Shares of Slovenská Poisťovňa (SLSP), the largest Slovak insurer, will continue to stagnate until the company's financial management becomes more transparent, market analysts and brokers maintain. SLSP is one of the most heavily capitalized Slovak shares but its liquidity is extremely low.
The issue last traded on February 11 when it closed at a year low of 1,000 Sk. "There just are not a lot of trades [of the issue] on the market," said Michal Holík of J&T Securities. "From our point of view [its] liquidity is very low."
One reason for the low liquidity is that the company's management holds a large portion of the issue's free float while over 50 percent is held by the state privatization agency, the National Property Fund (FNM). The SLSP has not yet been slated for further privatization.
However, an even bigger problem according to analysts was the sheer opaqueness of the company's financial management. "First of all, it is the largest insurance company in Slovakia but it is not audited by any of the big six [accountancy firms]," said Vladimír Zlacký, equity analyst with ING Barings. "The market doesn't really see what is going on in the company."
Dušan Sýkora, analyst with Creditanstalt, said trading with the share was also hampered by restrictions on foreign ownership in Slovak insurance companies. "Basically, they are the biggest and best insurance company but there is a clause in the Securities Act that foreign investors can't buy more than five percent of insurance companies," he said.
The SLSP controlls around 70 percent share on the domestic insurance market and it is one of the most profitable companies on the bourse.
Zlacký said SLSP's 1997 net profits would probably fall to around 300 million crowns from 359 the year before, but that the company remained healthy. With the share price standing at 1,000 crowns, the price-earnings ratio is about 5.0.
Dealers and analysts said they didn't expect substantial movements in the insurer's share price in the coming months, adding that the outcome of parliamentary elections in September could be crucial to SLSP.
12. Mar 1998 at 0:00 | Robin Shepherd