Yesterday during AGM CEZ shareholders approved dividend of
CZK 20 per share implying increase of 33.3% y/y and 41% pay-out ratio. Shareholders also approved a proposal to buy back up to 10% of CEZ share (i.e. 59.22m shares) in range of
CZK 300 to
CZK 2,000 per share for the next 18 months. AGM also approved three changes in SB as indicated before.
Our view:
CEZ currently hold 0.6% of treasure shares and can hold up to 10% which is a legal limit. When CEZ buys back its shares it can cancel them, swap them for other assets in CEE&SEE region or introduce convertible bonds. Should the shares are cancelled, this will have positive impact on our valution up to 5% of current fair value. For next year we expect the dividend pay-out ratio to be in the range of 40%-50% and it should stay in this range as long as CEZ will have acquisition opportunities that will add value to shareholders. At the moment we should be awaiting steps from government when the sale of 7% state stake in CEZ will be launched. We expect it in a month period. Note that governement needs money from the sale by the end of 3Q07 to finance infrastructure. As CEZ is limited to buy daily only up to 25% of past 30-day average daily volume, we can expect that some supply overhang will emerge.