Patria raised its short- and long-term recommendation on Unipetrol stock from hold to accumulate on Friday. The current Unipetrol tender is likely to be canceled soon, and we expect a new privatization tender will commence soon afterward. Since we don’t expect major international oil companies to participate on the privatization, we believe that regional players will be the most welcomed by the market. We believe that the new Cabinet will better address the transparency issues and privatization criteria that hindered the current tender process. Therefore, the prospect of a future credible strategic owner mounts.
We have noted throughout this year that the operational performance of the main subsidiaries has worsened, and that their value has therefore decreased, ceteris paribus. Nevertheless, the significant decrease of interest rates in the Czech Republic in the past 12 months more than offsets this. Our increased value estimate and target price of CZK 93 can be almost exclusively attributed to lower interest rates. There is one issue though that precludes us from recommending a straight buy: the stock’s low liquidity. We therefore make short- and long-term accumulate recommendations.
Minister of Industry J.Rusnok said on Saturday that new tender could start before the end of 2002, current one should be canceled on the Cabinet`s next meeting. Importantly, Mr. Rusnok informed he prefers fast privatization without splitting the holding, and without some of the conditions applied in the first tender (e.g., post-privatization sell of some of the acquired assets). These comments are positive and confirm our theses described in the new report, the stock could rise, low volumes remain an issue though.
Jiri Soustruznik