Contents

Chapter I - Introduction ............................................................................................................................... 2

Chapter II - Fundamental analysis .............................................................................................................. 3
II.1. Analysis of the Macro-Economic Context ........................................................................................ 3
II.2. Analysis of the Sectorial Perspectives............................................................................................... 7
II.3. Analysis of Economic and Financial Performances ........................................................................ 11
Chapter III - Technical Analysis............................................................................................................... 23
III.1. Technical Analysis based on Line Chart........................................................................................ 23
III.2. Technical Analysis based on Candle Chart.................................................................................... 29
Chapter IV - Conclusions .......................................................................................................................... 31
Chapter V References ............................................................................................................................. 33

Chapter I - Introduction
For our case study, we decided to choose three challenging sectors following the principle of
diversification in our portfolio. We have identified and argued our choice of companies listed on
Bucharest stock exchange market that have different sectorial activities. These companies are:

S.C. BIOFARM S.A. [BIO]- Pharmaceutics sector

S.C. FONDUL PROPRIETATEA S.A. [FP]- Financial sector

S.C. OMV PETROM S.A. [SNP]- Energetic sector

S.C. BANCA TRANSILVANIA S.A. [TLV]- Financial sector

To start with S.C. Omv Petrom S.A. is one of the biggest companies and the highest rated firm in
the Bucharest Stock Market in Romania with activities in the domains of exploration and
production, refinement and natural gases. The opportunities and challenges of the energetic
sector are numerous and problematic to say at least and the ability of the firm to sustain itself
over long periods of time are questionable. We decided that itll be a challenge to analyze the top
firm in the stock exchange and a sector that is constantly suffering from state intervention.
We have chosen S.C. Biofarm S.A. firstly because its a Tier-1 Category firm listed on the stock
market (alongside Zentiva S.A. and Antibiotice S.A.) and also because of the policies they were
showing throughout the years and their ability to withstand pressure from the environment and
the state. The instability of the pharmaceutical sector and the sector nonetheless is interesting and
we decided we should proper analyze it.
In what concerns S.C. Fondul Proprietatea S.A. and S.C. Banca Transilvania S.A. the entities are
both activating in the financial sector. It is interesting to see how they managed to regroup and
continue to prosper in the years after the economic crisis hit Romania and comparing two
companies from the same sector, but with different policies would show us an image of how they
worked out. Investigating the development to the financial sector, their main challenges (like
credit risk) and future tendencies should show us an ample image of how these institutions
operate. In the following chapters we made an elaborate analysis of our choices and their sectors
respectively taking each company separately and correlating it with the sector it operates in.

Chapter II - Fundamental analysis

The fundamental analysis represents a method of evaluating a security that entails attempting to
measure its intrinsic value by examining related economic, financial and other qualitative and
quantitative factors. Fundamental analysts attempt to study everything that can affect the
security's value, including macro-economic factors and company-specific factors.

II.1. Analysis of the Macro-Economic Context

In the following fundamental analysis we have identified various macro-economic factors from
overall economy and different industries in order to create a perspective of the general context in
which the companies selected operate.
1. According to the National Bank of Romania release, the adjustment of the monetary policy
seeks to maintain price stability in a sustainable way. This factor will contribute to a temporary
lower inflation rate and to a healthy long-term recovery, in what regards the private sector

A lower rate leads to an increase in loan from investors and companies, thus an expansion of
investment. Also, because people have more money, consumption increases corporate profits and
their stock shares. Since the new policy encourages investments on the capital market, we expect
an increase on the BVB stock exchange market.

2. Long-term globalization is another macro-economic factor which influences the BVB. The
capital market in Romania is directly influenced by the international context, which can have
either a positive or a negative impact on BVB.

The chart above is based on index comparison and we interpreted as follows:

Between BET/CAC40; BET/DAX; BET/FTSE 100 - we can observe a similar tendency

in the high volatility of the stocks, variation given due to the globalization effect on the
developed markets, such as France, Germany and England. On our domestic capital
market it can be observed, on a long term comparison, that it was directly influenced,
thus had the same reactions as the international speculation stocks (small, long term
increase gain).

Between BET/Dow Jones - we can clearly notice the impact of the macro context, when
the stock market dropped after Israeli military planes struck Syria and eventually the
government shutdown, resulting in a drop on the American market. However, unlike the
previous comparisons, BET maintained its constant behavior given the fact that the
American stocks decrease was entirely influenced by the country risk factor.

3. The demand and supply on the labor market can represent another influential factor. The
daily movements of the stock market have in the basic principle the demand and supply,
including the labor market. Stock markets react positively or negatively based on the
unemployment indicator. The number of employees of an economy will go towards 4.5 million
in 2013. The state will suffer losses of approximately 200 million euro per month, which would
have been generated by half of million employees.

The National Institute of Statistics show that the number of unemployed people showed a
decrease in tendency from year to year and the rate of unemployment will be around 6.6%. If the
unemployment rate will stay high that means that companies are cutting jobs and wont have a
positive outlook on the economy, thats likely to have a negative impact on the stock market. But
if the unemployment is low, it signals a strong economy and a more optimistic outlook. BVB is
likely to react positively, but it may view the low unemployment as likely to cause inflation and
that will be negative.

4. According to the study made by ANIA and IDC Romania, the Romanian software market
increase seems to gather the attention of foreign investors due to its human resources profile and
sector gain opportunities. Currently, this industry employees about 60,000 people, of which 80%
are IT specialists.

Hereby since Romania excels at software programming, many foreign investors have located
here their R&D operational departments. This industry generates stable foreign investments in
Romanian companies, as shown by the last years gains, which will show a positive impact on
BVB.
5. An online newspaper has published recently an article related to the controversial issue of fuel
price. If the price of fuel will increase as stipulated, the profits of the said oil based companies
will decrease and their shares will not be as transacted as before. The new law implying that the
companies will absorb half of the costs to maintain consume will also drastically impact their
profits and the stock market.

