Property Fund net profit increased by 20 percent in 2011

The net profit of the Property Fund (FP) increased by 20 percent y/y to EUR 128 million in 2011, in the first year since Franklin Templeton became the sole manager of the fund, and during which time the FP was listed on the Bucharest Stock Exchange (BSE). Shareholders will receive dividends worth EUR 120 million, which represents 96 percent of net profit.

The fund’s revenue increased by 7 percent year-on-year to EUR 145 million, while expenses decreased by 34 percent year-on-year to EUR 17 million.
The next three quarters will bring public offerings from six energy companies in which the FP has stakes. The IPOs include Romgaz, evaluated at EUR 280 million, Nuclearelectrica, at EUR 116 million, and Hidroelectrica at EUR 384 million, companies where the FP has 15 percent, 10 percent and 20 percent stakes respectively.

The FP is a closed-end fund and its shares are currently being traded at a 50 percent reduction, but hedge fund Elliott Associates, whose stake in the fund is close to 13 percent, wants Franklin Templeton to start selling assets in the FP’s portfolio. At present, the fund manager is paid a quarterly fee of 0.47 percent of its market capitalization. Selling assets would guarantee the fund managers an additional fee worth 1.5 percent of the sums distributed to shareholders through to 2013, falling to 1 percent in 2014.

The Property Fund will seek a second listing on the Warsaw Stock Exchange, where 38 successful IPOs have been launched last year, and shareholders should vote on this initiative by summer. The heirs of Nicolae Malaxa, the Romanian industrialist, whose stake in the fund is close to 7 percent, have already expressed their agreement with the move.  

Top shareholders are Elliott Associates hedge fund, which holds a 12.9 percent stake, fund management group City of London Investment Management, on 7.2 percent, and Georgia Palade van Dusen with 6.5 percent.

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Around 46 percent of the fund shareholders were foreign institutional investors and 11 percent Romanian institutions. The Ministry of Public Finance held a 37 percent stake, but had no ownership left as of December 2011.

The FP’s net asset value (NAV) totaled EUR 3.48 billion at end-January which includes stakes in 73 companies, out of which only 27 are listed on the BSE, with a market capitalization of EUR 1.6 billion on the stock exchange.
The number of FP traded shares was 10.8 billion, representing 81 percent of the share capital, while the average daily turnover was EUR 4.8 million. The value of traded shares was EUR 1.3 billion in the last three weeks.

Around 86 percent of the NAV or EUR 2.9 billion is included in the energy sector. Oil and gas represents 34 percent, electricity utilities generation 33 percent and electricity and gas utilities – transport, distribution and supply – account for 19 percent. Top holdings include stakes in Hidroelectrica, OMV Petrom, Romgaz, CE Turceni, Nuclearelectrica and Transgaz.

Ovidiu Posirca