IC Market Espresso 24 Jun 2019

Share Prices in The Aftermath of Ordinance 114
On the 19th of December last year, the Romanian Government introduced a set of new tax regulations which targeted local banks and energy companies. As a result, shares of those companies suffered huge losses in value, with prices plummeting up to 20% in just one trading session. Today we observe how the prices recovered and how much were investors who decided to act rewarded for their risk.  
A Short Reminder

When looking at the chart showing the legislation impact on share prices during the first day, one can notice how unexpected the legislation was and how grim the initial predictions were. This is especially noticeable when looking at the banking sector where shares of Banca Transilvania plummeted 20%, while BRD Bank witnessed a decrease of 17%.

Impact of Ordinance 114 on Share Prices
Source: InterCapital Research, Bloomberg
What Happened After

However, as it turned out the proposed tax burdens were significantly lessened as investors and companies’ Management revolted, demanding a revision of the legislation. Afterwards, as the full effects of the legislation became clearer, it was obvious that the financial hit on the companies will not be as hard as initially expected and share prices started to recover. Thus, investors who took on a lot of risks last winter when they started buying, have significantly increased the value of their stock portfolios.

Change in Share Price Since The Introduction of Ordinance 114
Source: InterCapital Research, Bloomberg
As presented on the chart above, banks which suffered losses in value have successfully recovered from their initial drop and have actually posted strong returns, considering their high dividend proposals. However, banks were not the only ones who attracted investors interest. The main energy companies, such as Transgaz and Nuclearelectrica now also have high dividend potential. You can read more about the dividends proposed by all of the BET components here.

Dalekovod to Lay Off 52 Employees Due to Planned Downsizing
Dalekovod’s Management released a statement last week in which they announced that the company will be laying off 52 of their employees as part of the company’s restructuring plan.

The downsizing of employees represents a 12.5% decrease of total employment in the company. However, one should note that this was expected as the company already announced the downsizing of their administrative department. As a result, the company expects to record significant cost savings which will result in higher profitability. Still, note that the full effect of this decision will be visible in 2020, as one offs connected with severance packages will be visible in 2019. However, the exact amount was not disclosed in the announcement.

As a reminder, back in March, Dalekovod held an Investors Day @InterCapital where the company’s Management presented their outlook until 2020. To read more about it please click here.

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