Fondul Proprietatea – Romania’s finest

*** EDIT 2/8/2014 – DF Markets now do not offer Romanian stocks – you do not want to open a position with them now. ***
Got a few in during 2012 and made a bit on them….

Going to add a little more to my investment in this.  It is down a tad (somewhat unfairly) as far as I can tell this is due to problems in the Ukraine.

I wanted to buy ever since I read this article in the FT on it.  It was trading at a 60% discount, liquid, listed assets, had activist investors (Elliott Associates 15% onboard – all in all my kind of thing.

Problem was interactive brokers didn’t offer Romanian stocks, neither of my spreadbet cos offered it, my other broker didn’t offer it – so all in all I was stumped.

I searched around for Romanian brokers but couldn’t find one who I trusted with my hard won cash.

Searched around a few months later and found dfmarkets who offer CFDs on romanian stocks, for a mere 1% commission (EACH WAY!).  (If you are going to do this make sure you don’t go for the leveraged option as you will pay 7% odd interest, not clever at the best of times)…

*** EDIT 2/8/2014 – DF Markets now do not offer Romanian stocks – you do not want to open a position with them now. ***

When communism in Romania ended  the enemies of the people who had been relieved of “their” property were given shares in FP which in turn was given formerly nationalised assets.  Even today Romanian nationals own c30% of the shares.

Fund consists of:

53% Listed 47% unlisted assets.

Mostly Energy / power related.  Good bit of Romanian National grid / electric distribution.  Unlisted at independent valuation.

Fund currently trading at discount of 35% to NAV.  Good number of activist hedge funds with stakes – so lots of opportunity for potential catalysts.

Franklin Templeton managing assets so little risk of them getting stolen…

Plans to sell / otherwise get rid of biggest single stake in Petrom.  Also to list in London by end 2014.  There were plans to get list in Poland in 2013 but these fell through.  Confident there are lots of catalysts here to get rid of the discount.

Underlying assets are reasonably valued:

Petrom (36% of portfolio) has a PE of 5 and very low debt.

Hidroelectrica (15% of portfolio) was troubled – went insolvent then came out, Balance sheet looked OK to me – apparently there were some dodgy contracts resulting in a liquidity crunch.

RomGaz – PE of about 8, lowly geared balance sheet.

Other assets are Electricity distribution networks – worth something to someone, low volatility businesses….

There is currency risk, however Romania is growing at 4-5%.  Current Account deficit of c 4% of GDP – not good… Govt Debt to GDP of c 38%. (BTW check out very handy site.

All in all this should not be trading at a discount of 35%.  Another way to look at it is the value of the 57% listed / cash (valued at market) means the remainder are valued at about 22p in the pound!

I will probably be adding more money on Monday, depending on whether Mr Putin decides to annex eastern Ukraine!


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