IC Market Espresso 10 Mar 2020

 
A Tough Day for Equity

Yesterday CROBEX, SBITOP and BET recorded a decrease of -9.3%, -7.3% and -7.5% respectively.

Yesterday all regional markets plummeted which can be seen when observing the main indices of their respective stock exchange.

Performance of Regional Indices Since 2010

CROATIA

Yesterday 56 out of 65 traded stocks ended the day in red. CROBEX plummeted, ending the day at with a decrease of 9.27% (closing at 1,650.55 points). Note that the index observed such a sharp daily decrease only once since 2002; in October of 2008, when CROBEX dropped by 10.2%. It is also worth noting that the last time index was at this value was in March of 2016.  

Meanwhile, YTD CROBEX recorded a decrease of 18.2%.  

Of the CROBEX constituents, all ended the day in red, with Valamar Riviera leading the list (-16.2%). All tourist companies witnessed a double-digit decrease, as the markets seem have put a heavier weight to potential risks relating to Coronavirus.

As a result of the yesterday’s a drop, the P/E of CROBEX went from 15 to 13.64.

Turning our attention to the turnover, as a result of the sell-off, ZSE observed an extremely high turnover of HRK 46.63m (or EUR 6.2m), which is roughly 4.5 times higher compared to the average daily turnover of 2019.

Share Price Performance of CROBEX Constituents (9.3.2020) (%)

SLOVENIA

Slovenian’s main index observed a sharp decrease of 7.3%, ending the trading day at 817.92 points, with almost all constituents ending the day in red. When observing the SBI TOP since 2003, a higher daily decrease of the index was recorded only twice, both in 2008 (November 2008, a decrease of 8.1%).

Meanwhile, SBITOP recorded a YTD decrease of 11.7%.

When observing the constituents of the SBITOP, Unior recorded the highest share price decrease of 20%, followed by Cinkarna Celje with a decrease of 9.38%. Of the index heavy weights, Krka recorded a decrease of 9.22%, while Petrol recorded a decrease of 3.68%.

As a result of the yesterday’s a drop, the P/E of SBITOP went from 7.1 to 6.6.

Share Price Performance of SBITOP Constituents (9.3.2020) (%)

ROMANIA

BET index, also witnessed a drop of 7.5%, ending the trading day at 8,733.96 points, with all 16 constituents ending the trading day in red. Such a high decrease was last time observed in May of 2010, when the index plummeted 11%.

Meanwhile, BET recorded a YTD decrease of 12.5%.

Of the BET constituents, Alro recorded the highest decrease of 15.2%, followed by OMV Petrom (-13.85%). Of the index heavy weights, Fondul Proprietatea recorded a decrease of 5.2%, while Banca Transilvania recorded a decrease of 6%.    

As a result of the yesterday’s a drop, the P/E of BET went from 8.21 to 7.6.

Share Price Performance of BET Constituents (9.3.2020) (%)

Ericsson NT Signs Deals Worth Over HRK 84m

To put things into a perspective, the deals account for roughly 5% of the company’s 2019 consolidated sales.

Ericsson NT published a document on the Zagreb Stock Exchange announcing that the company has signed contracts worth more than HRK 84m. The mentioned deals were contracted in the following markets: Bosnia & Herzegovina, Belarus and Moldova.

The contracts cover mobile networks expansions which will mostly be realized in 2020 as well as network maintenance in the upcoming period. The company notes that they have contracted network maintenance with B&H operator HT Eronet for a two-year period. Further, with IDC from Moldova the company contracted virtualization of IP Multimedia Subsystem (IMS), and with beCloud from Belarus the expansion of LTE network.

To put things into a perspective, the deals account for roughly 5% of the company’s 2019 consolidated sales.

Intereuropa Preliminary FY 2019 Results

In 2019, the Group recorded flat sales, an increase in EBITDA of 14% and a net profit decrease of 6%.

In 2019, Intereuropa recorded sales of EUR 160.35m, remaining relatively flat. The Group’s sales were 5.5% below the planned level, especially at the subsidiary in Serbia where in 2019 that company was still feeling the effects of the harmful conduct of the former executive staff in 2018. The company notes that the Group successfully stopped the trend of a declining average sales margin from previous years and recorded an increase in the average sales margin in 2019 by 0.2 p.p. YoY.

When observing operating expenses, labour costs amounted to EUR 28.9m, which is at the same level recorded the previous year, as were average labour costs per employee.

Other operating expenses amounted to EUR 3.7m, which is an increase of 8% compared to the 2018 adjusted figures and 5% higher compared to the reported figures. Other operating expenses were higher due to a case of fraud at the subsidiary in Croatia, where the embezzlement of funds was discovered at the end of October 2019. A forensic investigation was still ongoing at that subsidiary when the unaudited financial statements were compiled. For that reason, temporary estimates of the effects of fraud were recognized in other operating expenses in the amount of EUR 0.5m in 2019.

Intereuropa generated EBITDA of EUR 13.9m in 2019, representing an increase of 14% YoY, however 2.6% lower than planned. The increase in EBITDA could be attributed to IFRS 16, where the cost of depreciation of right-of-use assets under lease amounted to EUR 1.4m in 2019. Also contributing positively were revenues from the reversal of adjustments to the value of receivables due to the recovery of operating receivables that were several years old and impaired in full in the past. Such a result puts the EBITDA margin at 8.7%.

Operating profit in 2019 amounted to EUR 7.16m, representing an increase of 22% YoY. It is also worth noting that the revaluation of real estate in the amount of EUR 0.8m also had a net positive effect on operating profit.

In 2019, Intereuropa recorded a net profit of EUR 3.9m in 2019, a decrease of EUR 0.2m YoY, while EUR 1.8m lower than planned. Higher expenses from deferred taxes had a significant impact on the results.