So - Wirtualna Polska

Transcription

Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Periodic Report
7 November 2005
BRE Bank Securities
Equity Market
Monthly Report
Macroeconomics
WIG
33 318
Average P/E 2005
17.7
Average P/E 2006
16.4
Avg daily trading volume (3M)
PLN 772 m
Equity Market
WIG vs. indices in the region
Recent political events and speculations concerning zloty weakening could
induce market players to invest in “exporters.” However, this could prove a
risky strategy, due to the fact that higher bond yields and larger spreads, in
relation to bonds, will attract capital thereby influencing the currency market.
Exporters could be a refuge in the case of a mass capital withdrawal from
Poland (and other emerging markets). However, no one is predicting this
scenario yet.
45000
pkt
40000
35000
Banks. We are awaiting 3Q results. Income should be similar to that noted
in the first half of the year, but we expect higher provisioning as well as
some worsening in net interest income. This should not have a negative
impact on the evaluation of the sector.
30000
25000
WIG
20000
04-10-27
November
05-02-22
BUX
05-06-20
Analysts:
Marta Jeżewska
(+48 22) 697 47 37
Marta.Jeżewska@dibre.com.pl
Tomasz Mazurczak
(+48 22) 697 47 35
Tomasz.Mazurczak@dibre.com.pl
Michał Marczak
(+48 22) 697 47 38
Michal.Marczak@dibre.com.pl
Sławomir Sklinda
(+48 22) 697 47 41
Slawomir.Sklinda@dibre.com.pl
Andrzej Lis
(+48 22) 697 47 42
Andrzej.Lis@dibre.com.pl
Krzysztof Radojewski
(+48 22) 697 47 01
Krzysztof.Radojewski@dibre.com.pl
Przemysław Smoliński
(+48 22) 697 49 64
Przemyslaw.Smolinski@dibre.com.pl
Macroeconomic Analysts
(BRE Bank S.A.)
Janusz Jankowiak
Akadiusz Grabarczyk
Jacek Kotłowski
Artur Ulbrich
(+48 22) 829 01 66
www.brebank.com.pl
PX50
05-10-16
Media. Prior to results for 3Q Agora issued a warning about a probable
increase of costs that result from preparing new projects, which lowered
investor expectations concerning 3Q results. In the light of this information,
the published results were a pleasant surprise, mainly due to maintaining
the EBITDA margin above 20% and good outlook for 4Q. With this in mind,
we believe the sector’s prospects are good.
Telecommunications. PiS announced that it will accelerate liberalization of
telecommunications market. Changes in the law include strengthening the
role of the URTiP president and releasing the local loop. PIS also plans to
appoint a new URTiP president. Telecom stocks should perform in line with
the market over the next month.
IT. Comarch obtained a major client for its proprietary loyalty system. Computerland announced a new forecast for 2005, assuming revenues of more
than PLN 800 m and a net profit of more than PLN 20 m. It also obtained its
first outsourcing contract on the local government market. The consortium
comprising of Computerland, ABG Ster-Projekt, Comarch and Emax, signed
major contracts with the Ministry of Education for equipping computer labs
in schools. Softbank finalised the purchase of Incenti and Gladstone and
will increase its stake in Comp Rzeszow.
Construction. According to CSO data, 10.7 thous dwellings were completed in September, i.e. by 50.1% more than last year and 10% more than
in August. From the beginning of the year to September, 17.3 thous dwellings were completed (19% more than in the same period last year). Elektrobudowa decided to go forward with building a switchgear factory in Russia.
Following the unsuccessful PRInż acquisition, Polimex-MS remains interested in entering the segment of road and railway construction.
Pharmaceuticals. According to PharmaExpert, drug sales increased by
7.2% in September in relation to the same period last year. In turn, according to IMS Heath, the entire drug market grew by 8.4% in this period in relation to September of the previous year. Bioton has increased its commitment in SciGen to 44.78% and will announce a call for the remaining shares
in the near future. The Management Board of Farmacol expects good 3Q
results and is considering paying off a dividend if the eventual acquisition is
not finalised.
BRE
Bank Securities
does not rule out offering brokerage services to an issuer of securities being the subject of a recommendation. Information concerning a conflict of interest arising in
7 November
2005
connection with issuing a recommendation (should such a conflict exist) is located on the final page of this report.
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Equity Market
Questions about the End of Deflation
Spring corrections on equity markets in 2004 and 2005 were connected with the increase of
US bond yields: respectively to 4.9% and 4.6% on 10-year bonds. Currently, the latter level
has been exceeded again, but equity markets have already experienced a downward wave of
several percent. Recently, data concerning a better than expected increase of labour efficiency
in 3Q (4.1%) as well as the decline of labour costs caused a marked recovery. This shows
only that the markets are very sensitive to inflation in the US.
US corporate profits increased in 3Q as expected (some 15% y/y). General EPS of US companies is at record levels and account for almost 12% of GDP.
Dynamics of EPS in US - S&P 500
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
-5
-10
-15
-20
Source: CNN based on First Call data
This level is accompanied by a general consensus that EPS growth in 2006 will be high, which
is somewhat of a threat to the market. Moreover, in the context of high valuations (higher average P/E than in Europe) and increasing interest rates (more than in Europe) it is likely that the
US equity market will be disappointing next year.
However, the Polish equity is more concerned about the economic growth of US as well as the
target level of interest rates than about the performance of US equities. If there is no economic
growth in the US, equity markets around the world will not develop. The forecast of 3.5% increase of GDP in the US should be sufficient to maintain a strong global economic growth and
a positive climate for equities, and particularly to maintain a strong growth of the Asian economies. Forecasts of the Fed rate fluctuate between 4.25% and 5% for 2006. Hedge funds leveraging positions in USD are again under pressure. The relative increase of the attractiveness of
US assets will probably be weakened with the prospect of subsequent depreciation of USD.
Nevertheless, all parameters important for US inflation (labour efficiency, labour costs, employment, utilisation of production capacity, base inflation) will continue to exert a strong influence on equity markets.
Political uncertainly in Poland has probably peaked – the formation of the government may
even improve the investment climate. In addition, the government’s economic achievements
should no longer (at least for the next several months) dampen the investment climate – declarations of postponing the date of adopting the euro has already cast a shadow over the market. Yields on 10-year bonds are almost 1 percentage point higher than last month and
amount to 5.6%. Global threats of deflation are have passed and therefore Poland will have to
confront a steeper profitability curve. This phenomenon will improve the margins of banks,
however, in the short-term, it will negatively influence the value of the trading portfolio. Banks
that sold their bonds earlier will benefit from this.
Recent political events and speculation concerning zloty weakening could induce market players to invest in “exporters.” However, this could prove a risky strategy, due to the fact that
higher bond yields and larger spreads, in relation to bonds, will attract capital thereby influencing the currency market. Exporters could be a refuge in the case of a mass capital withdrawal
from Poland (and other emerging markets). However, no one is predicting this scenario yet.
7 November 2005
2
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Current recommendations of BRE Bank Securities S.A.
Company
Recommendation
BPH PBK
Suspended
BZWBK
Hold
GETIN
Suspended
HANDLOWY
Suspended
ING BSK
Suspended
KREDYT BANK
Suspended
MILLENNIUM
Suspended
PEKAO
Suspended
PKO BP
Suspended
AGORA
Accumulate
BUDIMEX
Reduce
COMARCH
Under review
COMPUTERLAND
Under review
ECHO INVESTMENT
Under review
ELEKTROBUDOWA
Hold
EMAX
Under review
FARMACOL
Accumulate
Target price
Date issued
119.00
2005-09-26
74.00
2005-08-05
38,1
2005-09-20
35.00
2005-09-19
39.60
2005-09-06
FORTE
Buy
13.80
2005-03-18
HOOP
Accumulate
14.50
2005-03-18
INDYKPOL
Suspended
JELFA
Buy
KĘTY
KGHM
Hold
Reduce
KROSNO
Under review
LOTOS
Hold
35.50
2005-09-05
MONDI
Accumulate
49.00
2005-11-02
NETIA
Under review
ORBIS
Under review
70.00
2005-02-25
129.50
34.70
2005-08-04
2005-08-08
4.50
PGF
Hold
58.10
2005-09-06
PKNORLEN
Hold
58.90
2005-09-05
POLIMEX
Hold
43.80
2005-09-19
POLMOS LUBLIN
Accumulate
35.00
2005-08-22
PROKOM
Buy
SOFTBANK
Accumulate
TELEKOMUNIKACJA POLSKA
Hold
19.50
2005-02-08
TORFARM
Accumulate
45.90
2005-09-06
7 November 2005
145.00
2005-10-25
36.70
2005-09-02
3
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Changes in recommendations within the last month
Company
Recommendation
MONDI
Accumulate
PROKOM
Buy
Target price
Date issued
49.00
2005-11-02
145.00
2005-10-25
Recommendation Statistics
Issuers for which BRE Bank Securities S.A.
has rendered services
All
Statistics
number
percentage
7 November 2005
Sell
Reduce
Hold
Accumulate
Buy
Sell
Reduce
Hold
Accumulate
Buy
0
2
8
7
3
0
1
2
3
1
0.0%
10.0%
40.0%
35.0%
15.0%
0.0%
14.3%
28.6%
42.9%
14.3%
4
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
The Polish financial market did not at first respond badly to the victory of Law and Justice (PiS)
in the Parliamentary elections. It ignored the unpredicted nomination of the unknown candidate
for the Prime Minister. Even after the PiS candidate won the second round of the Presidential
elections, the correction was still minor, though it already became clear that PiS took it all and
the Civic Platform (PO) lost the whole lot. The market was patiently waiting for the cabinet to
be formed. Nervousness crept in when it became clear that there would be no PiS-PO coalition. The Zloty depreciated immediately by over 2%, market interest rates rose by over
40 basis points, and the stock exchange fell by over 3%.
Valuation of PLN-denominated assets failed to feature a scenario of no majority PiS-PO governing coalition (this scenario was considered highly unlikely). No wonder. All in all, the electorate, both of PiS and of the PO, knew in advance that a coalition of these two parties would
take power. They had been reassured a number of times by PiS and PO leaders. No one was
expecting that this fundamental promise would be broken. Today, one may wonder whether in
fact PiS was not playing the PO card right from the scratch in order to upkeep its chances in
the elections, never really intending to share its victory with the economic “liberals”. If such
was the case, then everyone (PiS voters included) fell for the masterful plan of the Kaczyński
brothers.
A government formed by PiS only may merely put into operation PiS electoral program, since
there is no other plan. The attempt at implementation of this program will have no serious adverse consequences for the 2006 budget, as it is simply too late now. However, the risk to the
2007 budget is now on the rise. The PiS program involves multiplying public spending without
indicating the sources of financing. It is a program whereby the State being a market player
will intervene at taxpayers’ cost. The program fails to guarantee an effective use of labor and
capital. It will neglect to avail of the know-how and expertise in order to improve the competitive edge of our economy.
Poland’s duty to reduce the public finance deficit under the excessive deficit procedure (EDP)
will serve as a rigid restraint upon costly interventions anticipated by the PiS program. The
EDP procedure requires the deficit to be reduced by at least 0.5 percent of GDP year by year.
Infringement of the EDP procedure would jeopardize Poland’s access to the structural funds.
Hence, the spending spree is being been kept in check, although not all local politicians seem
to be aware of it. We believe that no government would dare to expose Poland to a risk of a
potential loss of approx. EUR b 11, available during the term of office of the newly elected
Parliament. In other words: it is not possible to implement the entire version of the PiS program. Yet, a part of it may be put into practice with the support of Samoobrona, LPR and PSL
In our opinion, the negative reaction of the market to a minority PiS government will be moderated over a short term, within the horizon of the coming few months, by to the already highly
determined structure of the next year’s budget, left behind by Minister Gronicki. During this
period, the scale of market interest rate growths and the weakening of the Zloty will depend
not so much on assessment of new legislative bills (which will fail to appear) as on potential
proposals of amendments to the structure of financing the next year’s deficit (more domestic
issues, less foreign issues). However, the real market test for the minority PiS government
(should it survive at all) will come next spring when the government will have to present the
draft 2007 budget and the related legislation.
7 November 2005
5
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
Main Macroeconomic Indicators
GDP and Output
GDP
Domestic demand
Private consumption
Gross fixed asset investments
Value added
in industry
in the construction sector
in the market services sector
Industrial production growth y/y
Industrial production growth m/m
Retail sales y/y
Retail sales m/m
Labor Market
Average wages in enterprise sector (in PLN)
Wages growth m/m (CPI-adjusted)
Wages growth y/y (CPI-adjusted)
Employment m/m
Employment y/y
Unemployment rate
Foreign Trade
Current account (in US$)
Foreign trade in goods balance- payment basis (in
US$)
Exports – payment basis y/y (in US$)
Imports – payment basis y/y (in US$)
Current account (in EUR)
Foreign trade in goods balance- payment basis (in EUR)
Exports – payment basis y/y (in EUR)
Imports – payment basis y/y (in EUR)
Current account (% GDP)
Prices
CPI m/m
CPI y/y
CPI annual average
HICP y/y
Net inflation y/y
PPI m/m
PPI y/y
Money Aggregates
Money supply (M3)
Money supply y/y
Cash in circulation
Total loans
Total household loans
Total corporate loans
Total deposits
Total household deposits
Total corporate deposits
Forex Rates
US$/PLN rate (end of month)
EUR/PLN rate (end of month)
Interest Rates
NBP intervention rate
Lombard rate
Deposit rate
Mandatory reserves rate
WIBOR 3M
Bond yield 2Y
Bond yield 5Y
Bond yield 10Y
Aug 04
Sep 04
May 05
Jun 05
13.7%
1.8%
9.6%
-1.5%
4.9%
5.2%
3.6%
4.3%
4.6%
7.3%
-3.1%
4.5%
9.5%
9.0%
8.8%
0.7%
3.5%
-0.3%
4.0%
2.3%
0.9%
-4.8%
8.0%
0.2%
2.8%
-0.3%
1.5%
3.8%
2.8%
2.6%
10.8%
2.7%
6.9%
9.0%
10.5%
4.6%
2412.66
-0.2%
0.3%
-0.1%
-0.8%
19.1%
2439.59
1.1%
-0.6%
0.1%
-0.6%
18.9%
2386.34
-2.8%
-2.0%
0.3%
-0.4%
18.7%
2423.92
-2.2%
0.5%
0.1%
1.6%
18.3%
-410
-971
-505
-961
Oct 04
Jul 05
Aug 05
Sep 05
Oct 05
2.6%
-7.9%
5.0%
0.7%
4.8%
4.0%
7.9%
1.2%
3.3%
1.7%
2.1%
6.0%
3.2%
3.7%
8.2%
2.8%
5.5%
9.8%
5.4%
-1.7%
6.1%
1.5%
6.3%
3.1%
2512.78
3.9%
3.0%
0.3%
1.7%
18.0%
2506.55
0.0%
1.9%
0.0%
1.8%
17.9%
2480.56
-0.9%
1.2%
0.1%
2.0%
17.7%
2483.99
-0.3%
0.0%
0.2 %
2.2%
17.6%
2472
-1.0%
1.9%
0.2%
2.1%
17.4%
93
-531
-468
-266
-364
-420
-199
-631
-209
-345
-453
-328
35.8%
35.2%
-338
-299
24.3%
23.8%
-4.0%
30.6%
31.5%
-797
-344
20.0%
20.7%
-4.3%
25.4%
23.1%
-407
-160
17.5%
15.3%
-4.6%
17.7%
20.1%
-754
-495
11.3%
13.5%
-2.6%
13.2%
11.2%
77
-172
12.9%
10.8%
-2.2%
11.0%
6.8%
-438
-286
12.9%
8.7%
-1.9%
16.3%
16.7%
-380
-368
15.5%
15.5%
-1.9%
16.4%
14.4%
-217
-267
15.8%
13.8%
-1.6%
-0.4%
4.6%
2.5%
4.9%
2.3%
0.3%
8.5%
0.3%
4.4%
2.8%
4.7%
2.4%
-0.1%
7.9%
0.6%
4.5%
2.9%
4.6%
2.4%
1.2%
7.6%
0.3%
2.5%
4.0%
2.2%
1.5%
-0.2%
-0.5%
-0.2%
1.4%
3.7%
1.4%
1.4%
0.3%
0.0%
-0.2%
1.3%
3.5%
1.5%
1.4%
0.2%
0.0%
-0.1%
1.6%
3.2%
1.8%
1.3%
0.1%
-0.2%
0.4%
1.8%
3.0%
1.8%
1.3%
0.0%
-0.2%
0.4%
1.6%
2.9%
1.7%
1.3%
-0.1%
-0.6%
356.6
355.9
375.5
50.1
264.8
112.4
123.8
300.3
191.5
76.5
50.5
282.8
128.1
124.6
319.4
194.7
78.1
391.5
10.8%
53.8
281.8
125.6
125.9
325.3
199.7
85.9
389.5
10.4%
55.3
283.3
128.8
125.6
324.4
200.6
83.6
396.2
11.1%
55.2
287.3
131.8
125.3
330.9
201.2
88.4
401.2
12.7%
55.4
290.4
133.7
125.7
335.6
200.2
93.1
406.0
8.1%
50.9
263.7
111.3
124.1
300.7
192.3
76.7
393.4
13.2%
52.9
285.5
130.0
126.1
329.6
200.1
83.9
3.6816
3.5569
3.396
3.3845
3.3518
3.3508
3.2527
3.2611
3.3074
4.4465
4.3832
4.3316
4.1675
4.0392
4.0692
4.0146
3.9201
3.9642
6.50%
8.00%
5.00%
3.50%
7.00%
7.82%
7.64%
7.30%
6.50%
8.00%
5.00%
3.50%
6.91%
7.06%
6.98%
6.74%
6.50%
8.00%
5.00%
3.50%
6.84%
6.87%
6.74%
6.45%
5.50%
7.00%
4.00%
3.50%
5.24%
5.114%
5.168%
5.125%
5.00%
6.50%
3.50%
3.50%
4.70%
4.560%
4.660%
4.683%
4.75%
6.25%
3.25%
3.50%
4.48%
4.645%
4.892%
4.910%
4.50%
6.00%
3.00%
3.50%
4.41%
4.415%
4.634%
4.741%
4.50%
6.00%
3.00%
3.50%
4.30%
4.026%
4.529%
4.647%
4.50%
6.00%
3.00%
3.50%
4.43%
4.60%
5.083%
5.293%
Source: GUS, NBP, Eurostat, Reuters, BRE Bank SA
7 November 2005
6
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
Trends
USA – Longer and Longer Inflation Shadow
There seems to be no end to the discussion on the upside and downside balance of risks upon
the future inflation and growth in the Unites States. Difference of opinions remains wide. And
although facts seem to more and more favor those who forecast a greater jeopardy on the side
of inflation rather than growth, there are still some who say that low market interest rates’ level
is a sign of an opposite phenomenon.
