Warsaw Stock Exchange: Adjust the volumes please (downgraded to HOLD)
We have downgraded Warsaw Stock Exchange (GPW) to HOLD (from Buy) and lowered our 12M price target (PT) to PLN 39.1 (from PLN 53.7). The change in our view stems from: i) a c.20% cut in our 2019E net profit; ii) a reduction in our dividend payout ratio expectations; and iii) the increase in capex for the implementation of the new strategy. We appreciate the new strategy, but we believe the implementation will take some time. We highlight that some of the announced initiatives might require cooperation with the regulators, which could be a challenge. Currently, GPW is strongly dependent on the equity segment, so the revenue side is beyond management’s control, in our view. We see the 2020E EBITDA and revenue CAGR targets as challenging, unless the sentiment towards Polish equities improves and trading volumes rebound. Due to the pressure on the underlying results, we see a descending trajectory in DPS during 2019-20E. On our estimates, GPW trades at 2018-19E P/Es of 8.9-12.9x.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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