Since the beginning of 2015, the price of Adris’ ordinary share has increased by 21.2%, while the price of Adris’ preferred share increased by 14.4%. In this brief analysis, we looked at the spread difference between these 2 share types.
The only real difference between Adris’ ordinary shares and preferred shares is that the ordinary shares maintain voting rights at the GSM, while preferred shares let go of that right. As such, the difference in the prices of these shares is solely based on the importance for investors of having voting rights at the GSM. Investors with higher amounts of ordinary shares, and thus voting rights, could influence the Company’s direction and policy, especially if a larger number of investors decided to band together and support a certain course.
Since 2007, both the price of Adris’ ordinary and preferred shares changed wildly, as did the spread between them.
Prices of Adris’ ordinary and preferred shares (2007 – 2023 YTD, EUR)
Source: Bloomberg, InterCapital Research
Furthermore, from 2007 to 2023 YTD, the price of Adris’ ordinary shares decreased by almost 36%, while the preferred shares suffered a lesser, but still a noteworthy decrease of 13.4%. However, considering the state of the stock market back then, where prices were inflated to such a high degree that the majority of companies, especially the longer-lasting Croatian blue-chip are still to reach those levels again, the decrease isn’t surprising.
In terms of the spread, the average spread between the ordinary and preferred shares amounted to 17% in the period from 2007 until now, while currently, it stands at app. 15%.
Spread between Adris’ ordinary and preferred shares (2007 – 2023 YTD, %)
Source: Bloomberg, InterCapital Research
If we looked at the largest spread between these 2 share types, we can see that the largest one was seen during the GFC. For example, out of the 5 largest spreads between the stocks, the 1st one was at 68.9%, and it occurred in October 2008. The 2nd and 3rd largest spreads occurred in January 2007, while the remaining 2 occurred in October 2008. On the other hand, the lowest spread recorded since 2007 occurred in June 2014, at 0.60%, followed by 0.61% in July 2009, and 0.82% in December 2009, while the remaining 2 also occurred in April and May 2014, respectively.
Looking at the more recent data, since 2015, the price of Adris’ ordinary shares increased by 21.2%, while the price of Adris’ preferred shares grew by 14.4%. In the same time period, the average spread amounted to 19%. Excluding 2015 itself (due to it being the first year since the official end of the recession), all the maximum spreads were recorded in March 2020, with the largest recorded on 23 March 2020, at 30.1%, followed by 29.5% on 24 March 2020, with the remaining top 5 largest spreads following this trend, and the lowest being 25% on 19 March 2020.
The story with the minimums is a little bit different, with 4 out of 5 lowest spreads recorded in 2022, ranging from 4.96% at the lowest to 5.65% at the highest. The only outlier was the 5th lowest spread, at 5.81% in February 2020.
So having all of this data in mind, we can see some very interesting trends. The largest spreads occur primarily at the beginning of times of great crisis, which in this case would mean the Global Financial Crisis (GFC) in 2008, and the beginning of the COVID-19 pandemic in 2020. On the other hand, the minimums recorded are usually either after the end of the crisis or when the crisis seems to be soon over. For the minimum, this was the case if we spoke in general, but if we looked at recent data only, this would not always prove to be the case. As we have seen, 4 out of 5 lowest spreads in the last 5 years were recorded in 2022, where the situation for the equity markets, in general, was far from ideal.
This can be due to several reasons. First of all, both ordinary and preferred shares have solid liquidity and an active market marker, and as such the spread between their prices can be managed better. This wasn’t always the case, and the improvement in the spread in recent years can most certainly be attributed to this. Furthermore, even economic shocks, which temporarily do increase the spreads, do get better as the situation improves. Also, due to the higher price of ordinary shares, even if both shares decline by the same percentage points, the decline in absolute amounts for the ordinary shares will be larger. Finally, Adris’ preferred shares are part of both the CROBEX and CROBEX10 indices, and any investment into them will also partly be invested into the preferred share, something that isn’t present with the ordinary share.
Yesterday, AD Plastik published that the company’s factory in Zagreb was awarded the Ford Q1 certificate. This certificate is one of the most prestigious quality certificates in the automotive industry. With this certificate, AD Plastik’s factory is ranked among the highest-quality suppliers of Ford, the global car manufacturer.
