Latvijas Gaze shares up in a sea of complacency

  • 2001-08-16
  • Boriss Epsteins
Despite losses by a majority of Lithuanian and Estonian stocks, the Baltic index and the Baltic List capitalization continued to rise in the outgoing week, pulled ahead by further strong gains in Latvijas Gaze shares. The Baltic index charged ahead by 6.6 percent over the week to a new all-time record high of 150.11. Out of 15 Latvian, Lithuanian and Estonian blue chips included on the Baltic List, only two stocks moved up, 12 fell and the suspended Pro Kapital shares were unchanged. Notwithstanding the sudden loss in Eesti Telekom shares, the Baltic List capitalization increased by 4 percent due to rising prices in Latvijas Gaze shares and ended the week at 2.82 billion euros ($2.5 billion).

Latvijas Gaze's capitalization rose to $729.57 million, bringing the Latvian gas company close to the current leader - Estonia's Hansapank whose capitalization is $772.36 million. The Baltic List turnover fell slightly, to 7.03 million euros, from 7.9 million euros the previous week. Estonian stocks contributed 52.8 percent of the weekly turnover, Latvian stocks (primarily Latvijas Gaze) accounted for 45.8 percent while Lithuanian stocks brought in only 1.4 percent. The Baltic List stocks remained absolute leaders on the Estonian and Latvian stock markets, generating over 80 percent of the total stock market tunover on their respective home bourses. In Lithuania this figure was just 12.5 percent.

Among developments likely to have a material impact on all Baltic stock markets are reports that oil and gas companies Itera and YUKOS are strengthening their relationship in the Russian market. Itera controls a substantial part of the Baltic gas market and also has large holdings in Baltic gas distribution companies. It is clear that it was Itera's intention to increase its influence in Latvijas Gaze and was behind the strong upwards drive of these shares in recent weeks. At the same time, YUKOS, the second largest oil company in Russia, is increasing its presence in Mazeikiu Nafta, the largest oil concern in the Baltics. It is also evident, and worrying, that in case these two companies join their efforts in the Baltics, they will control a large part of the Baltic oil and gas complex.

Estonia: Indexes down with Eesti Telekom

The Tallinn Stock Exchange saw relatively brisk trade in the outgoing week; attention focused on Eesti Telekom's tumbling to ever new lows. The share index dropped 4.4 percent, or 6.13 points, in the course of the week to finish at 131.34. The euro price index as calculated for the six Estonian Baltic List shares was off 1.1 percent, closing at 125.97. The aggregate turnover from the 618 deals made in the five days was 72.45 million kroons ($4.14 million).

Eesti Telekom, with its steep fall, set the tone for the market, head of Suprema's market analysis department Sten Sumberg said. The reason for the shares' dive was the general weakness of telecoms throughout the world, Sumberg said, adding that the fall was apparently amplified by Eesti Telekom executives' comments concerning repurchase of shares and share price. Telekom shares shed 9.2 percent to end 5.75 kroons lower at 56.75 kroons.

According to earlier comments by Eesti Telekom executives, a share repurchase program could be initiated at this price. "Future outlooks are optimistic and we believe the market will take an upward turn again,"Sumberg said. Trigon Markets broker Kristel Kivinurm also believes that "Telekom will stabilize somewhere between 55 kroons to 60 kroons".

Hansapank dropped 3.1 percent, or five kroons, to finish at 153.25 kroons, and Norma closed 1.7 percent, or 0.90 kroons, lower at 51 kroons. Sumberg said Hansapank moved down because of the weakness of other shares, mainy Telekom. Trigon's Kivinurm believes that holders of Hansapank shares for the most part are apparently awaiting the bank's results due out on August 23.

In regard to Norma, relative quiet held at the week's end, but the share has held relatively strong due to solid second-quarter results posted by the company, Sumberg said.

Latvia: Latvijas Gaze on a roll

The unexpectedly steep climb of shares in the gas company Latvijas Gaze last week pushed up all Latvian stock exchange indexes amid increasingly frequent warnings by analysts about the market being likely to collapse once the fight for Latvijas Gaze shares is over. Dow Jones Riga Stock Exchange capitalization index shot up 28.3 percent to 262.51 and the price index RICI jumped 4.3 percent to 163.2. The euro price index of the three Latvian Baltic List stocks took a huge 26.3 percent leap upwards to a record high of 278.54. The weekly turnover was 1.86 million lats ($2.95 million).

The gas company's shares soared skywards, gaining as much as 38.5 percent to 10.28 lats on a turnover of 1.79 million lats and forcefully sweeping aside all previous records of price gains and capitalization.