7
PPI
CPI
10Y
6
5
4
3
2
Ja
n04
M
ar
-0
M 4
ay
-0
4
Ju
l-0
Se 4
p0
N 4
ov
-0
Ja 4
n0
M 5
ar
-0
M 5
ay
-0
5
Ju
l-0
Se 5
p05
1
Source: EcoWin
In September the CPI in the United states rose to 4.7 percent on a yearly basis. Manufacturer
prices increased up to 6.9 percent, the highest level in 14 years. Although the yields of 10Y
bonds reached a peak since March this year and exceeded 4.5 percent, the value of the CPI
has for the first time since the 80-ties outrun the yields of 10Y bonds. Market interest rates are
indeed growing, but the process is very slow and divulges investors’ wavering moods as regards their assessment of prospects of the US economy.
It is worthy of note that 10Y bond yields in the United States being close to 4 percent have
historically corresponded to a growth of roughly 1.3 percent of GDP. Hence, even considering
a worst-case scenario of GDP dynamics, the present interest rate level seems unsustainable.
During the forth quarter of the year and the first quarter of 2006, the GDP dynamics in the
States should exceed 4 percent in order to stabilize at 3.5-3.8%, i.e. close to the potential, at
the year end. In our view, the economic growth in the states may decelerate noticeably during
2007-2008 due to potential increase of tax burden, higher rental costs, lower consumption and
reversal from an accommodating monetary policy. Until then, interest rates will keep on growing.
Replacement of the Fed chairman will not stop the process. The fed funds rate at the turn of
the first and second quarter of 2006 should reach 5 percent. The market interest rates should
rise to 5.50-5.75 percent during the same period.
A passing nature of the CPI growth following the supply shock may not certainly be an argument against tightening of the monetary policy. The present stabilization of core inflation at the
level of approx. 2 percent must be perceived in the context of its impact upon the core dollar
index. Studies which have been well-documented on long time series indicate that an impact
of a weak dollar has some 2.5 year lag upon the core inflation growth. The dollar ceased to
depreciate at the end of 2004, and it means that the core index should go up at the end of
2006 and in the first half of 2007.
1.4
EUR/USD
1.3
1.2
1.1
Ja
n03
M
ay
-0
3
Se
p03
Ja
n04
M
ay
-0
4
Se
p04
Ja
n05
M
ay
-0
5
Se
p05
1
Source: EcoWin
7 November 2005
7
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
Considering the economic growth forecasts, today we can state with a great certainty that the
new cycle of monetary policy easing may begin in the United States only after the inflation
expectations stabilize in the mid-2007.
The Euroland – 6 Bad Years
The GDP dynamics in the Euroland will not exceed 1.2 percent this year. Forecasts indicate
that also in the forthcoming year, for a sixth time in a row, the rate of Euroland growth will be
below the long-term 2-percent trend. At the same time, mainly due to high oil price level, the
CPI will remain below the ECB target, growing up to 2.6 percent in September.
CPI
3
2.5
2
1.5
1
0.5
0
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
GDP
2005
Q3
Source: EcoWin
The conditions in the real sphere of the economy and inflation prospects place the ECB in a
highly difficult position. However, beginning from May, when the Bank has not precluded interest rate reductions as yet, the shift of risk in the balance of risks towards inflation becomes
more and more visible.
The market which until June discounted the first 25-point interest rate increase in the Euroland
not before the spring of 2007 (EONIA swap based forward contracts), is now clearly expecting
a tightening of the monetary policy much earlier. At present, the first interest rate increase is
anticipated to take place in the second quarter of 2006. The market evaluates its likelihood at
50 percent.
100
98
IFO
96
94
92
90
88
Ja
n
-0
Ap 3
r0
Ju 3
l-0
O 3
ct
-0
Ja 3
n0
Ap 4
r0
Ju 4
l-0
O 4
ct
-0
Ja 4
n0
Ap 5
r0
Ju 5
l-0
O 5
ct
-0
5
86
Source: EcoWin
The changes in the balance of risks are followed by a progressive increase in the market interest rates in the Euroland. Beginning from the bottom level of 3.02 percent, the German 10Y
bonds should hit as much as 3.50 percent at the year end, reaching 4.0-4.25 percent at the
end of 2006, yet still far from last year’s 4.42 percent.
Arguments in favor of higher interest rate increase could be as follows: the Euroland economy
reacts to a shock caused by high oil prices better than could have been expected, the leading
indicators are heading upwards, consumer confidence index which has been nose-diving stabilized during the summer; weakening of the euro during the period of September-October
corresponds to some 25 basis point reduction of the interest rate; money supply is accelerating.
However, there are serious arguments against interest rate increases as inflation expectations
are still well anchored, the core inflation is stable, there is no second round effects, internal
demand is goring more slowly than the GDP which is sill low (1 percent); and high money supply fails to translate into the growth of consumption or investments.
7 November 2005
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In our opinion the arguments against interest rate increase in the Euroland are still stronger
than beyond this zone. We believe that the ECB will soon focus its efforts on anchoring the
inflation expectations, which is most easily attainable by intensification of anti-inflationary
rhetoric.
Monetary Policy
Inflation – Hike Lower than Worldwide
As a result of high fuel prices, in September the inflation in Poland rose up to 1.8% y/y (by
0.4% m/m from 1.6% in August). However, the “oil shock” in Poland was relatively lower than
in the United States or in the Euroland, mainly due to reduced excise on fuels and appreciation of the zloty. Fuel prices rose by 3.4% “only”.
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
-0.2%
-0.4%
-0.6%
-0.8%
09 2005
07 2005
08 2005
05 2005
06 2005
04 2005
02 2005
03 2005
12 2004
01 2005
10 2004
11 2004
08 2004
09 2004
07 2004
05 2004
06 2004
Others
Transport
Dwelling
Clothing and footwear
Alcoholic beverages, tobacco
Food and non-alcoholic beverages
03 2004
04 2004
02 2004
Contribution to CPI m/m
We believe that this inflation hike is only temporary. The CPI should remain close to the bottom-level inflation target in the remaining months until the end of the year. In the first quarter
of 2006, the inflation may growth (the base effect and the anticipated increase of excise on
fuels, by even PLN 0.35/liter), but it should not exceed 2%. All these phenomena are taking
place under the conditions of stable and low base inflation. The net inflation remained at an
unaltered level of 1.3%; the remaining measures give no cause for concern as well.
The inflation anticipations are beginning to grow as well, up to 1.4% in September (from 1.3%
in August). The structure of this index implies further upward movement in the coming
months. First of all, the inflation with a 2-period lag on the basis of which the expectations are
shaped is now beginning to grow (inflation expectations in September correspond to CPI for
July, when it totaled 1.3%, i.e. the bottom level this year). Secondly, the future inflation indicator published by Ipsos fell below 100 points already, which means an expected acceleration of
inflation. However, it must be added that the inflation expectations should not remain permanently anchored at a level below the bottom target line.
Despite a continued growth of fuel prices, the PPI dynamics remains low. August figures have
been revised downwards to 0.2%y/y, in September, prices reported a decline at the same
pace. By December, this dynamics should remain close to 0%.
We are facing a situation of absence of inflation pressure on the one hand and companies’
incapacity to transfer higher fuel prices upon recipients on another hand. Cost indexes reported in figures on corporate results are growing faster than their sales revenues, while deterioration of financial performance undermined propensity to invest, above all in small and medium companies which are most prone to fluctuations of demand and costs driven by external
factors.
In the business tendency studies so far the largest companies reported the highest propensity
to invest, whereas in the third quarter of the year the drop was highest in this group. Small
companies report higher than average propensity to finance investments from bank loan. How
does this relate to figures on money supply?
Corporate deposits rose by some PLN b 5 second month in a row. A major portion of these
funds stand for special deposits (Poland’s telecom operator TP S.A. accumulated funds to
acquire shares in PTK Centertel – almost PLN b 5, gas and mining giant PGNiG deposited
IPO proceeds on bank accounts, i.e. some PLN b 2.7), yet it is clear anyway that these companies still refrain from reaching to use their reserves and spend them on investments.
7 November 2005
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In addition, corporate loan dynamics remains very low. Although we have been observing
positive dynamics of these indexes in recent months, yet the 2% y/y level of corporate borrowing can hardly be considered a sign of investments’ growth.
40%
30%
20%
10%
0%
Ja
n0
M 2
ay
-0
Se 2
p0
Ja 2
n0
M 3
ay
-0
Se 3
p0
Ja 3
n0
M 4
ay
-0
Se 4
p0
Ja 4
n0
M 5
ay
-0
Se 5
p05
-10%
Corporate deposits y/y
Corporate loans
Source: NBP
Even a very high FDI growth reported in the revised figures on the C/A account beginning from
the launch of 2004 cannot trigger investments’ growth. This hike is purely statistical by nature
(please refer to the text box below). This growth cannot stand as an argument in favor of a
higher investments dynamics than reported by the Central Statistical Office (GUS).
Money supply figures reveal an accelerating dynamics of household borrowing, which is nearing 20% y/y. It is partly a result of mortgage loans. By August, the volume of household borrowing increased since the start of the year by some b 17, of which b 9 stands for home loans
(by and large denominated in foreign currencies).
The figures on consumption reveal no sign of the effect of increased household borrowing.
Purchase of furniture, radio and television equipment & household appliances are made at the
cost of reduced vehicle purchases. Most probably it has altered the structure of loans for purchase of products, yet the volume has picked up only slightly.
Ja
n03
Ap
r-0
3
Ju
l-0
3
O
ct
-0
3
Ja
n04
Ap
r-0
4
Ju
l-0
4
O
ct
-0
4
Ja
n05
Ap
r-0
5
Ju
l-0
5
140 000
120 000
100 000
80 000
60 000
40 000
20 000
0
Housing loans
Household loans
Hire purchase loans
Source: NBP
In the light of salary & wage figures, a sustainable acceleration o private consumption should
not be expected at the moment. Next year’s indexation of pensions and illness benefits and
higher subsidies for farmers may be an impulse.
Nil Movement of Real Salaries
Real growth of salaries in the corporate sector could have been observed for a period of 5
months. It ended faster than we could have expected, even despite no substantial hike of inflation in September. We did expect a lower annual salary dynamics (high base for the last year),
but the drop has surprised us. 1.8% y/y growth means that the salary growth has merely offset
the inflation increase.
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Macroeconomics
8%
6%
4%
2%
0%
Ja
n0
M 2
ay
-0
Se 2
p02
Ja
n0
M 3
ay
-0
Se 3
p03
Ja
n0
M 4
ay
-0
Se 4
p04
Ja
n0
M 5
ay
-0
Se 5
p05
-2%
Nominal wages y/y
Real wages y/y
Source: GUS
When broken down into sectors, the changes seem stable over the period of the last few
months. Salaries in industrial processing are growing at a rate slightly surpassing 2%. On the
other hand, in construction the growth topples 5%. Then again, labor efficiency and producer
prices are growing faster in this sector.
Salary dynamics may be greater in October, as the base is much more favorable. In our view,
growth of even as much as 4% should be no surprise. Yet, this tendency is not sustainable.
Average rate of salary increase should return to below 3% in the coming months. As we have
mentioned a month ago, low salaries are yet another item in a puzzle depicting corporate environment. Salaries growth is curbed by 2 factors: high unemployment rate limits salary demands, while high fuel prices reduce the propensity of entrepreneurs to satisfy these claims.
Given such conditions, the effects of the second round may only be spoken of in theory.
Nonetheless, if MPC members accentuate that the second round effects are the sole factor
jeopardizing the inflation, and November was pointed to as the month of interest rate reductions, the market reaction to publication of figures on salaries in November may be quite nervous.
Employment in the corporate sector is on the rise (growth by 0.2% m/m in September), reaching 2.2% on an annual basis. If the former monthly growth dynamics of 0.1-0.2% were to be
continued, at the turn of 2006 the annual dynamics would have fallen to some 1.5% (January
of 2005 witnessed a leap growth of employment). The rate of unemployment continues to all,
though due to seasonal factors, the decline is slower and slower. In December and January
the unemployment may rise (due to seasonality), yet, despite weaker rate of economic growth,
the rate of unemployment will anyway be 1 percentage point lower than a year ago (we estimate it at 17.8%).
Output, i.e. Feeble Domestic demand
Figures on output are no surprise. Growth of industrial production by 5.5% y/y is higher than in
the past months. Yet, along with figures on construction and assembly sector (10.5% y/y,
much weaker than in Q2) this data can hardly be considered impressive.
Growth of industrial output should be analyzed with foreign trade dynamics. If the exports grow
(15% y/y in August) despite a relatively low production dynamics, how would the internal demand progress?
Major growth of output is reported in exports-oriented sectors, such as machines and equipment, metal products, non-metal products.
3
O
ct
-0
3
Ja
n04
Ap
r-0
4
Ju
l-0
4
O
ct
-0
4
Ja
n05
Ap
r-0
5
Ju
l-0
5
-0
3
l-0
Ju
Ap
r
Ja
n03
35%
30%
25%
20%
15%
10%
5%
0%
-5%
Exports y/y
Industrial output y/y
Source: GUS, NBP
7 November 2005
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Figures confirm the earlier information on the economic growth based on the former forecasts:
Q3 will be somewhat better than Q2 (majority of GDP growth forecasts have been reduced to
3.3-3.6% in Q3, we are near the bottom line).
