Commentary
H1'08 reports failed to wake up the investors
The summer holiday season on the Bulgarian Stock exchange continued one more weak as the weakly turnover with shares was traditionally low and most of the investors were only observers of the happening. The main part of the turnover with shares during the week was due to a single deal with 5.19 mln. shares of Chimimport [6C4] worth BGN 44.1 mln. The deal was effected on Wednesday (27 August). As a result of the low investors’ interest in the last week the main index SOFIX stayed almost unchanged advancing by as little as 0.2% to 1,028 points. Among the best performing shares in the last week were the company trading with construction and heating materials Toplivo [3TV] which added another 6.81% to its market capitalization and the battery producer Monbat AD which appreciated by 6.35%. The lack of active trading with shares in the last couple of weeks led to the exclusion of four more companies from the list of potential “victims” of the short selling – a recently introduced service on the stock exchange. In the list of the endangered companies remained only Eurohold Bulgaria [4EH], CB FIB [5F4], Monbat and Chimimport as the following four companies no more face the criteria for short selling – CB CCB [4CF], Sopharma [3JR], Industrial Holding Bulgaria [4ID] and Grain Foods Bulgaria [T43].
The consolidated financial statements for the first half of 2008 published in the last few days were to a great extent in line with the expectations of the investment public. A major part of them confirmed the deteriorated financial standing of the public companies which was evident in the first quarter financial reports, as well as the unconsolidated reports for H1’2008 published in the end of July. The already observed fact that the publicly traded companies and conglomerates were hit by the sharply appreciating raw materials and commodities and the surging salaries was confirmed one more time. As common the investors witnessed again both negative and positive earnings surprises concerning the corporate sales and profits. A typical example of a negative surprise were the financial reports of the parent company of Toplivo Synergon Holding [6S7]. The conglomerate announced a 99% plummet of its earnings after taxes and minority to as little as BGN 44 ths. which was primarily due to the robust growth of its operating and financial costs. Other cold shower examples were the road construction companies Trace Group Hold [T57] and Holding Roads [6H2], which surprised the investors with lower than expected growth rates of the top line, accompanied by an embarrassing deterioration of the operating and net result as compared to the same period last year.
The report also includes:
market Trends
SOFIX (chart)
BG40 (chart)
market Statistics
| Segment | Volume (BGN) | Deals |
| Trading in Equities | 59 234 938.00 | 4 281 |
| Weekly Chng | 455.22% | 17.19% |
| Trading in Corp. Bonds | 1 677 195.40 | 26 |
| Weekly Chng | 104.09% | 8.33% |
| Margin Trades | 0.00 | 0 |
| Weekly Chng | 0.00% | 0.00% |
| Margin Trades | 0.00 | 0 |
| Weekly Chng | 0.00% | 0.00% |
| market Capitalization: | BGN 20.29 bln / EUR 10.37* bln |
* The Bulgarian Lev is pegged to the Euro at BGN 1.95583 per EUR 1.00.
