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Managers at Magna International Inc. (NYSE:MGA) seem to be doing a pretty good job convincing analysts the company’s deal with Russian oligarch Oleg Deripaska has serious potential for returns.

RBC Capital Markets analyst Nick Morton became the latest analyst to say the agreement has upside, especially for Magna’s assembly operation.

“We believe that expansion into Russia would be positive for Magna-Steyr,” Mr. Morton wrote in a note to clients after meeting with Magna officials. “Engineering and design on a new Russian car is to begin immediately and production revenues for Steyr could begin in 2009/2010.”

Steyr, located in Austria, has to win new business because much of its volume for Chrysler and BMW is scheduled to end over the next 3 years, Mr. Morton said. The argument is that the company’s parts business could also benefit because Russia’s auto supply base now is a disorganized mess and Magna can provide badly needed rationalization and technology.

Magna has been telling analysts that it believes it can put at least $1,000 and perhaps as much as $4,000 worth of its parts on average in each Russian vehicle. Based on a market of 2 million new vehicles, that would generate between $2-billion and $8-billion in annual revenue for the company.

Pipe dream? Too soon to tell.

Magna founder Frank Stronach has always been a big thinker. But this deal with Mr. Deripaska, which gives the Russian shared control of Magna for an investment of US$1.54-billion, is his biggest plan yet.

Mr. Morton has an “outperform” rating on Magna shares with a 12-month price target of C$100. Magna shares were trading in the range of C$96 in Toronto.

Source: Magna International Succeeds in Selling Russian Deal To Wall Street