Transelectrica paradox: Analysts say shares are attractive despite falling profits

Market analysts say the shares of electricity transmission company Transelectrica (TEL) have a potential to increase due to the low multiples at which the company’s shares are traded, compared with those of other companies operating in the same sector, as well as to the big investments that the company has committed to, with a positive impact on the company’s operating profit.
Investors seem to agree, considering that shares have increased 50% since the beginning of the year, above the 28% rise of the BET index (of the 10 most liquid shares on the stock exchange).
“Even with this low profitability recorded in 2009, Transelectrica is traded at significant discounts compared with other companies in neighbouring countries (…),” says Mihai Caruntu, head of the capital market research department within BCR.
However, the results of the last few years reported by Transelectrica disappointed investors, with the company’s profit falling from year to year, from 277.2 million RON (78 million euros) in 2006 to 6.1 million RON (1.4 million euros) last year, which also led to a significant cut in dividends disbursed to shareholders.