Falling Lithuanian stocks dent Baltic index rise

  • 2001-05-24
  • Boriss Epsteins
Losses by most Lithuanian stocks and weakness in Estonia's car safety belt maker Norma during the last week held back the Baltic index from its recent ascent. The index stood almost unchanged, inching down just 0.04 percent to 130.04, despite gains by most Estonian and Latvian shares. Losers outnumbered gainers eight to seven on the Baltic List of blue chips listed on the Riga, Vilnius and Tallinn bourses.

The Baltic List capitalization, meanwhile, was up 1.5 percent, pushed up by soaring prices of Eesti Telekom and Hansapank shares. The capitalization increased from 2.62 billion euros ($2.31 billion) to 2.66 billion euros. This would have been even higher had it not been for the drop in Lietuvos Telekomas' share price. Lietuvos Telekomas, along with Hansapank and Eesti Telekom, secure over 70 percent of the total Baltic List capitalization.

Last week Baltic List turnover was 37.81 million euros, up from 6.25 million euros a week ago, as a controlling stake in the Latvian insurance group Balta changed hands. Latvian stocks accounted for 72.7 percent of the list's weekly turnover, Estonian 26.8 percent, and Lithuanian 0.5 percent. Transactions in Balta made up over 68 percent of the Baltic List turnover, while Norma shares accounted for nearly 20 percent. Baltic List stocks dominated trade on the Estonian and Latvian national bourses, generating over 96 percent of their respective home market turnovers. In Lithuania, meanwhile, the indicator was just 6 percent.

Estonia: Options trading in Norma boosts volume

The Tallinn Stock Exchange saw trading in unusually big volumes, with shares in the car safety-equipment maker Norma strongly dominating brokerage house activities. The week was exceptional in that it lifted Norma and the EVP privatization voucher to the center of investor attention, pushing aside the market's traditional darlings, Hansapank and Telekom, Uhispank trader Mart Helmja said. The stock index TALSE put on 3.3 percent to finish at 143.38. The price euro index of the six Estonian Baltic List stocks was virtually unchanged, edging higher by 0.07 percent, to 126.15 for the week. Total turnover generated in 701 deals was 164.85 million kroons ($9.25 million), with 69 percent of this coming from deals with shares in Norma.

"Commotion and speculation around Norma's share actually started several weeks earlier," Helmja said. Uhispank's capital markets strategist Aivo Kangus believes that for Norma, the main reason for the shares' volatility and big turnovers was the substantial trade in options contracts. The volume of options was too big, compared with Norma's usual trading levels, Kangus observed. "Volatility still won't be over on May 18, when the options expire, as their impact will be carried on into the next week," he said.

The long-term forecast for Norma is both stable and positive, however, he added. Besides the expiration of option contracts on May 18, this was also the first ex-dividend trading day for Norma. The Tallinn-based company will pay a dividend of 5 kroons per share. In the course of the week Norma tumbled 8.7 percent to close at 50 kroons, with a five-day turnover of 114.1 million kroons.

EVP privatization securities, meanwhile, regained much of the ground lost the week before, rising 7.7 percent to 0.54 kroons on trade of 3.07 million kroons. "The price of EVPs came halfway back, turnover came along and movements were in the positive direction," Helmja explained. He said the refreshing jolt was to everybody's benefit.

The trader believes that in events concerning EVPs, everything now depends on the government's actions and its general strategy. During the week ending May 11, EVPs lost nearly one-fifth of their value, falling from 0.61 to 0.50 kroons. The sudden decline was triggered by a proposal from the Finance Ministry to selectively extend the validity date of EVPs.

Eesti Telekom posted gains of 6.3 percent to close at 83.50 kroons, with a turnover of 17.9 million kroons, while Hansapank was up 1.1 percent to 150 kroons, with 17.9 million kroons in turnover.

Latvia: Stock market enjoys record turnover

The Latvian stock market last week generated an unusually high turnover of 15.4 million lats ($24.3 million), with the bulk of it contributed by trading in the insurance company Balta. Transactions in Balta shares accounted for 14.4 million lats, or 93.5 percent of the total stock market turnover, as the Danish insurance company Codan finally closed on the purchase of slightly over 73 percent of outstanding shares.

The gas company Latvijas Gaze and the oil terminal Ventspils Nafta, the remaining two Latvian stocks on the Baltic List, also generated relatively high turnovers exceeding 1 million lats. So, Latvia's three Baltic List stocks commanded nearly 100 percent of Riga Stock Exchange turnover.

All of Latvia's stock market indexes posted gains for the week. The capitalization index DJRSE jumped, in lats, 1.1 percent to 136.93, and the price index RICI was up by 2.7 percent to 161.21. The Latvian euro price index of the three Baltic List stocks rose 1.2 percent to 163.02.

Balta was up 3.1 percent to 4.25 lats, though the stock is likely to reach 4.5 lats in the near future, the price at which Codan is set to buy out the remaining outstanding shareholders. Analyst Reinis Ceplis, of Suprema, explained the weak performance of Balta last week by the fact that, in the wake of the news of Codan's purchase of a controlling stake, sellers reacted too quickly for buyers' comfort, in raising their offer price.

Strong trading activity in Ventspils Nafta shares surrounded the company's shareholders meeting, though nothing of substance took place. Shareholders again decided, as they did a year ago, not to pay dividends, but instead channel a large part of profits into reinvestment. Moreover, the company's management continued with its pessimistic forecasts over prospects for the next several years. Ventspils Nafta's share price remained unchanged amid a lack of news and closed at 0.6 lats on a heavy turnover of 858,000 lats. Ventspils Nafta shareholders are awaiting news concerning privatization of the state-owned stake in the oil terminal.

