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ECONOMY

Capital markets: Bullish market sees VSŽ, Nafta up

The Slovak capital market over the last month could best be described as bullish. Strong demand was registered for several blue-chips on the official SAX index, whose value was pulled up by a sharp rise in issues such as Nafta, SES Tlmaee and VSŽ. The SAX gained 10% over the past month to 98.74 points (as of October 23).
The rise in VSŽ shares was in expectation of the results of an extraordinary general meeting at VSŽ, which was to decide on acceptance of a bid from US Steel to take over the Slovak flagship company. The bid, worth between $425 million and $475 million, was backed by 99.98% of shareholders from the 82.33% present at the EGM. Prior to this approval, VSŽ shares were traded at poor volumes.
US Steel had bought an 8.68% stake in VSŽ before the meeting for 197 crowns per share. At this time, the market price was oscillating around 100-120 crowns. VSŽ President Gabriel Eichler also added fuel to the price fire by saying that the real value of VSŽ shares lay between 400 and 450 crowns. The share price jumped on the OTC market, trading at 251 crowns as of October 24.


Ivan Matušek

The Slovak capital market over the last month could best be described as bullish. Strong demand was registered for several blue-chips on the official SAX index, whose value was pulled up by a sharp rise in issues such as Nafta, SES Tlmaee and VSŽ. The SAX gained 10% over the past month to 98.74 points (as of October 23).

The rise in VSŽ shares was in expectation of the results of an extraordinary general meeting at VSŽ, which was to decide on acceptance of a bid from US Steel to take over the Slovak flagship company. The bid, worth between $425 million and $475 million, was backed by 99.98% of shareholders from the 82.33% present at the EGM. Prior to this approval, VSŽ shares were traded at poor volumes.

US Steel had bought an 8.68% stake in VSŽ before the meeting for 197 crowns per share. At this time, the market price was oscillating around 100-120 crowns. VSŽ President Gabriel Eichler also added fuel to the price fire by saying that the real value of VSŽ shares lay between 400 and 450 crowns. The share price jumped on the OTC market, trading at 251 crowns as of October 24.

Another Slovak flagship company which carved out its year high is the oil and gas storage firm Nafta Gbely. Since the beginning of the year, Nafta prices have already broken through the 300-400 crown levels at which they peaked last year, strengthening almost 300% to a closing level of 1,500 crowns on October 20. Nafta 3Q financial results released last month put the company in the black with a profit of 526 million crowns. The recent financial performance could bring higher earnings per share than last year, and there is room for a further increase in Nafta's share prices with the forthcoming privatisation of its major shareholder SPP (state gas utility Slovenský plynárenský priemysel), which currently holds a 55.91% stake.

Another surprising jump was seen in power engineering firm SES Tlmaee shares, whose jump on the anonymous market was followed by the transfer of major stakes in direct trades. The floor soared to 380 crowns from its lower level of 120 crowns at the beginning of the month - a 200% jump mainly on the back of rumours about a potential takeover by a foreign entity. These rumours gained credence with a concentration of stakes in direct trades.

As well as this movement with Slovak blue chips, FNM state privatisation agency bonds recorded a small correction in the week ending October 20. A persistent increase was halted when FNM bonds dipped to 10,700 crowns, yielding approximately 29.1%.

However, by the end of the week they were back at between 11,200 crowns and 11,300 crowns. It is still not clear how the FNM wants to pay off these bonds in the amount of 30 billion crowns in cash. The FNM has said that it has several methods of carrying out the repayments, but has not clearly explained anything as yet.

Ivan Matušek works in the Sales and Trading Department of Slávia Capital brokerage house. Questions and comments can be sent to imatusek@slavia.sk

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