However, the company’s market capitalization on the Bucharest Stock Exchange is almost half of that, EUR5.8 billion.
Analysts say the main reason why Petrom is trading at a lower profit multiple is that its free float is too small, so private equity firms with lots of cash to spend avoid it.
Petrom shares are trading at lower profit multiples than other companies in the sector largely because the company is illiquid and not listed on an international market via GDRs, for which reasons major investment funds ignore it, says Tamas Pletser, equity analyst oil&gas with Erste Group. “We valued the company at EUR6.35 billion corresponding to a target price of RON0.5027.”
Swiss Capital analysts recommend ‘buy’ for Petrom and a target price of RON0.628/share, which values the oil company at RON35.6 billion.
OMV, the owner of Petrom, which got 93% of its 2013 profit from the Romanian company, is trading at a profit multiple of 9.4, 75% higher than Petrom’s.
Exxon is trading at more than double Petrom’s profit multiple, 12.7, while Royal Dutch Shell and British Petroleum are valued at 10.5 and, respectively, 10 times their net profits.
Analysts say that despite the record profit Petrom posted last year, the results did not produce any significant surprises because they were close to the analyst estimate average.
Prior to the announcement of the results, analysts expected to see a RON4.7 billion net profit for 2013 and the company eventually reported RON4.82 billion.
Petrom shares dropped 1.5% after the announcement of the results on Wednesday and closed at RON0.457. (EUR1=RON4.4916)
(English version by Loredana Fratila-Cristescu)