II.2. Analysis of the Sectorial Perspectives

A - Pharmaceutics sector
In what concerns the pharmaceutics sector there are mainly three big companies listed on the
stock market having the biggest part of the market share.

Antibiotice S.A. is a producer of generic medicine, having a portfolio of over 150

medicines ranging from therapeutically dedicated medicine to anti-inflammatory;

Biofarm S.A. was founded in 1921 is one of the leading companies in the pharmaceutical
sector, in producing and researching of medicine. It also has 7 more companies abroad;

Zentiva S.A. is an international society dedicated to development, producing and

commercializing modern brands of pharmaceutical products.

Development and challenges of the sector

The statistics revolving around the evolution of the pharmaceutical sector given by the APMGR
are only theoretical and in reality they should be seen in the larger context of the sector.

The studies showing the evolution of the pharmaceutical sector should take into
consideration the Claw-back tax, paid by the producers that consist of 14 percent of the
turnover in the first half of the year and it should exclude the exports, estimated at 15-20
percent.

The delays of over 300 days for collecting the bills of the medicine with prescription
determine coating costs for the risk of not collecting the said bills and this limits the
profitability of the producing companies

In the last six months (January-June 2013) the total value of the pharmaceutical market
was of 5,9 billion lei, growing with 3,5percent compared to the same date in the previous
year

These products offered by the pharmaceutical sector have an inelastic elasticity with
price, in the sense that when the economy goes up or down, the demand is more or less
the same. Given that the economic growth in 2013 will go up to almost 2 percent, it can
only advantage the sector.
7

Tendencies
The pharmaceutical Romanian companies tend to lean towards export, this way relieving
pressure from the national market that has been affected by the increased pressure from the
Claw-back tax and the weak discipline of the market. The slow rhythm of sales in our country
and the Claw-back tax determined a decrease of the share value for Antibiotice from 0.466
RON to 0.355 RON and for Biofarm from 0.237 RON to 0.218 RON for each share.
B Energetic sector
In the oil sector, more explicitly, the extraction of petrol and natural gazes, the sector is
dominated by Omv Petrom S.A. which is the biggest oil company rated at the Romanian stock
market. The company has activities in the domains of exploration and production, refinement,
natural gazes and energy. Other big energetic companies listed on the stock market that we have
identified are Rafo S.A. and Rompetrol Rafinare S.A.
Development and challenges of the sector
The energetic industry in Romania suffered a dramatic decrease in energetic resources in the last
years and the key to undoing this problem is the necessity to increase the security in the domain
from the national production and to limit the dependency for resources from import. Attention
should be given to the renewable resources and to an efficient capitalization of the European
funds. Projects for promoting the use of renewable resources should also be taken into
consideration. The need for independence and safety in the energy industry has led to the
development of the system of production by cogeneration, in order to reduce the consumption.
Opportunities in the oil industry have been marked by a new kind of oil extraction resources such
as petrol de ist that may have beneficial impact on the global market and also the Romanian
one.

The prices for oil will lower and will vary from country to country;

It might influence the geopolitical dynamic with an increase of the energy

independence of countries like The United States and China, but also Romania;

Real prices will be lower than the ones anticipated and it might create benefits for
companies that require petrol and similar products of energy.
8

Tendencies
The energetic sector will moderately increase in the period of September-November, forecasting
an increase of the production volume (cca. 11 percent).
C Financial sector
Companies in the financial sector listed on Bucharest Stock Exchange provide different financial
services, thus a classification is needed for differentiation. In what regards the financial services,
except insurance and pension funding we have trusts, funds and similar entities - category where
Fondul Proprietatea S.A. (FP) operates under. Another financial category is related to monetary
intermediation activity where companies such as Banca Comerciala Carpatica S.A (BCC), Banca
Transilvania S.A (TLV), BRD Groupe Societe Generale S.A (BRD) and Erste Group Bank AG
(EBS) provides their services in the sector. There are also companies that do not fall under the
latter categories of financial services. Here we meet the SIF companies from 1 to 5 which are set
up as a joint stock companies with private capital having a different objective than the other
financial companies on BVB.
Development of the financial sector in the recent years
The banking sector of Romania made up of 40 banks at the end of December 2012 finances
mainly the Romanian economy, providing about 92 percent of the total financing granted by the
Romanian financial system. The banking system has proven to be resilient during the crisis,
continuing to grant funding to the economy of Romania. The economic growth outlook
generated by the absorption of European funds, the level of financial and bank intermediation of
almost 40 percent and respectively 57 percent, make Romania be an attractive destination for
investors who invest in banking sectors.
The banking sectors assets stood at 83 billion, their weight against GDP amounting to 62
percent. The weight of the assets belonging to banking institutions with foreign capital against
total assets of the Romanian banking sector advanced from 83 percent in December 2011 to 89.8
percent in December 2012. The level of financial intermediation, calculated as the weight of nongovernment credit against the GDP stood at 38.4 percent in 2012, a value similar to the one
registered in 2008, before the crisis, down compared with its maximum of 40.1 percent,
9

