market WRAP-UP
We can call the last week a busy one, full of news and financial reports as the deadline for releasing Q1 2008 financial reports expired. Surprisingly the banking sector is developing quite well after the release of moderate Q1 2008 results. SOFIX froze at 1147.84 bps, unchanged WoW, while BG40 insignificantly increased by 0.12% to 333.13 bps. The week gainer Neochim (NEOH, BGN 67.25, +20.2%) crossed the BGN 70 border on Friday following the excellent Q1 financial report released by the company. The news about the sale of 75 gas stations and a fuel storage depot of Petrol (PET, BGN 8.18, +17.7%) ranked the company at second place of the week gainers while the bad outcome of the negotiations for the sale of Kremikovtzi (KREM, BGN 13.97, -16.8%) pushed the factory for a second consecutive trading week among the losers. We expect during the forthcoming short week the market slightly to recover from the levels of the last few weeks as far as the expectations about companies’ performance are positive.
SOFIX (one month) (chart)
BG40 (one month) (chart)
| SOFIX | BG40 | |
| 1-wk change | 0.0% | 0.1% |
| 1-m change | -7.8% | -5.9% |
| 3-m change | -18.2% | -21.3% |
| 6-m change | -39.8% | -44.8% |
| Year-to-date | -33.9% | -35.5% |
| 12-m change | -9.9% | 31.8% |
| Period | Week 17 |
| Weekly volume (No of securities) | 10 273 433 |
| Weekly turnover (BGN) | 41 505 412 |
| Average weekly turnover YTD (BGN) | 75 382 749 |
Top Gainers*
| Neochim [NEOH] | 20.2% |
| Petrol [PET] | 17.7% |
| EuroIns Insurance AD [EURINS] | 5.9% |
Top Losers *
| Kremikovtsi [KREM] | -16.8% |
| Kaolin [KAO] | -8.7% |
| Lead and Zinc Complex [OTZK] | -7.0% |
* from our list of selected stocks. Changes based on avg. prices. For companies included, see table on p.3
news HIGHLIGHTS
- Please be aware that 1st, 2nd, 5th and 6th May are non-working days in Bulgaria. Saturdays, 10th and 17th May will be official working days.
- Lukoil Bulgaria and Petrol [PET] signed a deal for €237m (see more on page 4).
- Bulgarian American Bank [BACB] approved a cash DPS of €0.77.
- Sopharma [SFARM] shareholders will vote on a €0.03 DPS on June 9th.
- Fazerles’s [FZLES] shareholders to vote on a €0.51 DPS on June’s 12th.
- Sunny Beach [SLB] has proposed a €1.38 DPS.
- Agria Group Holding [AGRIA] bought agricultural equipment for €1.5m.
- Bulgarian Real Estate Fund [BREF] has rented out 2000 hectares agricultural land at an average rent of €7.45/dka
- CBA Asset management [CBAAMG] acquisition of 11 stores of “Burlex 104” was approved.
- The majority owner of Elektronika [ELKA], Eltower, submitted a tender offer at €28.12 per share.
- Foreign tourists in winter resorts increased by 23% for Jan and Feb 2008 compared to same period in 2007.
Q1 2008 UNCONSOLIDATED FINANCIAL RESULTS
Central CooperativeBank [CCB]
Continued operating inefficiency at CCB in Q1 At end-Mar 08, CCB’s total assets were BGN 1.6bn and loans to NFI amounted to BGN 721m. The deposit base increased by 2% QoQ driven by 8% growth in retail deposits to BGN 739m. Last quarter, the bank ceded a receivable under a credit facility, the nominal amount of which had been BGN 21.4m and which was carried on the books (after provisioning) at BGN 11.3m. As the bank sold the receivable for BGN 20m, it booked a BGN 8.7m profit in the P&L. The Q1 provisions / gross loan ratio also fell to 1.9% as a result of the cession. The net income margin of 5.19%* continued to be relatively high. Total operating income amounted to BGN 27m (with a loss from securities of BGN 2.7m) and cost-toincome ratio was 67%, still significantly above the industry average. CCB had net income of BGN 6.8m, ROaE of 14% and ROaA of 1.7%. Liquid assets amounted to 36% of interest bearing liabilities and the capital adequacy ratio was 16%.