Figures on domestic demand dynamics will be of particular importance. According to our estimates, it will remain low, though its contribution to GDP should not be negative. If domestic
demand is found not to accelerate, it is hard to expect of the Monetary Policy Council to remain indifferent. Despite objections of some of the Council’s members, including its Chairman
Balcerowicz, the MPC managed to push though 2 interest rate reductions in July and in August.
We are convinced that in the case of low pace of domestic demand dynamics, the same majority will vote in favor of successive interest rate reductions. Basically, all the MPC members
who made announcements in this issue spoke in unison that the decisions on interest rates
must be deferred until November (GDP figures in Q3 are published by the Central Statistical
Office (GUS) on November 29, i.e. on the day the MPC holds its meeting.
If an interest rate reduction took place in November, most probably it would not have been the
last one. Successive reduction could be anticipated in Q1 2006, if intensification of political risk
resulting from tensions along the PO-PiS line of contacts would not prevent it.
Assumptions of Monetary Policy for 2006
Are such conclusions as regards the MPC conduct justified in the light of “2006 Monetary Policy Guidelines”? What are the differences versus the earlier documents of the same type?
Let us point out the major items of the Guidelines that may constitute better foundations to
forecast the course of the monetary policy than the scarce content of the communiqués issued
after the successive monthly meetings of the MPC.
1. Starting from the next year, the Council has decided to put an end to the three-grade system of monetary policy bias which it adopted only a year ago. The decision may or may not be
agreed with (there are differences of opinions, both amongst MPC members as well as
amongst market players). However, it is difficult to concede that the central bank abandoned
the bias without a single word of explanation. The bias simply disappeared from the monetary
policy toolbox. Leaving aside complaints on lack of transparency, the following question is,
however, unavoidable: should the bias be discontinued while it is expansive, neutral, or tightening? Or perhaps the Council believes it is of no pertinence? The answer to this question
remains an unknown as the issue is not mentioned in the “Guidelines”.
2. The Monetary Policy Council has emphasized that the inflation target is to keep the CPI
close to 2.5 percent rather than within the band. The “Guidelines” highlight the symmetry of the
target. According to the Council, this means that a downward deviation from 2.5 percent is
undesired in the same way as a surplus of 2.5 percent (based on a twelve-month continuous
target). This is a novelty indeed. This principle, obvious to a number of central banks, has
never before found its way to any official documents of the Council. Notice is made of this with
a particular appreciation and satisfaction.
3. After a yearly absence, the F/X market interventions are back again in the “Guidelines” as a
monetary policy instrument permitted as part of the floating F/X rate regime. This may seem
trivial, yet it is appreciable, since interventions were out of question a year ago without any
sound reason.
4. A definitive statement that Poland will join ERM2 with a floating F/X rate has been repeated,
which – as it seems - should put a stop to all speculations about the Council’s approval of
some form of a fixed rate system, (such as a currency board for example). What would this
mean if the zloty continues to appreciate strongly? It would bring about problems with economic growth, low inflation, and low interest rates, not to even mention the political problems
with the government.
5. The MPC has once again emphasized the importance of core inflation indicators as a tool in
assessing inflationary pressure in the economy. Notably, this time it was said in the context of
deliberations as regards the central bank’s possible reactions to supply shocks (these deliberations deserve a high praise). It should constitute a prime-rate information for market players given alone that the CPI is growing as a result of oil price increases and lower food price
rises; furthermore, there is a consensus that in Q1 2006 the CPI will rise briefly close to the
target, yet the core inflation is and will remain very stable at 1.3 – 1.4 percent. This information
7 November 2005
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should be important news, but would it? Hard to say, since a number of individual Council
members accentuated the threat of CPI growth and carefully overlooked the informative value
of core inflation indicators.
6. Another innovation in the “Guidelines” is the emphasized statement that it is not the level of
real interest rates, but also the real fx rates that determine the degree of restrictiveness of the
monetary policy. This clichéd assertion gains particularly in importance if we look at the MCI
levels throughout 2001—2005. The present MCI level only slightly differs from the fast disinflation phase in 2001. It is so mainly due to currency appreciation. According to all available information, appreciation pressure in H1 2006 will be comparable to H2 2005. Much depends on
the manner of financing the budget deficit by the new government. Continuation of the formula
whereupon foreign borrowing exceeds domestic financing, proposed by Gronicki, will intensify
the potential appreciation pressure (the limit of the government’s currency exchange in the
central bank is too low to absorb all foreign issues).
7. Another novelty is the highlight on the balance of risks to future inflation and growth. However, it is hard to refrain form putting a question at this point: why had such important information, highlighted in the “Guidelines”, been missing from the communiqué issued after the last
MPC meetings? Neither the September nor October communiqués did not specify any balance
of risks.
8. The „Guidelines” also mention the information that deviation of the inflation path from forecasts published in inflation projections suggests that economic processes defy expectations.
This is incontestable: half a year or even a quarter ago no one could have fathomed a negative contribution of domestic demand to GDP.
9. The balance of risks reflected in the „Guidelines” is such that GDP growth may be expected
to come close to the potential while inflation may be expected to hit the target during the time
horizon of the monetary policy impact. Clearly, interest rate change may hold back or put off
the closing down of the output gap. However, the “Guidelines” fail to explicitly specify the
Council’s preferred scenario on this issue.
10. Stabilization of inflation expectations close to the target might be decisive for interest rates.
The Council had stated in its „Guidelines” that such stabilization might be difficult to achieve in
2006. The problem is that - as we all know very well - the inflation expectations are bound to
rise at this point in time (it would be difficult to keep them at some 1 percentage point below
the inflation target even without oil price rises). The point is to keep them from exceeding the
target. Can interest rates do it?
11. And so the notorious “second round effects” are back. The question is why should the effect of the second round appear after the “oil shock”, while it did not surface after the “EU accession shock”? There is no answer to this question in the Guidelines, other than a little hint
that the situation on the labor market continues to fight a growing payroll pressure. It is definitely hard to question.
Reading the Guidelines, we come to a conclusion that there is still a majority in the
Council (decisive to the outcome of the July and August votings when the Chairman of
the Council was outvoted) willing to pursue such monetary policy, the priority of which
would imply bringing inflation close to the target (symmetrical deviation) as fast as possible, to stabilizing the inflation expectations around the target, and a fast growth of the
observed GDP close to the potential level (stable balance of risks). Based on the information contained in the „Guidelines”, we hold up our opinion that in the current macroeconomic environment, the monetary policy will remain accommodative. It would have
been altered only by a major escalation of political risk.
7 November 2005
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A Surplus Turned Into a Deficit, i.e. One More Change in the Methodology
Q2 2005 C/A figures published at the end of September brought about a considerable revision
of figures from the years 2004-05. Following that revision, the cumulated annual C/A balance
as at the end 2004 equaled –4.4% GDP (-1.5% before the revision) and -2.2% at the end of
Q2 2005 (-0.4% before the revision).
0%
-1%
-2%
-3%
-4%
05
05
M
ay
-
M
ar
-
Ja
n05
ov
-0
4
N
Ju
l-0
4
Se
p04
04
04
M
ay
-
M
ar
-
Ja
n04
-5%
C/A (%GDP pre revision)
C/A (%GDP post revision)
This is attributable to a change in the posting of certain profits of companies with foreign capital share of at least 10%. To date, the published C/A figures covering the years 2004-2005
factored in only the dividend paid out to the foreign shareholder – such an item was reported in
the balance of incomes. The remaining profit attributable to foreign investors was included as
zero transfer. Now, it is treated as re-investment.
This changes the disbursements in the balance of income by the amount equal to the difference between profits from companies with foreign shareholders and the sum of losses of such
companies and the dividend paid out in a given year. If total profits of enterprises exceed the
dividend paid out in a given period and total losses, disbursements are increased (as was the
case in 2004 and 2005). An effect to the contrary was observed till 2002 – profits were lower
than the sum of losses and the dividend which triggered off revisions ultimately curbing disbursements in the balance of incomes thus improving the C/A balance. In 2003 the profits
were close to the sum of losses and dividends, hence the revision was minor.
700
600
Change in disbursements due to revision
(m EUR)
500
400
300
200
100
0
05
M
ay
-
05
M
ar
-
Ja
n05
ov
-0
4
N
Ju
l-0
4
Se
p04
04
M
ay
-
04
M
ar
-
Ja
n04
-100
What happens to the reinvestment amount? It changes in the opposite direction the balance of
foreign direct investments (FDI) of the period, being a part of the financial account. Hence, the
balance of payments does not actually alter as compared to figures from before the revision,
yet the C/A balance changes (it has deteriorated – in the last 2 years) at the expense of the
inflow of FDIs reported by the NBP.
From that angle, the year 2004 was exceptional – enterprises reported very high current profits
and, at the same time, the dividend paid out for 2003 was low. In 2005, the scale of the revision is far more limited, the dividend paid out for 2004 is high and the current result generated
by enterprises proves worse.
In order to avoid similar considerable revisions of figures in the future, NBP commenced to
initially assess figures on reinvestments on a regular basis. In Q2 2005 such a change in
methodology translates into the curbing of the C/A by approx. EUR m 250 against approx.
EUR m 900 a year ago. Ultimately, these figures will be revised in a year’s time, with its direc-
7 November 2005
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Macroeconomics
tion being impossible to be determined now. We hope that at least the scale of the revision will
be limited.
For example – in 2004 an enterprise generated a profit, of which EUR m 10 is attributable to a
foreign investor. At the same time, in 2004 EUR m 1 worth of 2003 dividend was paid out to
that investor. Initially published data, disclosed EUR m 1 in the C/A disbursements, while following the revision C/A disbursements increased by EUR m 9 worth of reinvestments, and FDI
revenues rose by the very same EUR m 9.
All in all, the revision of data for 2004 and incorporation of current estimates of reinvestments
to C/A figures alter the picture emerging from an analysis of C/A data. According to new data,
Poland no longer reports a surplus on the current account, as a result of that change the C/A
balance may be by approx. 1.5% GDP lower than we previously estimated, reaching approx. 1%. Although Poland’s balance of payments is not modified, the considerable deterioration of
the C/A balance cannot go unnoticed. For those who lack a deeper insight – a rapid worsening
of the C/A balance may turn out an unpleasant surprise.
Fiscal Policy
2005 Budget, It’s Gonna Be Great
Revenues
Indirect taxes
Corporate income tax
Personal income tax
Income of state units financed from the budget
Of which: income from customs duty
Other income
Expenditures
Interest payment of domestic debt
Interest payment of foreign debt
Pension Fund subventions
Social Security Fund subventions
Local governments subventions
Deficit
Q1 2005
23.78%
23.97%
33.82%
20.02%
26.06%
18.62%
5.76%
25.69%
15.98%
37.85%
26.64%
36.62%
35.27%
Q2 2005
49.47%
47.76%
50.80%
44.24%
58.60%
38.77%
79.02%
50.04%
51.71%
46.65%
53.03%
67.83%
58.74%
Q3 2005
76.16%
73.58%
75.34%
71.57%
96.84%
59.83%
100.33%
71.93%
67.63%
56.67%
78.82%
91.60%
82.24%
Sep 2005
9.03%
8.46%
7.23%
9.57%
12.24%
7.40%
15.23%
7.19%
4.11%
3.56%
7.34%
4.13%
7.73%
35.22%
52.90%
50.81%
-2.02%
Q1-Q3 2004
73.12%
70.94%
91.58%
66.35%
77.28%
102.17%
97.84%
71.03%
60.06%
62.34%
75.72%
98.86%
82.61%
63.92%
source: MF
According to MF figures, after September actual budget deficit equaled 50.81%, a very good
result bearing in mind that the rate of economic growth, and the inflation alike, falls approx. 2
percentage points below budget forecasts.
Both sides of the budget, i.e. revenues and expenditures look satisfactory, and the realization
of all tax income categories is higher than planned. Moreover, the “other income” item proved
higher in September than had been anticipated.
The expenditures side of the budget features a much-lower-than-expected subvention to the
Social Security Fund (FUS) and Pension Fund (FER) as well as lower payment of interest on
domestic debt in September.
We expect that the actual deficit may total approx. PLN b 28 this year, instead of PLN b 35
provided for in the Budget Act, owing to revenues being by nearly PLN b 5 higher, and expenditures – by approx PLN b 2 lower. Following the month of September, the deviation from the
linear trend indicated a budget position by even as much as PLN b 8.5 better than planned.
Budget deficit 2004-2006
50 000
mln PLN
40 000
30 000
20 000
10 000
0
01
02
2004 (execution)
2005 (forecast)
7 November 2005
03
04
05
06
07
2005 (execution)
2006 (plan)
08
09
10
11
12
2004 (plan)
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Macroeconomics
Budget 2006 and Not Strong Enough Mech’s Anchor
As announced by Cezary Mech, PiS economy expert, the new government intends to correct
the 2006 budget inherited from Minister Gronicki and Belka’s government. The deficit is to be
curbed to PLN b 30. The revenues that PiS wants to write down in the Budget Act are to be by
PLN b 0.4 higher (VAT proceeds are to increase thanks to the launching of a construction program) while expenditure are to be lower by PLN b 2.2 (reduction of administrative expenditure).
In our opinion, the “lifting” of the revenues side is incredible. As we have mentioned before,
the Minister Gronicki’s draft already provided for highly inflated revenues. The calculation of
some of revenue categories (for example, following the assessment of reduction in the revenues attributable to the refund of VAT on construction materials) are highly uncertain. What’s
more, before the presidential elections, PiS announced an additional investment relief for entrepreneurs and a fuel relief for farmers, which would undoubtedly further limit revenues.
Similarly incredible is the announced curbing of administrative expenditures. Beyond any
doubt, savings are advisable in that area, but cannot be achieved by merging or winding up
governmental agencies whose tasks, in an unchanged form, are to be assigned to other bodies.
We are even more critical of „Mech’s anchor” than we were of „Belka’s anchor”. True, Belka
announced the reduction of budget expenditures by 1 percentage point above the level of inflation which he never managed to achieve as a Finance Minister, but Mech promises to anchor the nominal value of deficit at the level of PLN b 30 in the forthcoming 4 years, which
cannot prove successful with such a developed program of expenditures and revenue shortages.
What’s more, in accordance with the Public Finance Act, once the first safety threshold is
passed, i.e. once the value of public debt exceeds 50% of GDP, the budget deficit/
expenditures ratio in the subsequent year cannot be worse than in the base year. Hence, if the
execution of this year’s deficit totals PLN b 28, the revenue/deficit ratio will drop to approx.
15.5%, if the already-raised projection of next year’s revenues reaches PLN b 191.7, it follows
from a simple calculation that, under the law in force, the deficit at the level of PLN b 30 is too
ample.
And, as we know, the insufficient „Mech’s anchor” fails to provide for the implementation of
Eurostat’s recommendations that a 20% subvention for the Social Security Fund, to set off a
decrease in revenue from transfers to OFE, should be added to budget expenditures annually.
We do not know either, how the anchoring of the nominal deficit of the state budget relates to
the deficit of the public finance sector, that is being assessed when determining whether the
criterion of nominal convergence is met.
Forecast measures of public finance imbalance (% of GDP)
2004
2005
2006
Central budget balance
-4.7%
-3.3%
-3.3%
General government sector balance
-5.0%
-4.5%
-4.0%
-2.7%
Primary balance of the general government sector
-2.2%
-1.3%
-0.8%
0.3%
Cyclically adjusted balance of general government
-4.5%
-3.8%
-3.5%
-2.4%
Cyclically adjusted primary balance of general government
-1.8%
-0.6%
-0.3%
0.6%
-3.9%
-3.4%
-2.8%
-2.0%
-6.0%
-5.4%
-4.8%
-3.9%
General government balance according to ESA ’95
(Open Pension Funds included)
General Government balance according to ESA ’95
(Open Pension Funds excluded)
2007
Source: MPC opinion on the Budget Act 2006
Summing up: the financial market will not calm down just hearing the announced introduction
of ‘Mech’s anchor” Any politician who believes that the announced PLN b 30 deficit and resumption of negotiations with Eurostat and the European Commission on OFE classification
are to satisfy investors, is bound to be bitterly disappointed.