registered in 2011. The controlled disintermediation process has happened in a context of the
contraction of lending denominated in foreign currency and of consumer lending. The new credit
policy enables Romanians to take consumer loans over a shorter period of time, and enforces a
higher down-payment for housing loans in all currencies, from 15 percent in lei, up to 40 percent
in other currencies.
Challenges
The main challenges to financial stability are credit risk, especially the credit risk associated to
lending denominated in foreign currency and the risk of a disorderly development of external
financing. In Romania, the recommendations of the European Systemic Risk Board to all EU
authorities concerning lending denominated in foreign currency were extended to companies
also. Higher unemployment, a significant reduction of wages and the downsizing or even the
termination of the business of some companies have contributed to the ongoing drop of the loan
reimbursement capacity with direct consequences upon the quality of banks loan portfolios
which at its turn led to a higher volume of provisions that credit institutions had to establish.
The Board of the Romanian Central Bank (BNR) recently decided to lower the monetary policy
rate to 4.25 percent a year from 4.5 percent as of October 1. BNR reiterated that it will closely
monitor domestic and global economic developments and adjust monetary policy accordingly so
as to ensure price stability over the medium term and financial stability.
Tendencies
Banks have changed their orientation from a fast expansion to a prudence-oriented strategy, by
adapting their branch networks and their employee number. The number of bank outlets was of
about 5,700 at the end of December 2012, while the number of employees across the sector was
adjusted to 61,700 people.
The commitment of credit institutions shareholders has provided for the maintenance of capital
adequacy at comfortable levels. The Romanian banking sector continues to hold solid capital
reserves, the solvency ratio standing at 14.9 percent. This calculation includes the effect of the
prudential filters.

10

Banks have adapted their offerings, launching credit cards to refinance one or more existing
cards or overdrafts. Clients accessing such cards in order to refinance their existing debt may
choose to pay in a number of installments. In addition to interest, the new credit card may be
accompanied by a number of costs, such as issuance fee and administration.

II.3. Analysis of Economic and Financial Performances

A Analysis of Banca Transilvania performances
Banca Transilvania S.A (TLV) is a banking institution with headquarters in Cluj-Napoca,
Romania. The bank was founded in 1993 in Cluj-Napoca by a local business people group, with
a capital of 2 billion RON, of which 79 percent was Romanian and 21 percent foreign. Currently
BT is on the third place among banks in Romania in terms of assets with a market share of over 8
percent. Its activity is organized into four main business lines: corporate banking, IMM, retail
banking and medical division. Bank has formed specialized teams and a comprehensive portfolio
of products and services to support the development of each segment. BT's mission is to support
business growth through innovative products and services offered with professionalism.
The bank's strategy is supported by strong shareholders such as the European Bank for
Reconstruction and Development, which owns 15 percent of the share capital, Bank of Cyprus
and the IFC - the World Bank's investment arm. BT is one of the most wanted employers in
Romania, ranking among the top 20 companies, according to the classification made in 2012 by
Catalyst Consulting and made public through the media in June this year. BT is present in all
major economic centers in the country with a network of over 560 branches, agencies and
outlets.
1. Dynamic comparison between the latest 3 available lists of financial data.
BT - Financial Trimestral Situation (mii lei)
31/03/2013
30/06/2013
30/09/2013
Turnover

623.000

733.550

1.942.344

Net profit

84.396

180.185

240.238

Total debts

27.360

27.250

27.293

11

Tendency

Even though the debt in the last quarter increased with 42.902 million lei compared to the second
term of this year, it still represents an encouraging, favorable financial situation for the company.
This is given by the fact that the turnover for the last period had an increase of over 1.320.000
million lei faced to the first quarter, while in the second period, the difference reduced to an
amount of 1.209.000 million lei. Also, the net profit for all the last two terms registered a
favorable growth due to the constant increases in the turnover as illustrated above. Overall, from
the last three trimestral data we have observed a positive and constant growing tendency of the
companys financial situation.
Given the profitability indicators illustrated below in the table, we have analyzed the company
based on their ratio as follows:
Indicators
PER

9.61

P / BV

1.14

DIVY

1.62

EPS

0.15

Earnings per share or EPS, is the amount of money the company actually earns for each share of
stock that is outstanding. The EPS ratio is 0.15 lei. It means that every share of the common
stock earns 0.15 lei of net profit.
Price earnings ratio or PER, is one way investors use to determine how much a stock costs
compared with how much the company earns. The PER ratio is 9.61. Compared to the reference
value of 9 we conclude that Banca Transilvania is slightly an over-evaluated company.
Price per Book Value or P/ BV, is one of the most useful ratios when buying or selling company
share. The P/ BV ratio is 1.14. A PBV ratio of 1 means that the investors are paying a price for
the shares which are exactly equal to the net asset value of the shares. Since the ideal PBV ratio
should be below 1, we conclude that the company is slightly over-evaluated again.
Dividend Yield or DIVY, is the yield a company pays out to its shareholders in the form of
dividends. The DIVY is 1.62 percent. If this value is compared with the interest rate, which is 5

12

percent, we can conclude that investing in shares of Banca Transilvania is not as attractive for
investors as placing money in a bank deposit.
2. Comparison with other companies from the same sector and on the same period of time.
Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a
company generates with each dollar of shareholders' equity. The formula for ROE is:
ROE= net income*100/ shareholders equity

Net income
Shareholder's Equity
ROE %

BT S.A. Return on Equity

31/03/2013
30/06/2013
84.396.000
180.185.000
2.872.177
2.817.452
2.93
6.39

30/09/2013
240.238.000
2.993.549
8.02

For the last trimester, Banca Transilvania generated 80.25 lei of profit for every 1 lei of
shareholders' equity, giving the stock an ROE of 8 percent. Comparing with the last two periods
of time, we notice a rising ROE suggesting that a company is increasing its ability to
generate profit without needing as much capital. It also indicates how well a company's
management is deploying the shareholders' capital. Giving the constant growth from 3 percent to
8 percent and if these values are compared with the interest rate, which is 5 percent, we can
conclude that investing in shares of Banca Transilvania is more attractive for investors that
placing money in a bank deposit for the third trimester.
ROE % Q3 2013
Banca Transilvania
BRD Groupe Societe Generale
Banca Comerciala Carpatica
Erste Group Bank AG

