Kety: Good price, solid dividends, high quality (upgraded to BUY)
We have upgraded Kety from Hold to BUY, with a lower 12M price target (PT) of PLN 366/share, implying 22% upside potential (down from PLN 380; Kety paid out a DPS of PLN 23.9 in 2018). We see the following as the key reasons behind our rating upgrade: i) Kety’s attractive valuation (our 2019E EV/EBITDA is at 7.8x, 2 standard deviations (SD) below its long-term average); ii) its high dividends (2019-21E yields of 7-9%, i.e., twofold greater than the average at its Polish peers); iii) the c.50% production capacity extension in the low-cyclical consumer sector (Flexible Product Segment) from 4Q19E; iv) its strong balance sheet (we expect the ND/EBITDA to stay below 2.0x over 2019-21E); and v) its strong track record (since 2010, the company has always met its annual profits forecasts). Moreover, in our view, Kety is well on track to meet its financial forecasts for both 2019E and 2020E.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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