Moscow Exchange/Warsaw Stock Exchange: Value is what you get (MOEX upgraded to BUY, GPW stays HOLD – transfer of coverage)
In this report, we transfer coverage of Moscow Exchange (MOEX) and Warsaw Stock Exchange (GPW). For MOEX, we have upgraded our rating to BUY (from Hold), with a new price target (PT) of RUB 104/share (22% upside) vs. RUB 115/share previously; for GPW, we keep our HOLD rating, but raise our PT to PLN 45.2/share (12% upside) vs. PLN 39.1/share before. We see five arguments for our preference for MOEX over GPW: i) the higher growth potential in MOEX’s profits (a 2018-22E EPS CAGR of 5.2% vs. -1.8% for GPW, adjusted for the profit from the Aquis disposal, on our numbers); ii) MOEX’s greater profitability (average 2019-21E ROE at 16.6% vs. 14.0% for GPW, on our estimates); iii) MOEX’s lower valuation (at a double-digit discount vs. average historical discounts to its peers, whereas GPW trades close to the average historical discounts); iv) the greater diversification of MOEX’s revenues (equities trading accounting for only 5% of the 2018 top line vs. 27% for GPW); and v) MOEX’s higher liquidity (3M ADTV at USD 12m vs. USD 0.4m for GPW). We note, however, that our forecasts are far more conservative for GPW than for MOEX, as we pencil in the costs of several strategic initiatives introduced by the former stock exchange, but include revenues from only one of them. Consequently, we see greater upside potential for our forecasts for GPW than for MOEX.Moskovskaya Birzha MMVB-RTS PAO. Moskovskaya Birzha MMVB-RTS PAO (MMVB-RTS OAO) is a Russia-based integrated stock exchange that provides electronic trade organization, clearing and settlements on trades, depository and information services. The Company provides trading and settlement services in such segments of the financial market as foreign exchange (FX) market, federal bonds market, market of derivative financial instruments, cash equities market, corporate and regional fixed income market, commodities market, as well as market for state and municipal orders. The Company was established as a result of the merger between MMVB ZAO and RTS OAO. It operates through six branches and three representative offices. As of February 27, 2013, the Company's major shareholder was the Central bank of the Russian Federation with a stake of 22.47%. In January 24, 2014, the Company sold its whole stake in MMVB-IT ZAO.
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.
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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