8.02%
9.04%
4.62%
11.23%

In comparison with the other financial institutions in the same field, Banca Transilvania has the
smallest ROE (8 percent) while Erste Group Bank has a ROE of 11 percent, which shows the
fact that the latter is more appreciated by the investors, probably due to the fact that is one of the
largest financial services providers in Central and Eastern Europe.
13

3. Comparison with the mean of the sector and also with the mean on the market.
Banca Transilvania activates in the financial intermediation sector. The PER indicator of the
company is 10.19 compared to 9 results that TLV is over-evaluated. On the market level the
PER has a ratio of 9.38 which means that the company is slightly over-evaluated in comparison
with other companies from the same market field such as BRD OR BCR. In what regards the
sectorial level, we can underline that the financial intermediation field is over-evaluated in
comparison with other companies from different sectors, having a P/BV of 1.09, while for
instance the construction sector has only registered a ratio of 0.25.
B Analysis of Fondul Proprietatea performances
Fondul Proprietatea SA (FP) is a joint stock company operating as a closedend investment fund
without a set lifetime, incorporated in Romania, trading on the Bucharest stock exchange (BVB)
since 2011. The Funds Investment Objective is long-term capital appreciation via investment
primarily in Romanian equities with strict adherence to the principles of value investing.
The Sole Administrator of the Fund is Franklin Templeton Investment Management Limited
United Kingdom, Bucharest Branch (the so-called FTIML or Fund Manager), effective since 29
September 2010. Its specificity lies in the fact that its purpose and its operations are governed by
special legislation. The private fund was established by the Romanian government in December
2005 in order to assure the financial resources necessary to compensate the persons abusively
expropriated.
The compensation is made in shares, representing the actual value of the real estates which are
not given back in kind. Restitution is totally independent of the Fund being managed by the
National Authority for Property Restitution- a legal entity specialized in the central
administration.
The nominal value of a shares issued by Fondul Proprietatea is 1 RON. Property Fund shares are
traded by their holders, freely, to BVB (symbol FP), either by leveraging actions or by selling
them or by obtaining annual dividend resulting from the work of the Fund.

14

1. Dynamic comparison between the latest 3 available lists of financial data.

FP S.A. Financial Trimestral Situation (mii lei)
31/03/2013
30/06/2013
30/09/2013
Turnover

11.911.903

874.883.978

924.586.980

Net profit

(5.571.232)

514.633.081

535.202.815

Total debts

19.891.282

955.413.584

32.784.630

Tendency

For the first quarter we noticed a financial loss in the net income of the company. This negative
result can shake investor confidence and greatly affect the company's ability to distribute profits
as a return on equity (ROE) to shareholders. In Fondul Proprietateas case, given the positive
earnings for the next two periods of time, we can say that the company took the necessarily
measures to recover the losses and to gain investors trust again by the end of the third quarter.
The debts increased in the second semester as the company invested in recovering their previous
losses and redirect the company on the right track and by the end of the third quarter of 2013, we
can notice that the debt has decreased given by the proper management of the fund. Overall, the
company has shown favorable tendencies as turnover and new profit had a constant growth and
debts have decreased compared to the previous term.
As previously in the BTs case we have made an analysis of the given profitability indicators as
illustrated below.
Indicators
PER
P / BV
DIVY
EPS

21.99
0.94
4.82
0.04

Earnings per share or EPS, is the amount of money the company actually earns for each share of
stock that is outstanding. The EPS ratio is 0.04 lei. It means that every share of the common
stock earns 0.04 lei of net profit.

15

Price earnings ratio or PER, is one way investors use to determine how much a stock costs
compared with how much the company earns. The PER ratio is 21.99. Compared to the reference
value of 9 we conclude that Fondul Proprietatea is an over-evaluated company.
Price per Book Value or P/ BV, is one of the most useful ratios when buying or selling company
share. The P/ BV ratio is 0.94. A PBV ratio of 1 means that the investors are paying a price for
the shares which are exactly equal to the net asset value of the shares. Because the PBV ratio is
below 1, we consider that the company is slightly under-evaluated and the rate of 0.94 is a sign
that its running well.
Dividend Yield or DIVY, is the yield a company pays out to its shareholders in the form of
dividends. The DIVY is 4.82 percent. If this value is compared with the interest rate, which is 5
percent, we can conclude that investing in shares of FP is as attractive for investors as placing
money in a bank deposit.
2. Comparison with other companies from the same sector and on the same period of time.
Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a
company generates with each dollar of shareholders' equity. The formula for ROE is:
ROE= net income*100/ shareholders equity

Net income
Shareholder's Equity
ROE %

FP S.A. Return on Equity

31/03/2013
30/06/2013
(5.571.232)
514.633.081
12.075.638
11.613.100
(46,136)
4.431

30/09/2013
535.202.815
11.488.160
4.658

For the first quarter the company lost almost half of total shareholder equity given by the
negative net income which subsequently led to a negative ROE. Its not an encouraging sight as
investors likely lose money because the business has no cash left over to pay them.
However, for the two last quarters we noticed a positive net income and thus a rising constant
ROE. For the latter quarter, Fondul Proprietatea has generated 46.58 lei of profit for every 1 lei
of shareholders' equity, giving the stock an ROE of 5 percent. If this value is compared to

16

interest rate, we can conclude that investing in shares at Fondul Proprietatea is as attractive as
placing money in a bank deposit for investors.
ROE % Q3/2013
Fondul Proprietatea
SIF Banat Crisana S.A.
SIF Moldova S.A
SIF Transilvania S.A
SIF Muntenia S.A
SIF Oltenia S.A.