7 November 2005
16
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
Other Financing?
If the new Finance Minister has any room to maneuver the 2006 budget, it is certainly not in
the area of planned revenues, expenditure, deficit. Moreover, other macroeconomic relations
than those proposed by Minister Gronicki in his bill are rather hard to imagine. By all means, it
is the structure of deficit financing that allows for most far-reaching modifications. Would these,
however, be changes for the better? Minister Gronicki wanted to issue more bonds on the foreign market than on the domestic market.
Cezary Mech announced he would not support that intention and, as he put it: „we will pay off
(foreign) debt and we will issue debt on the domestic market”. It is one of possible ways out.
The question is: what about yields if the supply of bonds for the domestic market increases
substantially? How does the undertaking that ends with an increase in market interest rates
relate to the rationalization of costs of interest on public debt? And how to reconcile this with
the charges, addressed against the MPC, that the level of short-term interest rates is too
high?
If we believed that incoherent and mutually exclusive announcements from the economic program of PiS were to be implemented, we would have to dispose of Polish bonds at fast a rate,
particularly of those with longer maturity dates. Since it is not the case, and the net outflow
from the treasuries’ market did not exceed PLN m 500 in the week immediately preceding the
elections in the setting of the total involvement of foreign investors amounting to over PLN b
70, we could safely say that the credibility of program announcements by PiS is very low.
7 November 2005
17
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
EUROMONITOR
4 convergence criteria
The blue area is delineated by the Maastricht criteria, the line within means that the
criteria have been met.
Criteria
area
Inflation
Spread against interest rates in the
Euroland
5.4
5Y
Interest
rates
Public debt
EUR/PLN
-5%
3.4
-10%
2.4
-15%
1.4
-20%
10-05
Source: Reuters, BRE Bank SA
-25%
Inflation
5%
2Y
0.7
5Y
0%
10Y
Interest
rates
Public debt
-5%
0.4
-10%
0.0
-15%
EUR/CZK
-0.4
-20%
-0.7
Source: MF, CNB, CSO, Reuters, Eurostat, EC,
BRE Bank SA
5%
9
3Y
0%
5Y
7
Interest
rates
01-02
04-02
07-02
10-02
01-03
04-03
07-03
10-03
01-04
04-04
07-04
10-04
01-05
04-05
07-05
10-05
10-05
8
Public debt
07-05
04-05
01-05
10-04
07-04
04-04
01-04
10-03
07-03
-25%
01-03
Deficit
Inflation
10Y
-5%
6
-10%
5
4
-15%
3
EUR/HUF
-20%
2
Source: MF, HNB, Reuters, Eurostat, EC,
BRE Bank SA
1
01-02
04-02
07-02
10-02
01-03
04-03
07-03
10-03
01-04
04-04
07-04
10-04
01-05
04-05
07-05
10-05
10-05
07-05
04-05
01-05
10-04
07-04
04-04
01-04
10-03
07-03
-25%
04-03
Deficit
01-03
H
u
n
g
a
r
y
07-05
04-05
01-05
10-04
07-04
04-04
01-04
10-03
07-03
01-03
Source: MF, GUS, Reuters, Eurostat, EC,
BRE Bank S.A.
04-03
0.4
01-02
04-02
07-02
10-02
01-03
04-03
07-03
10-03
01-04
04-04
07-04
10-04
01-05
04-05
07-05
10-05
Degree of
adjustment
Deficit
T
h
e
C
z
e
c
h
R
e
p
u
b
li
c
0%
10Y
04-03
P
o
l
a
n
d
5%
2Y
4.4
Deviation of the nominal currency rate
from the current value
Since May 1, 2004, the reference values for monetary criteria are calculated for EU-25 countries.
Explanations:
First colum:
Figures concerning debt and deficit of the public sector relate to the year 2004. The quoted values have been calculated according to ESA 95 methodology and
published by Eurostat. In accordance with a decision of the European Council the costs of the pension system reform are subtracted from the value of
deficit for Poland (and Hungary).
Figures concerning the inflation (HICP) and long-term interest rates are quoted as of the end of September 2005.
Interest rates have been calculated as mean daily yield (1 Y) for T-bonds with a 10-year maturity date (semi-annual capitalization). The reference countries include Denmark, Finland and the Netherlands (instead of Sweden).
Second colum:
T-bond yields are quoted for Hungary and the IRS rate for Poland, the Czech Rep. and the Euroland.
7 November 2005
18
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Macroeconomics
4 CONVERGENCE CRITERIA
CRITERION
POLAND
THE CZECH REP.
HUNGARY
Interest rates
5,43%
5,42%
3,61%
6,84%
Inflation
2,4%
3,0%
1,7%
4,1%
Deficit
3,0%
3,9%
3,0%
5,4%
Debt
60,0%
43,6%
36,8%
57,4%
ERV
8,55%
4,83%
3,04%
ERV max
10,92%
6,29%
9,98%
ERV min
7,28%
3,65%
3,04%
Explanations:
Upper lines – description at the preceding page.
Lower lines:
•
The ERV (Exchange Rate Volatility) is a measure of exchange rate volatility applied by the EMI and the ECB in the convergence reports. The measure is calculated on the basis of daily exchange rates of the last 20 days of the month. The quarterly figure is the mean for 3 months.
•
The ERV (forecast) of the last quarter (June – August 2005) as well as maximum and minimum values of the quarterly ERV of the last eight periods
have been quoted.
•
The ERV is interpreted as a standard deviation of the annual exchange rate in the next year, assuming that the rate volatility does not change versus
the present rate. Forex stability of a currency is reflected by its lowest possible value.
YIELD CURVE
THE CZECH REP.
POLAND
HUNGARY
6%
4%
6%
6%
4%
4%
2%
2%
PLN
EUR
HUF
CZK
EUR
EUR
2013
2012
2011
2010
2009
2008
2007
2005
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2015
2014
2013
2012
2011
2009
2008
2007
2006
2005
2010
Source: Reuters, BRE Bank
2006
0%
0%
0%
2014
2%
EMU/USA
1.2
0.4
1
0
0.8
-1.2
lip 05
sty 05
lip 04
lip 03
sty 04
sty 03
0
lip 02
Aug-05
Feb-05
Aug-04
Feb-04
Aug-03
Feb-03
Aug-02
Feb-02
Aug-01
Feb-01
Feb-00
Aug-00
2045
2025
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0.2
-1.6
0
0.4
sty 02
Bunds
US Treasuries
1
0.6
Spread 10Y Bunds
vs. 10Y US
lip 01
-0.8
sty 01
2
lip 00
-0.4
lip 99
3
Spread 2Y/5Y
Bunds
sty 00
4
0.8
sty 99
5
Explanations:
Curves based on quotations as at October 24, 2005.
7 November 2005
19
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Financial Sector
Banking Sector
Foreign loans more available
The European Commission intends to make it easier for consumers to obtain loans abroad and
to uphold the rights of consumers to resign from a loan within 14 days of concluding a loan
agreement. These are proposals to improve the directive concerning consumer loans. The new
proposals involve loans of up to EUR 50 thous and do not include mortgage loans. We do not
believe that the introduction of these changes will result in increasing competition among banks
in various countries. A consumer loan is essentially a loan that is not earmarked for a serious
investment. We doubt whether a consumer would travel abroad to find a cheaper loan. However, it will be convenient for people who reside permanently outside their country of origin. The
right to resign from a loan within 14 days is already in force, but not all consumers are aware of
this fact.
Largest bank in the region – Poland ahead
According to The Banker, PKO is the largest bank in Central and Eastern Europe in terms of
assets. The top 10 also includes Pekao, BPH and ING. The top 100 banks under consideration,
includes 10 Polish banks. In terms of capital, PKO BP ranks third, but the accumulated value of
capital of the 10 Polish banks ranks Poland first with a 30.7% share in the capital of the 100
banks. However, all this will change if the merger of Pekao and BPH goes forward. The merged
banks will have more than PLN 120 bn of assets at their disposal and will be the largest bank in
Central and Eastern Europe.
Credit cards increasingly more popular
The number of credit cards in Poland grew almost 50% the last year. Currently, more than 2.5
m credit cards have been issued. Bank Handlowy remains the leader in credit card sales (565
thous), although PKO BP managed to reduce the distance to the leader from 200 thous to 75.5
thous (489 thous). Broadening the offer of credit cards, even before the merger of BPH and
Pekao, is a part of the bank’s strategy to become the leader in all segments of the market and
effectively compete with the bank that has greater assets. ING, Kredyt Bank and MultiBank
noted the highest dynamics of growth. Nominally, the highest growth was noted by PKO BP,
Lukas Bank and BPH. The comparison was prepared by Rzeczpospolita, daily.
Mortgage loans – situation remains good
The indebtedness of Poles from residential housing loans at the end of August 2005 totalled
PLN 40.8 bn, according to the Real Estate Financing Committee. The situation on the real estate market remains good. Due to the demand for housing and falling interest rates the Poles
increasingly more frequently decide to purchase a dwelling. The banks, whose increase of loan
volumes this year largely depend on selling their mortgage products, benefit to a largest extent
from this fact.
Central bank on loans in foreign currencies
The representatives of the Central Bank warned the chiefs of commercial banks against granting residential loans in foreign currencies. The annual meeting of the presidents of these banks
with Leszek Balcerowicz was held in October. As long as the zloty strengthens, foreign currency loans are attractive. The problem occurs when the currency weakens. However, it is difficult to resign from offering a product, which given the current macroeconomic conditions is so
competitive. However if a real threat appears, the banks that have consistently granted loans
only in the currencies in which the client received an income (i.e., mainly in zlotys) will benefit
the most. These banks are BZ WBK, ING and Pekao.
EFG to enter the Polish market
EFG Eurobank announced its intention to open a branch in Poland. It has not yet applied for a
separate banking license.
This is not a new information to us. The recent announcement is only the official confirmation
from a representative of the bank. The new bank will increase competition on the Polish market. The Greek bank is a very aggressive player, which probably decided to enter the Polish
market due to the chances of obtaining a share in the very dynamically developing Polish banking market.
Optimistic approach to the future
Pengab published the banking climate index. In October, the index reached 38.6. According to
data of the company, publicly traded banks and banks with a share of foreign capital offered
the lowest valuation of the market climate. Cooperative banks have the highest perception of
the market. In turn, banks listed on the Warsaw Stock Exchange are reporting the best financial
7 November 2005
20
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Financial Sector
results. The index is a secondary indicator that evaluates what is happening on the market. We
do not believe that publicly traded banks will begin reporting much worse results in the future.
The index is a good reflection of the current situation on the market. In 2005 banks in Poland
will manage to improve financial results once again.
The Merger – Another Month of Waiting for Decisions
Course of UCI call for shares of HVB and BA CA
October was the month in which the issue of the UCI call for HVB shares was settled. The call
was originally to last until 10 October, but UCI extended it 2 weeks (to 24 October), because it
failed to purchase the minimum 65% of HVB shares in the first phase. Investors waited until
the last moment to respond to the UCI offer, counting on either the offer changing or a counteroffer from the Saudi investors. The Saudi investors withdrew from submitting a counteroffer
for HVB shares. One of them, Mansour Almalik, stated that they were resigning due to the fact
that UCI’s acquisition of HVB was too advanced. When the offer of UCI did not change and
the speculations concerning a counteroffer did not prove true, investors decided to exchange
their shares. UCI purchased approximately 80% of HVB’s stock.
The call for BA CA shares occurred in conjunction with the HVB call. The call was prolonged in
this case as well. The original deadline was 17 October, but it was extended to 31 October. A
total of 10.6% of BA CA shareholders exchanged their shares for either cash (EUR 79.60) or
for UCI shares (19.92 UCI shares for 1 BA CA share). UCI currently owns a 88.2% stake of the
Austrian bank, and 77.5% was acquired through the successful call for the shares of HVB—
previously the principal shareholder of BA CA.
As a result of the successes of the two calls, UCI formally became the principal shareholder of
BPH. However, it still waits for the agreement of the Polish Banking Supervision Commission
and Securities and Exchange Commission in order to become the majority shareholder of BPH
and execute its voting rights at the General Meeting of Shareholders.
When will the actual merger occur?
UCI will acquire HVB at the beginning of 2006, and not at the end of 2005 as stated earlier. It
is due to shifting the publication of HVB’s 3Q report in order to coincide with the publication of
UCI’s report. The Polish issue, or lack of agreement from the Polish supervisory bodies for the
merger of Pekao and BPH and for the UCI call for BPH’s shares could be one of the factors
retarding the process.
The European Commission agrees to HVB and UCI merger
The European Commission agreed to the merger of HVB and UCI. The Commission did not
confirm the cases in which the merger would threaten competition on the local markets. This
also means that there are no circumstances that would threaten the merger of Pekao and
BPH, subsidiary entities of the banks in Poland. PiS, the winner of the parliamentary elections,
appealed earlier to the Polish supervisory bodies to block the merger. The decision of the
European Commission was expected precisely at this time and the market expected such a
decision of the Commission.
Banking Supervision Commission – decision regarding Polish market
BSC continues to consider the question of the Pekao and BPH merger as well as the right of
UCI to execute votes during BPH’s General Meeting of Shareholders. UCI was asked several
times to provide additional documents. According to representatives of UCI and BSC the proceedings could last from 2 to 5 months.
The press office of NBP released a communiqué on the topic of the proceedings currently occurring in BSC. This was connected with articles in the press on this topic and speculation that
involved the issue of what the banking regulator was actually doing since the European Commission gave the green light for the UCI and HVB merger. NBP stressed that BSC has to issue
the permissions to execute voting rights. Among the collected documents and information, the
possibility of BSC having an effective supervision over the bank following the investor gaining
control is also being verified. The decision in this specific issue is important as UCI’s taking
control over BPH and the likely merger of Pekao and BPH would be an unprecedented operation in the European Union. Pekao is the second, and BPH the third largest bank in Poland,
and their merger will lead to the establishment of not only the largest bank in Poland but also
in Central and Eastern Europe.
7 November 2005
21
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Financial Sector
Attitude of UCI representatives
The president of UCI, Alessandro Profumo, is convinced that the merger of UCI and BPH will
be successful. He is also determined to conduct the merger of BPH and Pekao on the Polish
market. Apart from the Polish regulators, Profumo is also waiting for the agreement of supervisory bodies in several other countries (the merger of UCI and HVB will cause a change in the
structure of the banking sector in 20 countries), and will be as complicated in Croatia as it is in
Poland. However, the president of UCI states that delays will not have a significant influence on
the HVB acquisition.
Attitude of Pekao and BPH employees to the merger
The Association of Social Interest (SIS) stated that it will block the merger of the two banks if
UCI (the current owner of Pekao) does not present a social benefit package to the employees
and does not secures the interests of minority shareholders. At the beginning of September SIS
asked to participate in the administrative proceeding conducted by BSC and SEC. The commissions have 2 months to agree to the association’s participation. If they do not do this, SIS plans
to file suit in administrative court. The stronger the trade unions, the more difficult the situation
of the management board. However, the investors could have expected such a course of
events. According to initial estimates, the merger of the two banks will lead to reducing employment by 2–3 thousand. Therefore, the merger could cost UCI more than originally planned.
Structure of UCI – HVB group following the merger
UCI released general information concerning the structure of the bank following the merger.
There are plans to establish 4 departments. The retail and asset management departments will
be run from Milan. The other 2, corporate and MSE as well as investment banking will be located in Munich. Moreover, the division for Central and Eastern Europe will be headquartered
both in Vienna and Munich. The communiqué did not contain information concerning Poland,
but the head of UCI, Alessandro Profumo, stated that Poland will obtain a status equal to Germany and will have a considerable degree of independence. The detailed plans concerning
Poland should be known soon. It was earlier speculated that the Polish regulators will not agree
to UCI’s acquisition of BPH, precisely due to the choice of location for the central office of the
Central and Eastern Europe division. However, the Italians did not change their decision.
