In a news piece from Hungary, geothermal developer PannErgy is describes as “the only Hungarian company that made it to Erste Bank’s Top Picks, with HUF 1,228 target price (it is currenty traded at around HUF 777), an upside of over 60%.

While Erste’s economists still believe that the fundamental recovery of markets in CEE region is on a rather sound footing, equity markets have shown themselves to be much more fragile.

“Austria and Hungary are seen posting the strongest growth rates, albeit after experiencing the biggest drops for 2009. Spreads between risk-free rates and earnings yields have narrowed. Consequently, the consensus sees the region as more or less fairly valued, based on the FED model (3% implied undervaluation).”

On 22 January,PannErgy announced that its partner ONP increased the capital of PannErgy’s geothermal arm Polifin by HUF 1.08bn. Via this step, ONP Holdings (owned by Ottó Albrecht, a Hungarian billionaire) acquired a 7.43% stake in the company. According to the preliminary agreement, ONP can increase its stake to 15% in a number of steps in the future.

Earlier, PannErgy increased the capital of Polifin to HUF 1.7 bn (from HUF 25 m). Out of the HUF 1.675 bn capital rise, HUF 725 m was cash, while HUF 950 m was an asset transfer. Therefore, Polifin has a good cash position right now (HUF 1.805 bn). The estimated cost of one plant at Miskolc is HUF 2-2.3 bn, depending on the location of the wells. The company intends to use a loan for these developments – around 50% of the required CAPEX would be provided by banks.

“Therefore, the present amount of cash is practically enough to develop two plants at Miskolc with a capacity of more than 20 MW. The plant at Szentl?rinc is expected to launch trial operations in spring, while two “unit” plants are expected to come on-stream in autumn and next January-February in Miskolc. If these developments are successful, the share price could see a boost by the end of the year.”

For the full article with more details on the Central and Eastern European stock markets, see link below.

Source: Portfolio.hu