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Fondul Proprietatea posts record profit, on asset sales

January 16, 2015 03:07 pm

Fondul Proprietatea posts record profit, on asset sales

Romanian investment fund Fondul Proprietatea (FP) ended 2014 with a record net profit of EUR 228 million, up by 48% compared to 2013, when the company’s profit amounted to EUR 151.1 million.

Most of this profit came from dividends paid by companies in which FP holds stakes, as well as from the fund’s asset sales, which reached EUR 240 million in 2014. The fund sold several significant stakes last year, in gas producer Romgaz, electricity transport company Transelectrica and oil pipe operator Conpet.

The fund’s profit is less relevant for investors, as fund manager Franklin Templeton convinced FP’s shareholders to give up on dividends. In return, FP will repay them some of the fund’s share capital, amounting to RON 0.5 per share, which is tax free, unlike dividends which are taxed with a 16% flat rate in Romania.

Fondul Proprietatea’s net asset value amounted to EUR 2.95 billion at the end of December, down by 11.8% from EUR 3.35 billion in December last year, according to a report sent by FP to the Bucharest Stock Exchange (BVB).

This was mainly influenced by the decline registered by OMV Petrom shares, which went down by 13% last year. The 19% stake held in OMV Petrom is FP’s largest individual holding, representing a third of its net asset value. Part of the fund’s net asset decline was also determined by the payments made by the fund to its own shareholders, either via capital returns or via share repurchase programs.

Fondul Proprietatea last year cancelled 1.34 billion of its own shares, which it had bought back in previous years and started a new buyback program for 990 million of its owns shares. As part of this program, the fund also made a buyback offer for 750 million shares, paying EUR 186 million to shareholders. The price in the offer was higher than the market price by about 18%.

These buyback programs are aimed at reducing the discount for which the fund’s shares are traded on the Bucharest Stock Exchange (BVB) compared to its net asset value per share, which is the main indicator investors follow.

FP’s shares are currently trading at RON 0.84/share, as of Friday, January 16, compared to a NAV per share of RON 1.2125/share, on December 31, 2014. This stands for a 30% discount.

Andrei Chirileasa,

Getinge – time to profit

On 12 January 2015, GETIB announced that the current CEO, Johann Malmquist, had informed the Board that he would like to resign from his current assignment. As a result the Board had decided to appoint Alex Myers as the new President and CEO of the Getinge Group, effective 25 March 2015. Mr Myers is currently President and CEO of Hilding Anders, a global leader within the bedding industry with a turnover of SEK9bn and 8,000 employees. Mr Myers has previous experience with GETIB, having been the Executive VP for the Extended Care business during 2009-2013.

Under the leadership of Johan Malmquist, GETIB has undergone a successful growth phase over the past 18 years, turning the company into a major supplier of medical capital equipment and consumables. However the last 2-3 years have been more challenging, with several earnings disappointments and more recently a material FDA uncertainty within its Medical Systems division. Investor feedback over the past 6-12 months made it increasingly clear, that these disappointments have resulted in a major stock overhang, with reduced investor interest in GETIB. The announcement yeasterday resulted  in further price weakness.

Morgan Stanley research, parts of which are quoted here, claims that they had discussion with GETIB post the press release, that did not suggest that business has become incrementally more challenging or that the FDA negotiations around its Medical Systems division have become more problematic. Johan Malmquist was quoted in the press that he expects resolution of the FDA investigation by late January / early February. If so, than the current price weakness caused by Malmquist resignation is a good time to buy.

See below my detailed analysis why Getinge is a good opportunity at current price levels

Fondul Proprietatea to distributte EUR 137 mln to investors

Romanian investment fund Fondul Proprietatea (FP) has proposed a reduction of its share capital by RON 610 million (EUR 137 million) and the distribution of this amount to its shareholders, according to an announcement posted on the Bucharest Stock Exchange (BVB).

Each shareholder would receive RON 0.05 per share. The distribution of cash is about 5.3% of the price for which its shares were traded on Tuesday (November 18), which was of RON 0.9395.

“The decrease is motivated by the optimization of the fund’s share capital” reads the FP report. This would be the second capital distribution made by the fund.

The fund also has a buyback public offer ongoing for 750 million of its own shares (representing 6% of its capital) at a price of RON 1.11 per share. With this offer, the fund will pay its shareholders another EUR 186 million. The offer ends on December 2.

The fund is currently valued on the Bucharest Stock Exchange at EUR 2.64 billion.

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