Romanian investment fund Fondul Proprietatea makes record profit in first six months

Romanian Fondul Proprietatea (BVB ticker: FP), the largest closed end investment fund in the Central and Eastern European region, posted a record net profit of EUR 240 million in the first six months of this year, two times higher than in the same period last year, according to the fund’s monthly report to the Bucharest Stock Exchange (BVB). Half of the profit was recorded in June, when Fondul Proprietatea sold a 5 percent stake in gas producer Romgaz for EUR 147 million, in a private placement on the Bucharest Stock Exchange. A significant part of the record profit posted by the fund in the first half of the year also comes from the dividends the fund received from companies in its portfolio, such as OMV Petrom, Romgaz, Nuclearelectrica, Transelectrica and Transgaz. As a result, Fondul Proprietatea significantly increased its net cash, from EUR 88 million at the beginning of this year to EUR 234 million at the end of June. The fund placed some EUR 200 million of its liquidities into state bonds, as bank deposits pay very low interest rates. Fondul Proprietatea’s manager, American group Franklin Templeton, has not carried on any new investment on behalf of the fund. Instead, its main strategy is focused on reducing the discount between the trading price for FP on the Bucharest Stock Exchange and the fund’s net asset value (NAV) per share. At the end of June, Fondul Proprietatea’s NAV per share was RON 1.2518 (EUR 0.2854) and its shares were trading at RON 0.853 (EUR 0.1944), which implies a 32 percent discount. The fund has been using most of its cash to buy back its own shares from the market, in order to support the share price. It is almost close to finishing its fourth buyback program, but in order to start a new one it needs to cancel the own shares it currently holds. The fund’s shares returned almost 8 percent to investors since the beginning of the year. This return includes the “special dividend” of RON 0.05 per share that the fund paid to its shareholders following a share capital decrease. The fund’s assets are currently of EUR 3.39 billion and its market capitalization is of EUR 2.59 billion. Andrei Chirileasa, andrei@romania-insider.com