Petrom reaches record-high market capitalisation: $2.45 billion

The stock of Romania’s largest company, SNP (National Oil Company) Petrom soared past the 2,000 ROL/share level on the Bucharest Stock Exchange at the end of last week, up to a record-high of 2,100 ROL/share, which prompted a 20% growth for the company shares.

Last week not even the most optimistic market analysts had expected the company’s value to exceed 2.45 billion dollars, which is 70 million dollars more than early this year. Back in 2001, when the company was floated, its market capitalisation was only 566 million dollars.

The growth is reason for joy, especially for the Romanian State, which is the main shareholder in Petrom, with a 93% stake. Moreover, the state is expecting financial bids for the main stake in Petrom next week. The company’s transfer to private ownership, which had been originally scheduled for last year, has been deferred several times and, in the meantime, the Petrom stock price has climbed almost one billion dollars. According to brokers, Petrom shares are now more expensive than the stocks of the companies bidding for it.

The “Petrom boom” last week was generated, according to the Bucharest Stock Exchange brokers, by big Buy orders launched by several foreign investment funds, although the reports of the main brokerages operating on the Romanian market do not list the Petrom shares under the ‘buy’ recommendations.

Petrom investors are betting on a significant improvement in the company’s financial situation over the next four years, after the privatisation process is completed. “The purchase of Petrom shares is a bet, because every penny that is invested could bring both another penny but also a 50% loss in the next two years. The foreign investors on the Romanian market have been buying Petrom shares because it is the only big company on the market which can still bring big profits from soaring stock prices,” one of the brokers that handled Petrom purchases by foreign investors last week told Ziarul Financiar.

The company’s spending and revenue budget for this year is deemed as a “preservation budget”, as turnover is scheduled to amount to 80,404 billion ROL ($2.4 billion), with gross profit set to slightly exceed 3,200 billion ROL.

“Question marks should arise from the fact that the company’s market value has exceeded its turnover. Compared with the shares of Hungarian company MOL, Petrom stock is much more expensive, if the financial situation is considered,” said Grigore Chis, trading manager with SSIF Broker.

The state expects financial bids for Petrom from seven investors – MOL (Hungary), PKN Orlen (Poland), OMV (Austria), Hellenic Petroleum (Greece), Gazprom (Russia), Occidental (USA) and Swiss trading company Glencore.

The state is selling 33.34% in the company to a strategic investor, which will then participate in a capital increase in order to come to hold 51% in Petrom. The transaction is estimated at 1-1.3 billion dollars by international analysts.
vlad.nicolaescu@zf.ro ; adrian.mirsanu@zf.ro