FFBH Equty Research - Elana Agrocredit - November 2018
UNDERVALUED STOCK WITH A GROWING PAYOUT FOR THE DIVIDEND INVESTOR
- Elana Agrocredit has grown rapidly since inception – 8% CAGR of the credit portfolio and 63.3% CAGR of total operating income.
- Higher crop production, rising land price and rents in Bulgaria have boosted the credit demand in the sector.
- Additionally, the consolidation of agricultural land into bigger holdings has led to more transactions and higher need for debt.
- The sustainable spread between portfolio and debt yields (c.a. 4.5%) has boosted profits and returns.
- Furthermore, a fixed 90% payout has produced a growing DPS and a historical yield of up to 7.0%.
- We expect that the company will continue to grow its assets over the mid-term, increase the portfolio’s yield and maintain a solid spread between lending and borrowing costs despite expectations for rising interest rates.
- Forward dividend yield could be pushed back to and above 7.0%, despite fluctuations, caused by the regular capital raises part of the business model.
- Solid financial position with average D/E of under 90% and interest coverage between 3.0x and 5.0x historically.
- Operating costs that are predominantly variable and help foster a steady growth in DPS.
- Dividend discount valuation shows that at present the stock is trading below our fair value of BGN 1.30 per share.
- The combination of solid balance sheet, predictable earnings, prospects for a high forward yield and a margin of safety at the current stock price offer a potential for adequate total return to dividend-focused investors, thus we assign BUY rating to Elana Agrocredit.
First Financial Brokerage House (FFBH) is a leading non-banking financial institution on the Bulgarian capital market. Founded in 1991, FFBH offers the complete spectrum of investment banking services spanning corporate finance, privatisation advisory, mergers and acquisitions, financial consulting, brokerage services, research & analysis and asset management.
FFBH provides its services mainly to major international banks and corporations seeking investment in Bulgaria. FFBH is not only local contractor and partner to its clients but also an information source and provider for all major news and events in the economic and political life of the country.
We are the main contact point for the large majority of foreign and local institutional investors in the Bulgarian equity market. FFBH is providing access to the Bulgarian Stock Exchange by either its highly experienced sales trading desk or by order routing across the Bloomberg network.
Additionally, FFBH is offering a range of tools, specifically tailored for the retail investor. Both domestic and international markets are only a click away, via electronic trading solutions. As a major advantage, our customers are able to benefit from the broad range of Analysis & Research products with premium quality, provided by our team of dedicated analysts.
Clients of our research products are most of the largest foreign and local institutional investors looking for opportunities in Bulgaria. More than 100 investment banks, investment funds and other institutional investors use our Equity research and Economic review on a regular basis. FFBH’s Morning Bulletin and Weekly Bulletin reach more than 300 clients over different countries and continents.
Our major Research and Analysis Services include:
- Semi-Annual Outlook of the Bulgarian economy and the domestic capital markets;
- Equity analyses of the biggest and/or most liquid companies listed on Bulgarian Stock Exchange - Sofia;
- Quarterly Bulgarian Real Estate sector and REITs overview;
- Quarterly Bulgarian Banking System overview;
- Quarterly macroeconomic overeview, with details on the major economic sectors, commentaries, and statistical indicators;
- Daily and Weekly bulletins, including an overview of the capital markets and the most important macroeconomic & corporate events.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.