Kety: A good stock for bad times (upgraded to BUY)
We raise our rating on Kety from Hold to BUY and set a new price target (PT) of PLN 473/share (27% upside). Over the last decade, Kety has tended to outperform the WIG index when either GDP growth was slowing, or aluminium prices were dropping or at low levels. Since, at the current time, we see such a combination, we highlighted Kety as our top pick among the Polish industrials in our March strategy note. The key arguments for our preference are unchanged and are reflected in our forecasts: a strong balance sheet (ND/EBITDA at 1.3x at end-2020E); its dividend (DPS of PLN 24.5; 7% dividend yield); and its business diversification, and the 30% capacity expansion in the low-cyclicality Flexible Products Segment (FPS), which should allow Kety to moderate the impact of the crisis on profits. We assume 3% yoy EBITDA growth in 2020E, in line with the company’s forecast. We also believe the stock is cheap at our 2020E EV/EBITDA multiple of 8.0x, 14% below the long-term average.Grupa Kety is an aluminum industry company based in Poland. Co.'s operations are organized in three business segments: Aluminum Extrusions, Aluminum Architectural Systems and Flexible Packaging. Co. offers aluminum extrusions in different shapes, bars, tubes and wires of aluminum and its alloys, which are used in the construction & building, advertising, indoor fittings, transportation, automotive industry, white goods, machinery engineering and electrical engineering. Co.'s Aluminum Architectural Systems produces aluminum joinery, realizing investment projects and selling systems. Co.'s flexible packaging segment offers packaging made of aluminum foil, films and paper.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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