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Further lethargic trading, however Crobex in the plus; peer analysis of Končar Group
Good morning! Over the course of yesterday a change of mood came over the market and the equity indices finished in the plus. Crobex achieved 0,2% growth and Crobex10 recorded a positive correction of 0,33%. For the most part, the mood was attributed to blue chip companies (HT, Dalekovod, and Adris). There is however a lack of turnover still present, and only a modest 11,4 million HRK were traded yesterday. Although shares of the Končar Group aren’t the most liquid on the market, it can be said that they are “waiting in the wings”. A reason for our focus on the firm is because of their announcement yesterday stating they will build a wind farm in Split worth 200 million HRK. This is just further confirmation that Končar is orienting itself in the direction of investment in energy. However, as you can see from the title, we have decided to explore a bit and see how Končar Group performs in relation to their peer group. The estimated average multiple for 2010 for the peer group: P/E 14,6x, P/S 1,26x and EV / EBITDA 7,59x, and the current multiple of the group Končar is: P/E 10,2x, P/S 0,45x and EV/EBITDA 8,57x. If we take this Information into account in the valuation model, we obtain that the implied value of Končar Group shares are 484,26 HRK. Do you believe in the State and their announcement of the new infrastructure works? Certainly do not forget that a good part of that applies to railways and energy. All this is just an added incentive, and another positive sign for that stock.
Yesterday we received yet another announcement of Business results for the fourth quarter and 2009 from Viro sugar factory. Although sugar is sweet, the same cannot be said for their 2009 results. Their sales declined 32% in relation to the previous year. The basic reason for this is the reduction of sugar and the absence of increased sugar prices in the market during 2009. Furthermore, there was reduction in sugar production from imported raw sugar in the previous year and a significant decline in exported sugar into the EU market. Exports decreased 38% in comparison to the previous year. Due to the significant decrease of income, Viro reduced total expenditures in 2009 by 29,5% through which they were ultimately able to achieve a net gain of 49% in the reported period.
A little sweet something on the bottom line ;). At this point, we are turning more to the Business of Viro, because we will be sending a company note with a detailed analysis of the company’s Business results during the course of the day.
Today we further expect trading at lower volumes, however on a positive note due to the positive sentiments from abroad. Have a nice day!
CROATIAN EQUITY market; HIGHLIGHTS
| DOWN | 39 |
| NO CHANGE | 5 |
| UP | 32 |
| TOTAL TRADES | 76 |
exchange RATES (table)
TOP PERFORMERS (table)
CROBEX/ General info/ Change (%)/ Fundamentals (Trailing Basis) (table)
CRO -- Croatia Zagreb CROBEX (charts)
- QUOTE OF THE DAY:
“Doubt is uncomfortable, certainty is ridiculous.”
Voltaire
Medika Group - results of operations in 2009
Medika Group is one of the few companies that reported positive Business results in 2009. Despite the difficult conditions present in the past year, on the top line the Group achieved an increase in sales revenue of 5,2% over the same period last year. An aggravating circumstance to the group is the declining price of medicine, which amounted to 12% in the first half of the year. On the other hand, as a positive impetus for sales growth was the opening of new pharmacies in the ZU Prima Pharm system. The number of pharmacies within the ZU Prima Pharm system was 48 on December 31st 2009 which was 4 more than on the last day of 2008. In the end, the Group’s total operating revenues were 5,6% higher than in the same period in 2008. This growth in total Business income was further helped by the fact that income from operations increased to 42,4% in the reporting period.
With the growth of operations, there is the growth of operating costs. Operating expenses grew 5,5% in 2009 in relation to 2008. In terms of operating expenses, material costs grew by 4,8%, followed by staff costs by 2 3%and other expenses from 2,3% operations by 31,7% in the reporting period. Given the higher growth in total operating revenues of operating costs, the Group achieved EBITDA growth in 2009 of 10% compared to the 2008. Due to increased depreciation costs, EBIT was increased in 2009 by of 7,9 % compared to 2008. Thanks to higher financial income based on interest and exchange rate differences, the group has managed to mitigate the net financial loss in 2009. Ultimately this has led to growth in net profit in 2009 of 29,5% compared to 2008.