AD Plastik published on its website that the company’s factory in Zagreb was awarded the Ford Q1 certificate, one of the most prestigious quality certificates in the automotive industry. This certificate was given by Ford, the global car manufacturer, ranking AD Plastik among the highest quality suppliers of Ford.
Further, one of AD Plastik’s factory in Solin already has the mentioned certificate for a number of years. Still, since yesterday, the factory in Zagreb also owns the mentioned certificate after the 3-year preparation. The company was obligated to present numerous documents along with a description of procedures including the entire supply chain and production quality.
According to the preliminary results for 2022, BRD Group recorded an NII increase of 13.7% YoY, NFCI increase of 1.4%, net banking income growth of 11.7%, and a net income to majority of RON 1.33bn, an increase of 1.4% YoY.
In 2022, BRD Group’s net loans, including leasing receivables, increased by 10.4% YoY. On the retail side, BRD marked a record level of new housing loan production and the second-best year for new loans, with nearly RON 7.5bn in new loans being granted to individuals during the year. Corporate financing increased by 25.8% YoY, built on a strong performance in the SME segment (+43% YoY), and a notable increase in loans granted to large companies (+18.7% YoY). The leasing activity also increased, by 15.1% YoY. The Group notes that they continue to be an active participant in the IMM INVEST program, offering support to over 2,000 eligible SMEs. In fact, the total value of loans approved under this program amounted to RON 2bn, an increase of 69% YoY.
The Group also continues to finance the sustainability transitions. As such, the value of new sustainable finance transactions amounted to EUR 215m in 2022. They also note that this is important progress towards the EUR 1bn strategic objective of sustainable financing by the end of 2025. The deposit base also increased, with corporate deposits growing by 17.2% YoY, driven by extensive collection from large corporate customers. On the other hand, retail deposits increased by 3.1% YoY, in a tight liquidity and competitive context.
Looking at the financials more closely, BRD Group recorded a net banking income of RON 3.46bn, an increase of 11.7% YoY. They note that the macroeconomic environment was marked by strong inflationary pressures, an accelerated upward trend of market interest rates, and increased volatility. Due to the very dynamic commercial activity and the effect of the interest rates, net interest income increased by 13.7% YoY but was tempered by the significantly increased remuneration of customers’ deposits. Net fees and commission income increased by 1.4% YoY and amounted to RON 754.3m. This was driven by an increased volume of transactions and a dynamic health insurance production, counterbalancing the lower revenues from asset management activity and e-banking commissions given the migration of retail customers to free of charge mobile app, YouBRD.
Moving on, operating expenses were under the influence of inflationary pressure, but costs increase was limited by a maintained rigorous spending discipline. In total, OPEX grew by 9.2% YoY and amounted to RON 1.74bn. Staff costs increased by 8.6% YoY and amounted to almost RON 900m. They were influenced by the price effect of wage increases and other benefits adjustments within the collective labour agreement, and exceptional inflation premiums. Other operating expenses also increased, growing by 14.1% YoY to RON 547.6m. This growth was due to higher costs of external services, elevated energy prices, and increased IT&C related expenses.
As a result, the gross profit amounted to RON 1.71bn, an increase of 14.3% YoY. This would also imply a gross profit margin of 49.57%, an increase of 1.13 p.p. YoY. The NPL ratio stood at 2.5% in December 2022, down 0.6 p.p. YoY. Finally, the net profit to majority of the Group amounted to RON 1.33bn, an increase of 1.4% YoY, implying a net profit margin of 38.4%, a decrease of 3.9 p.p. YoY.
BRD Group key financials (Preliminary 2022 results vs. 2021 results, RONm)
Source: BRD Group, InterCapital Research
This would also mean that the return on equity and ROE of the Group amounted to 15.9%, an increase of 2.5 p.p. YoY. The Group’s total capital ratio stood at 20.9% in December 2022. Finally, the BRD Board of Directors decided that no dividend from the 2022 profit shall be proposed for the GSM approval. According to the Group, this is consistent with the strong recommendations of prudence from the National Committee for Macroprudential Oversight and the National Bank of Romania. The high risk of volatility remains, and the quick fix relief on other comprehensive income (OCI) reserve recognition in own funds is no longer applicable starting 1 January 2023. As such, this decision was made in order to ensure enough lending capacity while respecting on a permanent basis, and especially in severely adverse conditions, the regulated ratios.