Financial February: Slight gains for the indices, in the month when companies presented their achievements of the past year

The indices of the Bucharest Stock Exchange (BVB) had slight increases in February, when companies announced their preliminary results for the past year and, in some cases, their dividend intentions.

The BET index of our market's twenty most liquid stocks advanced 2.4% to 15,891 points after the basket of shares hit a month high of 16,013 points, while the BET index -BK, the yield benchmark of investment funds, appreciated by 0.44%, up to 2,960 points.

• Nvidia's capitalization has crossed the two trillion dollar mark, becoming the third largest company on Wall Street

In the United States, indexes hit new all-time highs, with gains fueled primarily by corporate earnings and excitement around artificial intelligence. The S&P 500 rose 5.1% in February, its fourth straight month of gains, while the Dow Jones gained 2.2%. The Nasdaq Composite, of companies in knowledge-intensive sectors, rose by 6.1%.

"Corporate earnings in the fourth quarter were solid, suggesting a re-acceleration (aka profitability momentum), which supported new highs in stocks," wrote Angelo Kourkafas, CFA, senior investment strategist at Edward Jones Investments, in his latest editorial.

The maker of graphics processors used in artificial intelligence applications Nvidia reported a net profit of $12.29 billion, nearly nine times higher than in the fourth quarter of 2022, as the company reached a market capitalization of $2 trillion, the third the largest corporation on Wall Street after Apple and Microsoft.

On our side of the Atlantic, where companies also published their financial results, the pan-European Stoxx 600 index rose 1.8%. Preliminary data showed some improvement in some economic activity in February, with services returning to growth, while inflation was lower but above expectations.

• Gains for banking stocks, which reported increases in profitability

At the Bucharest Stock Exchange, the BET-XT index, of the thirty most liquid shares, had an advance of 1.9% in February, while the BET-NG index, of energy and utility companies, appreciated by 1%. For the most part, major companies have reported year-over-year growth in revenues and profits, and dividend proposals are generally in line with expectations, as can be inferred from share price performance.

BRD-Groupe Societe Generale (BRD) securities rose by 10.7%, while Banca Transilvania shares rose by 4.6% last month. Both credit institutions reported increased profits compared to last year, and BRD announced that it wants to propose that 60% of the result be allocated to dividends. Banca Transilvania has not yet announced its intentions regarding the distribution of profit, but historically the credit institution from Cluj has proposed a combination of dividends and free shares.

Banca Transilvania announced the acquisition of OTP Bank Romania plus other companies from the OTP group and according to some sources Economica.net is about to buy BRD Pensii. Instead, related to BRD, the news appeared in the press that Societe Generale hired JP Morgan to find a buyer for the credit institution in our country, a fact that was not commented on by the bank's officials.

• Consistent dividend prospects for OMV Petrom

During a period when the price of oil had a slight increase, the shares of OMV Petrom appreciated by 6.38%. The company announced that it intends to propose a dividend with a gross yield of 6.7% of the share price on February 29, plus the possibility of additional dividends. In addition, the oil and gas producer announced that it is entering the period with the largest investments in the company's history, but that at the same time it will pay a progressive dividend.

The shares of Romgaz, partner company with OMV Petrom in the Neptun Deep project, had a decrease of 2.34% last month, even if the issuer reported a profitability increasing by 10%. The gas producer has not announced its dividend proposal, but brokers estimate an allocation of 50%, below the usual rates in recent years of 90% and sometimes from reserves, which the company granted at the request of the state.

Hidroelectrica's shares fell slightly, by 0.6%, which shows that the historical profit reported by the company, of 6.3 billion lei, was included in the issuer's quotation on the stock exchange. The energy producer is controlled by the state, which in recent years has requested that 90% of profits go to dividends, which would now represent a dividend of 12.7 lei per unit, equivalent to a gross yield of 10.2% compared to the last price of the company's stock since February.

