GPW – Return of the Individual Investor
Shares in GPW have outperformed the WIG broad market index by about 20% since our initiating report in January. As operator of the Warsaw Stock Exchange, GPW has directly benefitted from the latest turmoil in global equity markets, which made for record-high trading volumes in the weeks from March through April. This included volumes provided by individual investors, who bring in thicker profit margins through higher trading fees. In addition, the huge volatility in global markets helped to promote Polish derivatives, and the TGE energy exchange as well delivered solid performance in the first quarter of 2020. Looking ahead, however, the outlook is more cloudy. For example, energy use during the worldwide economic lockdown has gone down, and this is bound to reflect on TGE's volumes in the rest of the year. Second, trading activity on the WSE might also be curtailed in the medium term after large withdrawals from equity funds and the interrupted rollout of the national PPK workplace pension scheme, compounded by low confidence in the Polish capital market. Third, GPW is poised to incur higher costs of employment and financing this year than originally forecast, offsetting stronger trading volumes. Further, at the current level GPW's valuation has come close to an all-time high at 13.4x P/E, a ratio which leaves little room for further growth; the upside potential is additionally curbed GPW's unapproachability as a potential acquisition target. We downgrade GPW from buy to hold, and we lower the target price to PLN 41.56 per share.
Gielda Papierow Wartosciowych w Warszawie SA (Warsaw Stock Exchange, GPW) is a Poland-based stock exchange. It is a parent entity of WSE Group that offers products and services within its trading markets of equity, derivate, fixed income and structured products. It also distributes market data. The Company has two business lines: Financial market, which includes trading in equities, derivatives, fixed-income and other instruments, listing, and information services; and Commodity market, which includes trading in electricity and property rights in certificates of origin, operation of a register of certificates of origin, clearing, trade and technical trade operator services. As of December 31, 2011, it operates two wholly owned subsidiaries, WSEInfoEngine SA, providing data transmission and information services; and Instytut Rynku Kapitalowego WSE Research SA, engaged in publishing; as well as 92.47%-owned BondSpot SA.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
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