Thus far in 2023, 3 out of 9 SBITOP constituents outperformed the index more than 50% of the time, 1 tied it, while the remaining companies underperformed as compared to the index.
Today, we are bringing you an overview of the YTD performance of the SBITOP and its constituents, as well as how they compare to each other. Several metrics are analyzed. Firstly, the raw YTD returns of the constituents as well as the index, as well as how much the constituents outperformed/underperformed as compared to the index. Secondly, on a day-to-day basis, an overview of the performance of the constituents as compared to the index. Looking at both of these data points can show us was it more worthwhile to invest in individual companies, or an entire index through, for example, an ETF.
Thus far in 2023, SBITOP yielded a return of 12.4%, slowing down the growth, especially in the last couple of months. The current macroeconomic environment, but also the natural disasters and floods that affected not only a lot of people in Slovenia, but also companies, directly through damage, and indirectly through higher insurance claims, or a need for more loans from the banking sector. This led to a regression in the return of the overall index, albeit there are outliers to this general trend.
How much did individual constituents outperform/underperform as compared to the index (YTD, p.p.)
Source: Bloomberg, InterCapital Research
Among the observed companies, Luka Koper recorded the largest increase of 25.4% YTD, followed by NLB at 18.6%, Krka at 17.4%, and Petrol at 15.5%. On the other hand, Triglav, Cinkarna, and Equinox recorded negative returns, of 11.9% and 3%, and 1.6%, respectively. Finally, Sava Re and Telekom Slovenije recorded mid to mid-high single-digit growth rates, of 4.9% and 7%, respectively. This would mean that as compared to the index, Luka Koper recorded an increase of 13%, NLB of 6.2%, Krka of 5%, and Petrol of 3%. On the other hand, Triglav underperformed the index by 24.3%, Cinkarna by 15.5%, Equinox at 14%, Sava Re at 7.5%, and Telekom Slovenije at 5.4%, respectively. In hindsight, this would have meant that investing in the index as a whole would have been better than investing in more than half of the individual companies. This is especially the case of the companies that recorded negative returns, as this not only means that money is lost due to the loss of value of the shares but also due to the opportunity cost of not investing in an asset that yielded a return. If we also take into account the inflation rate which is eating into disposable incomes, then this loss seems even greater.
Overall, thus far in 2023 190 working days were recorded. To see how the individual companies compared to the index, we looked at returns on each of these days and compared them to the returns of the index. If the return is higher, we considered that the share in question outperformed the index, and vice versa. Out of the observed companies, 3 outperformed the index more than 50% of the time, 1 tied it, while the remaining 5 companies underperformed as compared to the index. The best performance was recorded by NLB, which outperformed the index on 52.6% of the days, followed by Krka and Petrol, both at 51.6%, respectively, and Cinkarna, at 50% of the time. On the other hand, Equinox outperformed the index only 46.3% of the time, Triglav at 46.8%, while Telekom Slovenije, Sava Re, and Luka Koper outperformed the index 48.4% of the time each, respectively. As can be seen here, the daily returns by themselves don’t show us the whole story. Luka Koper is a perfect example of this, even though it had a lower number of days outperforming the index, it still yielded strong returns. As such, the overall returns matter, and returns on certain days can be a lot higher (or lower) than the norm. One way to mitigate this risk is to hold a stock for a longer time frame. By extension, investing in an index that tracks the movements of all of these companies mitigates the risk even further.
How often did SBITOP constituents outperform the index (amount of days, %)
Source: Bloomberg, InterCapital Research
This comparison, however, does not take into account one more important variable when investing in Slovenia, and that is the solid dividend yields of the companies. These yields between companies vary, between a couple of percent to close to or even above 10% annually, in some years. If all the individual dividends are taken together in the form of the SBITOP index, it would mean that the index could have a dividend yield of 5-7%, annually.
By the end of August 2023, the NAV of the Croatian mandatory pension funds increased by 0.7% MoM, 9.3% YoY, and 10% YTD, amounting to EUR 19.3bn.
According to the latest report by the Croatian Financial Services Supervisory Agency, i.e. HANFA, the Croatian pension funds have recorded a positive trend of growth in 2023, despite the challenging macroeconomic environment, including the high inflation rates. As the pension funds are the largest institutional investors in Croatia, how they develop over time and the challenges they face could be to some degree used to gauge the overall sentiment on the capital market. In the report, we can see that the NAV of the Croatian pension funds increased by 0.7% MoM, 9.3% YoY, and 10% YTD, amounting to EUR 19.3bn. Furthermore, the net contributions into the funds are exepctedly increasing, with EUR 108.6m contributed in August 2023 alone, and EUR 814.3m contributed since the beginning of the year.
Croatian mandatory pension funds AUM structure change (January 2018 – August 2023, EURm)
Source: HANFA, InterCapital Research
In terms of the asset structure, on a monthly basis, the largest increase was recorded by bonds, which increased by EUR 131.6m, or 1.1%. Following them we have shares at EUR 35m, or 0.8%, while on the other hand, receivables decreased the most, by EUR 29.7m, or 1.3%, followed by the money market holdings at EUR 14.2m, or 5.5%, and other assets, at EUR 7.6m, or 30%.
Meanwhile, on the YoY basis, the largest increase was recorded by shares, which grew by EUR 671.8m, or 18.7%, followed by bonds, which increased by EUR 539.2m, or 4.7%, and the money market, which increased by EUR 106.6m, or 76.4%. On the other hand, other assets decreased the most, losing EUR 144.4m, or 89.1% of their holding value.
Of course, large increases in both bond and share holdings are expected, as these are two of the largest asset types being held. In fact, bonds account for 62% of the total assets, an increase of 0.28 p.p. MoM, but a decrease of 2.7 p.p. YoY. Meanwhile, shares hold 22.1% of the total, remaining roughly unchanged MoM, but increasing by 1.75 p.p. YoY. Lastly, investment funds hold 11.3% of the total, decreasing by 0.23 p.p. MoM, and increasing by 0.63 p.p. YoY.
Current AUM of Croatian mandatory pension funds (August 2023, % of the total)
Source: HANFA, InterCapital Research
At the share price before the announcement, this would amount to a DY of 5.5%. The ex-date is set for 20 October 2023.
On Friday, Banca Transilvania held its OGSM and EGSM meetings. During the OGSM meeting, the distribution of profit was approved, in the amount of RON 897.5m from the 2022 net profit (41% payout ratio), and EUR 4.9m from the retained earnings. As such, the total amount to be distributed amounted to RON 902.4m. This would imply a gross dividend per share of RON 1.13. At the share price before the announcement, the dividend yield amounted to 5.5%. The ex-date is set for 20 October 2023, while the payment date is set for 6 November 2023.
On the other hand, during the EGSM meeting, the approval of the program of corporate bond issues was also made. These will be denominated in euro and/or RON, or in another currency (depending on the market conditions in terms of the interest rate), with a maturity of no more than 10 years. The frequency of the coupon would be annual or semi-annual, with the maximum amount to be issued set at EUR 1.5bn (or other currency equivalent), through several separate issues, carried out over a maximum period of 5 years.
The entire report can be accessed here.
Banca Transilvania historical dividends per share (RON) and dividend yields (%) (2019 – 2023)
Source: Banca Transilvania, InterCapital Research