* All ratios are on a TTM basis for income statement figures and on a quarter-average basis for balance sheet figures.
Source: FFBH
Corporate Commercial Bank [CORP]
Slow-down in lending, large gains on retail deposits, the provisioning ratio remains very low
At end-Mar 08, CORP’s total assets were BGN 1.7bn and loans to NFI reached BGN 718m. The provisions / gross loan ratio was below 0.6%. Deposits from customers of BGN 1.5bn were down 6% QoQ due to a reduction in corporate deposits by BGN 232m, which was to a large extent offset by the BGN 136m increase in retail deposits. CORP continued to achieve profitability improvements in terms of the net interest margin (which reached a historically high level of 5.10%) and cost / income ratio, which came in at 42% (up 4.1pp QoQ and 22pp YoY).
Net income was BGN9m (up 74% YoY), with ROaE of 17.5% and ROaA of 1.8%. The bank liquid assets amounted to 50% of interest-bearing liabilities and the capital adequacy ratio was 13.10%.
* All ratios are on a TTM basis for income statement figures and on a quarter-average basis for balance sheet figures.
Source: FFBH
Kaolin [KAO]
Q1 results pressed by unfavorable weather conditions and rising operating costs Kaolin reported 2% YoY decrease in Q1 2008 revenues to BGN 22.3m mainly due to severe weather conditions causing main facilities operations to stop for three weeks. At the same time Q1 2008 unconsolidated operating expenses increased 6% YoY and pressed EBITDA down to BGN 3.5m (-31% YoY). EBITDA margin slipped to 16% in Q1 2008 compared to 22.5% in Q1 2007. Main reason for EBITDA deterioration was the 28% hike in freight costs, which was driven up by higher fuel prices. As a result cost of hired services (about 80% of which are transportation costs) rose 18% YoY to BGN 9m.
On the balance sheet it is noteworthy that Kaolin management decided to draw additional BGN 10m loans in Q1 to support working capital and investment needs despite its large BGN 27m cash position. As a result IB debt reached BGN 27m and IB debt to equity stood at 23% in end-March 2008 compared to 15.5% in end-2007. Source: FFBH
Q1 2008 UNCONSOLIDATED FINANCIAL RESULTS (CONT’D)
SynergonHolding [PETHL]
Audited consolidated results for 2007
Synergon Holding audited consolidated financials showed virtually unchanged revenues at BGN 348m. Total operating expenses were BGN 316m (up 2% YoY). The holding reported BGN 3.6m income from investments in 2007, which resulted in a strong YoY bottom-line improvement to BGN 13.5m. Source: FFBH
Neochim [NEOH]
NEOH posts net profit for Q1 3.5x YoY to BGN 22.3m
The Q1 net income of Neochim is up 3.5x to BGN 22.3m the report filed with BSE revealed. Last year the company's Q1 profit amounted to BGN 6.3m.
