Fondul Proprietatea announced competion of the 6the buyback in which the fund has repurchased 731.9 million shares. The share will be cancelled at the next shareholder meeting. Yesterday Fondul announced commencement of the 7th round of buyback in which it will repurchase 409.6 million of shares. The fund is authorised to purchase up to 25% of the daily volumes.
Fondul Proprietatea announced the completion of the 6the buyback in which the Fund has repurchased 731.9 million shares. The share will be cancelled at the next shareholder meeting. Yesterday Fondul announced the commencement of the 7th round of buyback in which it will repurchase 409.6 million of shares. At current market price, the buyback amounts to USD 80 million, which represents 4% of its market capitalisation. The fund is authorised to purchase up to 25% of the daily volumes.
Fondul shares currently trade at 31% discount to its NAV. If the shares were repurchased at the current prices, the NAV would increase by USD 35 mln, which is approximately 1.8% of the NAV.
Fondul is working on the listing of its largest asset Hidroelectrica on the local stock exchange which should be completed by the end of 2016. Hidroelectrica is Fondul largest holding at 27% of NAV. The illiquidity of this holding represents on of the main reasons for the NAV discount.
Net dividend yield of 6.25%
The Fund management proposed that the Fund for 2016 will distribute 0.05 RON per share. The payment will take the form of reduction of share nominal by that amount. In most jurisdictions, such capital return is tax-free. Fund shareholders will, therefore, be able to collect net ”dividend” yield of 6.25%.
From Wood and Co Research note released this morning:
Fondul Proprietatea has disclosed the NAV for end of June at RON 1.1445, up 5.4% from previous NAV disclosed on 9 June (just after the reduction in par value to RON 0.85 per share). The reason for the increase in the NAV is the revaluation of the stakes held in Bucharest Airports, Constanta Port and the one in Hidroelectrica after exiting insolvency. The total cumulated increase was RON 785.7m, 6.5% of the NAV, with the largest effect coming from Hidroelectrica revaluation.
Fondul Proprietatea is one of the largest closed end funds in the world. The largest investor in the fund is actvist investor Paul Singer.
Franklin Templeton Investment Management Ltd. United Kingdom Bucharest Branch, in its capacity as Investment Manager of Fondul Proprietatea SA (“the Fund”), announced yesterday that it has sold the entire participations of the Fund in E.ON Distributie Romania S.A. and E.ON Energie Romania S.A.
The stakes in total represented 5.3% of Fondul´s NAV. The shares of the Eon companies were not listed.
Details of the transaction were not disclosed.
For more details on the Fondul opportunity see:
FONDUL PROPRIETATEA WELCOMES HIDROELECTRICA’S INSOVENCY EXIT AND CALLS FOR ITS SWIFT IPO
Bucharest, 21 June 2016 – Franklin Templeton Investment Management Limited United Kingdom Bucharest Branch, in its capacity as Investment Manager of Fondul Proprietatea SA (“the Fund”), welcomes the closure of the insolvency proceedings of Hidroelectrica following the syndic judge’s decision on 21 June. After a long period in insolvency, Hidroelectrica emerges as a healthier and stronger company, prepared to capitalize on its enormous potential and to list on the stock exchange.
“We would like to congratulate the judicial administrator Remus Borza for Hidroelectrica’s outstanding results over the past four years and for his dedication, commitment and contribution to the restructuring of Hidroelectrica. From a loss-making company Hidroelectrica became a highly profitable, efficient and competitive one. The judicial administrator made remarkable efforts over the past four years and, despite the numerous challenges, managed to increase Hidroelectrica’s revenues and reduce operational costs, which allowed the company to return on a positive cash flow and subsequently exit insolvency” commented Grzegorz Konieczny, Portfolio Manager of Fondul Proprietatea.
He added: “We are concerned to see that even though the company’s exit from insolvency had been expected since last year, Hidroelectrica still does not have an independent Supervisory Board selected and appointed in accordance with Ordinance 109/2011. This might pose significant risks for the company in the near future. We urge the Ministry of Energy to accelerate the appointment process of the new Supervisory Board that should follow up with an appointment of professional executive management team. Especially now, after the insolvency exit, Hidroelectrica needs strong and determined management in order to protect the value that has been created during the process, to create further value for Hidroelectrica’s current and future shareholders as the next important milestone is to successfully list the company in Bucharest and London.”
The closure of the insolvency proceedings opens the way towards Hidroelectrica’s initial public offering, the first listing of a Romanian state owned company in more than two years and the largest listing in the history of the local capital market. Fondul Proprietatea is a strong supporter of the company’s IPO, which represents a great leap towards the upgrade of the local stock exchange to the emerging market status.
Fondul Proprietatea advocates for Hidroelectrica’s dual listing on both the Bucharest Stock Exchange and the London Stock Exchange, which would benefit the Romanian capital market, as well as ensure access to a larger pool of demand at the time of the IPO and afterwards, as well as greater visibility for the company. In order to contribute to a successful dual listing, Fondul Proprietatea has proposed to sell during the IPO a 5% stake out of its 20% holding in Hidroelectrica, and also a 3.74% stake representing the subscription rights the Fund has in the share capital increase process, besides the 15% stake the state intends to list.
I am buying Unicredit. Below is an outline of Morgan Stanley report that nicely
summarises the case.
1st Take: CEO Resigns
Unicredit’s CEO steps down after an extraordinary board meeting as “the conditions are now such that it is time for a change at the top of the group”. Mr Ghizzoni agreed to stay in office until his successor is found.
We forecast a CET 11.4% by 2016e vs the 10.75% SREP/G-SIB. The retained earnings, progress in non-core RWA reduction and possible disposals could avoid a capital raise in our view, and hence why we remain Overweight the stock.
Recent unconfirmed press reports (Reuters, May 20) suggest UCG may be reviewing the disposal of up to 15% of Fineco and a stake in its Polish business Pekao among other measures to replenish capital in the short term. Press reports (Reuters 24/05/2016 link) also suggest the JV between Pioneer and Santander may not go ahead, although given the contribution to capital (+25bp) and the approval of the board on the deal, it’s difficult to see it stopped, in our view. UniCredit and Santander declined to comment. We believe the final step around strategy to rebuild capital, including a capital raise or not, will remain uncertain until the new management team is in place.
Delivery on already announced cost targets is key to lift profitability medium term, in our view. Unicredit already booked €760m restructuring charges in FY15 and 1Q16 including provisions for early retirements (6.1k departures planned throughout 2018) and Ukraine. Costs should start to come down from 2017e, and together with lower provisions drive a recovery in ROTE to 7.6% on our numbers 2018E.
At 0.4x P/TBV capital build is key to drive re-rating. UCG is now trading on 2.1x P/PPOP, which is close to historical lows; however, we believe capital rebuild, non-core rundown and execution on restructuring are key levers to restore confidence