In 2023, 8 out of 20 index members recorded higher returns than the BET index. Furthermore, in terms of the trading days, excl. Hidroelectrica, 9 out of 19 companies outperformed the index more than 50% of the time, while the remaining companies underperformed compared to the index.
In 2023, Romanian blue chips recorded significant changes in price levels, with some companies recording almost triple-digit growth, while on the other hand, declines were mostly recorded by one specific case we’ll get into detail.
YTD performance of BET constituents (2023 YTD, %)
Source: Bloomberg, InterCapital Research
In terms of the YTD performance, the largest growth was recorded by BVB, at 102%, followed by TTS at 90%, Aquila at 70%, Purcari at 47%, SFG at 45%, and so on. In fact, 16 companies recorded double-digit growth, and 2 companies recorded single-digit growth, while on the other hand, only TeraPlast and Fondul Proprietatea recorded decreases, of 8% and 80%, respectively. However, the decline in Fondul’s share price was to be expected, as its NAV is closely related to its share price. By extension, the NAV is based on the holdings that the fund has or has had in the past. In this case, this would refer to Hidroelectrica, which made up 80% of the holdings of Fondul. After the listing of the company in July, Fondul received over EUR 10bn from the listing. This was subsequently paid out in the form of a special dividend, with a DY of app. 90%. After this payment, the NAV automatically dropped, as did the share price. So the decline in the share price of FP could be seen as an “adjustment” to the new reality.
YTD performance of BET constituents compared to the BET index (2023 YTD, p.p. difference vs. BET)*
Source: Bloomberg, InterCapital Research
*Hidroelectrica’s price change as of July 2023’s IPO
BET by itself, recorded a 22% YTD return. If one were to make a decision to invest in any of the individual companies that make up the index or invest in an index as a whole through instruments such as ETF, a comparison between these two options sheds some light. If one were to invest individually, BVB would yield them a return that is 80 p.p. higher, TTS 68 p.p. higher, Aquila 48 p.p. higher, and Purcari 25 p.p. higher. On the other hand, FP would yield a return that is 102 p.p. lower, TeraPlast would yield a 30 p.p. lower return, MedLife 13 p.p., Transgaz 12 p.p., etc. Here we can see that even though some individual companies did have positive returns, there is a clear opportunity cost (as well as higher risk involved). Because of this, instead of the previously mentioned 18 companies which had a positive return, now we have only 8 companies with higher returns. Of course, this doesn’t mean that those individual investments weren’t worthwhile, only that in hindsight, investing in the index would have been better due to the opportunity cost.
Another way that could be used to look at performance is the outperformance or underperformance compared to the index. We define these two states when companies either yield higher returns (outperform) the index on the working days or yield lower returns (underperform) as compared to the index. Thus far in 2022, there were 195 working days in Romania.
How often did BET constituents outperform the index (amount of days, %)*
Source: Bloomberg, InterCapital Research
*Hidroelectrica has been excluded as it traded for only several months since its IPO
In terms of the companies observed, 9 out of 19 companies outperformed the index more than 50% of the days, while the remaining companies underperformed. Leading the way is TTS, outperforming BET during 57% of the days, followed by Transelectrica at 55.4%, BVB at 54.9%, Aquila at 54.4%, as well as SFG and Conpet, at 53.9% each, respectively. On the other hand, TeraPlast, outperformed the index only 42% of the days, followed by Fondul Proprietatea at 45%, and MedLife at 45.6%. Here several things have to be pointed out. Cumulatively, a higher number of days with positive returns does help the company’s stock price rise, but this is not the only factor. Days, when higher growth is recorded, could drive the stock price up even if the stock is not yielding large returns on other days. As such, this presentation is limited and should be taken into consideration together with the overall returns of a given stock. When this is done, a comparison can be made between different stocks to see where they stand.
Today, we decided to present you with a brief overview of SBITOP constituents’ free float before the Q3 reporting season.
In our analysis we considered free float to equal all individual shareholdings lower than 5%, while pension funds and UCITS funds were considered as free float regardless of their shareholding percentage using the latest available shareholder structure information.
Free Float of SBITOP Constituents (%)
Source: LJSE, InterCapital Research
Among the SBITOP constituents, three of them have a free float higher than 50%, while the other six constituents can be considered as to be mostly held by a small group of majority shareholders. Of the constituents, Krka has by far the highest free float amounting to 73.1%. On the other hand, Equinox, Zavarovalnica Triglav, Telekom Slovenije and Luka Koper are at the bottom of this list regarding the part of shares “available” on the stock exchange. Equinox has a free float of 20.5%. Equinox is followed by Zavarovalnica Triglav and Telekom Slovenije with a free float of 30.7% and 31.9%, respectively. Finally, Luka Koper currently stands at 37.9% free float.
Comparing both medians and the mean of the free float of CROBEX and SBITOP constituents, as main indices on ZSE and LJSE, a pretty similar picture is seen. Free float of SBITOP constituents median amounts to 45.9%, while the CROBEX median for the same parameter amounts to 50.9%. Meanwhile, the mean for SBITOP constituents amounts to 46.1%, while the mean for CROBEX amounts to a slightly higher number of 50%. The important thing to stress out is that the data range for CROBEX constituents is wider and has a higher deviation than the data range for SBITOP constituents, which shouldn’t come as a surprise as CROBEX has more constituents within the index itself.
Source: LJSE, InterCapital Research
We should emphasize that the Prime market is the most demanding market on the Ljubljana Stock Exchange regarding the requirements set before the issuer. It is worth noting that it requires the issuer to fulfill additional liquidity criteria, which will result in greater volume, a higher number of trades and therefore reduce “hidden” costs (like high bid-ask spread resulting from illiquidity).