Nuclearelectrica's shares depreciated by 4.3%, as the company expects a reduction in profitability this year, and for last year it reported a net result down by 10%. Shares in Electrica, which will be part of the FTSE Russell indices starting this month, rose 2.6%, while Transelectrica shares fell 2.3%, with the company reporting a 57% drop in profit, in 2023, compared to the previous year.

• Aquila, Digi and Sphera - among the highest returns in BET

Shares of consumer goods distribution and logistics company Aquila rose 7.7% in February, during which the stock hit a new all-time high. At the end of January, Alin Dociu, one of the company's founders, sold through accelerated placement 8.33% of Aquila's capital, at a price 9.4% below that of the "regular" market. Most of the shares were acquired by the Pilon II pension funds managed by BCR, Metropolitan and NN, as can be deduced from the data available on the About Private Pensions website. Significant increases on strong volumes in the early days of February suggest that funds continued to buy Aquila shares after the placement.

For last year, the company reported a profit of 97 million lei, 14% more than in 2022, the highest since its establishment, according to a press release from Aquila.

Digi shares appreciated by 7% in February, in a continuation of the upward trend started in the last two months of last year. The company reported growing revenues and operating profit, and for this year it estimates the expansion of activities in Portugal and Belgium.

Sphera Franchise Group had the best year in its history, according to a company statement, in 2023 the profit of the operator of the public food chains KFC, Pizza Hut and Taco Bell amounted to 79.8 million lei, an increase of 80% compared to from the previous year. In February, Sphera shares rose 6.2% to a more than five-year high.

At the opposite pole, the shares of the wine producer Purcari Wineries from the Republic of Moldova depreciated by 6.6%, the biggest decrease in BET. The decrease comes in the context of tensions in Transnistria, the pro-Russian separatist territory in eastern Moldova.

• Minus 2.6% for BET-FI, the only basket of shares from the BVB that fell, last month

The BET-FI index, of SIFs plus Fondul Proprietatea, had a 2.6% setback, up to 56,704 points, the only basket of shares from BVB that depreciated last month. FP shareholders approved the sale of FP's stake in Enegie Romania as well as a new buyback program, but rejected the proposal to dispose of other holdings of the fund, most likely due to pressure from the Ministry of Finance. In addition, Finance is seeking to reduce Franklin Templeton's management fee and preserve FP's current equity. The way the request is worded may mean that, in addition to holdings in companies, the preservation also involves cash in the fund's accounts or to be received. However, in this situation, if the request receives the shareholders' vote, FP would no longer be able to carry out the newly voted buyback program or distribute dividends.

The BURSA newspaper asked the Ministry of Finance for clarification in this regard, but has not received an answer so far.

Lion Capital sold the holding of 98.9% of the company Azuga Turism to Electric Planners SRL, for the minimum price of 8.99 million euros, the buyer paying, on the date of signing the contract, an advance of 1.5 million euros. The way in which Azuga Turism ended up in the portfolio of the former SIF Banat-Criaşana was the subject of a criminal investigation that resulted in suspended sentences for Dragoş Bîlteanu and Najib El Lakis, former managers of the company.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) located between 71% for Infinity Capital Investments, while the SIF Muntenia securities had a relative difference to the net asset level of 52 %. In the case of FP, the discount was 24%, slightly above administrator Franklin Templeton's goal of under 15%.

The large gap between the net asset and the market price can reflect many things, including the presence in the portfolios of some holdings in unlisted companies, the absence of dividends, but first of all it is a mirror of the total lack of trust in the management of some SIFs. Symptomatic is the case of the former SIF Oltenia, in whose shareholding there were five Pilon II pension funds a few years ago, which held 12% of the capital. Today, the mandatory pension funds have completely left the company's shareholding, and the trading discount has reached over 70%.

The Ministry of Finance launched a new offer of Fidelis government bonds in February, with total subscriptions amounting to around 1.8 billion lei (843 million lei and 191 million euros), below the amount raised in December last year, of 2.5 billions of lei.