Uptrend for BVB indices, last three months of 2023

The indices of the Bucharest Stock Exchange (BVB) had appreciations on the line, in the last quarter of last year, in tune with the evolution of the large stock markets in the West, to which some internal elements were added, which favored the increase in prices. The BET index, of the twenty most liquid securities of our market, rose by 7.2% to 15,371 points in the last three months of last year, while the BET-BK index, the performance benchmark of investment funds in shares, it appreciated by 7.9%, up to 2,887 points. The gains continued this year, with the BSE indices hitting new all-time highs in the first trading sessions of 2024.

• The Fed left its key interest rate unchanged in December for the third time in a row

In the United States, indices posted solid gains, mainly on the back of decelerating inflation and expectations that the Federal Reserve will start cutting interest rates this year. The S&P 500 index, the benchmark of the American market, appreciated by 12.5%, while the Nasdaq Composite index increased by 13.6%, in the fourth quarter of last year.

The Fed left its key interest rate unchanged in December for the third time in a row, and markets expect the US central bank to cut rates three to four times this year. According to the CME FedWatch Tool, traders see about a 70% chance the Fed will cut interest rates by 25 basis points at the March meeting.

In Europe, where there are also expectations of interest rate cuts this year and the economy shows signs of weakness, indices had lower appreciations. The pan-European Stoxx 600 rose by 6.4% in the last quarter of last year, while in Frankfurt, the DAX40 rose by 8.9%.

• FP sells the package owned by Engie Romania, for 433 million lei

At the Bucharest Stock Exchange, the companies published their results for the third quarter, respectively the first nine months of last year, which give investors an idea of the profits that the issuers could obtain in 2023 and the possibilities of dividend allocation. According to estimates by TradeVille and Prime Transaction, overall, this year's dividend yields will be lower than last year's, but there are also cases where a higher dividend is shaping up.

Fondul Proprietatea (FP) shares increased by 24.5% in the last quarter of last year, mainly due to the public offering through which the fund bought back about 30% of its capital, at the price of 0.6319 lei, with much more than the one in the market. Also, FP signed the sale-purchase contract of its participation in Engie Romania, for 432.6 million lei, money that will be used to reduce the discount between the price and the Net Asset Unit Value (VUAN), if the operation get the vote of the shareholders.

In a report published at the beginning of December, the Prime Transaction team estimated a dividend of 0.1 lei for FP, a forecast that did not include the sale of the package to Engie Romania, which was not announced at the time. Compared to the Fund's share price from the last meeting last year, Prime's estimate equates to a gross yield of around 19%.

• Dividend estimates with gross yields of 5% for Sphera and TTS, respectively 6.5% for Purcari, relative to the last share price of December 2023

Shares of Sphera Franchise Group (SFG) appreciated 24.1% in the last quarter of last year, the second best performance in the BET index. The increase came exclusively in December, and the volumes show that it was institutional investors who bought. "One possible reason is the positive expectations for the last quarter of the year, when the group's sales usually reach the highest values of the year," said a report by Prime Transaction, published at the end of last week.

Prime estimates a dividend of 1.84 lei for Sphera this year, while Tradeville estimates a much lower dividend of 0.9781 lei per share. The average of the two estimates amounts to about 1,409 lei, which is equivalent to a gross return of 5.5%, compared to the last price of the SFG share in December last year. On the third step of appreciation in BET, in the last quarter of last year, were Transport Trade Services (TTS) titles, which rose by 23.3%. For the company, a year with a large increase in profitability is shaping up, given that in the first nine months the result was 84% above that of the same period of 2022, and the prospects are positive.

"The company remains on the positive trend determined by the reconfiguration of logistics chains at the regional level, in the context of the war in Ukraine, both from the point of view of financial results and from the point of view of the stock market evolution", it is mentioned in the Prime report. The average of the dividend estimates in the case of TTS is 1.3575 lei per share (1.245 lei - Tradeville; 1.47 lei - Prime Transaction), equivalent to a gross yield of 5%, compared to the share price at the end of last year.