Many analysts predicted growth for Latvijas Gaze shares but few expected the stock to rocket up the way it did. It is possible that Latvijas Gaze price fever will continue until Aug. 30, when the next auction offering a 3 percent stake in the company will be held. At the same time, Latvijas Unibanka analyst Andris Skapars warns that the time is near "when small shareholders will have on their hands as insignificant an amount of shares as no one would want to buy."When it comes to that, the price of shares rendered illiquid may sink as fast as it had risen earlier.

Apart from the largest shareholders fighting for influence in the company, Latvijas Gaze's share price may be subject to a speculative impact from recently resurfacing allegations about intentional undervaluation of the company's assets. Last week several Latvian politicians claimed that Latvijas Gaze's underground gas storage facility in Incukalns contained large amounts of unbooked gas, which was pumped into reservoirs during Soviet times.

If this statement is true, which is very unlikely, Latvijas Gaze's assets and, consequently, share price may be worth considerably more.

There were no other events on the Latvian market last week but for the deals with Latvijas Gaze shares. However, one could mention the 18,429 lats in trade with shares in the distillery Latvijas Balzams, in which the company is scheduled to have a shareholders' meeting next week. This meeting may bring about changes in both the company's management and business strategies. Latvijas Balzams shares were flat at 0.36 lats.

For Ventspils Nafta shares, this week was also uneventful. The oil terminal stock remained unchanged at 0.62 lats per share on a turnover of 6,123 lats. The suggestion by Latvian Privatization Agency General Director Janis Naglis about a possible sale of state holdings in Ventspils Nafta at the beginning of next year so far has failed to draw any response from the market. Firstly, Naglis' predictions are far from being accurate. Secondly, it is very unlikely that there will be as fierce a fight for Ventspils Nafta shares as there has been for shares in Latvijas Gaze.

Lithuania: Bourse continues in bearish mood

Bearish moods continued to dominate the Lithuanian stock exchange, with most of the stocks closing lower amid weak trading volumes, as small one-off deals prevailed on the market. Only Ukio Bankas bucked the trend by roaring ahead by nearly 40 percent. As a result, the bourse's benchmark price index Litin-10 rose 0.6 percent to 995.30. However, the blue chip official list index Litin was down 1.7 percent to 318.98, while the broad index Litin-G closed 1.2 percent lower at 810.62. Additionally, the euro price index as calculated for the six Lithuanian Baltic List shares was off 3.7 percent, closing at 110.03, an 11-month low. The bourse's equity turnover reached 2.76 million litas ($690,000). Due to large deals in treasury securities the bourse's total turnover reached 25.3 million litas.

"Lackluster moods still prevail on the Lithuanian bourse, and it is likely that similar trends will continue all through August. Foreign investors remain passive, therefore trade may not pick up until early autumn,"Martynas Kulvinskas, head of the brokerage unit at the agricultural bank Zemes Ukio Bankas , said. Listed on the current list, Ukio Bankas rocketed up by 39.3 percent to 4.18 litas. Since the start of the month, Ukio Bankas is up by almost 47 percent. The turnover in Ukio Bankas shares reached just 40,700 litas largely due to the lack of sellers - all the shares offered over the past three trading sessions were completely sold out. Brokers attributed an increased investor interest in Ukio Bankas shares to the "suspicious"sale of 10 percent of the bank's authorized capital via four block deals in mid July. Some 6 million litas' worth of shares changed hands then at a price ranging from 9 litas to 11 litas. The Lithuanian press earlier reported that Ukio Bankas shares had been acquired via block deals by a foreign bank. There is no concrete news, however, about either the seller or the buyer of the shares.

On the official list, blue chip Lietuvos Telekomas fell 1.4 percent to 1.40 litas in trade worth 212,400 litas. Last week the leader of Lithuania's ruling majority, Gediminas Jakavonis, strongly criticized Telekomas for starting to apply the fixed-line connection charge, which also applies to Internet service.

The cheese maker Rokiskio Suris slid 4.2 percent to 20.11 litas in trade worth 31,400 litas. The downfall could be attributed to profit-taking after the recent surge in share prices. Refrigerator producer Snaige sank 6.6 percent to a new historical low of 28 litas with 13,500 litas worth of shares traded. Obviously, the market still reacts on news that negotiations with potential strategic investors have been terminated. The TV-tube producer Ekranas skidded 3.6 percent to 5.78 litas amid a turnover of 8,100 litas, and the knitwear manufacturer Utenos Trikotazas closed flat at 2.80 litas on a turnover of 1,800 litas. The only official list gainer was the brewer Kalnapilis, which climbed 1.1 percent to 4.25 litas on a turnover of 30,000 litas.