TCS Group Holding: Take profits from the bonanza (downgraded to SELL)
We have downgraded TCS Group Holding (TCS) to SELL (from Hold). We believe the market’s implied long-term profitability expectation may be aggressive, and it does not leave a margin of safety for the potential normalisation of profitability, or possible bad years down the line. The current market valuation also puts a 50% premium on the USD 27.6/share price in the failed Yandex deal. This may also be an indication that the market is pricing TCS very buoyantly. We like TCS. It is a compounder, which is unique in the emerging European banking space. We would take profits from these levels and wait for a better entry point. Our new price target (PT) is USD 36.5/share. The stock trades at 13.1x P/E and 3.9x P/TBV, on our 2021E numbers.TCS Group Holding is a retail banking services group based in the Russian Federation. Co. is principally engaged in providing retail banking services in the Russian Federation through its subsidiaries, primarily Tinkoff Credit Systems. Co., through this subsidiary, fully licensed by the Central Bank of Russia and a member of the Deposit Insurance System, specializes in credit cards. Co. provides online retail financial services through a branchless operating platform. Co. also offers remote access to its financial products and services through its online banking as well as through mobile banking and high-volume call centers.
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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