Mol Nyrt., Hungary’s largest refiner, headed for a 16-month low after Bank of America Corp. recommended selling the stock, saying the outlook for refining and a conflict over the Croatian unit is weighing on earnings.
The shares fell 0.9 percent to 15,310 forint by 12:53 p.m. in Budapest, the lowest level on a closing basis since May 31, 2012. The volume of trading was 47 percent of the three-month daily average, data compiled by Bloomberg show. BofA lowered Mol to underperform from neutral and reduced its price estimate to 14,050 forint from 18,550 forint, according to an e-mailed report today.
Shares have slid 4.8 percent since Croatia issued an arrest warrant on Oct. 1 for the Chairman and Chief Executive Officer Zsolt Hernadi as part of a bribery probe into a deal in 2009 that gave Mol control of INA Industrija Nafte d.d. The conflict comes at a time when the European refining industry is “poised for a long-term decline,” BofA said in the report.
“We also see significant risk to the Mol-INA partnership arising from the ongoing conflict with the Croatian government,” Anton Fedotov, a London-based analyst at BofA, wrote in the report.
Concorde Ertekpapir Zrt., Hungary’s largest broker, cut its price estimate for Mol to 16,900 forint from 18,000, keeping its recommendation at equal weight, citing the dispute with Croatia which it said “is set to remain tough,” according to an e-mailed report today.
“It does not make sense for Mol to give up control over INA,” Attila Vago, a Budapest-based senior analyst at Concorde, wrote in the report. “Mol appeared to have paid a huge premium -- about 30 percent to 40 percent over the fair value -- for INA” and synergies have not yet been “fully extracted,” Vago said.
Six analysts have a sell recommendation on Mol’s shares, while nine say hold and four suggest a buy, according to data compiled by Bloomberg. Hungary’s benchmark BUX (BUX) index, in which Mol has the heaviest weighting at 30 percent, retreated 0.8 percent today.
Croatia is using “non-economic” methods to intimidate Mol and should consider buying back the company’s stake in INA, Hungarian Prime Minister Viktor Orban said Oct. 4. Mol, which owns 49.1 percent of INA, has denied any wrongdoing in the corruption probe. Hungary’s 24.6 percent stake in Mol makes it the refiner’s largest shareholder.
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