In terms of important events that occurred in 2009, it is worth mentioning that the Group founded Primus Property in the second quarter of last year. They then purchased a new building in Dugopolje and the Split Business center moved to this location. Also, in late September three tranches of commercial records were issued in the value of 4 million HRK (8. tranch), 1 million EUR (9. tranch), 5,5 million EUR (10. tranch) with the aim of refinancing the previous tranch (7. tranch) of commercial records.
For the current year, Medika Ltd. anticipates sales growth of 2% (with the tendency to increase 5% annually until 2013), which would increase current market share from 28,66% to 28,75%. The strategy of ZU Prima Pharm is to expand their pharmacies throughout the whole of Croatia.
PERIOD (000) HRK (table)
FY 2008 / FY 2009 (table)
Trailing basis indicators (table)
Trailing basis margins (table)
MDKARA ZA share price movements (chart)
CROATIAN EQUITY market; FUNDAMENTALS OF SELECTED COMPANIES
Selected Croatian Equity Fundamentals (Trailing Basis) & Performance (table)
TECHNICAL OUTLOOK; CROATIAN EQUITY market - DLKV-R-A; daily graph
DLKVRA -- Dalekovod dd (charts)
So far, so good
- On Monday we looked at daily DLKV graph and we pointed out a buy signal on RSI. DLKV was then traded around 350 and now it is around 360. We positioned our T/P levels at 360 and 370. DLKV is slowly nearing those levels and breach of resistance at 355 looks especially bullish in short term (it happened yesterday). ADX shows that uptrend gained some strength in the last 4 days but it is nowhere near levels on which it could mean that up trend is overheated. 365/370 still looks like important resistance and we would leave our T/P on these levels. 355 could now become first support and 340 looks like very good support.
Trading suggestion:
- Same as on 15/3.
| Technical targets: | |
| 370,00 | low on 28/10/09 |
| 366,00 | 38,2% fibo |
| 361,60 | close |
| 355,00 | low on 23/11/09 |
| 340,00 | high on 8/12/09 |
WORLD EQUITY indices - FLASH DATA
Dow Jones increased the seventh day in a row
The Dow Jones index rose yesterday for the seventh day in a row, the longest period of its growth since August last year, when it strengthened by 4,9%. It was only strengthened by 1,7% in the last week. This is primarily the result of cautious investors who still do not see that there is a significant recovery of the US economy around the corner. The news of the producer price decrease in February (0,6%) had a positive effect on the market, because it confirms that inflationary pressures in the US are weak, which allows the FED to maintain interest rates at record low levels. Due to rising prices of oil and raw materials, the exchange rate raised dollar decline, there has been price growth in mining and energy sector. Among the biggest winners were shares of Alcoa, whose value increased 4,8%, after it was announced that the production slow is resolved in Italy.
AA US (chart)
TECHNICAL OUTLOOK; WORLD EQUITY indices - WIG20; daily graph
WIG20 - WSE WIG 20 index (chart)
Resistance levels
- Today we are looking at WIG20 index. This daily graph covers up trend form beginning of 2009. We can see that last correction has been completely annulled and index is very close to 2.500 (highest level in almost 2 years). We see very solid resistance around 2.500/55 (previous high + rising white trend line which proved to be resistance several times in the last 6 months). Although WIG tested 2.500 yesterday (but it has not breached it) RSI and CMCI are still showing sell signals. ADX tells us that up trend is prevailing, but it is not too strong. Support can be seen around 2.200 and 2.400/50. All in all... in case you are long we would be careful and sell part of the position around 2.500. More about this in trading suggestion.
Trading suggestion:
- Sell part of the position at 2.500 and rest around 2.550. Re-entry is possible around 2.450/400. S/L can be above white trend line.
| Technical targets: | |
| 2.555,00 | white trend line |
| 2.500,00 | high on 20/1/10 |
| 2.465,00 | close |
| 2.450,00 | high on 4/1/10 |
| 2.186,00 | high on 3/8/09 |
TECHNICAL OUTLOOK; TRACK RECORD (table)
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