Positive outlook for the Romanian equity market in 2012 – Erste report

The Romanian equity market remains the most attractive in the CEE, together with the stock market in Poland. The Turkish market is also rated positively by Erste analysts in the 2012 CEE Equity Strategy report.   

The equity market in Romania will be able to attract foreign investors on the basis that the Government sticks to its plan of selling stakes in state-owned companies on the Bucharest Stock Exchange (BSE). However, Erste analysts warn that the institutional investor base is low in Romania, which could reduce the subscription targets for offerings in utilities and energy producers.

Romania will sell this year a 15 percent stake in Romgaz, the largest producer of natural gas, currently engulfed in a corruption scandal, for EUR 300 million. The government will also try to gather EUR 40 million from Transelectrica SPO (Secondary Public Offering) and another EUR 85 million from Transgaz SPO, both utilities where the minority stakes will be sold at a discounted price.

Erste says that IPOs of energy producers Hidroelectrica and Nuclearelectrica will be delayed for 2013, as the profitability of these companies hasn’t improved significantly. The same goes for telecom company Romtelecom and airline company Tarom. The Government failed to sell a 9.84 percent stake in Petrom on the BSE last year and no date has been set for resuming this offer.  

In the financial year that has just ended, Petrom, the two utilities Transelectrica and Transgaz, Fondul Proprietatea and the SIFs, had dividends yielding at 6 percent. Moreover, dividends of Transgaz yielded at 10 percent, while financial investment companies, SIF 2 Moldova and SIF 3 Transilvania, may also yield at more than 10 percent, due to the capital gain from the BCR exit.

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Erste analysts consider Petrom to be a  cheap stock in the current oil market. The company will increase its power generation facilities which should attract additional investors.  SIFs 1-4 are also seen as good investments due to the recent ownership level increase from 1 percent to 5 percent and the BCR exit.    

The ZEW/Erste sentiment indicator, which assesses economic expectations for the next semester, reveals that equities will become more attractive this year compared to 2011, and CEE stocks will be favored against the Euro zone.

Ovidiu Posirca