Shares in Digi Communications ( DIGI ) rose 19.6% in the final quarter of the year amid news of expansion in Spain and Portugal, while Purcari Wineries ( WINE ) climbed 11 .9%. For the wine producer, the average dividend estimated by brokers is 0.9286 lei (0.975 lei - Prime Transaction; 0.8823 lei - Tradeville), equivalent to a gross return of 6.5%, compared to the last share price last December .

• Appreciations of 9.8% for the shares of Banca Transilvania and 14.7% in the case of BRD

At a time when the Euro Stoxx Banks index was up 5.8%, Banca Transilvania (TLV) shares rose 9.8%, while BRD-Groupe Societe Generale (BRD) shares appreciated with 14.7%, given that, in December, BRD shareholders approved a dividend with a yield of 5%. The banks benefit from the high interest rates of the last period, which is reflected in profitability, and the average dividend estimates have returns compared to the last share trading prices in 2023 of 5.8% in the case of Transilvania Bank and 8.1% for BRD, according to our calculations based on brokers' reports.

• Dividend estimate with a gross yield of 10% for Hidroelectrica, compared to the share price at the end of last year

The BET-NG index, of energy and utility companies, had an advance of 4.8%, in the last quarter of last year, the lowest among the baskets of shares from BVB, given that the performance of the issuers that make up the index it was mixed. The shares of Hidroelectrica (H2O) rose by 6.7%, to 128 lei, a price that gave the energy producer a market capitalization of 57.6 billion lei, the largest Romanian company on the BSE. In the first nine months, the company reported a net profit of almost 5.2 billion lei, 42% above that of the same period last year and above the budgeted level for 2023, of 3.6 billion lei. The average of the dividend estimates that Hidroelectrica could grant is 12.7432 lei (11.7 lei per Prime Transaction share; 13.7864 lei - TradeVille), equivalent to a gross yield of about 10%, compared to the price of the H2O share from the end of last year.

Romgaz (SNG) shares appreciated by 11.3% in the last quarter of last year, the company being one of the best dividend payers on our stock exchange. For this year, the forecasts are somewhat lower, the average of Prime and Tradeville estimates equaling a gross yield of 6.8%, but being a state-controlled company, it is not excluded that the dividend will increase, at the request of the majority shareholder.

Conpet (COTE) shares rose 7.1% in the last quarter of the year, while Transgaz (TGN) shares depreciated by 1.6%. Shares of Electrica (EL) increased by 14.5% in the last quarter of the year, mainly due to appreciations from several stock market sessions on high volumes, which shows the presence of institutional investors in the market.

Bucharest Stock Exchange stocks stagnated in the last quarter of last year, as the effects of Hidroelectrica's listing and the elections for a new Council dissipated. Radu Hanga remained BVB president for another four-year term, with over 90% of the votes cast in the November 2023 elections.

The worst performance in the BET index in the last three months of last year was recorded by MedLife (M) shares, as the company's profitability fell sharply, indicating weak results for 2023.

• 67% trading discounts for Lion Capital and Infinity Capital Investments compared to the November VUAN

The BET-FI index, of the SIFs plus Fondul Proprietatea, rose by 9.6% in the last quarter of the year, on the back of the increase in the shares of FP and Transilvania Investments (TRANSI). The shares of the Braşov-based investment fund rose by 16.8% in the last three months of last year, without any obvious reasons to explain the evolution of the share price.

At the end of December, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) located between 67% for Lion Capital and Infinity Capital Investments, while the SIF Muntenia securities had a relative difference compared to the level net assets of 49%. In the case of FP, the discount was 21%, slightly above administrator Franklin Templeton's goal of under 15%.

In December, the Ministry of Finance listed a new issue of Fidelis government securities at BVB, worth 2.47 billion lei, respectively 497.7 million euros. The offer was made in five installments - three in lei, including one dedicated to blood donors, and two in euros. The tranches in lei are due in 2024, 2026, with annual interest rates of 6.1% and 7.25%, respectively. For the installment of blood donors, the maturity is in 2024 and the interest rate is 7.1%. In the case of euro bonds, the maturities are in 2024 and 2028, with annual interest of 4% and 5.5%, respectively.