4.65%
3.66 %
15.32%
25.44%
14.21%
16.92%

In comparison with other financial institutions, Fondul Proprietatea and SIF Banat-Crisana have
recorder the smallest ratios among all the other intermediaries. This means that investors find the
other SIF companies to be more attractive than Fondul Proprietatea, given the high ROE ratios.
3. Comparison with the mean of the sector and also with the mean on the market.
Fondul Proprietatea is an active entity in the financial intermediation sector. The P/BV ratio of
the company is 0.94 compared to 1 denotes the fact that FP is slightly under-evaluated on the
market level (P/BV ratio is 0.96).
In what regards the sectorial level, we can underline that the financial intermediation field is
over-evaluated in comparison with other companies from different sectors, having a P/BV of
1.09, while for instance the construction sector has only a ratio of 0.25.

C Analysis of Biofarm performances

Biofarm S.A. (BIO) is a pharmaceutical company located in Bucharest with its main domain
activity being the fabrication of pharmaceutical products (CAEN Code 2120). Biofarm is also
one of the main pharmaceutical companies coted at the stock market (the other two being
Antibiotice S.A. and Zentiva S.A.) and one of the main leaders in the internal market.
Its strategy is to develop around 10 new products every ear and to try and extend in the
international market.

17

1. Dynamic comparison between the latest 3 available lists of financial data.

Biofarm S.A. Financial Trimestral Situation (mii lei)
31/03/2013

30/06/2013

30/09/2013

Turnover

33,443,588

58,440,133

85,570,856

Net profit

8,739,670

13,537,643

18,559,757

Total debts (ST+LT)

28,050,765

44,668,811

29,451,629

Tendency

The turnover has increased in the third semester with almost 44 million compared to the first.
The net profit also showed a tendency in increase reaching 17,356,009 million. The total debts
increased as well in the second semester, but then decreased reaching 29,451,629 million, a little
over the level that was established in the first trimester. All this will lead to an increase in the
price of the stock and the stock holders will appreciate.
It represents an encouraging, favorable financial situation for the company and the continue
increase of the turnover and the net profit, as well as the decrease of the total debts shows
constant growth and attractiveness to the investors.
Return on equity (ROE) = (Net Profit/Shareholders Equity)*100
Biofarm S.A. Return on Equity (mii lei)
31/03/2013

30/06/2013

30/09/2013

Net profit

8,739,670

13,537,643

17,356,009

Shareholders Equity

163,843,701

164,539,257

168,865,815

Return on Equity (%)

5.334

8.228

10.278

Tendency

It can be observed that in the last three trimesters the tendency for the return on equity has been
steadily increasing reaching 10.278 percent, meaning that the investments in shares is attractive
for the investors. A rising ROE suggests that a company is increasing its ability to generate profit
without needing as much capital given by the rise in both the shareholders equity and the net
profit throughout the three trimesters of 2013.
18

Given the profitability indicators illustrated below in the table, we have analyzed the company
based on their ratio as follows:
Indicators
PER
P / BV
DIVY
EPS

15.3
1.96
4.42
0.02

The price earnings ratio or PER is 15.3, compared to the reference value of 9 we conclude that
Biofarm is an over-evaluated company.
The price per book value or P/ BV is a financial ratio used to compare a company's current
market price to its book value. A P/BV ratio of 1 means that the investors are paying a price
for the shares which are exactly equal to the net asset value of the shares. The P/BV is over 1
(1.96), thus meaning that the company is slightly over-valuated.
Earnings per share or EPS is 0.02, meaning that every share of the common stock earns 0.02 lei
of net profit.
Dividend Yield or DIVY is 4.42, which shows that compared with the interest rate, investing in
shares of Biofarm is as attractive for investors as placing money in a bank deposit.
2. Comparison with other companies from the same sector and on the same period of time
We have compared Biofarm with another two similar companies such as Antibiotice and Zentiva
based on the Return on Equity indicator.
Antibiotice S.A. Financial Situation (lei)
31/03/2013

30/06/2013

30/09/2013

Net profit

5,073,973

16,124,703

26,700,182

Shareholders Equity

351,528,867

342,007,046

346,548,451

Return on Equity (%)

1.44

4.71

7.70

19

Tendency

Zentiva S.A. Financial Situation (Lei)

31/03/2013
30/06/2013
30/09/2013
Net profit

13,896,082

28,351,169

37,223,304

Shareholders Equity

265,753,462

260,208,549

269,080,684

Return on Equity (%)

5.23

10.90

13.83

Tendency

The tables illustrated above regarding the ROE ratio shows that the highest ROE is found at
Zentiva S.A. (13.83 percent at the last trimester). This also shows that the shareholders from
Zentiva and Biofarm have obtained the best profit from the pharmaceutical sector.
3. Comparison with the mean of the sector and also with the mean on the market.
Biofarm S.A. is an active entity in the Manufacturing sector (more importantly in the
pharmaceutical part). The P/BV ratio of the company is 1.94, compared to 1 shows that the
company is over-valuated on the market level (P/BV ratio is 0.96). At the sectorial level, the
Manufacturing sector, as in the case of Biofarm is also under-valuated having a 0.78 ratio.

D Analysis of Omv Petrom performances

Omv Petrom S.A. (SNP) is the leading company in the energy sector with its main domain of
activity being the extraction of unprocessed petrol (CAEN Code 0610). They are specialized in
the energy sector, more explicitly in the petrochemical sector, but also in the Exploration and
Production, Refinement and Natural Gases (being the second supplier of natural gases after
Romgaz S.A.).
In the petrol sector, PETROM detains a market share of almost 50 percent or above, followed by
Rompetrol S.A. and Lukoil S.A.