Member of Supervisory Council resigns
Albrecht Schmidt, chairman of the supervisory council of HVB, resigned from his post as he
opposed to the merger of HVB and UCI.
HVB development following the merger
HVB Group wants to increase its share in the German market, through acquisitions, following
the bank’s takeover by Unicredito, said president Dieter Rampl in an interview with Die Welt. –
We are not satisfied with our current position on the German market – he said. He stressed that
HVB does not yet have selected takeover targets.
BPH PBK
Good results on mortgage loan sales
BPH increased sales of mortgage loans by 37.5% to PLN 1.1 bn in 3Q. Since the beginning of
the year the bank has granted PLN 3.3 bn of residential housing loans. The bank plans to grant
PLN 4.5 bn of mortgage loans by the end of the year. BPH’s entire portfolio in this area totalled
PLN 9 bn at the end of September. We believe that the bank will meet its sales target. It is an
aggressive player, second in terms of mortgage loan sales, and is obtaining new clients.
BZ WBK
Mortgage loan sales – still no breakthrough
Representatives of BZ WBK announced that the bank intends to grant a total of PLN 50 m of
new mortgage loans in 2005. Following the first half of the year, the bank’s sales in this area
totalled PLN 316.3 m, in 3Q BZ WBK granted PLN 201.6 m of mortgage loans. The total volume of sales following the first three quarters reached PLN 518 m. Last year, during the first
three quarters, BZ WBK sold PLN 516 m of mortgage loans and PLN 637 m during the entire
year. The bank believes it will manage to achieve higher sales due to falling interest rates. BZ
WBK grants loans only in the Polish currency. We considered the weak results of BZ WBK’s
loan sales in our recommendation. Current data indicates that our assumptions will not change.
However, we do not know the sales results of other loan products, but it is precisely residential
7 November 2005
22
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Financial Sector
housing loans that are responsible for 3/5 of the increase ofloans in the banking sector this
year .
Bank Handlowy
Net profit higher than expected
The representatives of the bank confirmed that net profit for 2005 will be decidedly higher than
in 2004 (PLN 416.4 m). This will be achieved even without the participation of TFI’s sales and
sales of the asset management company planned for 4Q. This transaction, according to the
bank’s representatives, will have a significant impact on results for the last quarter of the year.
Following the first half of the year, the bank reported a net profit of PLN 314 m.
Dividend less than 100% of net profit
However, this does not mean that this year’s dividend will amount to 100% of net profit (not to
mention the reduction in capital by the payment of a dividend which occurred this year). The
bank has development plans and wants to accumulate capital for this purpose. The bank intends to concentrate on developing 3 core segments: credit cards, treasury operations and
mediation in sales of the financial offer. The development of Citifinancial, the department granting cash loans to less affluent clients, is also to strengthen the bank’s position.
The bank’s representatives mentioned for the first time a dividend of less than 100% of net
profit during the presentation of results following the first half of the year. If the bank manages
to stimulate the growth in the volume of assets to a level that the solvency ratio would decline,
the dividend will be smaller. However, it will continue to consider a high dividend if a solvency
ratio of 10-12% will not be achieved by a growth in the volume of assets. This does not mean
that the dividend yield will be lower, as it will depend on the reported profit. Last year, the bank
paid more than PLN 3 per share (the dividend also included a payment from the bank’s capital,
a total of PLN 12), but this year it could be even more than PLN 3 per share due to the dynamics of net profit.
Other
Philip V. King resigned from the post of vice president of Bank Handlowy. He has not been a
member of the management board since 26 October.
PKO BP
Quarterly results of Kredyt Bank Ukraina
Kredyt Bank Ukraina, a subsidiary entity of PKO BP, earned approximately PLN 1.3 m (UAH 2
m) in the first half of the year. PKO BP purchased 66.5% of the company’s shares from Kredyt
Bank last year. It has invested PLN 110 m in this subsidiary so far. In 1H05 the loan portfolio of
KBU increased by 16% (approximately by PLN 108 m), and deposits by 29% (by ca. PLN 137
m). PKO BP is currently interested in subsequent acquisitions of banks in Central-Eastern
Europe countries. Therefore, we expect further investments in this bank by PKO BP and the
development of its activity.
Sale of bad debts to securitisation fund finalised
The bank sold its bad debts to a securitisation fund, S-Collect, managed by TFI PKO/Credit
Suisse. The value of these debts amounted to PLN 660 m. According to Rzeczpospolita daily,
the bank received PLN 100 m. The bank can deduct the difference from the tax. Earlier, when
securitisation funds were not present on the Polish market and banks could sell their bad debts
to debt collecting agencies, such a tax relief was not available. Other banks are also considering selling non-performing loans (according to press news, BGŻ, Kredyt Bank, BRE and BZ
WBK). Loans totalling some PLN 3 bn are currently for sale, and according to debt collecting
agencies such sales could reach PLN 6 bn this year.
Old loans, in which the chances to regain the money are marginal, are usually sold. This gives
several benefits for a bank: disposing of accounts receivable from the balance sheet that are
virtually impossible to recover, tax benefits, and in addition the positive influence of the transaction on the quality of assets ratio. During the presentation of 2Q results, Pekao representatives
said that the bank would be trying to identity loans that could be sold to a fund. PKO BP had
announced in July that it intends to sell some PLN 1 bn of bad loans this year. At that time SCollect was interested in loans valued at PLN 660 m. Therefore, the investors already had
some prior knowledge about the transaction.
7 November 2005
23
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Financial Sector
Good results of e-banking
The bank announced that 1.1 m of its clients use online banking services. Jacek Obłękowski, a
member of PKO BP’s management board, recently stated that he would like this figure to total
at least 2 m by the end of 2006. Some 30 – 40% are to be new clients. In this year’s plans the
bank assumed 1 m clients using online banking services. The bank manager to fulfil the plan
with a surplus two and a half months before the end of the year. If this increase in clients continues the bank has a good chance to obtain 2 m online clients by the end of 2006. This is good
news for the bank, which is trying to obtain the leading position on the market before the
merger of Pekao and BPH. This places the bank in a better position with respect to competing
with such a large bank.
Greater control over PKO Credit Suisse TFI
According to Parkiet daily, the bank wants to increase its holdings in PKO/Credit Suisse TFI by
the end of the year. PKO BP and Credit Suisse Asset Management each owned half of TFI
shater so far. Currently, 25% of the shares are on the table. The reason may be the poor quality of fund management. It currently has a 7.3% market share, while it had almost 20% in 2003.
According to the press, 25% of the holdings could be worth some PLN 40 m. If the bank increases its stake in TFI, it could have a positive influence on the management of the fund.
Premium shares – payoff for patience
The bank presented a plan to award premium shares to individual investors that bought the
bank’s shares during the public offering and held them exactly one year from the date of the
first listing, 10 November 2004. A contract was signed with the BGŻ brokerage house to organise the issue. BGŻ will sign contracts with other brokerage houses in which the details of the
operation will be included. Each of them will review the accounts of their clients on 10 November and transfer the relevant information to BGŻ. The shares will be transferred to investors,
without any fees, on 23 November and be admitted to trading one day later. Only those individuals who had transferred their securities to a different account during the year must provide
a confirmation certificate from the brokerage house that assisted them in purchasing the shares
during the public offering. Investors will receive 1 share for each 20 shares purchased during
the public offering. The pool includes 8 m shares. During the public offering individual investors
bought 160 m of the bank’s shares.
Good results on mortgage loan sales
In 3Q 2005, the bank granted mortgage loans of PLN 1.97 bn. This result is up 46% over the
corresponding period of the previous year. Since the beginning of the year the bank has sold
PLN 5.47 bn of mortgage loans (up 44% than last year), and the bank’s portfolio of housing
loans at the end of September totalled PLN 15.75 bn.
The bank is developing its lending activity decidedly faster than analysts predicted—35%
growth of sales of mortgage loans sector. If the average growth in the volume of housing loan
sales in the entire banking sector actually amounts to some 35%, this will mean that PKO BP
acquired market share at the expense of other players. We do not have other data concerning
the bank’s entire loan portfolio, but within the scope of other products, the bank is developing
sales at least in line with the market average, which means that the PKO BP portfolio will be
larger than the market expectations. This could have a positive impact on the bank’s net interest income, and the growth in volumes will more than compensate for the falling interest margins.
Kredyt Bank
Cooperation with financial intermadiary
Cooperation has been established between Open Finance, a financial intermediary, Kredyt
Bank and Internetowy Dom Maklerski. The intermediary will sell Kredyt Bank’s mortgage loans
and services connected with IDM’s asset management. This is good news for Kredyt Bank.
Financial mediators are very effective in selling banking products. Clients are attracted to their
services because the mediators assist them in comparing several products and in taking advantage of various promotions.
KBC continues to increase its share in Central and Eastern Europe
According to Rzeczpospolita daily, KBC, the strategic investor of Kredyt Bank and Grupa
Warta, wants to strengthen its position in Central Europe. Therefore, it may purchase a 7.5%
stake in the Czech firm CSOB from EBRD. According to analysts, this stake is worth approximately USD 300 m. KBC also stated that it is interested in purchasing shares in companies
from minority shareholders in which it is already an owner. KBC already owns CSOB shares,
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which gives it a 21% share in the Czech market. The bank ranks second in the Czech Republic
and KBC owns a 90% stake in it. We do not know what KBC plans in regard to Polish investors. The Belgian group currently owns an 86% stake in Kredyt Bank.
Other
The shareholders’ capital of Kredyt Lease, a subsidiary entity of Kredyt Bank, was increased by
PLN 15 m, to PLN 27.5 m.
ING BSK
Pre-paid cards
ING wants to sell 50 thous pre-paid cards in the next 3 years. These are Visa eCards. This is
the first Polish, transparent, cutout card for making payments online and in commercial outlets.
It cannot be used to withdraw money from ATMs (due to the unusual size). ING currently offers
9 types of such cards. The bank has sold 120 thous pre-paid cards so far. Cards of this type
increasingly more frequently appear in the offers of banks. They provide the possibility of making purchases online, thereby limiting the risk of loosing only the amount of funds on the card.
For banks, they provide an opportunity to make additional income on commissions, as they
usually carry higher fees than payment cards, added to accounts.
Results of mortgage loan sales
In 3Q 2005, the bank sold PLN 84.5 m of mortgage loans (PLN 19.5 m in 3Q 2004). From
January to the end of September sales totalled PLN 207.9 m (PLN 104.2 m in 1-3Q 2004). The
total value of the bank’s mortgage loans amounts to PLN 896.9 m. ING is showing increasingly
better results from mortgage loan sales. The bank was behind its competitors earlier as it not
offered mortgage loans in foreign currencies. Therefore, there is a chance that banks, the loan
volumes of which have fallen so far, will manage to end the year with a growth in their loan
portfolios.
Getin Holding
Open Finance in Getin Holding
Getin will buy 70% of the holdings in Open Finance for PLN 6.5 m. The payment is scheduled
to be made by 3 July 2006. The seller is LC Corp, also controlled by Leszek Czarnecki. The
transaction comes as no surprise. In August, a letter of intent was signed regarding this issue.
The decision was expected by the investors, which has already been considered in the company’s stock price.
WBC purchase finalised
Shareholders of WBC agreed to sell the bank’s shares to Getin Holding. These shareholders
are the 12 largest Polish banks. In 2003, they contributed a total of PLN 200 m for capitalising
the bank, saving it from bankruptcy. Getin will pay PLN 210 m for the shares. In September, we
already knew the effect of Getin’s negotiations with shareholders regarding the sale and a conditional contract to purchase the bank was concluded at that time. We are currently waiting for
Getin holding to meet all the formalities. The banking supervisory bodies have to issue a permission for the transaction yet.
Bond issue
In November Getin will issue the first tranche of Eurobonds for EUR 150 – 200 m. In May 2005,
Getin signed a letter of intent with Barclays Capital regarding a total issue of PLN 1 bn.
Getin signed issue and dealer contracts with BRE Bank for a period of 5 years. Getin wants to
issue debt securities. The issue will amount to a maximum of PLN 500 m and will be conducted
in several tranches.
This information is also known to investors closely interested in Getin. The company will issue
bonds in order to finance the very aggressive lending activity of Getin Bank.
Good sales results
Fiolet, a subsidiary entity of Getin Holding, sold PLN 311 m of mortgage and cash loans during
the first three quarters of 2005. In September, sales totalled PLN 45 m. Getin purchased 60%
stake in Fiolet in August. This is more good news about good performance of subsidiary entities of Getin Holding, primarily engaged as intermediaries in selling the products offered by
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Getin Bank.
Dom Bank, the mortgage arm of Getin Bank, sold mortgage loans worth PLN 384.5 m during
the third quarter. From the beginning of the year to the end of September, the value of sales
reached PLN 858 m. However, the average loan value fell from PLN 220 thous in 2004 to PLN
148.5 thous in 2005. Since being established (August 2004), Dom Bank has sold PLN 1.073 bn
of mortgage loans.
Getin informs about the sale of products in its branches and by its intermediaries each month.
This fits well into the bank’s aggressive policy, taking advantage of the favourable situation on
the market. It is precisely due to the strong lending activity that Getin decided, among others, to
purchase WBC and issue debt securities.
Other
Changes have occurred in the supervisory board of Getin Bank. The new members are Arkadiusz Stolarski (head of the sales department so far) and Tomasz Starzyński (previously associated with Citibank), replacing the departed Tomasz Wróbel and Jan Czeremcha. In Getin, one
of the most important factors of to the bank’s success is intellectual capital. Therefore, changes
in the management could have a significant impact on the activity of the bank. However, we
believe that these changes will not have a negative impact.
Getin Bank, a subsidiary of Getin Holding, was evaluated by Moodys. The rating for short and
long-term deposits is BA2/Non, while the bank’s financial strength was given a D rating.
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IT
According to an IDC report, the value of the Polish IT outsourcing market amounts to USD 176
m and could increase to as much as USD 500 m in 2009. According to IDC, Poland has the
best prospects among countries of Central and Eastern Europe. Among Polish firms, Computerland has the largest exposure on this segment of the market. According to a Computerland TOP 200 report, Computerland’s revenues from outsourcing totalled PLN 63 m in 2004.
GK Prokom ranked second with revenues of PLN 59 m.
According to Parkiet daily, Computerland, Prokom Software and HP are short-listed to install
the production management system for KGHM. The value of the contract could total PLN 60100 m. KGHM wants to conclude the tender by the end of November. At this stage it is difficult
to predict the winner of the tender. Each firm has the resources necessary to install the above
system.
The consortium comprising Computerland, ABG Ster-Projekt, Comarch and Emax signed a
contract with the Ministry of Education to equip computer labs for schools. The consortium will
earn from PLN 54 to PLN 64 m. The tender for the delivery, installation and integration of the
hardware was organised in four regions of Poland.
According to Puls Biznesu daily, the Ministry of Education plans to conduct tenders this year for
the delivery of hardware and software for computer labs in schools with a total value of approximately PLN 300 m. The entire school IT program is valued at PLN 1.5 bn, of which tenders at
the value of PLN 0.5 bn are either ongoing or have been conducted. The program, 75% of
which is financed with EU funds, is to be completed in 2006. Please note the compromises of
firms participating in the tenders. Protests and appeals have undoubtedly lengthened the entire
process and threatened the loss of funds from the EU. We expect subsequent tenders within
the framework of the above-mentioned program to proceed in a similar way.
Comarch
New contracts
Comarch signed a contract with a global leader in the power sector to build, install, integrate
and maintain a global loyalty system based on Comarch’s proprietary AURUM Loyalty Care
solution. The contract could total EUR 20 m. As part of the framework agreement, the company
signed a EUR 4.126 m contract to install the system in the subsidiary companies in one of the
countries of Western Europe.
The company will install the same system (AURUM) for a client in Russia. The value of that
contract amounted to PLN 3.3 m.
