J&T Banka Czech Morning Note: 08/06/16; Erste, CEZ, Unipetrol

Index PX: 895 points (up 0.3% d/d); volume: CZK 1,016m (USD 43m)

Market comment

CEZ (no change, CZK 460) had its last cum-dividend (gross CZK 40 a share) trading day yesterday. It grew in the morning but on above average volume the price returned to the opening bell levels. Under pressure was CME (-0.9% or CZK 59.3) where sellers from warrants conversion were probably present on the market. Also O2 CR (-0.5% or CZK 228) remained under pressure after the speculation about possible stake divestiture from PPF to sustain its position in MSCI indexes. On the other hand financials almost returned what they have lost in previous session. That was in line with general European development. Namely Erste Group (+1.6% or CZK 639.4) and Komercni banka (+0.3% or CZK 975) were among those who were mostly bought by investors.

Erste Group: Neutral/negative. LT: Hold. Target price: EUR 25

Bloomberg reports that Uniqa the fourth largest shareholder in Erste Group (with 4.1 % share or 17.4m shares) sold its entire stake to institutional investors in accelerated book-building after yesterday’s close. The price was EUR 22.5 (CZK 607.7) a share i.e. a 5.1% discount to yesterday´s closing price of EUR 23.7 (CZK 639.4). Such a discount in such transactions is logical in our view. We would rate it as an opportunity if the stock price reacts to announced deal price.

CEZ: Neutral. LT: Pending. Target price: Pending

Today, 8 June 2016, CEZ’s shares go ex-dividend. At the general meeting on Friday, shareholders approved a 40 CZK/share dividend, which implies a gross dividend yield of 8.7%. The payment starts on 1 August.

Unipetrol: Neutral. LT: Not rated. Target price: Not rated 

According to press release, Unipetrol received confirmation letter from reinsurers that Unipetrol is entitled to an indemnity for the loss on its petrochemical steam cracker unit in Litvínov from August 2015. The indemnity should not be lower than USD 164m (CZK c3,9bn or CZK 21.5 per share) consisting of already received advanced payment in the amount of USD 90m as well as USD 74m. The advanced payments will be visible in 2Q16 results (21 July 2016).

Please note that Unipetrol should receive CZK 2.4bn as loss profit for 2015. More, we estimate another CZK 5.5-6.0bn as loss profit for 1H16. Plus CZK 4.1bn for reconstruction of the steam cracker unit. Payments form insures will continue. The final settlement will be after the unit reaches full output (Sep/Oct).

Separately, Unipetrol’s CEO Marek Switajewski said that refinery margin is declining while petchem margins are at record levels. CEO also stated that new polyethylene unit PE3 should be started at mid-2018 and should boost earnings. Last year damaged steam cracker is scheduled to be put back into operation at the end of June. We see no news at released information.