Although the Slovak capital market was in a lethargic trading mood during the past month, the official SAX Slovak stock index recorded a positive performance. On a monthly basis the index added some 17.65%, rising from 76.75 points on July 28 to 90.30 points on August 21.
The SAX was dragged upward chiefly by shares in VÚB, the second largest commercial bank, and by the oil refiner Slovnaft. VÚB shares strengthened 71.72% over the month, jumping from 396 crowns on July 21 to 799 crowns on August 21. The bullish trading was supported by the forthcoming privatisation of VÚB and better-than-expected 1H 2000 financial result. VÚB posted a profit of 140 million crowns, which was caused by the removal of a large portion (21.3 billion crowns) of its bad loan portfolio to the hospital bank Slovenska konsolidačná. The process was finished at the end of July. The bank is now ready for privatisation, a fact which triggered the strong demand for VÚB shares. There is still room for a further increase to the share's nominal value of 1,000 crowns.
Higher trading activity was seen also with shares in the biggest Slovak steel maker, VSŽ. After the final decision of the US-based steel maker U.S. Steel on its entry into VSŽ, the latter's shares fell to 50 crowns. Before this decision, big stakes in VSŽ were being traded at 200 crowns. Last month's trading with VSŽ was encouraged mainly by the positive news that VSŽ would remove part of its loan portfolio to a newly established company called Steel Košice, and thus VSŽ would bear only a small portion of its total debt. But in line with the approved VSŽ transformation process, its steel production related assets will also be removed to the newly established company, which will be wholly owned by U.S. Steel.
VSŽ shares were traded actively, their value rising over the month from 112 crowns to 165. Both VÚB and VSŽ issues have already reached their last year's trading levels, which could be a positive signal for the future performance of Slovak stocks. Recent trading has shown that the BSE floor has been captured by a very optimistic sentiment, which was seen in the performance of other Slovak blue chips like Slovnaft, Nafta Gbely and Slovakofarma. Almost all of these issues were traded at a higher level than the month before.
Since July 21, Slovnaft's shares added some 16% and closed at 516.9 on August 17. They still enjoy strong demand, and a level of around 530-560 crowns is favourable for long term investment. But the firm missed the official approval of the Slovak and Hungarian antimonopoly offices about the entry of the Hungary-based oil company MOL into Slovnaft. In the first stage of the take over, MOL will buy 36.2% of Slovnaft and will have a two year option on remaining shares up to 50% plus one share. According to the latest information, MOL currently controls 10.11% of Slovnaft.
Gas storage and exploration company Nafta Gbely also recorded a good price performance and strengthened to 921 crowns from its last month's price level of 448 crowns. Nafta posted half year profit of 312 million crowns, although in 1999 it showed a loss of 2.03 billion crowns. The long-term outlook for these shares is very lucrative if we take into account that the majority, 56%, is held by gas utility SPP which is on the privatisation list of the Slovak government. A long term contract with SPP will secure positive cash-flow per share for Nafta. The current spot price of Nafta shares is deeply undervalued. Ivan Matusek works in the Sales and Trading Department of Slávia Capital brokerage house. Questions and comments can be sent to email@example.com
Ivan Matusek works in the Sales and Trading Department of Slávia Capital brokerage house. Questions and comments can be sent to firstname.lastname@example.org