Kruk: unlevered and undervalued (stays BUY)
We keep Kruk as a BUY, with an updated 12M price target (PT) of PLN 355.5/share (down from PLN 439/share), offering 51% upside potential. The sole reason for our lower valuation is our higher risk free rate. We have tweaked up our 2022-25E financial median net profit forecasts for Kruk by c.3%. We continue to see Kruk as a high quality and attractively priced long-term value play. We highlight that its high ROE (25% in 2022E) points to either the company being able to accumulate capital for fast future growth, or it may translate into higher dividend payouts. We have not pushed aggressively for either of these two in our 2022-25E financial forecasts, but Kruk still trades at P/Es of well below 7x on our 2022-25E forecasts. 69% of our 2022E net profit forecast of PLN 707m was delivered in the 1H22 reported earnings (historically, the ratio has been below 60%) and we see it as cautious.Kruk SA. Kruk SA is a Poland-based company, which is engaged in the business support industry. The Company is a multi-operator, which offers loss prevention and debt collection services. The Company divides its business into two main operating segments: Debt Purchase, including acquisition of non-performing debt portfolios, and Debt Collection Outsourcing, offering fee-based collection of debt on client's behalf, focused on consumer and corporate loans. The Company provides services to financial institutions and large corporate customers. It manages receivables of banks, credit intermediaries, leasing companies and digital platform providers, among others. The Company's operating activities concentrate in a number of countries, such as Poland, Romania, Czech Republic, Slovakia and Spain. The Company's subsidiaries include Kruk Deutschland GmbH, Presco Investments Sarl and Espand Soluciones de Gestion y Recuperacion de Deuda SL, among others.
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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