English
"Fondul Proprietatea" (FP) is far from being a "bargain" for investors, the analysts of "Erste Group Research" say, as they their target price for the fund's stock by 30%, to 0.51 lei/share. Nevertheless, the estimate of "Erste" is 18% higher than the current quotation of the Bucharest Stock Exchange, and analysts recommend accumulating shares in the fund.
Analysts say that they have applied a discount of 48% to the fair value of the Fund's NAV of 0.98 lei/share (derived from the methodology which was used), in line with the NAV discount which several funds of private equity are trading at.
The discount applied to the Proprietatea Fund is higher, because the Fund has several unlisted companies in its portfolio, in which the Romanian state is the majority shareholder.
"The key factor towards a sustainable narrowing of the discount that the stock trades at is represented by the listing of Romgaz, Hidroelectrica and, to a lesser extent, of Nuclearelectrica", the quoted report says. The Initial Public Offering of Romgaz is scheduled to take place in mid-2012, whereas those of Hidroelectrica and Nuclearelectrica are the least likely to happen until 2013. "We have made an estimate that the alignment of the domestic price of natural gas to that of imported gas could be delayed by three years, but even under these circumstances, we think that Romgaz is attractive enough and would therefore be of interest to investors", according to the analysts by "Erste", who went on to say: "In other words, there would be favorable conditions for the launch of the IPO of Romgaz. Unfortunately, the same thing can't be said about Hidroelectrica, where clear signals are needed concerning the sale of a reasonable percentage of electricity on the OPCOM energy market prior to the launch of an IPO".
The increase of the block of shares owned by institutional investors (to 52%, from 19% prior to the listing) is encouraging for the "corporate" profile of the Fund, according to the quoted report.
Analysts also estimate that the Fund may pay out a dividend at least 10% greater than last year, amounting to at least 0.0346 lei/share. This would mean a yield of about 8%.
Compared to other similar funds, the Proprietatea Fund is not exactly a bargain, at this time, "Erste" analysts say: "These funds, with at least 50% of their assets in unlisted companies, trade at a discount of 40% on average, compared to their NAV. It must be noted that the rest of its portfolio is represented by cash or equivalent assets. Given the low liquidity of the portfolio of the Proprietatea Fund, it is difficult to accept that the 60% discount compared to the NAV that the shares of the Proprietatea Fund trade at is excessive."
Analysts also say that the listing of Romgaz and Hidroelectrica would reduce the proportion of unlisted stocks in the portfolio of the Proprietatea Fund to 35%.
• "Erste": The shares of "Petrom" can be considered cheap
The market's feeling towards the shares of "Petrom" (SNP), is crucial for the evaluation of the Proprietatea Fund, when one considers that they account for 25% of the assets of the Proprietatea Fund. Analysts feel that "Petrom" will post very good results for 2011, gaining due to the high price of oil, whereas in the future, the liberalization of the price of gas and energy is a factor which will boost profitability.
The report of "Erste" analysts, however, makes no mention of the decision of the Court of Bucharest of December 21st, 2011. At the time, the Court decided the annulment of a decision of the Proprietatea Fund (FP) of September 2010, by which its corporate charter was amended to allow the subsequent appointment of Franklin Templeton as manager of the Proprietatea Fund. The ruling can be appealed at the Court of Appeal of Bucharest.
Mihai Căruntu, Coordinator of the Capital Market Research Team of the Department for Strategy, Market and Macroeconomic Research, explained: "According to the announcement issued by Franklin Templeton of December 22nd, 2011, the manager of the Proprietatea Fund does not consider that the ruling in the lawsuit concerning the General Shareholder Meeting of September 6th, 2010 poses an actual risk.
Therefore, at least at the moment, we do not see any negative impact on the Proprietatea Fund which would formally endanger the management contract of Franklin Templeton. The evolution of the shares of the Proprietatea Fund after the announcement concerning this lawsuit confirms that the market feels the same on the matter.
In conclusion, we believe that the confidence expressed by Franklin Templeton concerning the management of this risk concerning the formalities of summoning the General Shareholder Meeting of 2010 represents an important argument for investors when it comes to assessing the risk of investing the shares of the Proprietatea Fund".
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