BG40 Stocks, August 29, 2008 (table)
Gainers & Losers*
| TOP GAINERS | Ticker | Sector | Weekly Chng |
| Alcomet | 6AM | metallurgy | + 9.51% |
| Housing compensation notes | BLKB | fin. instruments | + 7.67% |
| M+S Hydraulic | 5MH | machinery | + 6.98% |
| TOP LOSERS | |||
| Todorov | 5T6 | food and beverage | -8.55% |
| Synergon Holding | 6S7 | conglomerates | -6.93% |
| Bulgartabak Holding | 57B | tobacco | -6.67% |
*Gainers: Among shares with turnover above BGN thnd 50; Losers : Among shares with turnover above BGN thnd 20;
Мain Economic Indicators
| 2005 | 2006 | 2007 | |
| GDP, in bln EUR | 21.88 | 25.24 | 28.9 |
| GDP, real growth | 6.2% | 6.3% | 6.2% |
| Inflation, avg. | 5.0% | 7.3 % | 8.4 % |
| Unemployment, avg. | 9.9% | 8.4 % | 6.1 % |
| Fiscal Balance, %GDP | 2.3% | 3.7 % | 2 % |
| Gross Public Debt, %GDP | 29.9% | 23.0 % | 19.0 % |
| Gross external debt, %GDP | 69.8% | 80.7% | 97.3% |
| Current Account, %GDP | -12.4% | -17.8% | -21.5% |
| FDI, %GDP | 14.4% | 23.7% | 21.4% |
| Prime interest rate | 2.04% | 2.69% | 3.93% |
East European Markets
| index | Value | Weekly Chng | YTD Chng |
| Bulgaria SOFIX | 1027.99 | 0.24% | -41.85% |
| Croatia CROBEX | 3 495.02 | -1.24% | -33.29% |
| Macedonia MIB-10 | 5 130.07 | 1.26% | -33.73% |
| Montenegro NEX20 | 17 361.25 | -4.18% | -49.19% |
| Romania BET | 5 420.87 | -4.67% | -44.83% |
| Russia MICEX | 1 348.92 | -1.87% | -28.59% |
| Serbia BELEX15 | 1 367.90 | -3.86% | -41.00% |
| Turkey ISE-100 | 39 844.48 | -2.57% | -28.26% |
| Ukraine PFTS | 533.68 | -9.92% | -54.54% |
| Morgan Stanley MSCI EE (€) | 532.05 | -0.15% | -26.67% |
news of the week
Economics
- The Producer Price index (PPI) increased by 2.9% in July compared to the previous month as in the processing industry the increase was by 1.2%, according to data published by the National Statistical Institute. The annual percentage change in the PPI index was by 15.4%.
- The gross external debt in the first half of the year reached EUR 31.9 bn or 97.2 % of GDP – an increase by 13.4 % comparing to the end of 2007 and by 42.4 % on y-o-y basis., preliminary data of the BNB shows.
Politics
- The deputy Chair of the European Commission and Enterprise and industry Commissioner Gunter Verheugen paid an official visit in Bulgaria during the week. According to Verheugen the Bulgarian economy is developing well and is well positioned in a mid-term period. He expressed his confidence that this year Bulgaria will have a one digit inflation.
- Bulgaria confirmed its unconditional support for the independence, sovereignty and the territorial integrity of Georgia, announced the spokeperson of the Ministry of Foreign Affairs, after the Russia’s decision to recognize the independence of Abkhazia and South Osetia.
Corporate Sector
- The Financial Supervision Commission approved the prospectus for initial public offering of a convertible bonds issue of Industrial Holding Bulgaria [4ID]. The issue is in the amount of BGN 21.878 mln. And the maturity is 3 years. The coupon rate is 8% and will be paid semiannually. The conversion will be performed on the maturity date and with an interim conversion in the end of the second year. The funds are envisaged to finance the investment activities of the subsidiaries of the conglomerate. The maturity of the first issue of convertible bonds of Industrial Holding Bulgaria was in July 2007.
- On August 27, 2008 was signed the contract with the association Metro Trace for the construction of a part of the Sofia subway – the section from Patriarh Evtimii Blv. to Cherni Vryh Blv. (position II). The value of the contract is nearly BGN 142 mln. and the period of the construction works is 45 months. In the association Metro Trace with a leader Trace group Hold [T57] partners are also Trace Sofia, and SB Engineering. A Turkish firm shall be the executor of the first section (position I) from road junction Nadejda to Patriarh Evtimii Blv.
- Monbat [5MB] announced its estimations about net sales in the amount of BGN 136.9 mln. and earnings before taxes in the amount of BGN 24.04 mln. as of September 30, 2008. The company forecasted revenues of BGN 43.5 mln. and EBT of BGN 8.7 mln. for the third quarter alone.
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