Comarch signed a contract for the delivery and installation of a data warehouse in Zakłady Energetyczne ENION SA. The contract is valued at PLN 7.3 m. We announced the company had
won this tender in September. In accordance with earlier information, approximately PLN 2.1 m
of the above contract will be distributed among subcontractors. In the energy sector, Zakłady
Energetyczne’s Radomsko-Kieleckie District has also installed Comarch’s control system
based on a data warehouse. The clients of this type of system in other sectors include, among
others, the Ministry of Finance, BP Polska, Ambra, Atlantic and Sokołów.
Good 3Q for Comarch and Interia
According to the president of Comarch, 3Q results will be better than the results from the corresponding quarter of the 2004, when sales totalled PLN 90 m and net profit PLN 2.6 m. This
year’s targets of a 20% growth in revenues and net profit were also maintained. While we
agree with the president regarding revenues, growing dynamically in previous quarters, in our
opinion high costs will have a negative impact on Comarch’s profitability. The company reported a net profit last year of PLN 14 m, which would translate into PLN 16.8 m in 2005. Following the first half of this year, net profit totalled PLN 3.6 m (excluding PLN 5.74 m from an
one-off deferred income tax asset recognition).
According to Interia’s president, the results for 3Q05 are better than 3Q04. This month the
company will launch a major project in the Internet communications sector. In 3Q04 Interia generated revenues of PLN 5.5 m as well as an operating loss and net loss of approximately PLN
1 m. In the first half of this year the company noted a net profit of about PLN 1.2 m. Following
the success of Skype in cooperation with Onet.pl, a VoIP telephone project, becoming increasingly more popular, comes as no surprise.
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Expansion continues
The company registered the subsidiary UAB „Comarch” in Lithuania. This firm will engage in
selling and supporting IT systems. Comarch’s foreign expansion continues. This is the third
subsidiary in Eastern Europe following firms in Russia and Ukraine, which confirms that one of
Comarch’s priorities is the further development of exports.
Computerland
New forecast
The company’s management board presented a new forecast of 2005 results for the Capital
Group. Revenues are to total more than PLN 800 m, and net profit more than PLN 20 m. The
earlier forecast called for doubling 2004’s net profit (i.e., about PLN 27 m). Computerland
planned a new forecast (with a possible adjustment) with the publication of 2Q results. Despite
a prospective growth in both revenues and net profit in relation to 2004, in our opinion, the current forecast of net profit „of more than PLN 20 m” means a clearly lower result than the earlier
expected doubling of profit. At the same time, the company confirmed delays in the public and
utilities sectors.
New contracts
The company signed a PLN 55.9 m contract with BIW Koncept sp. z o.o. involving the sale of
equipment for computer labs. The end-user of the labs will be the Ministry of Education. The
above information is the result of a contract (worth PLN 61.6 m) signed on 11 October of this
year between Computerland and the Ministry of Education for equipping schools with hardware.
The company signed a 5-year contract with the Municipal Board of Local Resources (ZKZL) in
Poznan worth PLN 7.5 m. The contract involves outsourcing and the development of ZKZL’s IT
system. This is the first contract of its type on the local government market. As a result of this
contract Computerland can obtain references for similar contracts in other cities. Computer has
been cooperating with the city of Poznan for several years. Among others in Poznan, the company earlier participated in the installation of a geographic information system.
Emax
Contract with the Ministry of Education
The consortium comprising Emax and Incom signed a contract with the Ministry of Education
worth more than PLN 61 m to equip computer labs in schools. Emax’s revenues from this contract amount to PLN 20.5 m. The Emax consortium was the last to sign a contract with the ministry (Computerland, Comarch and ABG signed similar contracts earlier). The hardware will be
supplied by Incom, therefore the company has higher share in the contract.
Prokom
Changes in ABG Statutes
The company announced the registration of changes in its Statutes. The changes concern expanding the supervisory board (from 5 to 7 members) as well as broadening the right of Prokom Software to appoint members of the supervisory board (Prokom had the right to appoint 3
members and now has the right to appoint 4). Moreover, ABG announced the nomination of
Witold Szymański to the supervisory board. The changes in the statutes and rights of Prokom
take into account Prokom’s increased stake in the new company (34% of shares and votes).
ABG sells head office building...
The company sold its head office building for PLN 21 m to Ronson Development. The transaction is to be finalised by March 2006. According to the company’s vice president, ABG will vacate the premises in the second quarter of 2006. Plans assume renting space in a yet unspecified property.
...and a subsidiary company
The company signed a contract with NTI MBO SA to purchase 100% of NTI a subsidiary company for PLN 6 m. The book value of NTI on 30.06.2005 amounted to PLN 5.2 m. NTI creates
telecommunications and skeleton networks as well as structural cables (i.e., activity differentfrom the core business of ABG).
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Situation with Prokom Investments shares clarified
ABG announced that it treats its 1.6% stake of Prokom Investments shares (purchased for PLN
16 m) as a loan, as it signed an agreement to sell these shares. The purchase of the stake in
Prokom Investments (yet by the Ster-Projekt company) was not well received by the market.
Therefore, the explanation of the future of these shares could contribute to a further improvement in the sentiment surrounding the entire Prokom Software Group.
ABG contract with Optimus SA
The company signed a contract with Optimus SA worth PLN 51.6 m for the delivery of hardware and software. This transaction is connected with the recently signed contract between
ABG and MEN for equipping computer labs in schools. On the basis of the contract, the hardware will be supplied by Optimus SA.
Spin – forecast adjusted
The company management board adjusted the forecast of results for 2005. Sales revenues are
to total PLN 132.5 m (down from PLN 165 m) and net profit PLN 10 m (down from PLN 21 m).
According to the company, the adjustment of the forecast is due to changes in the project
schedules with several key clients as well as to the longer than expected reorganisation of
Grupa SPIN. Information appeared in August about a possible adjustment of results and
change in the strategy, assuming fewer acquisitions. Following the unsuccessful issue of
shares worth about PLN 60 m the company had to finance the purchase of Optix and minority
holdings in subsidiary companies from its own funds and loans, which additionally increased
financial costs. This year, Spin plans to acquire one more firm, Neokart GIS, operating on the
prospective market of geographic information systems.
Comp acquisition plans
Comp wants to acquire two IT firms, with annual turnover exceeding PLN 10 m. Funds for the
purchase will originate from recently conducted issues of shares and external funds. At the
same time, Comp wants to sell its holdings in the subsidiary company Radcomp, operating on
the market of IT solutions for the health sector. Comp collected about PLN 40 m from the two
share issues (December 04 and June 05), of which approximately half is designated for acquisitions. The company has already acquired Enigma Systemy Informatyczne for PLN 6 m. The
sale of Radcomp, in which Comp owns a 67% stake, is in accordance with the strategy of concentrating on the market of IT security. For 2005 the company forecasts revenues of PLN 95 m
and a net profit of PLN 10 m, not including the possible takeovers.
Comp – 3Q report
The company published non-consolidated 3Q report. Following the first nine months of 2005,
Comp generated revenues of PLN 55.6 m and a net profit of PLN 5.1 m (in 1-3Q04 revenues
totalled PLN 32,6 m and net profit PLN 3.3 m). In 3Q alone, sales totalled PLN 22.4 m and net
profit PLN 0.6 m (in 3Q04, PLN 9.2 m and PLN -0.4 m, respectively). The significant growth in
sales in comparison to 3Q04 is due to the settlement of a major long-term contract (more than
PLN 8 m with a profitability of 5%). According to the company the fourth quarter will be the best
of the year. Forecasts of the management board concerning year-end consolidated results for
2005 are revenues of PLN 95 m and a net profit of PLN 10 m.
Softbank
Acquisition of Gladstone...
The company signed a contract to purchase 51% staje in Gladstone Consulting. The contract is
valued at USD 8.3 m. On the basis of the contract, Softbank has a buy option (until 31 March
2005), and the seller a sales option for the remaining Gladstone holdings. The price for the
remaining holdings will be dependent on, among others, results and the date the option is executed. The final purchase price is lower than earlier indicated. According to yesterday’s NBP
exchange rate (3.26 PLN/USD), the purchase price is about PLN 27 m (Softbank earlier mentioned not more than PLN 31 m). We continue to believe that purchasing Gladstone will increase the value of Grupa Softbank.
...and Incenti
The company purchased 100% of Incenti’s shares from Prokom Software in exchange for
1.367 m of its own shares. As a result of the transaction Prokom owns 33% of the shares and
votes at Softbank’s GMS. The acquisition of Incenti is the final transaction connected with this
year’s issue of shares. Softbank previously acquired 100% of Koma and 51% of Gladstone
Consulting.
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Comp Rzeszów the change of name
The company changed its name to Asseco Poland SA. The name change is connected with
building an international capital group in the region of Central and Eastern Europe.
Comp Rzeszów issue passed
On Friday, the Extraordinary General Meeting of Shareholders adopted the resolution to raise
the company’s capital by not more than 400 thous of C series shares. The shares will be offered with a rights issue (8.625 rights issue for 1 C series share). The rights issue day is 18
November 2005. In accordance with the expectations, the new issue of shares was approved
by the shareholders. Comp wants to buy four IT firms in Poland and Slovakia with the funds for
the issue.
Stake increased in Comp Rzeszów
Softbank signed a contract with the president of Comp Rzeszów, Adam Góral, on the basis of
which he will sell his rights issue associated with the new issue of shares. Including the rights
issue Softbank has, the company will increase its stake in Comp Rzeszów 238 thous shares,
from 17.54% to 21.92%. Moreover, Adam Góral submitted an offer to Softbank to sell 268
thous shares of Comp Rzeszów. The offer is valid for 6 months, beginning on 27 September
2006. Softbank’s plans to increase its stake in Comp Rzeszów have been known to investors
for some time. As a result of this investment Softbank will be able to consolidate the results of
Comp, which forecasts a net profit of PLN 20-23 m this year and an approximate PLN 30 m net
profit next year. The purchase of an additional 268 thous shares (in September 2006 at the
earliest) will allow Softbank to increase its stake to about 28%.
Comp Rzeszów’s major contract
Comp announced it had concluded a contract with Sun Microsystems Poland for the delivery of
hardware. The value of the contract accounts for 13% of Comp Rzeszów’s equity. On 30 June
2005, the company’s shareholders’ equity (including minorities) amounted to PLN 93 m, which
values the contract in the area of PLN 12 m, with a rather low profitability.
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Media
Will PiS revolutionise the media?
PiS wants revolutionary changes in the public media. This is to consist in centralising authority
(i.e., the liquidation of the current boards and appointing individual persons responsible for supervising public television and radio). PiS also wants to reduce the number of National Radio
and Television Council (KRRiT) members from the current seven to three. The proposed
changes rather concern a desire to strengthen control over the media by the new government
(which could also be dangerous). For the private media, the most important would be declarations with respect to limiting the activity of TVP on the advertising market. However, such declarations have not been made.
Influence of election campaign on the sector
According to Expert Monitor, the advertising expenditures of all the political parties during the
presidential campaign totalled PLN 76 m gross and were the highest in history. PiS spent PLN
25.8 m on the parliamentary campaign and PLN 11.3 m on the presidential elections. PO spent
PLN 23 m and PLN 13.5 m, respectively. This is very promising data prior to the publication of
the results for media firms in 3Q and 4Q (extra revenues in comparison with last year). We do
not know the precise allocation of funds among individual media. The main beneficiaries will
certainly be TVN and AMS.
Starlink on television advertising
According to Starlink, the value of commercials broadcast on television in the first three quarters of the year totalled PLN 1.68 bn (i.e., a 9.7% growth in the relation to the corresponding
period of last year). Television stations earned PLN 22 m on the parliamentary and presidential
campaigns. Data from the media house are in line with expectations and should have no significant impact on the share prices of sector companies.
Agora
3Q results
Prior to results for 3Q Agora issued a warning about a probable increase of costs resulting from
the preparation of new projects, which lowered investor expectations concerning 3Q results. In
this light, the published results were a pleasant surprise, mainly due to maintaining the EBITDA
margin above 20% (we assumed a decline to 14%).
The decidedly lower growth in revenues (3.4% in relation to accumulated 20.6%) than in previous quarters is in line with the expectations and results from the decline of revenues from book
publishing to PLN 15 m (PLN 28 m one year ago, a more significant drop than we expected).
While the result of Gazeta Wyborcza is inline with our forecast (7.8% growth in revenues from
advertising), pleasant surprises include AMS, which benefited from the election campaign and
increased the EBITDA margin to 18% as well as magazines, in which with disappointing revenues and due to a reduction in promotional costs, EBITDA grew to PLN 3.4 m, from PLN -0.4 m
the previous year. Despite a 21% growth in revenues, EBITDA of the radio stations fell to PLN
2.2 m.
4Q will be encumbered with the costs of promoting the new daily newspaper and will have a
negative impact on the consolidated result. Nevertheless, we expect the results of individual
segments of activity in 4Q to be substantially better than last year (this includes book publishing), which will be well received by the investors. We believe Agora’s new daily newspaper project will be successful.
Advertising market
According to company estimates, in 3Q the advertising market grew as much as 16%. Advertising expenditures in segments that benefited the most from the election campaign grew the fastest (the company estimates its cost at PLN 50 m), that is outdoor advertising (+31%) and television (+17%), which attracted half of the expenditures of the election committees. Advertising
expenditures in daily newspapers grew in this period 13%, and 12% in radio stations.
Daily newspapers
In 3Q Gazeta and Metropol noted a 7.8% growth in revenues from advertising, which means
that, as in previous quarters, Gazeta is losing its market share (market +13%), mainly on behalf
of Fakt. In our opinion, this situation should continue another 2-3 quarters, which means until
Fakt achieves a position on the advertising market corresponding to its actual readership. The
growth in advertising expenditures on the Warsaw market (+7%), which is smaller than in the
case of the entire segment, also does not favour Gazeta Wyborcza.
In terms of readership, Gazeta, as one of few titles, and the only title with such a wide range, is
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increasing the sold print run. In 3Q, the average daily circulation amounted to 439 thous copies
(i.e., 5.8% more). Please note that the daily’s very interesting conception of advertising in media, primarily on television. Agora advertises the supplements to Gazeta (e.g., guidebooks to
restaurants), the sponsor of which are other entities (breweries in the case of the guidebooks).
The strategy of adding supplements has a positive influence on Gazeta’s volume of sales,
which translates into advertising income. The sponsor covers the cost of the supplement, and
Agora the cost of advertising.
Books
Revenues from the sale of books in the past quarter are PLN 7 m lower than our expectations
and PLN 13 m lower than last year. We believe the reason is the weaker sales of the classics
of literature series. However, we expect that beginning in 4Q, the company will again show a
high dynamics of revenue growth in this area, which is connected with the fact that:
- the 4Q comparative base is low, amounting to PLN 20 m.
- at the end of 3Q the company brought a number of new projects to market (tourist guidebooks, fairy tales for children, two series concerning John Paul II, a music series), while the
mentioned classics of literature mainly accounted for 3Q sales.
For the first time, the company reported the operating margin of the segment, which given the
revenues of PLN 14.7 m amounted to 11.2%. In our opinion, this is a value inadequate to the
previous quarters due to:
- 3Q being encumbered with additional costs of launching two new publishing series, in which
the first copy (with a large print run) is free (the costs the company mentioned in its warning
prior to 3Q results are included in this margin).
- Most of the revenues were generated by the 19th century literature series, which was coming
to an end. The end of a series usually has a small print run, which also lowers the profitability of
the project (unsold copies, higher unit cost of printing a short series).
AMS
The Group’s biggest beneficiary of the election campaign is of course AMS, which in comparison with 3Q 2004 increased revenues by 26%. This is a clear recovery following 2Q, weak in
this regard, when the dynamics in annual terms fell to 6.2%. Due to high operating leverage,
characteristic for outdoor advertising, the company’s EBITDA was PLN 6.1 m in relation to PLN
0.7 m in the corresponding period of the previous year. At the end of 3Q , the number of media
increased 0.5% in relation to the same period the previous year, and amounted to 23.7 thous.
