IC Market Espresso 22 Apr 2022

The Eagle Has Hatched, but when Will it Fly? Our Perspective on New CROATI 2.875 04/22/2032€

The “day when eagle flies” is a very American expression and essentially it means “payday“. The resemblance comes from the image of a bald eagle that is used as an ornament on greenback notes. Last week new Croatian bond has been placed at quite an attractive spread to the rest of the curve (wide NIP, i.e. new issuance premium) but so far the reaction has been mixed – the yield is higher, but the spread to Germany is tighter. When will the eagle fly? Find out in this brief article.

Last week’s Croatian bond placement caught the interest of several CEE issuers and just last week we were informed that Hungary and Bulgaria have sent out official RFPs. The splash of potential CEE placements might be one of the reasons why you see larger sizes of CROATI 2.875 04/22/2032€ being offered and currently, one large Street bank is axed to sell at least 10mm EUR around 99.40 levels. Notice that this is still some 25 cents above reoffer, so not much of a hurry here. In our talks with the dealers, we found out that they’re not particularly worried about Croatia, sticking to the view that Croatia ended the 2022 foreign markets funding round quite successfully and now it’s a (“relatively”) safe place to invest. The word “relatively” requires some additional clarification. It means that all idiosyncratic risks of Croatian paper have been cleared away, however, the trouble might come from its peers, namely CEE and EA periphery. There are some dark clouds above this “higher yield” (but not HY) cluster, namely the pending second round of the French presidential election and the rising probability of a really ugly Russian sovereign default.

Let’s speak about the possible Russian default more closely. Just last week SOE Russian Railways failed to make a coupon payment on its CHF bond, the event that EMEA Credit Derivatives Determinations Committee subsequently described by the term “credit event”. That is still not a default – and this is where things become really confusing. Credit rating agencies are banned from the Russian market and local companies suffer under a heavy weight of sanctions. Some of these sanctions include blocking of payments by financial intermediaries and Russian Railways are a case in the point. It’s worth also remembering that the Russian state attempted to make coupon payments on its 2bn USD 4.5% 22s and 3bn USD 5.625% 42s on April 04th in rubles instead of dollars, but was of course blocked by the US Department of Treasury on the same ground Russian Railways were blocked. This still doesn’t constitute a default because the state is subject to a 30-day grace period. It will expire on May 04th. Yes, that’s right, the same day FOMC makes its verdict on interest rate lift off. Now read this paragraph once more – do you get the feeling of option gamma growing around these dates (from all the hedging flow)?

Let’s get back to Earth. In a nutshell, CEEs are not loved by bond markets anymore because they carry a stigma of essentially being in the same basket as Russia and potential default might trigger a wide sell off from foreign accounts. We spoke to several European insurers and found out some of them decided to stay put on new CROATI 2.875 04/22/2022€. You probably knew that since the deal summary disclosed by the leads indicated that only 12% of the allocation went to insurers/pension funds. Some two thirds went to “asset managers & funds” and that’s the reason the paper might look heavy in the coming months. The potential silver lining, apart from the ubiquitous notion of Croatia and Bulgaria being on a firm path to EA accession in 2023, is the observation that some of the CEEs are looking away from placing a bond in moments like this. Bulgaria decided to pay the 1.25bn EUR international bond that matured at the end of March and instead focused on the local market for funding. Serbia decided to ask for one more loan from United Arab Emirates, conditions undisclosed. Still, the regional heavy weighters such as Poland and Hungary haven’t really turned away from foreign markets. They’re just lying dormant. The pace of CEE international bond placements is certainly worth looking at in order to predict the flow of new CROATI 2.875 04/22/2032€.

Source: Bloomberg

So how’s the new bond faring on the Street? The best bid/ask price in small to modest clip (<5mm EUR) is 99.00/99.20 (2.99%-2.97% YTM), which is basically slightly below reoffer. That’s B+205bps/B+202bps in terms of spread to Germany on equal duration. Perhaps the only good thing about Russia risks spilling over into CEE is the fact that fast money accounts (the ones that tend to close the position before the settlement) avoided Croatia, preventing a sell off on a wider scale. Plus, the new issuance premium was pretty wide and that’s certainly a buffer for the holders.   

Source: Bloomberg

One last thing and then we leave you alone for the day. This is really interesting – first, take a look at “CROATI€ Yield Curve” chart (the first one) and notice that new CROATI 2.875 04/22/2032€ is the 2.99% point on the red curve (this bond doesn’t appear on the black curve since it wasn’t placed by then). You can see it sticking its head above the rest of the curve, a direct effect of wide NIP used to make the paper float. Right? Wrong. Take a look at the “CROATI€ Spread Curve (bps)” chart (the second one) and notice the spread to Bund has narrowed to merely B+204bps (we mentioned that in the text already) – actually you can see the dent in the opposite direction on the red spread curve. Now, why is that? Could it be that the yield on the benchmark DBR 0 02/15/2032€ is sticking from the rest of the curve? Well, you’ll just have to take a look yourself:

Source: Bloomberg
Petrol Approves a Dividend of EUR 30 per Share and Share Split of 20-to-1

Petrol Approves EUR 30 DPS, DY 5.98%, ex-date August 3th. Also, Petrol approved a 20-for-1 share split.

Petrol published a resolution from their General Meeting in which the shareholders approved EUR 124.5m to be allocated as dividends. This translates to a dividend per share of EUR 30 and is 36.4% higher than last year’s dividend of EUR 22 per share.

The amount for the dividend is set by taking into account the necessary investments, free cash flow, the Company’s debt level, development plans, retained earnings from previous years, appropriate net debt to EBITDA ratio, and the liquidity situation.

