IC Market Espresso 10 Mar 2023

 
NAV of Croatian Pension Funds Grows by 1.2% YoY in January 2023

In January 2023, the NAV of the Croatian pension funds amounted to EUR 17.9bn, growing by 2.2% MoM, and 1.2% YoY.

According to the newest report on the Croatian capital markets published by the Croatian Financial Services Supervisory Agency (HANFA), the Croatian pension funds recorded NAV growth of 2.2% MoM, and 1.2% YoY in January 2023. Considering the sheer size of the NAV of Croatian pension funds (standing at EUR 17.9bn in January 2023), seeing how they perform over time can give us a hint of how the overall market is doing as well. At the same time, the net contributions into the funds amounted to EUR 90.1m in January 2023.

Croatian mandatory pension funds AUM structure change (January 2018 – January 2023, EURm)

Source: HANFA, InterCapital Research

Looking at the changes by asset holdings, on a monthly basis, almost all asset holdings recorded growth. In absolute terms, share holdings recorded an increase of EUR 229.5m, or 6.5%, followed by investment funds, which grew by EUR 80.3m, or 4.3%, as well as bond holdings, which increased by EUR 77.6m, or 0.7%. On the other hand, only deposits & cash recorded a decrease, of 0.3% or EUR 2.6m.

Moving on to the YoY basis, the story is a little bit different. In absolute terms, bond holdings lead the way, increasing by EUR 211.2m, or 1.9%, followed by the money market as well as deposits and cash, which grew by EUR 15.9m (+11.3%), and EUR 15.8m (+2%), respectively. On the flip side, investment funds, receivables, and other assets all recorded a decline, decreasing by EUR 27.5m (-0.7%), EUR 24.5m (-1.2%), and EUR 24.2m (-46%), respectively.

The growth on an MoM basis recorded by shares is to be expected, as Croatian pension funds hold a vast amount of shares in both domestic, but also to a lesser extent, foreign (Slovenian) companies. As January 2023 recorded some solid returns due to the improving macroeconomic situation (especially in terms of the warm winter & lower energy costs), positive sentiment was expected. The increase in bond holdings is also expected, as due to their nature the pension funds are risk averse, and bond holdings are some of the best assets in terms of mitigating risk. It will also be interesting to see how the first retail bonds issued by the Croatian government (more on which you can read here) will impact the asset holdings. However, this will only be evident from March 2023 onwards.

Coming back to the current asset structure of the pension funds, the largest share is still maintained by the bond holdings, which amounted to 62.5% of the total, a decrease of 0.93 p.p. MoM, but an increase of 0.45 p.p. YoY. Following them we have shares, which accounted for 21% of the total, representing an increase of 0.85 p.p. MoM, but a decline of 0.40 p.p. YoY, as well as investment funds, which accounted for 10.8% of the total, an increase of 0.22 p.p. MoM, but a decline of 0.27 p.p. YoY.

Current AUM of Croatian mandatory pension funds (January 2023, % of the total)

Source: HANFA, InterCapital Research

Salus Proposes EUR 35 DPS

At the share price before the announcement, this would amount to a DY of 2.5%. The ex-date is set for 25 April 2023.

Yesterday, Salus published a document on the Ljubljana Stock Exchange with its remaining 2022 dividend proposal. According to the document, Salus proposed EUR 35 DPS for the 2nd dividend payment in 2022, which at the share price before the announcement would amount to 2.5%. As a reminder, Salus already paid out a dividend of EUR 35 back in January 2023, with a similar dividend yield. This would mean that in total, Salus paid out EUR 70 DPS, which at the current share price, would amount to a dividend yield of 5%.

The ex-date for the 2nd dividend payment is set for 25 April 2023, while the payment date is set for 28 April 2023. Of course like with any proposals, the dividend proposal is subject to both counterproposals and approval at the General Shareholders Meeting, which will be held on 14 April 2023, at 4:00 PM.

Below, we provide you with a historical overview of Salus’s dividend payments and dividend yields.

Salus dividend per share (EUR) and dividend yield (%) (2014-2023)

Source: Salus, InterCapital Research

Nuclearelectrica Publishes Preliminary FY 2022 Results

In 2022, Nuclearelectrica recorded an operating revenue growth of 103% YoY, an EBITDA growth of 104%, and a net profit of RON 2.73bn, an increase of 163% YoY.

Starting off with the revenue, Nuclearelectrica recorded an op. revenue of RON 6.5bn in 2022, representing an increase of 103% YoY. Nuclearelectrica provides us with the breakdown of their revenue; in 2022, the largest increase came from the sales of energy on the free market. They note that in this segment, they delivered 99.6% of energy sold (FY 2021: 99.7%), and the average sale price of electricity sold on this market was RON 600,15/MWh, an increase of more than double (111% to be exact) YoY. Combined, this led to an increase of revenue in this market of 105% YoY, with the total amounting to RON 6.34bn, making up the vast majority of the revenues that Nuclearelectrica achieves. Overall, in 2022, the total production of electricity amounted to 10.2k GWh, a decrease of 1.7% YoY.

Moving on to operating expenses, they amounted to RON 3.56bn, an increase of 76% YoY. Starting off with the regular OPEX changes first, the largest increase was of course recorded on the “Cost of electricity purchased” line, which more than doubled (+106% YoY) and amounted to RON 513.7m, which is to be expected given the climate that was present in 2022 and still is somewhat present right now. Personnel expenses also increased, growing by 27% YoY and amounting to RON 564.8m. Other OPEX categories also recorded changes, but one that really stands out is the additional tax expenditure. In 2022, according to the “Contribution to the Energy Transition Fund”, Nuclearelectrica has to pay RON 1.09bn in additional taxes (2021: RON 0).

Even with these tax increases, EBITDA recorded significant growth. This is due to the revenue growth, outpacing the OPEX growth. In total, it amounted to RON 3.55bn, an increase of 104% YoY. This would imply an EBITDA margin of 55.92%, a decrease of 0.23 p.p. YoY. Next up, financial revenues amounted to RON 237.9m, an increase of 290% YoY. This growth came mostly due to higher interest income (more than 3x YoY), amounting to RON 217.9m, as well as higher exchange rate differences (+128% YoY), amounting to RON 19.9m. On the other hand, financial expenses decreased by 18.6% YoY, and amounted to RON 29.6m, mostly on the back of lower interest expenses. This resulted in a net financial income of RON 208.4m, an increase of more than 7.4x YoY.

The tax for the year amounted to RON 421.2m, an increase of 151% YoY, due to the higher operating profit. Combined with the additional income tax as well as the positive net financial result, this led to a net profit of RON 2.73bn, an increase of 163% YoY. This would imply a net profit margin of 43%, an increase of 9.63 p.p. YoY.

Nuclearelectrica key financials (Preliminary 2022 vs 2021, RONm)

Source: Nuclearelectrica, InterCapital Research

Moving on to the balance sheet, the total assets amounted to RON 11.8bn, an increase of 22.5% YoY. This was driven by the increase in cash and cash equivalents, which grew by 104% YoY, and amounted to RON 2.68bn, as well as the increase in bank deposits, which increased by 38% YoY and amounted to RON 1.83bn. On the flip side, total liabilities increased by 2.7% YoY and amounted to RON 1.29bn, mostly driven by higher current liabilities, which increased by 21.6% and amounted to RON 805.5m. At the same time, long-term liabilities decreased, by 18.3% and amounted to RON 488.1m. Finally, total equity also increased, growing by 26% YoY and amounting to RON 10.5bn. This increase, in turn, was mainly driven by the increase in retained earnings of 47% YoY, amounting to RON 6.8bn.