Market climbs on interest in Elektrim
The market broke last week through the 17,000 level for the first time since early September, fueled mainly by Elektrim's staggering 25.8% rise over five days.
The all-share WIG index climbed 7.21% on the week to close at 17,069.20 on Friday. And although volume fell 5.08% from the previous week's highs, it remained impressive at zl. 961.5 million ($228.93 million).
"The market is very strong right now," said Pawel Puchalski, an analyst at Dom Inwestycyjny BRE Banku. "And I think we'll end this year for sure above 17,000." That would give the market a 36% rise on the year.
Elektrim's soaring share price, which closed at zl. 39 per share, came after Vivendi said it would provide the conglomerate with $250 million before year's end to help Elektrim meet financial obligations. Vivendi said it would increase its stake in Elektrim Telekomunikacja from 30% to 49% and invest a total of $1.2 billion. Market watchers said that the performance of the stock, which accounts for about 10% of the WIG, was essential to this week's swell.
"It was crucial," said Daniel Kwiatkowski, a salesman at Raiffeisen Capital & Investment Polska. "Good news for Elektrim means good news for stocks in general."
But Elektrim wasn't the only mover. BIG Bank Gdanski (BIG BG) closed Friday at zl. 12.3, up 19.42% on the week and soaring 290% this year. "It is very curious, nobody knows why this bank is rising," BRE's Puchalski said. Also puzzling is why the bank is trading at such high levels, carrying a price-to-earnings ratio (p/e) of 30 based on last week's close. "The same question why it is so expensive could have been asked last week and nevertheless it is still rising," he said.
Polfa-Kutno, a pharmaceuticals firm, rose 11.88% on the week after having taken the unprecedented step here of buying back shares, Puchalski said. The company will spend zl. 34 million ($8.1 million) on a 16.3% buyback at zl. 75 per share, he said. Such moves are generally intended to increase shareholder earnings per share in lieu of dividend payments, but the majority of analysts consider the buyback a waste of money, he said. Polfa-Kutno closed at zl. 71.6 per share.
Another reason for this week's swell was the performance of Telekomunikacja Polska (TPSA), which rose by 12.66% to close at zl. 26.7 per share. Despite pressure from the Treasury Ministry to increase the bidding price for TPSA, France Telecom last Monday refused to up its previous offer of zl. 23 per share, or zl. 11.3 billion ($2.69 million) for a 25-35% strategic stake in the telecom giant.
"Of course, the price is still not final," said a source close to the deal. "But somebody who gives money has to be sure the money is well spent." Final negotiations over price will only begin after France Telecom receives an exclusive guarantee to bid for TPSA, which is expected to happen by the middle of this week, market watchers said. The French investor will then be able to start due diligence. Originally, the state treasury hoped to collect zl. 28-zl. 30 per share, or zl. 13.7 billion-zl. 14.7 billion ($3.26 billion-$3.5 billion) for a 35% stake in the company.
The unclear regulatory situation and questions about TPSA's ability to keep its dominant position in a market that is slated to open in 2003 led only two bidders to place an initial offer for a strategic stake France Telecom and U.S.-based SBC Communications. The latter pulled out of the bidding process in November, leaving the French concern as the lone participant.
Despite the surprisingly low interest in TPSA, analysts did not expect the government would try and re-open the tender in the hopes of pulling in more bidders.