20

1. Dynamic comparison between the latest 3 available lists of financial data.

Omv Petrom S.A. Financial Trimestral Situation (mil lei)
31/03/2013

30/06/2013

30/09/2013

Turnover

5.789

5.787

6.574

Net Profit

1.332

1.061

1.273

Total Debts (LT+ST)

1.079

1.692

568

Return on Equity (%)

17.2

18.5

19.6

Tendency

The turnover increased to almost one billion in the third trimester compared to the first, making a
favorable situation, the tendency being on the rise. The net profit has decreased in the second
trimester, making a decrease of the price of the stock, but increased in the third. The decrease of
the net profit is a result of paying part of the debts, showing the huge decrease of the total debts
in the third semester. It can be observed that in the last three trimesters the tendency for the
return on equity has been steadily increasing reaching 19.6 percent, meaning that the investments
in shares is attractive for the investors and the situation of the company is favorable.
Given the profitability indicators illustrated below in the table, likewise the latter companies, we
have analyzed the company based on their ratio as follows:
Indicators
PER
P / BV
DIVY
EPS

6.69
1.12
6.16
0.07

The price earnings ratio or PER is 6.69 meaning that the ratio is considered a fair value, but
compared to the reference value of 9 we conclude that OMV PETROM is an under-valuated
company.
The price per book value or P/ BV is a financial ratio used to compare a company's current
market price to its book value. A P/BV ratio of 1 means that the investors are paying a price

21

for the shares which are exactly equal to the net asset value of the shares. The P/BV is over 1,
(1.12), thus meaning that the company is over-valuated.
Earnings per share or EPS is 0.07, meaning that every share of the common stock earns 0.07 lei
of net profit.
Dividend Yield or DIVY is 6.16, which shows that compared with the interest rate, investing in
shares of SNP is more attractive for investors that placing money in a bank deposit.

2. Comparison with other companies from the same sector and on the same period of time.
S.N.G.N. Romgaz S.A. Financial Data (lei)
30/06/2013

30/09/2013

Net profit

771,402,488

410,665,587

Shareholders Equity

9,654,807,056

9,272,914,169

ROE (%)

7.99

4.43

Tendency

Romgaz is Omv Petroms biggest rival. Compared to the ROE of Petrom, Romgaz has a steadily
decreasing ROE, going in the second to the third trimester to only 4.43 percent. Given that
Petroms, ROE is 19.6 percent in the third trimester, it shows that the shareholders from Petrom
have obtained the best profit from the energy and oil sector.
3. Comparison with the mean of the sector and also with the mean on the market
Omv Petrom is the most important company in the Mining and Quarrying sector. Their PER is
6.74 compared with 9, it demonstrates that their PER is under-valuated. At the level of the
market, the PER is 9.38, which is over-valuated compared to PETROM, which is below 9. At the
sectorial level, the PER is of 6.73 showing that it is also under-valuated as it is with the company
itself.

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Chapter III - Technical Analysis

Technical analysis is a method of evaluating securities by analyzing statistics generated by
market activity, such as past prices and volume. Technical analysts do not attempt to measure a
security's intrinsic value, but instead use charts and other tools to identify patterns that can
suggest future activity.

III.1. Technical Analysis based on Line Chart

A Technical analysis of Banca Transilvania
The technical analysis of the company is conducted on a period of 12 months, taking as
reference two moments: the present one 30.11.2013 and the middle of May, where a
modification of the tendency took place. The indices taken into consideration are: Simple
Moving Average - SMA, Exponential Moving Average - EMA, Bollinger Bands BB and
Moving Average Convergence Divergence MACD.

Chart source: KTD.ro

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1. [SMA] is computed as the average closing prices for a number of periods. As it can be
observed, at the middle of May, due to the companys stock price suddenly drop, the shares of
BANCA TRANSILVANIA were under-evaluated, following in the next period a constant slow
growth. Regarding the current period, the closing price is above SMA which means that the
companys stock is over-evaluated.
2. [EMA] emphasizes the recent dynamics of the price, in the detriment of last periods, thus the
most recent days have a greater weight in the average structure than distant ones. As we can
observe in the chart above, the shares of the company decreased in May, the EMA being situated
below the SMA indicator due to the sudden drop.
3. [BB] is a band plotted two standard deviations away from a SMA. It defines the volatility of
the stock price. Taking the first reference moment into consideration, we observe a broader band
area than the closing price which emphasizes a high volatility and also the correlated high risk of
the price stock along with it. Moreover, the upper margin has intersected the band resulting thus
is a sudden reversed trend, from an increasing to an abrupt decreasing one. Still, the lower
margin has also been touched by the Bollinger band line which caused again a slowly constant
increase in the price dynamics.
4. [MACD] is a trend-following momentum indicator that shows the relationship between two
moving averages of prices. At the first reference period in May, the MACD line crossed the
trigger line from the bottom to the upper side which made the price to go up. However, the price
decreased shortly after when the MACD line reversed and went crossed the trigger line from up
to down. Currently, the MACD line forecasts a future price stock increase of the company.
B Technical analysis of Fondul Proprietatea
The technical analysis of the company is conducted on a period of 12 months, taking as reference
two moments: the present one 20.11.2013 and the beginning of July, where a modification of the
tendency took place. The indices taken into consideration are: Simple Moving Average - SMA,
Exponential Moving Average - EMA, Relative Strand Index - RSI and Bollinger Bands BB.

