Today, we are bringing you a brief overview of the year-to-date (YTD) performance of regional blue chips from Croatia, Slovenia, and Romania.

Croatia

Starting off with Croatia, the CROBEX10 index which represents the 10 largest Croatia blue chips, declined by app. 9% since the start of the year. Given the current macroeconomic and geopolitical situation in the world, especially in Europe, this is to be expected. In a sense, the 9% decline is much lower compared to regional (SBITOP -22%, BET -16%) and global (S&P500 -23%, NASDAQ 100 -33%), which could be attributed to lower liquidity due to low retail participation and large stakes of pension funds in the companies that comprise the index.

YTD performance of Croatian blue chip companies (%)

Moving on to the performance itself, the largest decline has been experienced by AD Plastik, which lost 52% of its value. AD Plastik was already in rough terrain in 2021, due to the semiconductor shortages in the automotive industry. With the beginning of the war in Ukraine however, the Company’s challenges were, even more, exacerbated, as they have over 20% of revenue in Russia. As the sanctions imposed on Russia mounted, so did the investors’ sentiment for investment into AD Plastik deteriorate. Next up, we have Arena Hospitality Group, which lost 19% of its value. However, it should be noted that this is not due to the Company’s fundamentals, as the Company posted solid Q2 2022 results, and all things are pointing toward Q3 2022 being even better. The current inflationary environment, however, both in terms of higher costs, but also in terms of the Company having to raise the prices of their services/accommodation, is leading to even higher than usual negative sentiment (for the current market). Next up, we have Atlantic Grupa, and even though the Company itself is doing quite okay right now, it was also forced to raise prices due to higher costs, which hurt the Company’s margins. On the flip side, the only Company which experienced growth was Atlantska Plovidba, whose stock price increased by 10% since the beginning of the year, driven by solid results due to higher demand in the shipping industry.

Slovenia

Next up, we have Slovenia.

YTD performance of Slovenia blue chip companies (%)

The largest decline was recorded by NLB, which lost 29% of its value since the start of the year. The current environment in terms of higher interest rates is affecting the financial sector especially hard, and given that NLB is the largest bank in Slovenia, but also a regional player, this hit the Company especially hard. Following NLB, we have Petrol, which lost 26% of its value since the beginning of the year, under pressure from higher energy prices, while at the same time, the Slovenian government capped the prices for which the Company can sell its products, leading to massive losses. Next up, we have Sava Re, which lost 24% of its value. The largest effect here came from the reduction in the value of the Company’s financial assets, due to the deterioration of bond and stock prices, thus leading to a lower value of these assets, and by extension, a lower equity value of the Company and thus a drop in price. Following them, we have Krka, which lost 23% of its value, mainly due to the fact that the East Europe region (of which Russia is the largest market, at 20% of the total sales), is under strong pressure due to the war. On the flip side, Luka Koper lost the least, that is, -6%, and is one of the companies that posted solid Q2 2022 results, and even stronger results in Q3 2022 are expected, so in this environment, a lower decline is expected. Overall, the largest index on the LJSE, SBITOP, declined by 22% YTD.

Romania

Finally, there is Romania.

YTD performance of Romanian blue chips (%)

18 out of 20 BET constituents recorded a decline YTD, with the largest being TeraPlast at -46%, followed by Aquila at -41%, Purcari at -40%, BRD at 35%, and Electrica at -34%. In fact, out of the 20 constituents, 15 recorded double-digit decreases. On the flip side, BVB recorded growth of 30%, while Romgaz recorded growth of 3%. Besides the individual issues faced by the companies, Romania is also under a lot of pressure in terms of inflation, with inflation at 15.3% in September 2022. Given that Romania is not part of the Eurozone but has its own currency, the Central Bank acted by increasing the interest rate to 6.25%. Given that a lot of Romania’s blue chips are energy production companies, they were also affected by special “windfall” taxes, which were taxes on extra profits made during times of higher energy prices. Overall, the BET index declined by 16% YTD.

As of September 2022, Fondul’s NAV reached RON 15.43bn, which would translate into a NAV per share of RON 2.6935, an increase of 29.4% YoY and a decrease of 4.5% MoM.

According to the latest Fondul Proprietatea’s NAV report (30 September 2022), Fondul reported a total NAV of RON 15.43bn (EUR 3.12bn), which translates into a NAV per share of RON 2.6935 (EUR 0.5443).

Comparing it on a YoY basis, the total NAV recorded an increase of 25.9%, while the NAV per share grew by 29.4%. Nevertheless, compared to August, NAV decreased by 4.6%.

Fondul Proprietatea’s portfolio structure still remains focused on the power utilities generation sector (78.5% of NAV) with Infrastructure (6.9%), Power & Gas supply and distribution (5.5%), and Oil & Gas (4.5%) following. This is also why the three biggest holdings, Hidroelectrica, Aeroporturi Bucuresti, and OMV Petrom amount to 87.5% of the total NAV of the Fund. In terms of the Fund’s portfolio structure, unlisted equities accounted for the vast majority of NAV, standing at 92.6%. Following them, we have listed equities with 5.4%.

Turning our attention towards the share price’s performance, during the month, the Company’s share price remained mostly flat, decreasing slightly by 1.3%, ending the month at RON 1.96 per share. The current discount to NAV per share stands at 30.6%.

Fondul Share Price & NAV per Share

Source: Bloomberg, InterCapital