Phyrric victories and real rallies
The market climbed steadily last week, fueled by domestic investors and following rises on both the Nasdaq and Dow Jones exchanges in New York, analysts said.
The all-share WIG index climbed 0.8% on the week to hit 22,386.2 points. Volume rose 16.4% to hit zl. 1.77 billion ($431.7 million).
"The index is very strong in its current shape," said Rafal Gebicki, an analyst at Raiffeisen Capital Investment Polska. He said that while internet and telecom firms continued to attract investment, "old economy" sectors, such as production stocks are popular once again, especially after the Dow Jones' record rise last Thursday.
Two stories dominated the headlines. Swedish construction firm Skanska purchased a 9.99% stake in Exbud from private investor Michal Solowow for zl. 62.96 million ($15.4 million). The move effectively ended the long-running tug of war between Solowow and Exbud President Witold Zaraska for control of the company.
Pawel Puchalski, an analyst at BRE Brokers, said that while Solowow can be seen to have made a profit, selling his stock for zl. 42 per share (Exbud's 52-week high is zl. 44.1), Zaraska's victory may be pyrrhic. "It looks like he won, but we don't know what he had to promise Skanska," Puchalski said. He added that until recently Zaraska had been very much opposed to the idea of a foreign investor in the company. Skanska has applied to the Securities and Exchange Commission to exceed 50% of votes in the firm. Exbud fell 7.2% to finish at zl. 38.8.
The other story was Elektrim, which rose 16.37% to close at a record high of zl. 77.5. The rally came on the back of news that the company will spend zl. 2 billion ($487.8 million) on the development of internet and mobile telecom projects. Elektrim will not formally announce its plans until April, by which time its partner Vivendi will have also announced its vision for the Polish telecom market, Gebicki said. "Elektrim has huge potential" in these markets, said Michal Marczak, another analyst at BRE Brokers.
In other news, Deutsche Bank Research maintained a "buy" recommendation on hotel chain Orbis and upped its share-price target in a report dated March 7. Orbis, which is gearing up to sell off a 35% stake, has recently been trading on the Warsaw Stock Exchange (WSE) in the zl. 40-zl. 42 range. Deutsche expects that to strengthen to zl. 50 per share. Orbis did not move on the week, closing at zl. 40.
Jakub Papierski, author of the report, said that during the first phase of Orbis's privatization last year, 58% of its shares were free floated. The upcoming 35% offer can therefore be considered "very liquid," and will be tempting to hotel-industry investors, he said.
Papierski said the likely takers are conglomerate hoteliers Accor and Bass. But any strategic investor buying 35% is likely to start jockeying for a 50% stake and control of the company, he said. Smaller stakes within the 35% sell-off going to several strategic investors is also a possible scenario, he said.
Orbis's growth prospects are "much greater than for its European peers," the report said. Its three subsidiaries, Orbis Travel, Orbis Transport and Orbis Casino, are expected to contribute only marginally to profit.
Orbis, which pulls in 66% of its revenue from the three-star hotel segment, has been refurbishing rooms, broadening services and improving and adding business and recreational centers. Deutsche estimates Orbis' sales in 2000 to rise 16.2% to an expected zl. 1.2 billion ($292.7 million), and net profit to climb 22.7% to zl. 117.1 million ($28.7 million). The stock carries a price-to-earnings ratio (p/e) of 16.5.