24

Chart source: KTD.ro

1. [SMA] is computed as the average closing prices for a number of periods. As it can be
observed, at the beginning of July, the shares of FONDUL PROPRIETATEA were underevaluated, following in the next period a constant slow growth. Regarding the current period, the
closing price follows the SMA indicator which means that the companys stock is neither under
or over-evaluated.
2. [EMA] emphasizes the recent dynamics of the price, in the detriment of last periods, thus the
most recent days have a greater weight in the average structure than distant ones. As we can
observe in the chart, the shares of the company decreased at the ending of June and beginning of
July, the EMA being situated initially below the SMA indicator, afterwards regaining a higher
position than SMA.
3. [BB] is a band plotted two standard deviations away from a SMA. It defines the volatility of
the stock price. Taking the first reference moment into account, at the beginning of July, we can
notice a broader band than the closing price which emphasizes a high volatility and also the
correlated high risk of the stock price associated with it. Moreover, the bottom margin limit has
intersected the band resulting thus in a reversed trend, from a decreasing to an increasing one.
However, the higher margin limit has also been intersected by the Bollinger band line which

25

caused again a decrease in the price dynamics. Regarding the current period, we expect a
decrease in the price since the upper limit margin has been intersected by the band.
4. [RSI] generally gives an insight of the moment when stock is either over-sold or over-bought.
At the beginning of July it can be noticed how the price reached lower and extreme lower limits
of 30.00, subsequently 20.00 which denotes that the price was under-evaluated and the market
over-sold. As expected, a rise in price was followed soon afterwards. Currently, the price has
reached extreme limits of over 80.00 which mean that the price is over-valuated and the market
is over- bought. Therefore, we expect in the future a decrease in the stock price.
C Technical analysis of Omv Petrom
The technical analysis of the company is conducted on a period of 12 months, taking as reference
two moments: the present one 20.11.2013 and the ending of May, where a modification of the
tendency took place. The indices taken into consideration are: Simple Moving Average - SMA,
Exponential Moving Average - EMA, Relative Strand Index - RSI and Bollinger Bands BB.

Chart source: KTD.ro

26

1. [SMA] is computed as the average closing prices for a number of periods. As it can be
observed, at the ending of May, the shares of OMV PETROM were under-evaluated, following
in the next period a constant slow growth. Regarding the current period, the SMA indicator is
situated below the closing price of the stock, which means that the shares are over-evaluated. We
can predict that in the following period the stock price will decrease.
2. [EMA] emphasizes the recent dynamics of the price, in the detriment of last periods, thus the
most recent days have a greater weight in the average structure than distant ones. As we can
observe in the chart above, the shares of OMV PETROM were increasing at the ending of June,
the EMA being situated over the SMA indicator.
3. [BB] is a band plotted two standard deviations away from a SMA. It defines the volatility of
the stock price. Taking the first reference moment into consideration, we observe a broader band
area than the closing price which emphasizes a high volatility and also the correlated high risk of
the price stock along with it. Moreover, the lower margin has intersected the band resulting thus
is a sudden reversed trend, from a decreasing to an abrupt increasing one. Still, soon after, the
upper margin has also been touched by the Bollinger band line which caused again a slowly
constant decrease in the price dynamics.
4. [MACD] is a trend-following momentum indicator that shows the relationship between two
moving averages of prices. At the first reference period in May, the MACD line crossed the
trigger line from the upper to the bottom side which made the price to go down. However, the
price increased shortly after when the MACD line reversed and went crossed the trigger line
from down to up. Currently, the MACD line forecasts a future price stock decrease of the
company.
D- Technical analysis of Biofarm
The technical analysis of the company is conducted on a period of 12 months, taking as reference
two moments: the present one 30.11.2013 and the middle of May, where a modification of the
tendency took place. The indices taken into consideration are: Simple Moving Average - SMA,
Exponential Moving Average - EMA, Relative Strand Index - RSI and Bollinger Bands BB.

27

Chart source: KTD.ro

1. [SMA] is computed as the average closing prices for a number of periods. As it can be
observed in May, the companys shares were under-evaluated, following in the next period a
constant slow growth. Regarding the current period, the closing price is under SMA which
means that the companys stock is under-evaluated.
2. [EMA] emphasizes the recent dynamics of the price, in the detriment of last periods, thus the
most recent days have a greater weight in the average structure than distant ones. As we can
observe in the chart above, the shares of BIOFARM were increasing at the middle of May (given
the higher EMA), the EMA being initially situated below the SMA indicator due to the sudden
drop.
3. [BB] is a band plotted two standard deviations away from a SMA. It defines the volatility of
the stock price. Taking the first reference moment into account, in May we can notice a broader
band than the closing price which emphasizes a high volatility and also the correlated high risk
of the stock price associated with it. Moreover, the bottom margin limit has intersected the band
resulting thus in a reversed trend, from a decreasing to an increasing one. Regarding the current
period, we expect an increase in the stock price since the upper limit margin has been intersected
by the band.

28

4. [RSI] generally gives an insight of the moment when stock is either over-sold or over-bought.
At the middle of May it can be noticed how the price reached lower and extreme lower limits of
30.00, subsequently over 20.00 which denotes that the price was under-evaluated and the market
over-sold. As expected, a rise in price was followed soon afterwards. Currently, the price is
under-valuated and the market is over- bought. Therefore, we expect in the future an increase in
the stock price.

III.2. Technical Analysis based on Candle Chart

Given the candle charts situation we could only analyze Biofarm and Banca Transilvania as the
other companies charts didnt present as much relevant information as these ones.
A- Technical analysis of Biofarm
The technical analysis of the company is conducted on the last trimester of 2013, taking as a
reference point the month of October when a group of several speculative green candlesticks, as
illustrated in the chart above, registered a high intra-day variation in the trend.

Chart source: KTD.ro

Overall the trend presents a closely tight pressure on the stock prices, given either by the buyers
or the sellers power, that debuted in the first half of the month with an explosive increase. After
the trend reached its peak, we are met with another intensive trade session which closed with a
great amount of indecision in the market, as illustrated by the cross-shaped candlestick.

