IC Market Espresso 31 Jan 2019

 
Croatia Issues up to 6bn HRK of Local Debt on Friday in a 3Y/10Y Dual Tranche
In the first days of February the Croatian Ministry of Finance is not dormant – the first large government debt auctions are taking place in the following seven days. With 1.5bn EUR of FX treasury bill maturing next week, the government plans to issue 1bn EUR of brand new 455-day TB, as well as 6bn HRK of longer paper; this is effectively some 2.3bn HRK more than the debt becoming due and 54% of the planned deficit for 2019 (4.2bn HRK). And 2019 is just getting started…

Last week the Ministry of Finance of Croatia announced that it will issue up to 1.0bn EUR of new 455-day treasury bill in order to refinance the 1.5bn EUR of bills maturing next week; the auction will take place today, starting at 09:00 and ending at 11:00 (it’s possible to take part through AUPD function on Bloomberg). Speaking about return, it’s likely that it will end up barely in positive – this paper is mostly purchased by banks for liquidity purpose and any non-negative yield is considered a bargain.

The remaining 500m EUR would be refinanced through a dual tranche of 3Y EUR-indexed bond (RHMF-O-222E) and a tap of 10Y HRK paper (RHMF-O-297A), the cumulative amount not planned to exceed 6.0b HRK.

Speaking about the shorter paper (RHMF-O-222E), the yield is likely to end up between 0.55% and 0.65%, depending upon the investors demand which might turn up to be substantial as many local financial institutions might find this paper quite attractive. The current pricing is some 105/115bps above DBR 01/04/2022 (-0.50% YTM looking at the bid levels) – not bad for the paper that’s close to the belly of the curve, issued by the country that’s confidently approaching ERM II.

However, yield hunters such as pension funds and insurance companies would probably be focused on RHMF-O-297A; using the bids displayed yesterday by four market makers, the reoffer price should be a couple of pips below par (99.97 looks attainable), meaning that the investors might get an opportunity to go long on 10Y LCY bond @ 2.375% YTM (at par YTM is equal to the coupon). We should take this calculations with a grain of salt: with liquidity levels at all time highs (35b HRK, 9.2% GDP) and ample dry powder on long term investors’ balance sheet, it’s possible that the reoffer price might end up substantially above par. Looking at the secondary market in January, the paper was under intense buying pressure and has been trading between 100.00 and 100.78 in clean price; even the ones who bought it at 100.78 shouldn’t be disappointed too much – the government plans to issue up to 6bn HRK of bonds in total, which is just a tip of the iceberg of demand; expect modest allocations.

MedLife Acquires Hungarian Rozsakert Medical Center
MedLife will acquire 51% of the Rozsakert Medical Center Group of companies (RMC) in Hungary which is one of the top ten providers of private medical services in Hungary.

Following up on recent media speculations about MedLife’s acquisition in Hungary, the company released a statement today in which they announced their first international acquisition.

MedLife will acquire 51% of the Rozsakert Medical Center Group of companies (RMC) in Hungary which is one of the top ten providers of private medical services in Hungary. According to Mihai Marcu, MedLife Group’s CEO, the investments allocated for this stage amount to EUR 4-5m, and in the next period they will look at other expansion opportunities. This would mean that the deal is worth around 3% of MediLife’s T12 2018 sales revenues.

Note that in 2017, Hungarian RMC recorded a turnover of EUR 4.2m.

Sopharma Trading Publishes Preliminary Financial Results for 2018
In 2018, Sopharma’s revenues increased by 8%, while EBT increased by 25%.

Sopharma Trading posted a document stating their preliminary financial results for 2018.

According to it, the company reported an increase in revenue by 8% YoY, amounting to BGN 723.7m. Meanwhile, in 2018, EBT increased by 25% YoY, amounting to BGN 20.2m.

When observing solely December, Sopharma’s revenues increased by 3% amounting to BGN 68.2m, while their EBT increased by 88% amounting to BGN 2.8m.

Electrica Files for Annulment against ANRE’s Order
The appeal regards the annulment in full of ANRE President’s Order regarding the approval of the specific tariffs for electricity distribution service and of the price for reactive energy SDMN.

Electrica posted a document stating that they have filed at the Bucharest Court of Appeal an administrative litigation against ANRE. The appeal regards the annulment in full of ANRE President’s Order regarding the approval of the specific tariffs for electricity distribution service and of the price for reactive energy SDMN. It also concerns the Order regarding the approval of the specific tariffs for electricity distribution service and of the price for reactive energy for SDTN.

Furthermore, the appeal regards the approval of the specific tariffs for electricity distribution service and of the price for reactive energy for SDTS. At the same time, it was requested to order to ANRE to recognize the amounts that were not included in the 2019 tariffs and to include these amounts in the computation of the tariffs for the year following litigation’s final decision.

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