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WITH LOW LIQUIDITY AND NO DIVIDEND ALLOCATIONRopharma shares are down 23% over the last two years

ANDREI IACOMI ( Translated by Cosmin Ghidoveanu)
English Section /

Ropharma shares are down 23% over the last two years

Marcel Murgoci, Estinvest: "Looking at it strictly from the point of view of the Price to Book Value indicator, we can say that the RPH stock is correctly valued" 

The shares of Ropharma Brasov (RPH), the company operating the drug store chain of the same name, have followed a mostly downward trend over the last two years, with the price going down about 23%, between December 27, 2017 - December 6, 2019, way behind the BET Plus index, of which the stock is a part of, which rose almost 28%, over the same period.

That drop comes even though between the end of June 2018 and mid-May this year, the company has developed a share buyback program, which is likely meant to prop up the stock price.

Marcel Murgoci, chief operating officer of the Estinvest brokerage firm, stressed that, from his point of view, there are several reasons why the RPH stock has depreciated over the last two years.

The broker told us: "Although it makes a profit, having a net result in the last three years of around seven million lei, Ropharma did not pay dividends. In fact, the issuer has not paid dividends for many years, and the last time the company repaid its investors was in 2013, but did so with free shares. However, investors do not like this too much, especially when there is no constant growth of the company".

In addition, the director of Estinvest pointed out that the RPH stock has a lower liquidity compared to that of the shares of the larger companies listed on the Bucharest Stock Exchange (BVB), an element which favors large price fluctuations.

Basically, from the beginning of this year until the end of last week, the average daily turnover of RPH shares was only 4,870 lei, below Turbomecanica (TBM), with an average daily turnover of 98370 lei, Vrancart - 12690 lei (the two companies having similar weights with Ropharma in the BET Plus index) or MedLife (M) which sees daily average transfers of about 225000 lei.

"Or, without other elements to support the quotation, the lack of dividends and a low liquidity are factors that have the potential to cause a downward trend in the stock price," Marcel Murgoci said.

The director of Estinvest added: "On the other hand, Ropharma has carried out a share buyback program and it is probably not a coincidence that shortly after the end of that operation in May, that is, once this liquidity provider for the stock disappeared, RPH dropped sharply".

It is an assertion that comes as, after the stock buyback program conducted by Ropharma ended on May 17, when the stock was priced at 0.344 lei, the RPH quotation experienced a decline of about 18% and closed last week-end at 0.282 lei.

During the operation, which lasted about a year, Ropharma repurchased 641893 shares (the equivalent of 0.1255% of the share capital) at the market price, for a median trading price of 0.287544 lei for the entire program.

Regarding the current state of the stock, Marcel Murgoci pointed out that Ropharma has a Price to Book Value of 0.93, close to 1, which means that the market price is very close to the book value of the title.

"Thus, looking strictly from this point of view, we can say that the RPH stock is correctly valued. However, it should be emphasized that the Price to Book Value indicator only provides information, which is not necessarily sufficient for a proper valuation of the company. It's just an element of an ensemble, "concluded Marcel Murgoci.

Businessman Mihai Miron indirectly owns 31.69% of Ropharma's shares, through ADD Pharmaceuticals (17.62%) and RIMIA Investments (14.08%), companies registered in Cyprus. Another major shareholder is Arrow Pharmaceuticals from the United States of America.


The Price to Book Value indicator shows the ratio between the market share of the stock and the book value of the stock, or the company capitalization compared to the net assets and can be interpreted as the amount that the shareholders would receive after the payment of all the debts, if the company were to shut down

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