Sofia blue-chip stock index suffers bruising in August ahead of rebalancing

Sofia blue-chip stock index suffers bruising in August ahead of rebalancing

The SOFIX index, which tracks the 15 blue chips listed on the Bulgarian Stock Exchange, posted its biggest monthly decrease this year in August, losing 2.28% to a closing value of 567.45 points.

© Цветелина Белутова

In August, investors mainly reflected on the freshly published first-half financial statements and set their sights on the results of the second change in the SOFIX index base for the year, which is expected to be announced in early September.

Stara Planina Hold's setback

The performance of the BSE benchmark index in August was heavily hit by industrial group Stara Planina Hold and its affiliate M+S Hydraulic.

Stara Planina Hold saw its share price drop 9.01% throughout the month, closing at 5.05 levs per share at the end of August.

On July 29, Stara Planina Hold announced that, according to preliminary results, its consolidated sales fell 3.3% year-on-year in the first half of 2019 and are 1.3% lower than the company forecast in its business plan. The group also said it expects a 3.8% annual drop in consolidated sales for the full year.

With a stake of 31%, Stara Planina Hold is the biggest shareholder in the other major decliner among the SOFIX members - hydraulic equipment manufacturer M+S Hydraulic.

M+S Hydraulic shares eased 5.41% to a closing price of 7.0 levs, as investors weighed up the company's financial results and its possible exclusion from the SOFIX, due to the low number of transactions involving the company's shares over the past six months.

On July 25, M+S Hydraulic reported a 26.9% plunge in its first-half net profit caused by a 9.5% decrease in operating revenue. M+S Hydraulic's revenue was mainly hit by lower exports, which fell to 50.3 million levs in the January-June period of 2019 from 55.2 million levs the year before.

Year-to-date SOFIX slump deepens

At the end of August, the SOFIX was 4.54% down on a year-to-date basis, as software group Sirma Group Holding and Stara Planina Hold led decliners among its members, falling 24.78% and 19.66%, respectively.

Although Sirma Group Holding's shares rebounded by 3.03% since the start of the third quarter of 2019, this was still not enough to offset the poor performance at the start of the year.

In December 2018, Sirma Group Holding announced that it would seek to raise nearly 40 million levs via a capital increase through a new share issue. The company was offering new shares for subscription at a price of 1 lev each, while its shares closed 2018 at 0.904 levs on the Bulgarian Stock Exchange.

Despite the extension of the subscription period by 25 days to February 15, the capital increase was still unsuccessful, which investors did not take lightly.

Doverie United Holding's YTD share price rise reaches triple digits

If there's one company among the BSE blue chips worth noting this year, it is Doverie United Holding. The diversified group posted a massive 101% rise in its share price by the end of August, detaching itself from the overall SOFIX trend.

Doverie United Holding wrapped up a major acquisition earlier in 2019 to complement its upbeat financial performance this year.

In March, Doverie United Holding's wholly-owned subsidiary Doverie-Invest completed the acquisition of a 63.8865% interest in one of the largest Moldovan lenders - Moldindconbank. Doverie-Invest acquired the stake in a public tender with a starting price of 76.6 million levs.

Subsequently, Doverie-Invest acquired a further 13.73% interest in Moldindconbank through a buyout bid.

Although Doverie United Holding still does not include Moldindconbank's results in its consolidated financial statement, the group posted a first-half net profit of 4.9 million levs excluding minority interest, compared to a net loss of 2.0 million levs in the same period of 2018. The company also reported a 23.9% annual rise in revenue in the first half of 2019.

BGREIT refuge

As the SOFIX keeps struggling to escape correction territory, investors increasingly turn their sights to the less volatile BGREIT index, which tracks the performance of seven real estate investment trusts listed in Sofia.

Ever since the start of 2018, the BGREIT has been heavily outperforming the SOFIX, beating all-time highs on no less than 13 occasions and posting a 4.39% year-to-date increase.

Out of the seven BGREIT members, two posted double-digit growth in share price from the start of the year until the end of August.

Roi Property Fund REIT's shares gained 12.50% over the first eight months of the year, while Super Borovetz Property Fund REIT's share price rose 10.47%.

Port Burgas, a new addition to the SOFIX index, has a good performance so far
Photographer: Nadezhda Chipeva

New listings lift turnover

The Bulgarian Stock Exchange saw a sharp month-on-month rise in turnover in August, largely due to trading in the shares of two newcomers. Total regulated market trading turnover more than tripled to 35.1 million levs in August from some 10.9 million levs in July.

In August, trading in two companies listed on the stock exchange during the month generated 1.5 times the July turnover. Both companies went public without carrying out an initial public offering.

On August 12, the stock exchange admitted to trading the shares of real estate developer Green Town Projects. The company has a registered capital of 4.059 million levs and ended August at 9.1 levs per share, which translates into a market capitalization of some 36.9 million levs.

Deals in Green Town Projects' shares formed a turnover of 7 million levs in August.

The other notable listing during the month was Port Flot-Burgas, which started trading on the BSE on August 23. The company closed August at 4.04 levs per share or a market capitalization of 40.4 million levs.

Despite trading for only six sessions in August, Port Flot-Burgas' shares accounted for a turnover of over 9.3 million levs.

While the buyers of Green Town Projects shares are still undisclosed, Port Flot-Burgas' listing has evidently attracted interest from large institutional investors.

Port Flot-Burgas announced that Bulgaria's Badeshte Universal Pension Fund had acquired a 6.98% stake in the company in August, without giving further details. On August 26, a 6.98% stake in Port Flot-Burgas changed hands in a single deal worth some 2.79 million levs, bourse data showed.

Subsequently, Port Flot-Burgas said that Pension Insurance Company Toplina had acquired a stake of 8.25% in the company through two of the funds it manages. Universal Pension Fund Toplina acquired 6.97% interest in Port Flot-Burgas, while Professional Pension Fund Toplina bought 1.28%.

On August 29, an 8.25% stake in Port Flot-Burgas traded in two deals on the Bulgarian Stock Exchange, bourse data showed. The first deal, for 6.97% interest in the company, was worth 2.8 million levs, while the 1.28% stake changed hands for 516,300 levs.

Biodit IPO's woes

Security solutions developer Biodit has been in the pool of companies interested in going public for the past few years.

Biodit drafted an initial public offering prospectus earlier this year and submitted it for approval by the Financial Supervision Commission (FSC). The company received in April a 50,000 levs voucher from the country's SME promotion agency to cover expenses related to the planned IPO on the BSE.

Biodit's prospectus envisaged the offering for the subscription of 2.2 million new shares of 1 lev in par value each in the price range of 1.0-1.1 levs. The success threshold of the IPO was set at 1 million subscribed shares.

Everything was going according to plan for Biodit until the financial regulator decided in August to reject the IPO prospectus, saying the company has wrongly classified its major asset as know-how, thus releasing it from annual amortization. According to the regulator, this makes Biodit's financial statements misleading and contradictory, harming the interests of potential investors.

Author: Capital
Author: Capital
Author: Capital

In August, investors mainly reflected on the freshly published first-half financial statements and set their sights on the results of the second change in the SOFIX index base for the year, which is expected to be announced in early September.

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