Warsaw Stock Exchange: dividend helps, trading volumes behind cyclical peak (HOLD - transfer of coverage)
We are transferring coverage of Warsaw Stock Exchange (GPW), with a HOLD recommendation and a lower price target (PT) of PLN 38.4/share (8.7% upside), due to: i) the equities peak turnover probably being behind us; ii) lower trading volumes in the commodity markets, due to extreme price volatility and uncertainty, and the suspension of the obligation to trade energy through the exchange; and iii) higher costs due to rampant inflation. As a result, GPW’s capacity to pay dividends, a key element of the equity story, in our view, has also been revised downwards. This should be felt from 2024E, when we now expect it to pay PLN 2.2 (a 5.8% yield). It is trading below both its 5Y average historical multiples and its average historical 5Y discount to WIG index, currently. If our thesis is correct, and the Polish market has already priced in a recession and other negative external factors, we see limited downside potential for the stock, apart from major negative events.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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