IC Market Espresso 18 Nov 2019

Belgrade Conference 2019 Takeaways

Last week, we attended the annual conference organized by the Belgrade Stock Exchange where we had the opportunity to meet with some blue-chips and also a couple of companies we do not get to meet often from Croatia, Slovenia, Serbia and Macedonia. Here we bring you an overview of our meetings.

The companys we met with were:

  • Atlantic Group – to read our takeaways from this meeting click here.
  • Arena Hospitality Group – to read our takeaways from this meeting click here.
  • NLB Group – to read our takeaways from this meeting click here.
  • Naftna Industrija Srbije (NIS) – to read our takeaways from this meeting click here.
  • Metalac – to read our takeaways from this meeting click here.
  • Komercijalna Banka Skopje – to read our takeaways from this meeting click here .

To read the whole takeaways from the Belgrade Conference click here

DIGI Communications 9M 2019 Results

In the first 9M of 2019, DIGI recorded an increase in revenue of 15.6%, increase in EBITDA of 35.7% and an increase in net profit of 14.8%.

In the first nine months of 2019 DIGI Communications recorded EUR 874.6m, showing a solid increase of 15.6% YoY.

In the Romanian market, the company obserevd an increase in revenue of 8.3%, amounting to EUR 559.7m. Revenue growth in Romania was primarily driven by an increase in the fixed internet and data and cable TV RGUs, as well as increase in our mobile telecommunication services and cable TV ARPUs.

In the Hungarian market, DIGI recorded revenues of EUR 163.6m, noting an increase of 21.2%, while the Q3 lagged by 2.7%. The lower performance in Q3 (presented in EUR) could be attributed to the decrease in ARPU and to the foreign exchange impact of the depreciation of the HUF related to EUR in the reported period.

In the Spanish market, Digi witnessed a high increase in revenues of 52.2% YoY, amounting to EUR 137.9m.  Such an increase came on the back of the rise in mobile telecommunication services RGUs from roughly 1.21m at the end of Q3 2018 to approximately 1.73m in Q3 2018 (+42.5%). This increase could be attributed mainly to new customer acquisitions as a result of more attractive and affordable mobile and data offerings.

Turning our attention to the operating expenses, in the first 9M of 2019, they amounted to EUR 766.6m (+14.7% YoY). The highest increase in operating expenses could be observed in the Spanish market the highest increase (EUR 38.5m YoY). The large increase refers mainly to costs of fixed telephony, internet and data and mobile interconnection expenses. Starting from September 2018, Digi Spain provided fixed internet and telephony services as resale products. Salaries expenses increased as a result of a larger employee’s base.

As a result of all of the above-mentioned, DIGI reported an adjusted EBITDA of EUR 326.9m, which represents an increase 35.7% As a result, EBITDA margin observed an improvement of 5.5 p.p. and currently stands at 37.4%. Meanwhile, operating profit amounted to EUR 105.6m, representing an increase of 31%.

Going further down the P&L, the company recorded further increase in net financial loss by EUR 21.4m and currently stands at EUR -62.6m. In Q3, net loss from FX amounted to EUR 11.1m (compared to a foreign exchange gain of €0.9 million from previous period), which has contributed to the increase of the net financial loss. Besides that, interest expenses increased due to the additional issue of the EUR 200 million Bonds from February 2019.

In the 9M of 2019, net profit amounted to EUR 24m, representing an increase of 14.8%.

Fondul Proprietatea 9M 2019 Results & October NAV

As FP published their 9M results together with their NAV as of 31 October, we are bringing you key takes from the reports.

As Fondul Proprietatea published their 9M 2019 results, we are bringing you key takes from the report. According to it, the net gain from equity investments at fair value through profit or loss of amounted to RON 1.27bn, showing a strong increase of 198% YoY. Such a high rise was mainly generated by OMV Petrom, as a result of the positive share price evolution for this company (RON 699.4m, share price increase by 41.3%) and Hidroelectrica as a result of the valuation update of the Fund’s holding in this company (total impact RON 259.0m).

Gross dividend income amounted to RON 723.38m, showing a solid increase of 25.8% YoY. The  gross dividend income included the dividend income earned from the Fund’s portfolio companies, mainly Hidroelectrica (RON 358.7m). It is noteworthy that gross dividend income from Hidroelectrica observed an increase of 58.6% YoY. Next come, OMV Petrom (RON 152.9m), CN Aeroporturi Bucuresti (RON 73.0m), Societatea Nationala (RON 37.4m), Alro (RON 33.3m), Nuclearelectrica  (RON 26.7m), BRD Group (RON 18.3m) and Engie Romania (RON 16.4m).

Interest income amounted to RON 7.97m (+16.9% YoY), which arose from deposits held with banks and from short-term government securities.

As a result of all of the above mentioned, net operating income doubled, amounting to RON 2bn. Operating expenses witnessed an increase of 1.4% YoY, amounting to RON 56m.

In the first 9M of 2019, the company recorded a net profit of RON 1.94bn, representing a strong increase of 104% YoY.

NAV as of 31 October 2019

According to the latest NAV report, Fondul reported a total NAV of RON 10.71bn (EUR 2.25bn), which translates into a NAV per share of RON 1.5579. When comparing it to the same period last year, their NAV increased by 7%, while NAV per share increased by 13.3%. Meanwhile, when comparing MoM, Fondul’s NAV and NAV per share remained relatively flat.

Next, 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 63.8% of the total NAV.

Furthermore, when compared to the same period last year, the Fund decreased their listed equities (-1.35 p.p.), while their net cash & receivables also decreased by 0.52 p.p. Meanwhile, Fondul’s exposure to unlisted equities increased by 1.87 p.p. accounting for 70.2% of the portfolio.

Turning our attention towards the share’s price performance, as of 15 November, the share price amounted to RON 1.19, marking a 25.4% increase YoY. The discount to NAV per share decreased by 7.3 p.p. YoY and currently stands at 23.9%.

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