According to local press, the government is to set today the price for the 15% stake to be sold in Transgaz. The stake will be divided: 85% for institutional investors, 7% for small retail investors and 8% for large retail investors. The small investors will have a 3-5% discount to the large stake price. Considering the last closing price of RON 213.5 per share, the stake is worth RON 377m. Transgaz is suspended from trading today.
Transgaz trades at a 2013F EV/EBITDA of 4.23x, a significant discount to the western peers average of 9.4x. However, a discount is justified by regulatory risk present in both Transgaz and Transelectrica, with the regulator being late in adjusting tariffs or not recognizing all the costs. Transgaz will pay this year a dividend of RON 21.3 per share, representing a 10% dividend yield. Transgaz still benefits from making an additional profit from the transit activity which is so far unregulated activity. We view the news as neutral.