Compared to the share price on the day before the dividend proposal of EUR 502 per share the dividend yield is 5.98% Note that the ex-dividend date is set for 3 August 2022, while the dividend payment date is set for 5 August 2022.

In the graphs below, we are bringing you a historical overview of the company’s dividend per share and dividend yield.

As a reminder, the dividend policy target for the 2021-2025 strategic period is 50% of the Group’s net profit, taking into account the investment cycle, Group indicators, and achieved objectives. This is all part of the long-term financial stability of the Company, which combined with the stable dividend policy, is aimed at ensuring a balanced dividend yield for shareholders while at the same time, using the free cash flows to finance the Company’s investment plans.

Also, the proposal to split Petrol’s shares 20-for-1 was approved. By distributing shares the company wants to increase its liquidity and attract new investors. Proceedings will begin on August 19 and will be carried out automatically for the owner. A share split will also not bring any cost or tax consequences.

Dividend Per Share (EUR) & Dividend Yield (%) (2013 – 2022)

*compared to the share price a day before the dividend proposal

Ericsson NT Proposes HRK 64 DPS

At the closing price before the announcement, this would amount to a dividend yield of 3.4%. Ex-date is set for 30 June 2022.

At the meeting held on 20 April 2022, Ericsson NT Supervisory Board and Managing Director made a dividend proposal of HRK 64 per share. At the share price before the announcement, this would amount to a dividend yield of 3.4%.

The ex-date is set for 30 June 2022, while the dividend payment date is set for 1 July 2022. The proposal is subject to approval at the Annual General Meeting, which is to be held on 27 June 2022. Below we provide historical dividends per share and dividends yields.

Dividend per Share (2013 – 2022) (HRK) Dividend Yield (2013 – 2022) (%)

Telekom Slovenije Proposes EUR 3.5 DPS

At the share price before the announcement, this would amount to a dividend yield is 5.8%, which is a decrease of 1.6 p.p. from the previous year. The ex-date is yet to be announced.

Telekom Slovenije’s Management Board in cooperation with the Supervisory Board issued a proposal for the distribution of profit from 2021. This would mean that out of the total net profit of EUR 45.2m, 22.7m would be used for dividends payments, implying a payout ratio of 60.06%. This would amount to a gross dividend of EUR 3.50 per share. At the share price before the announcement, the dividend yield amounts to 5.8%, a decrease of 1.6 p.p. compared to the previous years.

The proposal is subject to approval by the General Meeting of Shareholders, which will be held on 16 June 2022. The ex-date and the payment dates are yet to be announced. Below we provide you with the historical dividends per share and dividend yield of the Company.

Telekom Slovenije Dividend per Share (EUR) and Dividend Yield (%) (2010 – 2022)

Upcoming Events – April 2022

Here you can find the dates for the upcoming events of the regional companies.

wdt_ID Date Ticker Announcement Country
30 28.4.2022 KOEI Končar 2021 Annual Report, Q1 2022 Results Croatia
31 28.4.2022 HT HT Q1 2022 Results, Investor & Analyst Conference Call Croatia
32 28.4.2022 ERNT Ericsson NT Q1 2022 Results Croatia
33 28.4.2022 ADPL Annual Report 2021, Q1 2022 Results Presentation Croatia
34 28.4.2022 SNG Romgaz Annual General Meeting Romania
35 28.4.2022 TLV Banca Transilvania General Shareholders Meeting Romania
36 28.4.2022 BRD BRD: Annual Genaral Assembly of Shareholders Romania
37 28.4.2022 BRD BRD: Annual Report 2021 - financial results Romania
38 28.4.2022 TGN Transgaz General Meeting: Approval of 2021 results Romania
39 28.4.2022 TEL Transelectrica General Assembly Meeting: Approval of 2021 annual financial results Romania
40 28.4.2022 SNN Nuclearelectrica General Meeting Romania
41 28.4.2022 ATGR Atlantic Grupa Q1 2022 results Croatia
42 28.4.2022 TRP Teraplast Annual General Meeting Romania
43 28.4.2022 TRP Teraplast 2021 Annual Report Romania
44 28.4.2022 COTE Conpet Annual General Meeting Romania
45 28.4.2022 ATPL Atlantska Plovidba Board of Directors Meeting Croatia
46 28.4.2022 ARNT Arena Hospitality Group Q1 2022 Results Croatia
47 28.4.2022 WINE Purcari Annual General Meeting of Shareholders 2022 Romania
48 29.4.2022 SNN Nuclearelectrica Annual Report for 2021 Romania
49 29.4.2022 TLV Banca Transilvania Annual Report for 2021 Romania
50 29.4.2022 SNG Romgaz 2021 Annual Report Romania
51 29.4.2022 TTS TTS Annual General Meeting, Annual Report for 2021 Romania
52 29.4.2022 TGN Transgaz Annual Report for 2021 Romania
53 29.4.2022 TEL Transelectrica Annual Report for 2021 Romania
54 29.4.2022 WINE Purcari Annual Report for 2021 Romania
55 29.4.2022 PODR Podravka Q1 2022 Results Croatia
56 29.4.2022 SNP OMV Petrom Q1 2022 Results Romania
57 29.4.2022 SNP OMV Petrom conference call - Q1 2022 results Romania
58 29.4.2022 COTE Conpet 2021 Annual Report Romania
59 29.4.2022 ATPL Atlantska Plovidba Q1 2022 results Croatia
60 29.4.2022 RIVP Valamar Riviera Q1 2022 Results Croatia

Given the current Covid-19 situation, some of these events might be subject to change (postponed or cancelled).

Want to invest? Do not know how and where? Contact us and we will solve everything for you.