The reasons might be the record profits and higher dividends, as well as shareholder concentration ahead of April elections. Some days SIF Transilvania was even more heavily traded than Fondul Proprietatea (FP.RO), as it was the case on Wednesday.
SIF Transilvania’s shares have constantly been among the most traded shares on the stock market along with Fondul Proprietatea, OMV Petrom (SNP.RO), and Erste (EBS.RO). Statistics show SIF Transilvania’s has been third largest traded volume on the stock market after Fondul Proprietatea and BRD (BRD.RO) since the beginning of the year, after having ranked sixth, behind SIF Oltenia (SIF5.RO) and SIF Moldova (SIF2.RO) in the same period of 2011.
SIF Oltenia and SIF Moldova had been the stars of the SIF group and investors’ darlings for years. Things changed in the past year, after SIF Transilvania posted record 2011 profit, following the sale of its stake in Romania’s largest bank, BCR, and is now about to match the record, after selling significant stakes in BRD and Erste since the beginning of the year.
SIF Transilvania paid the highest dividends of all the companies on the stock market compared against its stock price and might do it again next year. Investors seem to approve of this policy and have turned their attention to SIF Transilvania in the last few months.
“I believe SIF Transilvania is the most traded of the SIFs because it had the highest profits and paid the highest dividends,” says Octavian Dragolea, the manager of the Bucharest branch of brokerage firm IFB Finwest.
The 2011 profit of SIF Transilvania amounted to 207.7 million lei (EUR45 million) and 90% of it went to shareholders as dividends. The gross dividend of RON0.1712/share induced significant fluctuations of the share price. Right after the dividend date, the stock quote fell by 33%. It later starting rising again, and SIF Transilvania saw the highest increase in share price among SIFs since early August, 25%.
It posted RON196 million net income in the first nine months, while full-year profit might exceed RON200 million. Therefore, next year’s dividends might be as substantial as this year’s.
“SIF Transilvania’s management has had a different strategy towards shareholders for a number of years now. The more flexible strategy may be because of an intention to build a better relationship with shareholders and to prevent a revolution like SIF Muntenia’s (SIF4.RO),” Dragolea believes.
SIF Transilvania’s shareholders are due to elect a new board of directors for four years in April 2013. If during the same general meeting when they are supposed to do it they are offered hefty dividends, they might put their trust in the current management again. SIF Transilvania’s chairman, Mihai Fercala, has been running the company since its establishment twenty years ago.
The increase in the trading volume of SIF Transilvania over the past few months might also signal shareholder concentration in view of the April elections. Since early August, 14% in SIF Transilvania has changed hands, double the amount of SIF Oltenia and SIF Moldova and ten times the volume of SIF Banat-Crisana (SIF1.RO) and SIF Muntenia.
“There may very well be shareholder consolidation because the boards of directors are due to be elected next year. The managers of SIF4 are using every little thing they can to disregard the shareholders’ will,” said Adrian Manaila, owner of brokerage firm Eldainvest based in Galati (SE Romania). “There may be a struggle at the other SIFs, as well, because there are funds that own significant stakes and brokers working with those funds no longer want to pay for people who have no knowledge of the market, who do not know who their clients are, to sit in those boards of directors.”
The stakes are high here because the SIF boards of directors manage hundreds of millions of euros in assets and such positions are very-well paid, starting at EUR4,000 to EUR5,000 a month and going to as much as EUR20,000 for chairmen.
Developments on the stock market have announced changes in the boards of directors so far. For instance, businessman Dragos Bilteanu bought a lot of shares in SIF Banat-Crisana, which got him a position of vice-chairman in the board of directors. Businessman Gheorghe Iaciu bought 5% in SIF Muntenia from the stock market earlier this year and managed to have the old shareholder representative council replaced during the general meeting of shareholders in July.
Whereas SIF Moldova and SIF Oltenia saw some changes in recent years, caused by investors like Dinel Staicu and Catalin Chelu, and had several people take the position of chairman, SIF Transilvania has not seen much of a change so far, with Mihai Fercala ruling with an iron fist. His archrival is businessman Constantin Fratila of Constanta, who bought a lot of shares and might attempt to do the same as Iaciu at SIF Muntenia. To be able to do that he needs support from a number of powerful shareholders and has not managed to get it yet.
(English version by Loredana Fratila-Cristescu)