For today we decided to present you with the historic development of Croatia’s and Slovenia’s Market Cap to GDP together with the 2020 estimates.
We made a brief analysis of the total market capitalization of listed companies as a % of GDP for Croatia & Slovenia. The historic GDP data was taken from the Word Bank s latest available publications. Market caps were taken from the statistics published by regional stock exchanges.
The market cap to GDP ratio, or the Buffet Indicator as it is sometimes referred to, due to the fact that it was popularized by the famous investor Warren Buffet, compares the market capitalization of all publicly-traded stocks on a single market with the country’s GDP. It was one of the indicators of the approaching storm and later the crises in 2008, which severely damaged the equity markets. As Buffett said, “The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment”. Therefore, the metric is often used to determine whether the stock is over or undervalued.
Croatia (Market Cap / GDP) (%)
We can see that Croatia witnessed a high ratio in the pre-crisis year 2007, as much as 109%. However, after the financial crisis struck, one can notice that the ratio declined substantially as we were witnessing a lot of companies initiating squeeze out and delisting procedures.
The Covid-19 crisis has already had a very negative impact on the market cap of both equity markets and will definitely have a negative impact on the GPDs of respective countries. There are still many uncertainties which make estimating 2020 GDP quite challenging for Croatia and Slovenia, such as the duration of the crisis, will there be a second wave of the virus, how will the consumer confidence look like in the following months etc. Note that for this analysis we used IMF’s estimates of a GDP drop of 8% and 9% for Slovenia and Croatia, respectively.
Since the beginning of the year (until end of April), the market cap of the ZSE has decreased by 13.6% or HRK 17.7bn to HRK 130.2bn. Such a result as a share of 2020 estimated GDP puts the ratio at 34.4%, representing a YTD decrease of 3.61 p.p. It is also worth noting that this would be the lowest market cap/GDP in the observed period, quite lower than the median of 38.6%. The mentioned ratio would be even lower if we accounted for the fact that a few largest companies listed on ZSE have a low single digit free float. Therefore, the market cap to GDP adjusted for free float would amount to roughly 16%.
Since the beginning of the year (until end of April) the market cap on the LJSE has decreased by 16.8% or EUR 1.24bn to EUR 6.13bn. Therefore, such a result would put market cap to estimated GDP at 13.9%, close to the median of the observed period which amounts to 14%.
Slovenia (Market Cap / GDP) (%)
Zavod VZMD proposed a dividend payment of EUR 2.5 per share, compared to initially no dividend payment proposed by the Management Board. Dividend yield is 6.8%.
NLB received a counterproposal by the shareholder Zavod VZMD (Pan-Slovenian Shareholders’ Association) regarding the dividend payment in 2020. Zavod VZMD proposed a dividend payment of EUR 50m or EUR 2.5 per share, compared to initially no dividend payment proposed by the Management Board. The newly proposed dividend translates into a yield of 6.8%.
Note that the Bank of Slovenia has temporarily banned banks from paying dividends for a year, so we do not see the dividend payment as going through on the GSM.
EU citizens who enter the country will no longer be required to quarantine, provided they have not left the EU territory for a period of more than 2 weeks.
The Government of the Republic of Slovenia adopted an ordinance declaring the end of COVID-19 epidemic effective from 15 May, based on a joint assessment by healthcare professionals and the Government Slovenia is thus the first country in Europe to take this step.
Since the risk of spreading COVID-19 still persists, the general and specific measures adopted pursuant to the decision on the application of measures under the Communicable Diseases Act will continue to apply based on expert opinion until 31 May 2020.
The Slovenian Government adds that the current epidemiological situation makes it possible to ease measures that were urgent to contain and control COVID-19, but they cannot yet be totally lifted.
Its important to note that Slovenia will relax some of the measures it had put in place at its borders to prevent the virus being imported from abroad.
EU citizens who enter the country will no longer be required to quarantine, provided they have not recently left the European Union for a period of more than two weeks. All other foreign nationals who enter Slovenia will be required to quarantine for 14 days.
In Q1, Fondul recorded a net unrealized loss from equity investments at fair value through P&L of RON 2.46bn.
In the first 3 months of 2020, Fondul Proprietatea recorded the net unrealized loss from equity investments at fair value through profit or loss of RON 2.46bn compared to a gain of RON 392.4m in Q1 2020.
