Romgaz goes ‘on-trading’ on BVB and London Stock Exchange simultaneously

After a long-expected initial public offering, the biggest one in Romania’s history and successfully carried out last month, Romgaz’s Medias shares are available for trading from today on. The previously announced date – November 12, 2013, was confirmed yesterday through a press release by the Bucharest Stock Exchange (BVB).  Thus, following the favorable notice given by the BVB Listing Committee and further approved by the Board of Governors, the shares issued by Romgaz will be traded on BVB on Equities Sector, Tier 1 Shares. As per the BVB’s informing, the shares are available under the SNG symbol, the total of 385.422.400 shares to be traded having a nominal value of RON1.

As the IPO through which the Romania’s Ministry of Economy sold 15% of its stake in Romgaz also included GDRs (Global Depository Receipts) listed on London Stock Exchange, the trading will start simultaneously both for shares and GDRs (Symbol: SNGR). Due to the two hours time difference between Bucharest and London, the official starting hour was set for 10:00 a.m. EET (08:00 a.m. GMT), the opening hour at London Stock Exchange. Romania’s Prime Minister, Victor Ponta will be there, marking this premiere, since no other Romanian enterprise’s shares have been traded on a foreign stock exchange up to this point.

Being part of the privatization process of the most valuable state-owned company, the IPO run between October 22 and 31 was enthusiastically received by investors. Consequently, there was no surprise that the offering was several times oversubscribed, the government raising RON1.7 billion, closely to the maximum targeted amount of RON1.85 billion. For instance, the demand was 17 times higher on the retailers segment and despite having assigned 15% of the total shares offered, it was later decided to supplement it in order for them to receive another 5%. Yet, by taking these five percentages from the institutional investors, there was only a limited impact over the small investors that eventually got less than 13% out of the total subscription orders they placed.

Eventually, the shares were sold at RON30 trough BVB, (nearly to the maximal price of RON32), USD9.25, respectively, through London Stock Exchange. However, the RON30 price applied exclusively to institutional investors, as the small investors benefitted from a 5% discount, followed by a 3% one. Most of the shares sold, some 64% were bought through BVB, while the remaining 36% were acquired as GDRs, each certificate being equivalent to a share.

The enthusiasm shown during the public offering is very likely to be maintained once the trading starts, a XTB’s Romania report anticipates. Especially because there are plenty of investors that eventually had access to much fewer shares than expected given the IPO’s oversubscription rate.

According to the brokerage company’s report, the price will be set by ‘the battle’ between the investors seeking to increase their stakes, most of them willing to expect between 3 and 6 months before starting trading and those buyers who took the IPO only as an opportunity to get easy profit in short time. Thereby, there might a variation of 15% between the minimum and the maximum price at the end of the day.

While there’s anticipated an upsurge in the price in the first day, the experts also estimate an increase on mid-term. Hence, as per the same report, the price might reach RON33.74 per share after six months, proving that the investors’ eagerness towards Romgaz’s shares is not vanishing after the IPO’s fever.

The XTB’s forecast which is based on a comparative analysis with several companies from Russia, Sweden, Poland or Norway indicates therefore an increase by 12.47% over the offering price and a growth of almost 18.4% compared with the discount price of RON28.5, the small investors benefitted from. Such growth will be uphold by the gas price liberalization that will determine a boost in profits even assuming there will be some overcharges applied. Additionally, by acquiring 1.9% of the listed shares, EBRD (European Bank for Reconstruction and Development) increases the confidence level among the global investors that bought 60% of the available shares.

‘Opportunities come from liberalizing the gas price that will ensure an increase of the profit even in case of selective overtaxing. Exploring projects could bring advantages in the event of some discoveries, but a cautious investor would not base his investment decision only on such scenario, considering the high-level of uncertainty.’Claudiu Cazacu, Chief Analyst at XTB Romania - the Romanian subsidiary of X-TradeBokers Dom Maklerski, a Polish brokerage company leading the market on its sector in Central and Eastern Europe – said.

Romgaz is Romania's largest natural gas producer and supplier, its main activity involving the exploration and production of natural gas, the supply of natural gas or the storage in underground depositories and electricity production. In 2012, Romgaz produced almost 6 billion cubic meters of natural gas, being one of the most profitable companies in Romania.