The stock price of OTP Bank soared by 7.8% to HUF 7,030 yesterday, with volumes 3x the daily average, on further buying by Általános Értékforgalmi Bank Zrt. (AEB), controlled by tycoon Mikhail Rahimkulov. It was also officially reported that AEB had acquired a 1.9% stake (5.3m shares) in OTP Bank between June 23 and August 11.
Our view: Mr. Rahimkulov is a well known figure in Hungararian financial markets and, though his intentions are not known, his purchases of OTP Bank have generated considerable market excitement. The local market may be wondering what Mr. Rahimkulov knows that they do not. We see further buying by Rahimkulov as a positive catalyst for the stock price in the short-term.
We reiterate our Buy rating on OTP Bank, which is still the cheapeast among the major banks in CEE. In our view, concerns on Hungary's macroeconomic outlook and that a purchase of CEC could trigger a new share issue are more than priced in. The stock is trading at a 2007F P/E of 9.5x, which is well below the CEE regional average of 15.0x and the FTSE Eurofirst 300 banks index at 11.2x.