Czech Equity Daily: 03/12/08; Erste, CME, NWR, Banks

...Bank’s EGM passed (by 99.9% majority) a proposal for increasing share capital (through participation certificates bearing 8% yield p.a.) by 2.7 bn EUR (+40%). This has no dilution effect (participation certificates will be paid back in 5 years). It will support Erste’s Tier 1. The significant increase in capital should help increase the confidence of investors and business partners.   CME: Neutral (Analyst: Patrick Vyroubal) Michael Garin, CEO of CME, gave interviews for both Bloomberg and Reuters. He reiterated that next year CME expects EBITDA growth under almost any scenario. The revenues will slow down in 6 of 7 countries (Ukraine with 10-15% of CME’s revenues is uncertain), however operating margin should remain stable (at 37%) due to cutting of programming and corporate overhead costs (also capex will be significantly cut). CME should be able to increase ad prices because of regionally favourable conditions. He expects CEE will outpace Western Europe for at least one more decade in terms of ad market growth since mainly staples are advertised there, compared to discretionary goods in Western Europe. CME sees no acquisitions in the immediate future (raising capital is expensive). The company will not pay a dividend or buy back shares in the next few of years (focused on growth). Earlier, CME said that it is able to decrease operating costs by 10-20% without effect on ratings (but only for one season). According to expectation, TV Nova (CME) obtained a compensation licence for digital broadcasting of Nova Cinema (so far only through cable or satellite), which will increase audience reach.   NWR: Neutral (Analyst: Petr Novak) New World Resources announced yesterday that its subsidiary OKD sold its mining equipment and engineering services unit, OKD, Bastro a.s. (Bastro) to Bucyrus DBT Europe. The sale is part of the restructuring of OKD with the aim to focus on coal mining. Bastro’s revenues in 2007 amounted to 800 mn CZK (32 mn EUR), NWR’s total revenues were 1,370 mn EUR. We rate the news neutral as the aim to sell the unit was announced already in mid-2008. In addition, the selling price and other details of the transactions were not disclosed.   Banks (Analyst: Milan Lavicka) Finance ministers of EU countries yesterday approved an increase in the deposit insurance limit. Since 30 June 2009 all EU countries are to guarantee deposits of up to 50 ths EUR (now 20 ths EUR) and since 31 December 2011 the limit is to increase to 100 ths EUR. Also the deadlines for paying out of deposits are to change: the states are to start paying out within 20 days from a bankruptcy of a financial institution (now within 6 months). The proposal has yet to be approved by the European Parliament. In the Czech Republic, the limit should be increased to 50 ths EUR by the end of this year. An amendment has already been approved by Parliament and has to be signed by the President.