Zagreb Stock Exchange: A pricey bet on the Balkan markets consolidation (SELL - initiation of coverage)
We initiate coverage of Zagreb Stock Exchange (ZSE), a micro-cap (USD 11.2m) company based in Croatia, with a SELL rating and a price target (PT) of HRK 14.2/share, offering downside of c.8.2% to the 20 October closing price. ZSE is a group consisting of the Zagreb Stock Exchange, the Ljubljana Stock Exchange (LJSE), and a small stake of c.5.3% in the Macedonian Stock Exchange (MSE). On the negative side, we see a lack of major triggers in the short term and a relatively rich valuation compared to its peers. However, going forward, we appreciate the company’s M&A strategy and appetite, which could not only put the excess liquidity on the balance sheet to work, but also, at the same time, increase the scale of ZSE’s operations. In the meantime, we highlight the company’s diversified revenue stream, as well as its relatively high average commissions. The company trades currently at 16.5x and 15.2x our 2021E and 2022E EV/EBITDAs, respectively. While we see these multiples as quite stretched, we note that the company’s EBITDA, as well as its bottom line, could record superior growth rates going forward.
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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