The auction for the frequency spectrum allocation, with multiple frequency spectrums, will be carried out in 2 separate auctions. The decision on the allocation of the frequencies will be announced by the end of March.
Yesterday, Croatian Regulatory Authority for Network Industries (Hakom) announced that the bidding process for the issuance of licenses for the use of RF spectrum for mobile communications has begun. This is pertaining to the frequency bands of 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2600 MHz and 3600 MHz, on the territory of the Republic of Croatia. The auction will be conducted entirely through an electronic bidding system, and the bidding for each frequency band will be separated into two procedures. The first bidding, which began yesterday, covers the frequency bands 800 MHz, 900MHz, 1800 MHz, 2100 MHz, and 2600 MHz at the national level, and the second will cover the frequency band 3600 MHz at the regional level after the first one is completed.
The format for both biddings is the Simultaneous Multi-Round Auction (SMRA), while the specific allocation of frequency blocks per bidder will be determined in an additional bidding round through sealed bids. The permits will be issued for a period of 15 years, with the possibility of extension for an additional 5 years. It is expected that the decision on the allocation will be made by the end of March, which will depend on the dynamics of each of the biddings.
As mentioned, the frequency bands for the needs of mobile communications will be allocated at the national level, except for frequency blocks in the 3400-3480 MHz band, which will be allocated at the regional, or rather, county level in order to create opportunities for business of smaller, regional operators, and to encourage diversity of services, and to allow final users the possibility of choice.
The frequency bands that are subject to bidding for national coverage (initial price per block 2×5 MHz):
791-821/832-862 MHz (EUR 7m)
880-915/925-960 MHz (EUR 7m)
1710-1785/1805-1880 MHz (EUR 2m)
1920-1980/2110-2170 MHz (EUR 2m)
2500-2570/2620-2690 MHz (EUR 700k)
The initial price of all blocks of bidding for national coverage is EUR 154.8m. Meanwhile, the frequency band 3400-3480 MHz in the bidding for regional coverage, has the following initial price per block of 10 MHz (the difference is in counties due to the number of inhabitants):
Bjelovarsko-bilogorska at EUR 9.5k,
Brodsko-posavska at EUR 9.5k,
Karlovačka at EUR 9.5k,
Koprivničko-križevačka at EUR 9.5k,
Krapinsko-zagorska at EUR 9.5k,
Ličko-senjska at EUR 1.9k,
Međimurska at EUR 9.5k,
Osječko-baranjska at EUR 9.5k,
Požeško-slavonska at EUR 3.8k,
Sisačko-moslavačka at EUR 9.5k,
Varaždinska at EUR 9.5k,
Virovitičko-podravska at EUR 3.8k,
Vukovarsko-srijemska at EUR 9.5k,
Grad Zagreb at EUR 38k.
Finally, HAKOM also noted that for the frequency bands 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, and 2600 MHz, all the necessary requirements for participation in the public auction at the national level have been met by A1 Hrvatska, Hrvatski Telekom, and Telemach Croatia. For the frequency band 3600 MHz, all the necessary requirements in the public auction at the regional (county level) have been met by Digicom and Markoja.
In 2022, 5 out of 9 companies in the SBITOP index outperformed the index, 2 tied the index, while 2 underperformed as compared to the index, on a day-to-day basis.
Today, we decided to bring you an overview of how the SBITOP constituents performed as compared to the index as a whole, for the entire of 2022. It should be noted that this data by itself does not tell us much, as there could be days where certain companies outperformed/underperformed an index by high single-digit and even double-digit percentage points, while for the remainder of the year, they perform roughly the same or even worse compared to the index.
As the data presented here measures the daily performance of the constituents compared to the index, it should be taken together with the price changes recorded by the companies as well as the index itself. However, a company that does outperform/underperform as compared to the index it is part of, will in the long run yield higher/lower returns compared to the index, just because of the amount of time those changes are allowed to accumulate. So to start this off, let’s look at how the index as well as the constituents performed during the year.
