Today, we are bringing you a brief analysis of the cash per share of the Croatian blue chip companies, based on the 9M 2022 results.
With the 9M 2022 publishing season officially over (at least for the Croatian companies), we decided to bring you an analysis of some of the largest Croatian blue chips’ cash per share, as well as their current cash position. This analysis can be helpful, especially in times of the economic downturn, which arguably is affecting all companies now. This is because it will allow us to see the balance sheet’s strength and overall liquidity of these companies.
The cash per share metric used here measures how much cash any of these companies have on hand, on a per share (outstanding) basis. It is calculated by summing the company’s total cash in its balance sheet, and the short-term investments that can easily be turned into cash. This metric is useful for showing us a company’s ability to return money to its shareholders, through dividends, share buybacks, or their ability to use the money they have to pay off debts.
Cash per share of Croatian blue chip companies (9M 2022 vs. FY 2021, HRK)
Source: Companies’ data, InterCapital Research
It should be noted that the changes to cash per share are not solely based on the changes in the companies’ available cash and cash equivalents, but also on the changing nature of the number of shares outstanding (due to share buyback programs). With that out of the way, the largest cash per share is currently held by Ericsson NT, at HRK 349.6, which is a decrease of 9% YTD, followed by Adris at HRK 152.7, a decrease of 10%, Končar, at HRK 152.3, a decrease of 37%. Overall, the largest relative decrease was recorded by Atlantic Grupa, whose cash per share amounted to HRK 26.6, a decrease of 75% YTD, but this is due to the 1:4 share split, meaning that compared to the previous period, Atlantic Grupa has 4 times more shares outstanding, diluting the cash per share number. If we compared the cash per share for the same amount of shares outstanding for Atlantic Grupa (the current 13.3m), then the cash per share actually increased, by 2.1%.
On the other hand, the largest relative increase in cash per share was recorded by Podravka, with an increase of almost 5.3x YTD, amounting to HRK 29.8. Following them, we have Atlantska Plovidba, with a cash per share of HRK 137.2, an increase of 42% YTD, and Arena Hospitality Group, with a cash per share of HRK 80.7, an increase of 20% YTD.
Cash per share as a percentage of the current share price (%)
Source: Companies’ data, InterCapital Research
Looking at the cash per share as a % of the current share price can also be a good idea, as here we can see the influence of the share price changes on this metric as well. In this metric, Adris has the largest amount, at 36.4%,
In terms of the cash per share as a % of the current share price, the largest relative increase YTD was recorded by Atlantska Plovidba, with an increase of 10.05 p.p., followed by Arena Hospitality Group, at 9.73 p.p., and Valamar Riviera, at 4.55 p.p. On the other hand, the largest relative decrease was recorded by Končar, with a decrease of 10.15 p.p., and Adris, with a decrease of 3 p.p. YTD. However, the improvements in cash per share recorded are signaling the wrong thing here. The decrease in Arena’s cash per share was not only due to an increase in cash but also due to the decrease in share price, which declined by 25% YTD, while a similar situation is present with Valamar, as their share price declined by 16% in this period. Atlantska Plovidba’s improvement meanwhile, was mostly due to the increase in their cash position, as they recorded significant improvements in business results thus far in 2022, and their share price YTD declined by only 2%. Končar’s case is both one of a decline in available cash, and also due to the decrease in share price (-11%).
Cash position of Croatian blue chips (9M 2022 vs. FY 2021, HRKm)
Source: Companies’ data, InterCapital Research
Finally, looking at the cash itself, the largest amount held is by HT, at HRK 3.02bn, an increase of 5.3% YTD. Following them, we have Adris at HRK 2.4bn, a decrease of 11% YTD, Valamar, at HRK 1.2bn, an increase of 7.4% YTD, and Ericsson NT, at HRK 462.6m, a decrease of 9.4% YTD.
The changes in the cash positions are the usual part of the business operations of the Company, with investments and working capital requirements changing this value. The increase or a decline in asset value (such as with investments into securities), can also influence these changes. What can be seen here is that several companies increased their cash positions, due to strong 3Q and cyclicality of tourism business in Croatia, where summer season brings majority of annual results (such as Arena, Valamar, and Podravka). Others such as Atlantska Plovidba, increased their cash by 42% to HRK 189.5m, on the basis of the good business results. Yet others, such as Adris, suffered losses to their cash mostly due to the decline in the value of investments (primarily in Croatia osiguranje that is consolidated in Adris), due to the current macroeconomic developments and interest rate increases.
Today, we are bringing you an overview of the volatility index, and how it performed in a year marked by uncertainty, and macroeconomic and geopolitical developments.
First of all, what is the volatility index? The volatility index, VIX for short, is an index that represents the market’s expectations for the relative strength of near-term price changes of the S&P500 index. As it is derived from the prices of the S&P index options with near-term expiration dates, it is able to generate a 30-day forward projection of volatility. Volatility would refer to how fast the price changes are recorded, and this can be used to measure the market sentiment, especially the negative sentiment (fear) among investors. VIX levels over 30 can be considered risky, as it would mean that the market expects strong volatility.
With 2022 being a year of high uncertainty, inflation rates, and developments both on the macroeconomic and geopolitical levels, looking at how the VIX developed during this period can give us a gauge of how the market reacted.
Since the beginning of the year, the S&P500 index recorded a decrease of 17%, while as compared to the pre-pandemic levels, it has increased by 23%. However these changes do not reflect just how volatile the market can be, and as such the VIX index can come in handy.
VIX index movements (2015 – YTD 2022, points)
Source: Bloomberg, InterCapital Research
As can be seen in the figure above, the VIX index recorded an increase of 28% YTD, while compared to the pre-pandemic period, it increased by 61%. In other words, the volatility on the market has increased significantly since before the pandemic, which considering the developments in the world we have seen in this period, is not surprising. Currently, the index stands at 22 points, while its all-time-high in 2022 amounted to 36.45, and this was recorded on 7 March 2022, 2 weeks after the start of the Russian invasion of Ukraine, and in the time period when several extensive sanction packages were being considered and implemented on Russia.
However, the VIX reached its highest point on 16 March 2022, when it amounted to 82.69 points, just showing us how huge of an influence the start of the COVID-19 pandemic had on the financial markets. This makes sense as the VIX and S&P500 are negatively correlated Since negative news has a much stronger impact on the overall market sentiment and thus investor decisions to buy/sell the stocks they own, this is to be expected.
VIX vs S&P500 (2015 – 2022 YTD, %)
Source: Bloomberg, InterCapital Research
Looking at the longer time period, say since 2015 however, we can see that the volatility does even out. In fact, the average VIX value since then amounted to 18.7. If you invested in the S&P500 since 2015, it would yield a return of 92.6%. This would mean that even though the volatility does have massive effects in the short-term, its effects are not that long-lasting, and even the current volatility we can see on the market will surely even out in a longer time period.