The end price of the offering is set based on subscriptions of institutional investors and estimates published by analysts indicate a price of between RON11.2 and RON12. Small investors who subscribe in the first three days of the offering will get the shares at an 8% discount. They might in the end pay between RON10.3 and RON11.04 per share and obtain significant gains when the shares start trading (or allocation rights that will be used instead of shares until all formalities on registration of the capital increase are finalized).
“We believe the initial public offering for a 10% stake in Nuclearelectrica, which takes place between September 9 and September 20 on the Bucharest bourse, offers a good occasion for speculation to small investors, especially for underwriting conducted in the first three days, which get an 8% discount. Using a model that evaluates the dividends that the company could pay over the next few years, we have calculated a target price of RON12.17 for the next 12 months and we believe the interest of institutional investors will support the price of SNN (Nuclearelectrica) shares in the first trading sessions,” believe the analysts of brokerage Tradeville.
The trend of shares or of allocation rights in the first days of bourse trading is difficult to predict and depends on the final level of subscription mainly on the institutional investor segment. If on this segment the subscription level is more than 150% and the final price of the offering is higher than the minimum RON11.2 per share, there is a chance for the price to rise in the first days because some of the investors might not get as many shares as they wanted and thus buy more from the stock exchange and support the price, even if small investors, which get an 8% discount, are in a rush to sell.
A reference point could be the public offering through which the Romanian state sold on the bourse 15% in gas transporter Transgaz Medias (TGN.RO) in April, which had a similar value (EUR72 million) and a similar structure, with a 5% discount on the retail tranche. The final price of the offer was RON179 per share, above the minimum price of RON171 per share and retail investors got the shares for RON170. The shares started trading at a price of over RON190 per unit and in a few weeks’ time their price climbed to over RON200 per share, bringing them gains of 12-17% to retail investors buying in the offer.
But there are differences between Transgaz and Nuclearelectrica. Firstly Transgaz shares were already traded on the bourse and had a reference price. Secondly Transgaz is a more profitable company, which has paid significant dividends in the past few years. At the price of RON170, investors had insured a dividend yield of 12.5%.
In the case of Nuclearelectrica profits were weak in the past few years because the bulk of the company’s energy was sold on the regulated market (went into the household consumer basket) at prices 20-30% below those on the competitive market. Starting this year the share of energy sold on the regulated market by Nuclearelectrica will decline, which means amounts of energy sold on the competitive market, at a 20-30% higher price, will increase, which will have a positive impact on the company’s revenue and profit.
That is why Nuclearelectrica is a bet on the future evolution of the price of energy, unlike in the case of Transgaz, where things are better established and the company has a history of high profits behind it.
“The Nuclearelectrica offer is attractive in terms of its selling price. The estimated price target [after the listing] is on average between RON 12 and RON 13.92 per share after the peer group analysis and the Discounted Cash Flow analysis of future cash flows, i.e. by 7-24% above the minimum offer price. (…) But I expect the offer to close around the minimum price,” says Daniela Ropota, head of the analysis department of brokerage Intercapital Invest.
The Nuclearelectrica offer closes on September 20 and the shares will start trading after the capital increase is registered with the Trade Registry, which could take at least a month. Meanwhile the investors will be able to trade allocation rights on the bourse. The allocation rights will be used in place of shares until the shares start trading.
Analysts of brokerage firm Prime Transaction have a price target of RON14-15 per share for the next 12 months and are the most optimistic. Even if the shares don’t have a significant growth potential, Nuclearelectrica can be an interesting investment in the long term from the perspective of dividends.
(English version by Daniela Stoican)