SBITOP and its constituents’ 2022 price change (%)
Source: Bloomberg, InterCapital Research
As we can see in the graph, the SBITOP index recorded a decrease of 17% during the year. Of its member constituents, the largest decreases were recorded by Krka, at 22% followed closely by Petrol, at 21%. Next up, we have Sava Re and NLB, which declined by 20% and 18%, respectively, Telekom Slovenije at -16%, and Cinkarna Celje, at -11%. In fact, the only Company to record an increase is Luka Koper, at 2%. One should, however, also note that Slovenian companies usually pay out high dividend yields, amounting to app. 5% on the low-end to 10% on the high-end. The reasons for these decreases and an overall bad year for the companies are numerous, from the war in Ukraine and inflation, as well as increased interest rates which affect all equity markets, to more company-specific situations, such as the one with Krka (Krka’s East Europe region, which includes Russia & Ukraine, is one of the company’s largest markets, and as such, is affected by the war), and Petrol (which was affected by high oil&gas prices on one side, and margin restrictions on prices sold in Croatia and Slovenia on the other).
How much did individual constituents out/underperform the index (2022, p.p.)
Source: Bloomberg, InterCapital Research
In 2022, 252 trading days were recorded on the LJSE. During this period, 5 out of 9 companies outperformed the index in terms of daily comparisons, 2 companies matched the index, while 2 companies underperformed compared to the index. The Company that outperformed the index the most was Unior, which had higher returns 52% of the time, followed by Luka Koper at 51.2%, Cinkarna Celje and Krka, both at 50.8%, and Sava Re, at 50.4%. Petrol had the same number of days when it outperformed and underperformed as compared to the index, as did Telekom Slovenije, while Triglav outperformed the index only 49.6% of the time, and finally, NLB outperformed the index only 46% of the time.
How often did SBITOP constituents outperform the index in 2022 (%)
Source: InterCapital Research
Here we can also see the reason why taking just these data points does not make much sense. If you did, you could have said that NLB was the worst company to invest in out of all the observed companies. Even though NLB did record an 18% decrease during the year, it was still only the 4th worst performer. In fact, the worst performer during the year, Krka, at a 22% decrease, outperformed the index 50.8% of the time. This comes back to the statement made at the beginning of this overview, some days massive changes can be recorded, while other days none of them might. This can also be tied to investment strategies into these stocks in general; Day trading is quite expensive due to transaction costs, as well as the capital gains tax on any profits made. Furthermore, if it’s timed wrongly, which considering the number of days in question is bound to happen, there is an inherent higher potential for more negative returns, as compared to investing continually and consistently.
As of December 2022, Fondul’s NAV reached RON 14.57bn, which would translate into a NAV per share of RON 2.5701, an increase of 10% YoY and a slight decrease of 0.5% MoM.
According to the latest Fondul Proprietatea’s NAV report (31 December 2022), Fondul reported a total NAV of RON 14.57bn (EUR 2.94bn), which translates into a NAV per share of RON 2.5701 (EUR 0.5195).
Comparing it on a YoY basis, the total NAV recorded an increase of 10%. Nevertheless, compared to November, NAV slightly decreased by 0.5%.
Fondul Proprietatea’s portfolio structure still remains focused on the power utilities generation sector (76.5% of NAV) with Infrastructure (7.3%) and Power & Gas supply and distribution (7.1%) following. This is also why the three most significant holdings, Hidroelectrica, Aeroporturi Bucuresti and Engie Romania amount to 84.4% of the total NAV of the Fund. However, most of those come only from Hidroelectrica with 76.5% as the biggest holding. In terms of the Fund’s portfolio structure, unlisted equities accounted for the vast majority of NAV, standing at 92.9%. Following them, we have Net Cash & Receivables with 6% and finally listed equities with only 1.15%. Further, we note that during December, Fondul liquidated its position in OMV Petrom, which was previously the second biggest holding after Hidroelectrica with 5.6% of fund’s NAV in November.
Turning our attention toward the share price’s performance, during the month, the Company’s share price increased by 6.4%, ending the month at RON 2.04 per share. The current discount to NAV per share stands at 20.6%.
Fondul Share Price & NAV per Share
Source: Bloomberg, InterCapital