IN THE LAST NEAR TWO YEARS 17% rise for Biofarm shares

Biofarm (BIO) shares have seen a rather tepid evolution over the last nearly two years. The Bucharest-based drug maker saw a rise of 16.78%, from the beginning of last year until the 4th of December 2019, below that of major companies listed on the Bucharest Stock Exchange (BVB), such as those in the energy sector: Romgaz (SNG) rose 21.4%, while Nuclearelectrica (SNN) has almost doubled.

Alin Brendea, deputy general manager of brokerage Prime Transaction brokerage firm, told us: "Biofarm is one of the companies that has not attracted attention with anything remarkable lately. Although the valuation indicators remain attractive, the stock market liquidity of the company is suffering and, unfortunately, it is not a singular case. Thus, the lack of generous liquidity may be a cause for the lack of higher volatility of the stock.

It is an assertion that comes as, from the beginning of this year, the average daily turnover of BIO shares amounts to 0.216 million lei, well below that of Banca Transilvania (TLV) - 11.151 million lei, BRD - Groupe Societe Generale (BRD) - 4.87 million lei or Romgaz (SNG) - 3.98 million lei, companies whose stocks are among the most liquid on our stock market.

Alin Brendea further said: "The company's rather cautious dividend policy did not drive a more pronounced upward trend in the price of BIO shares".

However, in June 2018, the BIO quotation rose briefly, up to a peak of 0.415 lei (a level that the price of the drug manufacturer's share had not reached since the first part of 2008), which was then followed by several sessions with dropping prices, following sales of shares in the company operated by SIF Moldova.

Andreea Iordache, investment analyst at Tradeville brokerage, told us: "We believe that the evolution of June 2018 can be explained mainly by the distribution of dividends and the financial statements. Biofarm has published a report informing the investors of the company that shareholders registered on August 16, 2018 would be paid a gross dividend of 0.019 lei / share on September 04, 2018. Later, in August, the company published the half-year results for 2018, reporting a profit of 22.2 million lei, up 7.64% YOY".

• Alin Brendea, Prime Transaction: "The company's line of business has the potential for it to remain attractively profitable in the coming years"

Regarding the factors that have the potential to influence the price of BIO shares over the next six - twelve months, Alin Brendea of Prime Transaction told us: "As for every listed issuer, the future stock market of Biofarm will be influenced by the evolution of its financial results, the dividend policy and the potential interest from larger investors in becoming shareholders".

In addition, the director of Prime Transaction emphasized that the company's industry has the potential for Biofarm to maintain an attractive profitability ratio in the coming years.

According to the analysis team from Tradeville, the evolution of the share price in the immediate period is likely to be influenced by the decisions of the Ordinary General Meeting of Shareholders that will take place on December 11, 2019 and which will include on its agenda the approval of a gross dividend of 0.01 lei / share.

"Also, the company has reported a net increase in the last three years, with a net profit of approximately 38 million lei in 2018, as maintaining profitability level is an important indicator for investors," Andreea Iordache from Tradeville told us.

"The latest data, respectively for the period ending on September 2019, shows that the net profit increased to 40 million lei, an increase of about 11% compared to the same period of the previous year".

On Thursday, the price of the BIO stock closed the trading session up 1.17%, at 0.345 lei, which raises the market value of Biofarm to 339.95 million lei.

SIF Muntenia (SIF4) holds 50.89% din Biofarm, while SIF Banat-Crişana (SIF1) holds 36.74%. SIF1 holds almost 100% of SAI Muntenia Invest, the company that manages SIF4.