Fondul Proprietatea has published interim results covering the six months ended 30 June 2015, its first since listing in London in April. Over this period the total return on net assets was 1.9% but the discount widened from 26.1% to 32.9% and this meant the return to shareholders was -5.8%. Romania underperformed most markets in Central Europe over the month with the exception of Poland. The return on the BET-XT Index was 3.5% and so the fund underperformed over the period. Not only did the fund underperform but the discount widening also contravened Fondul’s objective to narrow the discount to an average of 15% (the target is 15% or lower on 2/3 of the trading days in the period).
The statement highlights a number of macro factors that they say weighed on performance – including the delay in the gas price liberalisation for households, the decrease in oil and electricity prices, the reduction of the regulated rate of return for the electricity distribution companies, and the negative impact on the global market sentiment due to the recent events in Ukraine and Greece.
Within the portfolio there is a big weighting towards oil & gas and power companies and generally this has not been helpful given the weak oil price. 60% of the fund is invested in just three stocks, OMV Petrom, Hidoelectrica (which is unquoted) and Romgaz. Hidroelectrica’s profits last year were up a third on those of 2013 and things seem to be going well so far in 2015 but OMV’s earnings have been hit hard.
Fondul Proprietatea concluded on 4 May 2015 a revolving committed credit facility of RON500m with Citibank Europe Plc, Dublin – Romania Branch. They intend to use this to fund share buy-backs but not to gear the portfolio. they say it is intended to be a bridging loan. On 23 June 2015, the Fund drew RON450m from the total credit facility, with one month maturity, with the intention to roll it over monthly, if needed.
FP. / Fondul underperforms on oil price and widening discount