For the first time in 4 quarters the unit costs per medium increased (+6%).
Magazines
We have mixed feelings in the case of the magazine segment’s results. Revenues were up only
1.8%. In comparison with 3Q 2004, average circulation declined by 13.4% and is not only the
effect of a smaller number of published titles, but mainly problems with selling titles already
present on the market for some time. The company explains that this is a phenomenon characteristic for the entire segment of magazines in Poland. Observing the sales of weeklies, it is
difficult not to agree with this explanation. Despite the disappointing sales, and due to lowering
costs of wages and salaries and promotions, the segment’s EBITDA result increased to PLN
3.4 m, from PLN -0.4 m last year.
Radio
Despite the dynamic growth in revenues (+21%), radio stations increased the EBITDA loss to
PLN 2.2 m. It was caused by the growth in costs connected with advertising (according to our
estimates PLN +2.5-3 m). Despite the conducted restructuring, we still see no progress in this
segment and are sceptical with respect to its prospects.
Other
The company estimates that expenditures on advertising this year could be 2-3 percentage
points higher than current forecasts. Such estimates cover our forecast concerning a 12.7%
growth in advertising expenditures for this year.
The Group’s advertising costs in quarterly terms amounted to PLN 29.8 m and are inline with
the average from previous quarters.
New daily
On 14 November Agora will introduce the new daily newspaper to the market, the target readership group is between the influential Gazeta Wyborcza and the tabloid Fakt. In 4Q the company will bear additional costs connected with launching the new title, which will encumber 4Q
net profit. The company did not release details of the project (costs of launching it). Despite the
fact that the company’s profit fell in 2H of this year, in our opinion, the project itself is a good
idea. Based on the current production of content (Gazeta Wyborcza, Metro, magazines) Agora
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could create a new title relatively cheaply, as well as promote it, which gives it a significant advantage over the competition. Moreover, such moves should seriously limit the endeavours of
other media groups wanting to bring new titles to market. In 4Q, we estimate the costs connected with the promotion of the new daily newspaper at approximately PLN 25-35 m.
AMS
Based on prepared projects, AMS intends to further develop in large cities. One such project
was launched in October and involves large-format (50-100 m2) advertising space on buildings.
The company currently has 40 such spaces and wants to increase this number to 240 by the
end of 2006. AMS also intends to increase its share in the market of advertising displayed on
means of public transport. The company currently estimates its share in this market at 35%. We
are view positively AMS’s development plans. As opposed to its main competitor – Stroer – the
company has always tried to focus on more expensive, but better quality media (Stroer mainly
focuses on billboards).
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Telecommunications
PTC expansion into 3G
PTC intends to broaden UMTS access to Poland’s 10 largest cities. The 3G network currently
operates only in Warsaw, but in the near future is to be launched in Wroclaw and Lodz and
subsequently in Bydgoszcz, Krakow, Lublin, Poznan, Szczecin, Torun and the three-cities. As a
result of the realisation of investments, the range will cover 7 m people, which will almost meet
the requirements specified in the UMTS license (20% coverage by the end of 2006, 7 m people
corresponds to coverage of 18%). The investments are in line with earlier plans, forced by the
terms of the license, and therefore should come as no surprise. However, they show the existing operators have an advantage over Netia, which as results from recent declarations of president Madralski, will launch UMTS at the end of 2006.
… Crowley into VoIP …
Crowley Data Poland – an operator mainly rendering services for corporate clients – is developing a VoIP platform, which is to increase VoIP revenues to 30% of total sales, from the 13%.
Crowley is a small operator with revenues of some PLN 60 m, which means that increasing the
share of VoIP in the company’s sales to 30% (estimated growth in VoIP revenues is approximately PLN 12 m) will not constitute a threat for infrastructure operators (TPSA, Netia). However, if we consider the 50 or 100 operators of this type (cable networks, portals, other smaller
operators) the pressure on the margin in fixed-line connections will continue for some time.
…. and GTS in new acquisitions
GTS Polska is interested in further acquisitions in Poland. After finalising the takeover of Energis (consolidated revenues of PLN 376 m this year and by 10-20% higher next year), Energis is
considering acquisitions of smaller operators, such as: Crowley and Pro Futuro. Controlled by
Russian capital, GTS is also interested in the largest alternative operators (e.g., Exatel and
Dialog). Due to its differing business model, the latter is not a priority target. GTS has again
confirmed that it is a serious competitor for Netia in the field of acquisitions.
PTC – how much it is worth to Elektrim
PTC generated a net profit of PLN 623.9 m in the first half of the year, in relation to PLN 477 m
in the analogous period of 2004. EBITDA was by 5.7% higher than in 1H2004 and closed at
PLN 1.38 bn. The dynamics of revenue growth amounted to 8.2% (PLN 3.265 bn). The management board announced that the operator will surpass the threshold of 10 m subscribers
(active SIM cards) in the next several weeks. The company has repaid all loans.
Despite the PTC’s dynamics of new connections falling (the dynamics is half that of Centertel’s
in the analogous period), the operator remains the market leader. At the end of 1H it had 600
thous more subscribers than Orange. Revenues, EBITDA and net profit were higher 8%, 17%
and 35%, respectively. PTC’s higher EBITDA margin (42%), in comparison with Centertel
(39%), can be the result of higher costs of obtaining new subscribers with a higher dynamics of
growth in the subscriber base. PTC could easily pay a dividend (even this year’s entire net
profit, about PLN 1.1 bn), but this is blocked by the ownership conflict.
Assuming that PTC reports an EBITDA of PLN 2.6 bn PLN this year, and the market value of
the operator is 6-times EBITDA, the company would be valuated at PLN 15.6 bn. Any risk connected with the ownership conflict has been disregarded in the analysis below. Assuming that
Elektrim owns 24% of the capital (the company claims to own up to 48%, which in our opinion
is not justified, at present we do not know if Elektrim has the right to any of the company’s
shares due to the legal risk and Polsat possibly taking over control) and taking taxes into account, the value of the Elektrim stake amounts to approximately EUR 800 m, or significantly
more than the debt resulting from bonds (approximately EUR 500 m). Assuming that the company has no other assets and liabilities, the difference between the market value of the stake
and the bonds is PLN 13 per company share. Unfortunately, this is only a theoretic value.
Telefonica acquires O2 – takeover terms
Telefonica submitted an offer to buy all shares of O2, the largest mobile network in Great Britain. The company is offering GBP 17.7 bn for the entire stake (i.e., 22% more than Friday's
valuation of the operator on the LSE). The transaction could be a determinant for other M&As in
the sector. The main valuation parameters, which could also have an impact on the valuation of
Polkomtel, should Polish shareholders leave the company, are presented below. Vodafone
confirmed that it is interested in purchasing the remaining shares of Polkomtel, both from Polish
shareholders and TDC. Goldman Sachs is advising Vodafone in negotiations. Vodafone justifies its position by the uncertain situation in the government and the PiS electoral victory, which
could result in blocking further progress in regard to the Polish shareholders withdrawing from
Polkomtel. Everything indicates that Vodafone has begun a race against time, which theoretically could accelerate the transaction. However, for the British, losing the race could mean that
the process will be halted if such is the political decision of PiS. In our opinion, both scenarios
are equally likely.
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According to our estimates, O2’s EV/EBITDA ratio for 2005 (year ends in March 2006) implied
by the Telefonica offer amounts to 8.7. The average 2005 EV/EBITDA ratio for mobile operators is 7.3; which means that the Spanish are inclined to offer a 20% premium to the average.
Vodafone’s previous offer (according to unofficial information), submitted to Polish shareholders
of Polkomtel, implied a 2005 EV/EBITDA ratio of 8.1 (including the premium, total value of PLN
18.95 bn). Assuming a ratio equal to that in the Telefonica’s offer, Polkomtel’s valuation increases to PLN 20.4 bn.
In our opinion, the price offered by Telefonica for O2, includes a premium for entering (by acquiring the leader) the profitable British market, which cannot really be applied to other transactions. In our valuations of KGHM and PKN, we accept the valuation of Polkomtel, implied by the
unofficial proposal of Vodafone.
Polkomtel – will it begin a revolution on the market?
According to press speculation, Polkomtel will establish cooperation with an MVNO. Among the
potential partners mentioned are Empik Media & Fashion – controlled by the investment fund
Eastbridge, the Gadu-Gadu communicator and PKO BP. As we have written previously, an
MVNO should appear on the market with a penetration level of 70-75%. This level should be
reached at the turn of the year. In our opinion, the introduction of the first MVNO by one of the
operators will result in a flood of subsequent operators. The network operators will compete
among themselves as wholesalers. An MVNO will intensify competition primarily in the pre-paid
segment. We believe that the three mentioned entities are extremely interesting as potential
MVNOs (differentiated activity, not competing with the competition). In our opinion, none of the
operators will be inclined to offer favourable terms to Netia’s MVNO, which will become their
“network” competitor in a year.
Vodafone still interested in Polkomtel
Vodafone confirmed that it is still interested in purchasing the remaining shares of Polkomtel,
both from Polish shareholders and TDC. Goldman Sachs is advising Vodafone in negotiations.
Vodafone justices its position by the uncertain situation in the government and the PiS electoral
victory, which could result in blocking further progress in regard to the Polish shareholders exiting Polkomtel. In connection with this, the process could accelerate in the near future or come
to be halted, if this is the political decision of PiS.
No fines for mobile telephony operators
After operators had begun to launch pilot programmes in accordance with the designated deadline, the Regulatory Office of the Telecommunications Industry and Post Office (URTiP) extended the period for introducing transferability of numbers in mobile telephony to 16 December
2005. URTiP’s actions eliminate the risk that operators will be fined. Whether the transferability
of numbers, which is becoming an increasingly more realistic possibility, initiates an additional
competition between the operators, will largely depend on the amount of fees for the service. In
the Western Europe, the service is not that popular precisely because of high fees.
TPSA
TPSA – better, weaker, in line with expectations
Dividend. TPSA will pay a dividend next year from profit for 2005 of PLN 1 per share, which
given the current price implies a gross yield of 4.5%. This is significantly more than this year’s
dividend (PLN 0.33 per share), but in our opinion less than the market expected. In a recent
report with a “buy” recommendation by one of the largest foreign investment banks, the analysts expect a dividend of PLN 2.5 per share. With the currently “difficult” political situation this
could be an additional reason for foreign investors to close their positions.
Centertel. In accordance with earlier statements, the company announced that it will purchase
the minority stake of Centertel shares from France Telecom. The negotiated price equals PLN
4.88 bn and is in line with the expectations of investors and analysts. We positively view this
transaction as the entire CF of the mobile operator will be acquired. However, we do not believe that the acquisition will have a significant impact on the operating activity of either of the
entities (i.e., greater possibilities of selling convergent services than prior to the transaction, as
the management board believes). Beginning next year, the company will increase net profit
approximately PLN 400 m by eliminating the minority shareholder. Taking into account the
higher interest costs connected with a higher net debt, this will account for ca. PLN 300 m, or
PLN 2.15 per share. It is important to note that beginning next year Centertel will bear the addi-
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tional cost of fees, about PLN 100 m, for using the name Orange.
Forecast. The management board also announced that it will lower the forecast of this year’s
dynamics of revenues. The board expects sales to fall 1.0-1.5% and the EBITDA margin to
remain at around 43%. For additional information on the company’s results and revenues see
our analytical report. However, we would like to point out that:
- the decline in fixed line revenues from telephone calls remains strong and shows no sign of
slowing, TP still faces the problem of VoIP and the erosion of revenues in local calls,
- revenues from broadband Internet access are not increasing, despite the growth in the number of subscribers (however, the dynamics here has also clearly fallen), strong competition for
TP will appear in this area next year in the form of the WiMax network,
- mobile telephony continues to show a high dynamics of revenue growth, which saves the consolidated sales, next year the dynamics in this area will also fall due to increasingly closer market saturation.
TPSA announced that next year’s investments will close with an amount corresponding to 1618% of consolidated revenues. The company also intends to further develop the Wirtualna Polska portal. Therefore, the investments will amount to PLN 2.9-3.3 bn. We estimate that investments will total PLN 3.38 bn this year, or 18% of revenues.
Another conflict with UOKiK
TPSA lost another conflict with the antimonopoly office, which blocked an increase in calling
charges for the 0-708-1 prefix numbers proposed by the operator. TPSA stated that it will abide
by the office’s recommendations. The effort to block cheap international calls was not successful, which will result in a further decline in the margins and revenues of TPSA in ILD. Despite
being negative, the information is not so important as to have an impact on the stock price.
Moreover, the Competition and Consumer Protection Office (UOKiK) initialled proceedings
against TPSA, which may have violated the telecommunications law, by demanding additional
fees from subscribers for the early termination of agreements for rendering broadband access
to the Internet. In the short-term, this information has no influence on the stock price. The scale
of the potential fine is unimportant in terms of valuation.
First effects of introducing the Orange brand
Centertel plans to introduce new roaming rates in foreign connections with carriers operating
under the Orange name in 17 countries. According to company representatives, in the initial
period of changing the brand, sales of new sim cards fell drastically, but are now by 20% higher
than in the pre-rebranding period. In our opinion, the introduction of new roaming rates is not
determined by the brand, but by affiliation with a specific telecommunications group. Currently,
the increased sales of new telephones also does not result from the new brand, but from the
increased expenditures on advertising and lower calling rates, which could have been achieved
just as well under the Idea brand. We continue to believe that for TP rebranding primarily
means additional costs, which does not change the fact that, with the ownership dispute in
PTC, Centertel will become the market leader next year … but not due to the new brand as TP
indicates.
TPSA prepares for the role of wholesaler
TPSA is conducting tests of technical solutions, due to which outside entities will be able to
render the service of fixed access to the Internet to TPSA clients. Alternative operators will begin rendering this service at the beginning of 2006. GTS Energis will probably be the first to
launch the service. This could be an announcement of a real revolution, leading to TP becoming a wholesaler. The scale of the phenomenon will be determined by the attractiveness of the
price offer. As usual, the key role here will be played by URTiP, which this time could find itself
under pressure from the new government, which has repeatedly declared its desire to limit the
role of TP.
Will PiS accelerate market liberalisation?
PiS says that it will accelerate the liberalisation of the telecommunications market. Activities
planned by the newly governing party will lead to changes in the telecommunications law,
which would, among others, strengthen the role of the URTiP president, and free up the local
loop. PiS also plans to appoint a new URTiP president. TPSA still does not function on a liberal
market, which must change. Changes introduced so far have been slow, which allowed the
operator to adapt its cost structure to falling revenues. A revolution in the telecommunications
law, and primarily in its execution, would shake up the company’s EBITDA margin. We believe
that such a scenario is very probable. The first effects will be evident not before 2H 2006.
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Netia
When will investments in 3G be launched?
According to the company’s president, Netia intends to sign an agreement by the end of this
year to purchase UMTS infrastructure. In our opinion, the negotiations which lasted half a year
will be extended and it cannot be ruled out that, in the case of Netia’s green field project, the
inclination of the hardware providers to accept vendor financing is very limited.
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Construction
Construction
Newly completed dwellings
According to CSO data, 10.7 thous dwellings were completed in September, which is by 50.1%
more than in the corresponding period of the previous year and by 10% more than in August.
From the beginning of the year to September, 17.3 thous dwellings were completed (19% more
than in the analogous period of the previous year). The developer branch’s share in overall
construction has increased significantly in the last 15 or so years to 30%. During this same time
the number of new cooperative dwellings has declined. Poland still has a shortage of some
1.5-2 m dwellings. Warsaw remains the most attractive market for developers, of which firms
such as Echo Investments and GTC are taking advantage.
Budimex
Construction of new terminal at Okęcie airport
Puls Biznesu writes that it obtained information concerning the advancement of works on the
new terminal at Okęcie – allegedly it is less than 30%. Construction works are to be completed
by April 2006, and not meting the deadline could result in the necessity of the Budimex,
Ferrovial, Estudio Lamela consortium paying contractual fines. According to unconfirmed press
information, the fine could be as high as USD 20 m. Budimex states that this is in regard to the
advancement of financing, and not the percentage of work completed and that everything will
be completed by the deadline.