Such a result was mainly generated by OMV Petrom (RON 889.2m, decrease in share price of 35.1%), Hidroelectrica (RON 349.7m), CN Aeroporturi Bucuresti (RON 311.2m), EDistributie Banat (RON 252.6m), E-Distributie Muntenia (RON 210.1m) and E-Distributie Dobrogea (RON 159.9m).
Given the current economic context as a result of COVID-19 pandemic, which caused a significant drop of stock exchanges around the world, the Fund has performed an assessment of the related impact on the valuation of unlisted holdings in the portfolio. The total impact was a decrease of the unlisted holdings with 13.1% or RON 1bn on 31 March 2020 NAV compared to 28 February 2020 NAV.
Gross dividend income amounted to 522.9m which is an increase by RON 488.2m YoY. This item in Q12020 included the dividends from E-Distributie Banat SA, E-Distributie Dobrogea and E-Distributie Muntenia as a result of a special dividend distribution from retained earnings approved by the shareholders of the companies.
As a result, net operating loss amounted to RON 1.94.bn, compared to a gain of RON 429.3m in Q1 2019. In Q1 2020, the company recorded a net loss of RON 1.96m compared to a profit of RON 414.4m in Q1 2019.
During Q1, the NAV per share recorded a decrease of 16.3% YoY, mainly due to the valuation update of the unlisted holdings in the portfolio, as above stated, and the negative share price evolution of the Fund’s listed holdings, mainly OMV Petrom. This was partially offset by the tender offer within the eleventh buyback program carried out by the Fund during this period. To read more about Fondul’s Q1 NAV click here.
Overview of April NAV
According to the latest NAV report (30 April 2020), Fondul reported a total NAV of RON 9.52bn (EUR 1.97bn), which translates into a NAV per share of RON 1.4561.
When comparing it to the same period last year, their NAV increased by 1.4%, while NAV per share decreased by 7.1%. Meanwhile, when comparing MoM, Fondul’s NAV decreased by 0.7% while NAV per share remained relatively flat. Note that April 2020 Nav is ex-dividend.
When observing the portfolio structure, it remains traditionally oriented towards the power, oil and gas sectors, whereby the two largest holdings, Hidroelectrica and OMV Petrom account for 67.5% of the total NAV.
The funds portfolio currently consists of 74.48% unlisted equities, 24.12% listed equities and 1.4% of net cash & receivables.
In Q1 Purcari recorded an increase in sales of 10%, an increase in EBITDA of 25% and a decrease in net profit of 7%.
In Q1 Purcari recorded an increase in sales of 10% YoY, reaching RON 46.4m. Such a solid increase came mostly on the back of Romanian market (+39% YoY), followed by Baltics and Poland, with +66% and +12% YoY respectively. Moldovan market recorded a 17% decrease, as this market was most dependent of HoReCa and DutyFree.
In terms of product mix, the premium segment showed strong performance, with Purcari brand growing +29% YoY, mainly driven by dynamics in Romania. Ceptura brand, which is traded locally in Romania grew by +31% YoY. Bostavan, the Group’s mid-price brand, recorded a decrease of -7% YoY.
Cost of goods sold amounted to RON 22.8m, representing an increase of 3% YoY. As a result of higher revenues growth gross profit increase by 17% YoY, to RON 23.6m. Such a result puts the gross margin to 50.8% (+3 p.p.), which increased on the improved product mix
SG&A costs went up by 5% YoY. Such a result was helped by overall cost discipline and cost cutting process started to defend negative impact of Covid-19 pandemic
As a result of the above, mentioned, EBITDA showed strong growth of 25% YoY, reaching RON 17.4m. Such a result puts the EBITDA margin at 37.5% (+4.4 p.p. YoY). Meanwhile operating profit amounted to RON 14.1m, representing an increase of 18% YoY.
Going further down the P&L, Purcari recorded a net financial result of RON -4.67m, compared to RON -1.66m in Q1 2020. The net financial result was impacted significantly by FX loss, due to the depreciation of both MDL (Moldovan leu) and RON versus EUR and USD by end of quarter.
In Q1, the company recorded a net profit of RON 8m, representing a decrease of 7%. Such a decrease came as a result of the aforementioned FX losses.
2020 guidance
Due to the high uncertainty related to the effects of Covid-19, the Group suspended on April 21, 2020 its previously announced annual guidance.