The Polish market outperformed the global markets last week. While the US suffered a slight decline (Nasdaq and S&P500 both down -0.2%, DJIA -1.4%) and the sentiment on the commodity markets remained uncertain, the WSE indices were rising (WIG, WIG20 and mWIG40 up by 1.1% – 1.3%, sWIG80 up by 0.6%) mainly owing to commodity stocks. The main index charts show a change of the short-term downtrend, which may bring WIG20 to the recent local highs above 2,900 points. However, the market is weak; in my opinion, it will be difficult to reach the resistance level; even if this happens, the resistance will hold, giving rise to a lateral trend with supply likely to prevail; the April highs are still out of reach of the current market.

Foreign stocks listed on the WSE performed similar to the broad market last week. The median price change was 0.6%, the average was 1.5%. The best performers were BMP AG (+11.7%) and Fortuna Entertainment Group (+10.1%), which remain in a strong mid-term uptrend. Astarta continued to recover its recent loss (+6.8%) and the other Ukrainian also companies appreciated: Agroton by 5.4%, Kernel by 6.4%, Sadovaya Group by 7.5%. Last week’s worst performers were Plaza Center (-8.5%) and Photon (-4.6%).

One of the reasons why Sadovaya was rising were the monthly results reported to the market. The company said it sold close to 105 thousand tons of coal in April, up by almost 40% year on year. KOV is expecting to close the acquisition of a 9% stake in a Nigerian oil licence from Shell, Total and Eni within less than the 20 weeks set in the contract. According to KOV, the stock will be trading at a large discount against the fair value after the deal (currently KOV’s capitalisation is oscillating around EUR 170 million and is expected to reach some EUR 1 billion). Plaza is planning to buy back ca. EUR 30 million of bonds. Astarta currently reports 215 thousand hectares of plantations (1/4 more than a year ago), which are in good shape and will soon begin to prepare for an early harvest. The Hungarian government signed a contract with Surgutneftegas OJSC to buy 21.2% of the corporation for EUR 1.88 billion; by 31 August, after parliamentary approval, the deal will be closed with the participation of a State institution or enterprise. Warimpex published Q1 2011 results: it posted a net loss of EUR 3 million and reported a revenue of ca. EUR 21.1 million. The company is expecting positive results on the sale of further properties. Orco Property Group posted a consolidated net loss of EUR 4.4 million in Q1 2011 while its revenue dropped to EUR 39.2 million. The company is developing 354 apartments, of which 100 have been reserved. Orco is planning to complete the recently resumed construction of the Złota 44 tower in December 2012.

Several new recommendations were published. KBC Securities maintained the “Hold” recommendation for CEZ with a target price of PLN 165 (the stock closed at PLN 150 on Friday). DMBZWBK analysts gave a “Buy” recommendation for Sadovaya Group and set a target price of PLN 15.8 (the stock closed at PLN 12.5 on Friday). Ipopema upgraded its Asseco CE recommendation from “Hold” to “Buy” and the target price from PLN 25 to 30.
 So long as the situation on the broad market remains unclear, the foreign stock segment is unlikely to perform particularly well. While the broad market is rising dynamically after the fall caused by turbulences on the commodity markets, this does not look like a long-term bull market. The market is only strong when the global markets are strong. In addition, price rises are not always backed up by a high volume of trading. The bulls seem unlikely to stand a chance of overshooting the recent April local highs. Even if they can reach the resistance levels thanks to a favourable global sentiment, they are unlikely to break above them at least until the summer. In the short term, interesting stocks include Ukrainian food producers, which did not follow the downtrend and are benefiting strongly from the calm sentiment on global food markets.
 
Bmp AG and Fortuna: Last Week’s Promising Leaders

Last week saw double-digits growth of the stock price of two foreign companies: Fortuna and BMP AG. In both cases, the performance was a continuation of an earlier trend. Investors began to appreciate Fortuna at the turn of March and April. After moving within a narrow band between PLN 16 and 17 for a month, the stock soared; the trend accelerated last week as the stock hit a historical high. However, considering the rate of growth over the last few days of trading, especially given the historically stable performance, the rise is unlikely to continue in the coming weeks; and yet, the long-term outlook is incrasingly interesting and the supply of the shares is getting weaker.

Although BMP did not hit a historical high (the stock traded at PLN 13.9 in 2006), the rise and the accelerated uptrend look promising. The global economic crisis kept BMP in a lateral trend at PLN 2.5 – 4.2 for more than two years. A second attempt to rise in March 2011 was successful; since 10 May, the stock has followed a very dynamic uptrend (the price has since risen by some 60%), which seems unlikely to turn. Naturally, an uptrend on this scale always carries increased investment risks; however, a consolidation and a calmer sentiment might provide an opportunity to take or increase a position in BMP stock.

The rise of both companies has fundamental grounds; it is augmented by investors’ expectations that the results will improve further in the future. According to its strategy, Fortuna will soon pay a dividend of EUR 0.3 per share (ca. 90% of consolidated net profit for 2010). In addition, the General Meeting has authorised the Management Board to buy back Treasury shares within 18 months. BMP is steadily improving financial results and growing the value of its assets, divesting (K2) and successfully investing with a focus on the media and marketing sectors.