ROUNDUP MOL buyback program sends shares soaring

ROUNDUP MOL buyback program sends shares soaring

	Published : Fri, 22 Jun 2007 14:10 By : Agencies Print this Story

BUDAPEST (Thomson Financial) - This morning, Hungarian oil and gas company MOL Nyrt announced a massive share buyback program amounting to 10 pct of stock by the end of the year, which has sent the shares rocketing on the Budapest Stock Exchange.

The company admitted that its acquisition plans are not going as fast as it would like while around 1 bln usd sits on its balance sheet doing nothing but attracting the attention of potential suitors.

At 10 pct of current market capitalization of 14 bln, the series of transactions, to be carried out by ING Bank, will amount to 1.4 bln usd.

'The company produces very strong cash flow ...I think this is about what they will do with this year's spare cash,' said Merrill Lynch's Hootan Yazhari.

'We have been saying that they will either use the money for an upstream acquisition or a share buyback, they have chosen the latter,' he added.

Continuing, 'in our view the shares are cheap and its not a bad investment ... but what is really positive is that they will scrap the shares next April which means a lot of accretion for shareholders.'

However, the move has also raised eyebrows over MOL acquisition plans with one local analyst noting, 'the tone of the release seems to suggest that they can't make an upstream acquisition.'

However Yazhari disagrees: 'I don't think that's the right decision to come to just yet ... they say they are looking at 50 [potential acquisitions] and they are looking very diligently and are not prepared to overpay just for the sake of a growth story,' he said.

The buyback program has also been highlighted as a defensive move in light of continued rumours of a buyout as well as large scale acquisitions by Russian interest recently, although analysts see this more of as a consequence rather than a cause of the move.

To facilitate the buyback program MOL had to lend around 8.8 mln of its existing treasury shares to the 'friendly hands' of OTP Bank Nyrt in order to get around rules which prevent the company owning more than 10 pct of its own stock. OTP now holds around 9 pct of MOL.

At 14.23 local time MOL's stock was up 6.1 pct at 25,615 forints compared to a rise of 2.31 pct in the BUX index. Turnover in the stock was 26 bln forints, most of the daily volume.

Merrill Lynch give MOL and target price of 28,000 forints.

edward.krudy@thomson.com

ek1/jlc

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