Analysts recommend buying Tallink shares

Photo: Tairo Lutter / Postimees

Analysts of banks operating in Estonia rather recommend buying the shares of Tallink, which announced on July 19 its seeking for a new major investor, but warn against making important decisions based on a single report.

According to Marek Randma, the head of Baltic Equity Research at Swedbank Research Division, the bank recommended buying Tallink shares already last week at a price of 1.1 euros. “Based on yesterday’s information we have not changed our position”, Randma said on July 20.

Eduardas Petrulis, SEB analyst of Lithuanian financial markets, said that the information released about Tallink is neutral regarding the value of the enterprise, since it reveals too little details about the developments so far. “Therefore any transaction based on this information would be speculative by nature and we do not recommend small investors making serious conclusions or important decisions about buying or selling on that ground”, Petrulis said.

He added that Thursday’s moves in the stock exchange had been natural in the sense that investors tend to relate such announcements to possible takeover offers. “Takeover bids are often made at levels above the market price, but this need not always happen. The existing information does not even allow concluding that there will be any transaction”, Petrulis said.

Shana Gavron, senior analyst of LHV, commented in the Tallink news that Citigroup has long been related to one of Tallink owners, Baltic Cruises, and it is therefore not surprising that the bank was brought to play, seeking to boost the shareholders’ wealth even further. Baltic Cruises Holding L.P., which owns 16.1 percent of Tallink, and Baltic Cruises Investment L.P., which owns 5.51 percent of the shipper on July 6 granted a right of first refusal to purchase their shares to Citigroup Venture Capital International Growth Partnership (Employee) II L.P.

Gavron added that this need not mean that there would certainly be some changes. “As for the selling or buying of Tallink shares, we consider 1 – 1.10 euros the fair price range of the shares, which means that the shares are currently traded at a level we expected”, Gavron said.

The listed company Tallink Grupp announced in the evening of July 19 that the supervisory board of the company has resolved to start an exploratory process relating to potential strategic options for the company. Citigroup Global Markets Limited has been appointed as the financial advisor of this process.

If a new core investor should be found for the enterprise, who would acquire more than 50 percent of the shares, a takeover bid would have to be made to the small shareholders. This expectation raised the price of the Tallink shares by more than eight percent on Thursday.

Barrister Toomas Taube, a small shareholder of Tallink, commented that the small shareholders are hoping for a takeover bid, which is usually made at a higher level than the current price of the shares. “The present excitement on the bourse is clearly caused by the expectations of a nice takeover bid”, he said.

Taube added that he has not decided to sell or buy shares. “Such acquisition after the news causes a feeling that I must be too late already”, he said. “But those who react quickly and buy shares the first day, may win. Of course, it depends on how long that euphoria will last. Let’s be honest, there is presently nothing but hope.”

Taube admitted that there have been so far been problems with Tallink shares – the enterprise has not managed to become profitable and neither has it released a clear plan for increasing profitability.

“But I bought these shares with a longer perspective and I do not change my mind every month. Tallink’s shares have not been the goose laying golden eggs, but they have not made loss either. The company is doing a good and necessary thing in the market, it is a decent company engaged in actual business”; Taube said.