29

This candle is actually the key candle of the identified trend as it predicts a future reverse trend
to the current one. Soon after, as expected, by the end of the month, the price dropped as sellers
had little dominance on the market.
B - Technical analysis of Banca Transilvania
The technical analysis of the company is conducted on the last trimester of 2013, taking as a
reference point the end of October when a group of several speculative green candlesticks, as
illustrated in the chart above, registered a high intra-day variation in the trend.

Chart source: KTD.ro

Generally, the trend presents the sellers pressures in order to increase the stock price which was
met as illustrated by the long upper shadowed candlestick, with a high buyer power. Also a
green candlestick without any shadows was formed since the session resulted in the open
equaling the low and the close equaling the high.
We can claim that the long-upper shadowed candlestick is the key candle of the trend as the
sellers initially tried to push up the price, however in the end the buyer power was stronger and
resulted soon as expected in a decrease given by the red short shadowed candlestick.

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Chapter IV - Conclusions
In what regards the technical analysis of the analyzed stocks on the short term, we have selected
only two companies out of the existing four. Namely, Biofarm and Banca Transilvania, the main
reasons for selecting only these two is the fact that both companies operate in attractive
industries and present safe investments for future stock investors of the companies. The energetic
sector for Omv Petrom and the second financial sector for Fondul Proprietatea present too many
challenges and face huge fluctuations which may attract only risk taking investors for the
companies. In what concern the fundamental analysis of the companies, investment predictions
on the long run involve different pattern thus all companies are attractive options due to the
different sectorial challenges. We have summarized below our selected companies from both
fundamental and technical analysis point of view.
In Biofarms case, the tendency for the turnover and net profit in the three semesters of the
current year has increased from one to the other exponentially. If we would be to extrapolate this
to the end of the year we can say that the price of the stock will increase as well, thus the
investors will find an encouraging and favorable situation for the company. The constant growth
of the company as well as a large decrease in the debts in the last trimester will be attractive to
investors. The continued increase of the return on equity also shows the attractiveness of the
shares for the investors suggesting that the company is increasing its ability to generate profit.
Comparing with the return on equity on Biofarms biggest competitors we deduced that Biofarm
has obtained the best profit from the pharmaceutical sector. Also the Dividend Yield is 4.42,
which shows that compared with the interest rate, investing in shares of Biofarm is as attractive
for investors as placing money in a bank deposit which suggests a safe investment. In the
pharmaceutical sector there are some issues that have effects on the company in the long term
period. In the macro-economic context, long term globalization influences the stock market: the
capital market in Romania is directly influenced by the international context which can lead to
either a positive impact on the stock market or a negative one. In the sectorial context there are
numerous threats that may hinder the stock market. The products in this sector have an inelastic
elasticity with price; companies tend to lean towards exports to relieve pressure from the national

31

market that its impaired by the Claw back tax that together with the slow rhythm of the sales
determined a decrease of the share value.
Furthermore we can forecast the next period of time using the technical analysis based on Line
and Candle Charts taking into consideration the present moment. As seen in the graphs, we can
say that the companys stock is under-evaluated (because the closing price is under the Simple
Moving Average) and that the stock price will likely increase due to volatility and because the
price is under-valuated and the market over-bought. The candlestick chart is currently displaying
a positive trend given by the green candles and confirms the line chart future prediction of the
stock price.
From the financial analysis of Banca Transilvania resulted an encouraging and favorable
financial situation due to the positive tendency of the turnover and net profit in regards to the last
trimesters and the fact that the short-term debts remained constant and without a huge deviation.
The price earnings ratio and the price per book value are both considered slightly overevaluated, however, the dividend yield standing at 1.62 percent is not an attractive sight to
investors. Still, the return on equity has shown a positive increase (in the last semester it reached
8.02) suggesting that the company is increasing its ability to generate profit without needing as
much capital. Compared with the interest rate of 5 percent we can deduce that investing in shares
is more attractive for investors than placing money in a bank deposit. As far as it concerns the
macro-economic context, Banca Transilvania can be affected from the recent adjustment of the
monetary policy since this factor encourages investments on the capital market. This, hereby, can
represent an increased interest for the company. Furthermore, the globalization is another macroeconomic factor that can have a long term effect on the Romanian capital market as it can have a
direct influence. Thus the international context can either boost or diminish the stock market of
the company. From a sectorial point of view, the banking segment places Romania in a favorable
light, making it an attractive destination for investors. However, this context faces some
challenges such as credit risk and the strict observation of the Romanian National Bank in order
to maintain a financial stability within the market. The financial sector is thus in a permanent
adaption given the recent tendency of the banks from a fast expansion to a prudence-oriented
strategy, given their modification of the branch networks, maintenance of capital adequacy at
comfortable levels and the new credit cards which the banks adjusted in order to cope with the
32

rapid changes in the market. From a sectorial point of view, the banking segment places
Romania in a favorable light, making it an attractive destination for investors. However, this
context faces some challenges such as credit risk and the strict observation of the Romanian
National Bank in order to maintain a financial stability within the market. The financial sector is
thus in a permanent adaption given the recent tendency of the banks from a fast expansion to a
prudence-oriented strategy, given their modification of the branch networks, maintenance of
capital adequacy at comfortable levels and the new credit cards which the banks adjusted in
order to cope with the rapid changes in the market.
In what regards the future periods, we can notice from the technical analysis of the different
indicators that the companys stock is over-evaluated (given that the closing price being above
the Simple Moving Average line) the price is under-valuated and the market is over- bought
(Bollinger Bands and RSI). Therefore, we expect in the future an increase in the stock price. The
candlestick chart is currently displaying a positive trend given by the green candles and confirms
the line chart future prediction of the stock price.

Chapter V References

www.bvb.ro
www.tradeville.ro
www.ktd.ro
www.onlinebroker.ro
www.zf.ro

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