Latvijas Gaze shares were unchanged amid an absence of news about the gas company's privatization, and for prospects of a gas tariff regulatory increase for industrial consumers. Shares rose just 0.8 percent to 3.8 lats in trade of 174,000 lats.

Among the blue chip stocks, noteworthy news was the stock market commission's decision that Gisli Reynisson, one of the largest shareholders in the pastry factory Staburadze, must make a buyout offer to the remaining minority shareholders. The analysts believe the stock could test levels of 1.62 lats a share if an offer is made. Staburadze rocketed 25.5 percent to 0.69 lats, but analysts are slow to forecast a continued steep rise, as Reynisson may contest the stock market commission's decision, delaying the order in court for an indefinite period.

Analysts, along with Staburadze's representatives, have said the company's financial situation is not bright and the buyout of shares by Reynisson, at 1.62 lats per share, will worsen the situation even further. Reynisson is closely linked to Nordic Food, the majority shareholder in Staburadze; therefore, these analysts assume that additional spending, in an amount of nearly 2 million lats for the share buyout, will indirectly influence Staburadze's operations.

The analysts and company representatives are mistaken with such reasoning and misleading the public with their claims. The 2 million lats assumed needed for a buyout have nothing to do with investing new money into existing operations. That is, there is no correlation between how a company's ownership structure is financed, in this case at what price and how the shares are to be bought out, and how successfully a company is operated. If Staburadze's situation is bleak, it is due to its management's performance, and this is reflected in its low share price. Latvian stock market regulations require that once a majority of issued shares are acquired, the acquirer must make an offer to buy out the remaining shareholders. It seems difficult to justify a buyout price of the remaining shares at 1.62 lats per share, as analysts have done, considering that the shares now are trading at 0.69 lats each. Nonetheless, a buyout represents offering existing minority shareholders a fair value for their shares, taking the company private, and Reynisson then following through with a reinvestment program, or a management restructuring, to improve Staburadze's operating results. This deal has been murky from the start, and the stock market commission must remain firm in its demands.

Lithuania: Bourse remains stuck in neutral

Trading activity remained subdued on the Lithuanian stock exchange last week. Some stocks saw brisker activity compared to the previous week, but turnovers were still low, and share prices were basically losing ground. The bourse's benchmark price index Litin-10 skidded 1.04 percent to 1,049.13, the blue chip official list index Litin was off 2.7 percent to 372.6, and the broad index Litin-G was off 0.2 percent to 937.57. The price euro index of the six Lithuanian Baltic List shares was off 0.9 percent to 117.43. The bourse's equity turnover reached 8.6 million litas ($2.15 million). The overall turnover reached 47.3 million litas, of which a 38.7 million litas turnover was generated through T-bill trading.

On the official list, blue chip Lietuvos Telekomas slid 2.7 percent to 1.74 litas with 307,800 litas' worth of shares traded. Telekomas hit 1.70 litas, its historical low, on May 16. Other stocks on the official list attracted even less lively investor interest. Cheese maker Rokiskio Suris held steady at 18 litas in trade worth 60,400 litas while TV-tube producer Ekranas slumped 8 percent to 5.51 litas with just 4,100 litas' worth of shares traded. Ekranas shares fell back following the release of the company's results for April that showed a four-fold decline in the TV-tube producer's profit, and a 22.9 percent drop in sales year-on-year.

Refrigerator maker Snaige was up 1.4 percent to 35 litas on a turnover of 57,600 litas. At the beginning of the week Snaige announced that three foreign investors are interested in acquiring a majority stake, but investor reaction to the news was short-lived. Brokers said the market is waiting for more detailed information as to who intends to buy, and at what price. The brewery Kalnapilis edged up 0.9 percent to 4.20 litas amid a 35,800 litas turnover; shares in the knitwear producer Utenos Trikotazas were not traded in the outgoing week.

On the current list, shares in the shipping company LISCO were the focus of investor interest, together with news that the Lithuanian Parliament voted down the president's veto on public trading of securities legislation. This restored investors' hope that the Danish company DFDS Tor Line would obey the law and announce a mandatory tender offer for the buyout of remaining outstanding LISCO shares. Nevertheless, LISCO slid 4.4 percent to 3.25 litas amid a 296,300 litas turnover.

The oil concern Mazeikiu Nafta soared 5.2 percent to 0.60 litas after the government offered to sell to the Russian oil company LUKoil one-third of the shares in the Mazeikiai-based company. Trading in the oil concern reached a turnover of 190,500 litas.

Vilniaus Vingis was off 2 percent to 4.90 litas on a turnover of 170,800 litas. A total of 6.38 million litas' worth of shares in Vilniaus Vingis, representing nearly 10 percent of the company's authorized share capital, changed hands in 14 block trades at 7 litas a share on May 14. Trading in Vilniaus Vingis' shares picked up on the eve of the shareholders' meeting. The shareholders will vote on reducing the face value of shares from 5 litas to 4 litas, and on paying this recovered amount out to the company's shareholders as a one-time special dividend. The financing of this share capital reduction will be through borrowing.

The gas company Lietuvos Dujos was off 1.9 percent to 1.53 litas amid a 114,900 litas turnover. In block trading, 239,700 litas' worth of shares in Siauliu Bankas, and 200,000 litas in the power utility Lietuvos Energija, changed hands.