

se (7.76@>;;) (7.6>@7?4) (7.77A?)

R6 " 7.44;<C?

p-val#e (7.?C47)

t "&0se(&) "7.@??A6>07.6>@7?4" 6.;>4A64

&f we look at T:ta le statistics! all t:statistics of three companies ased on coefficient eta at KG significance level are statistically significant and as a result we can re+ect the null hypothesis since the pro a ility value ,p-val#e) is smaller than F!FK. This actually means that the coefficient is significantly different from *ero! which is a contradiction to the theory of

24

'%"(. 2:sBuared is the proportion of variance that is explained y the regression model. When we translate this approximation to the '%"( model! then the 2:sBuared is an approximate measure of the amount of systematic risk contained in the total variation. %ccording to the '%"( the non:systematic risk can e diversified away. &n our regression analysis results )a*akhmys has higher 2:sBuared compared to others! that is 7.4A??@?, then a out IL.55G of all risk in this stock is systematic! meaning non:diversifia le. That also means that LI.K7G of the risk shown during 4FFL:4FI4 years of returns appears to e diversifia le. %t )a*munaiga*! 44.@4D of all risk in this security is systematic! other LL.H;G of risk is non:diversifia le as well as at /haikmunai! II.9KG of all risk in this stock systematic! leaving LL.4KG of risk is non:diversifia le.

25

References

>ottwald! 2. ,4FI40. 38, E), 2F 38, D-V-D,.D D-)'2E.3 M2D,G 32 M,A)ER, )32'* R-', V2GA3-G-3H. -ournal of interdisciplinary research 6essonova 8. S. E), 2F 'A -3AG A)),3 R-'-.1 M2D,G ('A M) F2R ,/ ,'3,D R,3ER. F2R,'A)3-.1 2. ,/AM G, 2F 3,G,'2MME.-'A3-2. '2M A.-,) )32'*) >u+arati D. Iasic ,conometrics Fama! ..F. U French! ).2. ,4FF50. The 'apital %sset "ricing (odel$ theory and evidence. (o#rnal of ,conomic erspectives 4A ,H0. Farrell! -. ,I;LK0. The dividend discount model$ a primer. Financial Analysts (o#rnal ?4 ,70. Hillier! D.! 2oss!S.! Westerfield! 2.! -affe! -. U -ordan! 6. ,4FIF0. 'orporate Finance. <)$(c>raw:Hill

26