The Hungarian privatisation agency, APV, sold 33m (2 050 HUF, -4,43%) Bank shares through a stock exchange transaction to international and Hungarian institutional investors, at the price of HUF 2,025 per share.
Our view: The sale came as a surprise, despite rumoured strong interest of at least four possible buyers, including (6 EUR, 0,34%), (47 USD, 1,76%), (98 EUR, -0,49%) and (155 EUR, 0,58%). Government previously stated that it would prefer to sell to a strategic investor whose ownership would ensure that the bank maintains its credit ratings. The price is roughly in line with earlier statements of government representatives and chairman, Ferenc Karvalits, that the privatisation of the bank could be considered successful if it valued the company between HUF 120bn and HUF 140bn. This would imply valuation of the bank within the range of HUF 1,818 and HUF 2,121 per share.
We believe that the is fundamentally overvalued, the strong interest in CEE assets, and the possibility that a strategic buyer might have been willing to pay a premium were supporting the stock price recently. At the same time the earnings outlook has faded into the background, with negative earnings momentum, given the rollover of mortgage book and re-pricing to weight on earnings growth. The offer price of HUF 2,025 per share values the bank at a 2007F P/E of 24.0x, compared to our fair value of HUF 995.4 per share, which implies a 2007F P/E of 11.8x. We expect the news to have a negative impact on the stock price today.