Czech Equity Daily: 12/05/10; CEZ, TEF O2, Unipetrol, Orco, ECM, AAA Auto, Macro

Index PX: 1,207 points (down 2.1% d/d); volume: CZK 1,526m (USD 77m)

Market comment

Yesterday was calm. All significant happened in the morning, when fears of a possible decline after Monday’s surge led to a decline of the most of blue chips. Trading volumes were below average. Overall it was traded CZK 1.5bn. The biggest decline showed CETV, Erste Bank and NWR (down almost 4%). 1Q results of CEZ were passed without a reaction.

CEZ: Neutral (Analyst: Petr Novak)

According to local daily Dnes (which quote source from CEZ), there is a probability that in case of win of Social Democrats CEZ could pay extraordinary dividend of CZK 20-30 (2.2-3.3% div. yield). Such a proposal is not any news for the market as a possibility of extraordinary dividend in case of Social Democrats win was already mentioned. Such a dividend would have to be approved at extraordinary general meeting which would take place probably in September or October according to the news. Yesterday CEZ´s management come with the proposal of gross dividend of CZK 53/share (5.8% div. yield). This dividend record date is the day of AGM (June 29).

TEF O2: Neutral (Analyst: Milan Vanicek)

Telefonica O2 CR will post its consolidated 1Q 2010 figures today after market close. The results will be negatively affected by the regulatory ruling (MTR cuts), lower consumer consumption and absence of one-off items as real estate divesture. In all we expect total consolidated sales to decline by 8.2% (-10.5 in mobile and -8.8% in fixed revs.). OIBDA is projected to decline 13.8% what should lead to a 17% decline in net income.

As the market consensus is in line with our estimates we would assume only small or no market reaction to the figures if those are accurate i.e. already priced in. Although, we would rate such numbers as somehow weak the title will be supported by the gross dividend of CZK 40 traded till 3 September (standard T+3 settlement) giving a 9.8% gross dividend yield. 

mn CZK, cons. IFRS

e1Q10 AFT

y/y

1Q09

eMarket

Revenues

13,888

-8.2%

15,131

13,949

OIBDA (EBITDA)

5,702

-13.8%

6,616

5,760

OIBDA margin

41.1%

-2.7%

43.7%

-

EBIT

2,802

-20.0%

3,503

2,859

NI

2,195

-17.0%

2,646

2,198

EPS (CZK, ann.)

27.3

-17.0%

32.9

Source: Telefonica O2 CR and ATLANTIK FT

Unipetrol: Neutral (Analyst: Petr Novak)

Unipetrol is to post its 1Q2010 results this Thursday (May 13) morning before market opens. We expect Unipetrol´s 1Q2010 performance to be significantly better in y/y and also q/q performance. The main impetus for the growth will come from the better performance of refinery segment. Also retail segment (Benzina) will perform y/y strongly. We expect petchem to have slightly worse performance. The main negative factor for 1Q2010 results will be fall in sold volume.  As a result of above average factors (rise in prices thanks to the y/y growth in crude oil prices) we project Unipetrol´s consolidated sales to grow to CZK 17.5 bn (+20.5% y/y). We expect Unipetrol consolidated EBITDA in 1Q2010 to reach CZK 1.3 bn CZK (+82.9% y/y) and EBITDA margin to reach 7.4% (+2.5pps). EBIT could be CZK 438 m according to our projection. The rise on the operating level will be behind the positive development also on the bottom level. We expect Uniperol´s net income in 1Q2010 to amount to CZK 257 m.

cons., mn CZK

1Q10e

y/y

1Q09

Market

Sales

17,482

20.5%

14,513

19,097

EBITDA

1,298

82.9%

710

1,215

   margin

7.4%

2.5pps

4.9%

6.4%

EBIT

438

-

-127

362

   margin

2.5%

3.4pps

-0.9%

1.9%

NI (after minorities)

257

-

-185

254

EPS (CZK, annualized)

5.7

-

-4.1

5.6

Source: ATLANTIK FT, Unipetrol.

Orco: Neutral (Analyst: Patrick Vyroubal)

Today Paris Commercial Court should decide on a draft of safeguard plan submitted by Orco (restructuralization of the company). The main point is an extension of the average maturity of bonds from 3 to 8 years (improving cash flow). The approval of the plan would significantly increase the chance of the company’s survival and enable to exit the court protection from creditors. If the plan is rejected, then the liquidation of the company would be likely. It cannot be also ruled out that the company will be given additional time to revise the plan.

ECM: Neutral (Analyst: Patrick Vyroubal)

ECM announced that on 27 May it will be held a general meeting of bondholders where it will be a voting on early repayment of bonds in the amount of 125% of nominal value. The reason is already known fact that the company have exceeded the maximum indebtedness (81% vs. max. 65%) given by covenants in EUR bonds (EUR 76m; 32% of total debt). If the company fails to find a solution, then in the extreme case it could lead to bankruptcy. ECM already said it wants to sell selected properties. A possible solution could be debt/equity swap or capital increase (however, both would cause dilution effect).

AAA Auto: Neutral (Analyst: Patrick Vyroubal)

A.J. Denny, CEO of AAA Auto, said in the interview for daily E15 that a used car market is still in difficult conditions and this year any significant improvements should not happen. In the nearest months no acquisitions are planned, the priority is to be in profit. Return to Hungary will be possible only if economic conditions improve (after 2012). The possibility of entering the Russian market, which offers a high potential, is continually monitored by the company.

GDP -  Q1/10p (Analyst: Petr Sklenar)

eAFT: +1.2%  y/y; eMarket: 1.2%; Previous (4Q/09): -3.1%