Revenues jumpedby more than 26% to BGN 95.1m, outpacing the 5% hike in operating costs. In our view, the reason behind this improvement in profitability is the 77% jump in prices of ammonium nitrate, Neohim’s main product. Source: FFBH
Emka [EMKA]
Emka's Q1 profit down 20% YoY to BGN 528k
Emka posted non-consolidated revenues of BGN 16.5m for Q1 2008, a 6.5% YoY increase. Exports accounted for 8.9m of the sales figure. Net profit however declined by 20.24% YoY to BGN 528k. In its annual report Emka's output was forecast to grow by 11% YoY in 2008. Source: Profit.bg
Sparky Eltos [ELTOS]
Sparky Eltos posts net profit of BGN 2.5m for Q1 2008 Sparky Eltos booked BGN 16.2m revenues for Q1 2008, up 57.53% YoY. Net profit soared 25x to BGN 2.5m in comparison with the mere 98k in Q1 2007. Source: Investor.bg; FFBH
Sparky Ruse [SPARKY]
SPARKY books net profit of BGN 1.7 m for Q1 2008
Sparky Ruse booked unconsolidated revenues of BGN 12.3m for Q1 2008, up by 24.3% YoY. Non-consolidated profit came at BGN 1.7m from a loss of BGN 130k in Q1 2007. Source: Investor.bg; FFBH
news IN THE SPOTLIGHT
Macroeconomic news
Broad money stands at BGN 42.2bn in March
In March 2008, broad money (M3) reached BGN 42.2bn, up 29% YoY compared to 29.8% in February, data of the BNB showed.
Loans to non-financial corporations increased by 60.5% YoY vs. 64.1% for the previous month. The change in loans to households and NPISHs (Non-Profit institutions Serving Households) amounted to 49.5% on an annual basis, compared to 53.9% in February. Source: BNB
Macroeconomic news
Household wealth growth outstrips inflation
Bulgarian household wealth stood at BGN 31.3bn or BGN 4,100 per capita in Q1 2008, up 28.5% YoY, shows data released by industry Watch. The figures equal 55% of the nation's GDP. Source: Dnevnik
Financial news
Bulgaria leasing market seen up 50% YoY in 2008
The leasing market is headed for an annual growth of 40- 50% in 2008 and should achieve further gains of 30% to 40% annually over the next 2-3 years, said the Bulgarian Association for Leasing. In 2007 the leasing market increased by 62% YoY, well above the average growth of 20% for Europe. New leasing deals amounted to BGN 2.7bn last year. Receivables under leasing contracts reached 7% of the nation’s 2007 GDP. Source: Dnevnik; Pari
Petrol [PET]
Lukoil and Petrol finalized a deal for EUR 237m
On Thursday it was announced Lukoil Bulgaria finally reached agreement to buy out 75 petrol stations of Petrol AD for the total sum of EUR 156.1m and its fuel storage depot in Sofia's Iliyantsi district for BGN 80.9m, thus the value of the end deal stands at BGN 237m. Source: Pari
Bulgarian American credit Bank [BACB]
Shareholder seeks more clarity on BACB stake sale
Arco Capital management which represents Gramercy, owner of about 25% of BACB shares, has demanded more clarity about the sale of a 49.99% stake to Allied Irish Banks p.l.c. If necessary, Gramercy will alert accordingly the BNB, the FSC and the CPC. The BACB deal is still pending approval by the BNB and the CPC. Source: Dnevnik
| Type | Coupon | Maturity | Currency | Yield (%) | Spread Over Treasuries (bps) | Bid (% of par) | Offer (% of par) |
| Eurobonds | 7.50% | Jan-13 | EUR | NA | NA | NA | NA |
| Eurobonds | 8.25% | Jan-15 | USD | 4.99 | 147 | 118.20 | 118.80 |
Most recent macro data
| BGN/EUR exchange rate | 1.95583 |
| Inflation (MoM March) | 0.8% |
| Inflation (cumulative 2008) | 3.4% |
| Base interest rate | 4.85% |
| LEONIA reference rate | 4.91% |
| GDP Growth (Y/Y 2007) | 6.2% |
| Unemployment (March 2008) | 6.79% |
| Public External Debt/GDP (Jan '08) | 12.4% |
| FDI Jan-Feb '08 (EUR) | 432m |
SOFIBOR for Fri, 18 Apr
| Maturity | Rate |
| Overnight (ON) | 5.01 |
| One week (SW) | 5.33 |
| 1-month | 6.45 |
| 3-month | 6.82 |
| 12-month | 7.88 |
SELECTED STOCKS INDICATORS (table)
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