It is difficult interpret the possibilities to pay fines by the consortium. The limited transparency of
the situation makes it difficult to evaluate the financial results of the investment.
New contracts obtained by Budimex-Dromex
Budimex Dromex, a Budimex subsidiary company, signed a contract involving a turn key project to build the 6-story district court building in Katowice for PLN 49.2 m. The work is to be
completed within the course of 36 months.
Budimex Dromex won the tender for expanding the border crossing at Hrebenne, valued at
PLN 10.1 m. The project is to be financed from Phare funds. Several days later the company
announced it had won the tender for modernising voivodship road no. 985, valued at PLN 30.3
m.
Representative of financial investors leaves SC
Ryszard Jach, the representative of financial investors in the company, was dismissed from his
position on the supervisory board. The dismissal is probably connected with contentious contract for building the new terminal at Okęcie. Despite this dismissal, other changes occurred in
the company’s supervisory and management boards. The information confirms earlier speculation concerning the dismissal of Ryszard Jach.
Elektrobudowa
Construction of switchgear factory in Russia
The company decided to launch the construction of a switchgear factory in Russia. For this
purpose, a Russian subsidiary company is to receive a USD 1 m capital injection. Elektrobudowa has invested USD 200 thous in the enterprise so far. The company estimates that the
investment will generate revenues of approximately PLN 30 m next year. Moreover, the revenues of the company are to increase at least 50% annually in the several years. In the opinion
of the management board, this year’s forecast of results is not threatened, and the portfolio for
next year is slowly filling up.
Polimex-Mostostal Siedlce
New Naftobudowa issue
Naftobudowa, of which Polimex-MS owns 50% stake, will conduct an issue of 3 m new shares.
The company hopes to obtain PLN 15 m for investments in production machinery and equipment. Half of the issue is to be taken up by the current majority shareholder Polimex-MS.
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Construction
Modernisation of Carbon-based Products Department
The management board of Polimex-MS announced that its consortium with Piecexport, Koksoprojekt and Naftoremont won the tender for the "Modernisation of the Carbon-based Production
Department" in Koksownia Przyjaźń, valued at PLN 405 m. The company did not provide information what part of the contract it is directly responsible for. The contract is to be signed in November.
We forecast that the consortium might win the tender. Winning the tender confirms a very good
trend in the company and should be very well received by investors.
Entry into segment of road and railway construction
Following the unsuccessful attempt to acquire PRInż, Polimex-MS is still interested in buying a
company engaged in the construction and modernisation of roads and rail lines. The establishment of Zakład Budowy Dróg i Kolei with a branch in Katowice is to develop this segment in the
company. The company wants to make acquisitions, develop the road building structure and
obtain the initial contracts before the end of the year.
Contract with Koksownia Przyjaźń
Parkiet quotes the company’s president that 80% of PLN 405 m from the last contract with Koksownia Przyjaźń will go to Polimex Group companies and that shareholders will be satisfied
with 3Q results.
The information about willingness to conduct further acquisitions confirms the intentions of
Polimex to enter a new, very competitive segment of the market, where pressure on margins is
strong. On the other hand, this is a segment with very good prospects, both within the context
of expressway construction and the modernisation of the railway network.
Waste treatment plant
The consortium comprising Polimex and Sutco-Polska won the tender for building a waste
treatment plant for EUR 20.2 m.
Further problems for PRInż
Parkiet writes about the financial liquidity problems of PRInż, controlled by the individual investor, Zbigniew Opach. The company’s creditors have filed several applications for bankruptcy
against it. According to the company’s president, a rapid capital injection is necessary. He believes Polimex-MS becoming a shareholder of the company is a sensible move. According to
Parkiet, Zbigniew Opach is in turn interested in returning to negotiations with Polimex regarding
the sale of his shares.
Polimex-MS has was interested to become a PRInż shareholder earlier. This is in line with its
strategy of entering the segment of road and railway construction.
Prochem
Risk of higher financial costs
According to Parkiet, Prochem that in a consortium with Megagaz is building the AdamowoBaza Surowcowa Plebanka pipeline for PERN Przyjaźń, cannot reach agreement with the investor in regard to the annex to the contract from 2002. Moreover, there is no agreement concerning the payment of PLN 88.6 m for the delivered pipes for building the pipeline. Lack of
paying off accounts could force the consortium to take out additional loans. The management
board of Prochem confirms that it is difficult to estimate the possible negative consequences of
not reaching an agreement with the investor. However, it did assure that net profit forecasts for
this year are not threatened.
Mostostal Warszawa
New contracts
The company’s management board announced that the company concluded a contract with
Dom Development S.A. for building a housing complex in Warsaw together with installations as
well as landscaping the grounds around the buildings. The value of the contract amounts to
PLN 83 m. The work is to be completed by June 2007.
Increase in working capital
Nesco, a sister company of Mostostal Warszawa, owned by the Spanish group Acciona, will
lend the Polish company another PLN 10 m. Parkiet writes that the total value of the loans from
Nesco, about which Mostostal released information in the last three months, amounts to PLN
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28 m. According to data cited by the newspaper, in 2H05, the value of the company’s contract
portfolio amounts to PLN 250 m. Next year’s target is PLN 400 m.
Increasingly more positive information about the company has occurred recently. It can be seen
that it is also benefiting from the recovery on the construction market. Financing from the sister
company ensures the company the financial liquidity necessary for realising its contracts. Estimating the need for capital at 10% of the value of a contract and considering the company’s
plans, it can be concluded that the company’s capital requirements could increase even more.
These needs may also partly be covered by the sale of Mostostal Invest (developer activity) to
the Spanish company. In the books of Mostostal Warszawa, the holdings in the subsidiary company are valued at PLN 24 m.
Sale of Mostostal-Invest
Mostostal Warszawa finalised the sales transaction of the 81.36% majority stake of Mostostal
Invest shares to the company of the Acciona capital group – Acciona Inmobilaria. The transaction is valued at PLN 30 m, while the value of the company in the books amounts to PLN 24 m.
Therefore, the company will show a gross profit of PLN 6 m on the entire transaction.
New contracts for Wrobis
Wrobis, a subsidiary of Mostostal Warszawa, obtained a construction contract in Norway valued at NOK 105 m (about PLN 52 m) for Elkem Aluminium ANS and Alcoa Inc. The works are
to be completed during 12 months. Moreover, the company will receive PLN 8.82 m for building
an industrial plant in Żarów. The contract is to be realised by the end of next February.
PBG
Forecast of results updated
PBG published an update of its forecast of results for 2005. Sales revenues are to total almost
PLN 422 m and net profit PLN 33.3 m. These figures are by 11% and 26% higher, respectively,
than the figures from the previous forecast. The new forecasts are mainly the result of including
new entities, Hydrobudowa Włocławek and KRI, into the PBG group. Moreover, the company
will receive almost PLN 20 m for managing the Wilga gas deposit for FX Energy Poland - a
company with US capital.
Contract in Latvia
PBG, in a consortium with Pall Poland, will modernise the collection station at an underground
gas warehouse in Latvia (PBG’s part is PLN 20 m). This is the first foreign contract for PBG.
According to information presented by the company’s spokesman, PBG is currently participating as a member of consortia in foreign tenders with a total value of more than PLN 600 m. The
results of the tenders should be known in the near future.
GTC
Greater commitment in the Balkans
The company will increase its commitment in the Balkans. It purchased holdings in the companies GTC Romania, GTC Hungary and GTC Serbia from Adri International for USD 19.4 m.
Following the transaction, the holdings in these companies will increase to 95-97%. According
to the management board, increasing the stakes in the subsidiary companies will have a positive influence on the financial results of GTC as early as this year. Developer investments in the
Balkans bring a higher rate of return as, in the opinion of the management board, GTC is one of
the few foreign developers on these markets.
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Metals
Grupa Kęty
New production capacity from Hydro
Hydro Aluminium will launch a new press for aluminium profiles in Chanów. The investment is
slightly behind schedule (1 month) in relation to earlier plans. The new press will double the
annual production capacity of Hydro in Poland, which currently amounts to 26 thous tonnes.
SAPA is also to have a new press by the end of the year (an increase in annual production capacity from 12 to 24 thous tonnes). We are not certain whether the production from the new
presses will be sold on the domestic market or be exported. The management board of Kęty
expects the latter possibility, which would not cause a decline in margins. In the case of the former scenario, a price war would ensue (imports from Germany are already competing), as occurred in 1999-2000. We will continue to monitor the development of the situation.
KGHM
Quarterly results
The quarterly results of KGHM for 3Q are better than we expected. Following a weak 1H in
terms of volumes, the company sold more copper (137 thous tonnes, +6.3%), and primarily
more silver (345.7 tonnes, +10.3%) than we assumed in our forecast (changes in relation to
3Q2004), which translated into higher sales revenues (PLN 2.039 bn) and as a consequence
net profit (PLN 691 m). The unit cost of production amounted to 7 643 PLN/t, which was by
8.2% higher than in the corresponding period of the previous year and 1.8% lower than in
2Q2005. The revaluation of tangible and financial assets increased net profit by PLN 92 m. As
a result of the valuation and settlement of transactions hedging future cash flow, shareholders’
capital was reduced by PLN 367 m. Since the beginning of the year the revaluation portion of
shareholders’ equity declined by PLN 578 m.
Following the first three quarters of the year the company’s net profit amounts to PLN 1.709 bn.
Considering the fact that prices of the metal are still high, this means that the forecast of the
management board (PLN 2.04 bn) will probably be exceeded by approximately PLN 200 m.
The big unknown remains the size of the losses on hedging that will be transferred from capital
to the income statement in 4Q (the company hedged 28% of the volume of sold copper).
The company Bipromet delivered a new technical study of the copper ore processing installation in the Congo to the management board, from which it results that the project requires investment expenditures higher than originally expected. In connection with the above, the management board has not decided whether to continue with the project.
New budget for 2005
The company’s supervisory council approved the annex to this year’s budget from which it results that following the new macroeconomic assumptions and the payment of additional employee bonuses, the company will earn PLN 2.078 bn this year instead of the PLN 1.92 bn forecast earlier. The above forecast was approved with the following macroeconomic data (data
from previous budget in parenthesis): USD/PLN exchange rate – 3.22 (3.3); annual average
price of copper – 3.55 USD/t (3.2 USD/t); annual average price of silver – 226 USD/kg (222
USD/kg).
Selection of general contractor for energy project
KGHM selected a contractor for the gas-fired thermal electric power plant project, the cost of
which was established at PLN 860 m. SNC Lavalin will be responsible for the construction. In
our opinion, this is very good news for the company. There was a risk that with prolonging process of selecting a contractor, KGHM would not keep to the deadline for completing the project.
This would mean that the company could have been forced to buy gas from PGNiG, which it
would not be able to use. The value of annual deliveries is approximately PLN 300 m.
Forecast of increase in production capacity lowered
ICSG (International Copper Study Group) lowered its forecast of growth in global production
capacity in the mining and milling areas for 2006, respectively by 2% and 2.3%. Forecasts for
2007 were lowered by 3.4% and 2% respectively and by 0.5% for 2008. The revision of ICSG’s
forecasts is a consequence of the current situation on the copper market: with weak demand
and high prices of the metal producers are increasing their production capacity much slower
than originally planned. It appears that this information is already included in the prices of the
raw material.
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Metals
New ICSG forecasts
2005F
2006F
2007F
2008F
Previous forecast
16.8
17.4
18.3
19.0
New forecast
16.7
17.0
17.7
18.9
-0.7%
-2.0%
-3.4%
-0.5%
20.5
21.5
21.9
22.2
20.4
-0.7%
21.0
-2.3%
21.5
-2.0%
22.1
-0.6%
Mine production (tons m)
change
Refined production (tons m)
Previous forecast
New forecast
change
Source: ICSG
Copper inventories on the COMEX, LME, Shanghai exchanges vs. spot price of copper on LME
180
160,0
Tons
‘000
ty
s. ton
Shanghay
Comex
140,0
4200
USD/t
Tons
‘000
ty
s. ton
LME
160
Zapasy
łacznie
Total inventories
Cena
(spot)
Spot price
120,0
4000
3800
140
100,0
3600
120
80,0
3400
60,0
100
3200
40,0
80
20,0
60
0,0
04-12-30
05-02-25
05-04-23
05-06-19
05-08-15
05-10-11
3000
2800
2004-12-30 2005-03-03 2005-05-13 2005-07-15 2005-09-16
Source: LME, COMEX, SME
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Chemicals
Refining Sector
We have observed a quite significant drop in petroleum prices last month. Last week a barrel
of Brent cost just over USD 57, i.e. more than USD 5 less than at the end of September. This
was also reflected on the market of oil-based products. Prices of petrol fell more than 20%,
while prices of diesel fuel and heating oil fell by 11% and 13% respectively.
Prices of petroleum (USD/bbl) and refining products (USD/ton)
70
65
60
55
50
45
40
35
30
25
04-04-01
04-07-01
04-10-01
05-01-01
URA L NWE
05-04-01
05-07-01
05-10-01
BRENT
900
800
700
600
500
400
300
200
04-04-01
04-07-01
04-10-01
05-01-01
PETROL
BENZY
NA
ON
05-04-01
05-07-01
05-10-01
HEATING
OIL
OLEJ
OPA ŁOWY
Source: Bloomberg
Retail fuel market
According to POPiHN, the number petrol stations in Poland increased from 6729 in 2Q05 to
6786 in 3Q05. Although all the largest chains on the market increased the number of their
own petrol stations, the greatest dynamics in the past quarter was shown by Grupa Lotos (GL),
which added 30 new facilities. However, comparing the number stations from the level from
the end of the first quarter, the stagnation is evident (data do not include acquisitions of Esso
and Slovnaft chains). In the past half-year Shell and PKN Orlen noted the largest growth in
retail market.
Number of petrol stations in Poland
1Q05
2Q05
3Q05 3Q05 - 2Q05 3Q05 - 1Q05
1906
1911
1917
6
11
Grupa Lotos*
349
317
347
30
-2
BP
288
293
294
1
6
Shell
225
231
237
6
12
Statoil
224
219
223
4
-1
Others
3750
3758
3768
10
18
PKN Orlen
* excluding purchased Esso and Slovnaft chains
7 November 2005
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Securities
Monthly Report
Chemicals
PKN Orlen
Tender for Aral stations lost
The company lost the tender for 69 Aral stations in the Czech Republic. OMV won, which according
to Euro Online, paid USD 210 m. The average price per station (PLN 10 m) that OMV probably
paid, despite their high quality (good locations and high sales) appears to be high. Due t the transaction, OMV became the leader on the Czech retail market. The fuel will be supplied by the German
refinery Schwechat.
Shadow of a chance for Możejki
The Lithuanian government stated that further negotiations regarding the privatisation of the Możejki refinery will be conducted with TNK-BP. Although this declaration formally does not yet eliminate
PKN from the tender, in accordance with the expectations, Orlen’s chances are now minimal.
New member of supervisory council
Krzysztof Obłój, a professor at Warsaw University, was appointed a member of the supervisory
council. We believe the nomination is a good one. Professor Obłój is an authority in the field of strategic management. His participation in the supervisory council increases the chance the current
composition of the management board will remain unchanged.
New strategy for Unipetrol
Grupa Unipetrol presented a new strategy for 2005-2008. The planned effects of realising the
“Partnership” programme will increase EBITDA EUR 138 m to EUR 442 m in 2008, from EUR 304
m in 2004 (assuming stability of external conditions: refining margins, differential, and currency
rate). Moreover, PKN Orlen expects effects of synergy to total at least EUR 24 m. The total cost of
implementing the strategy is estimated at EUR 19 m for Unipetrol and EUR 12 m for PKN Orlen.
Dispute continues
According to the spokesman of Agrofert, if PKN Orlen does not pay the contractual fine for failing
the sell a portion of the chemical assets (EUR 77 m) within the next month, the company will file suit
with the court of arbitration in Prague. PLN Orlen created a reserve for this amount in 2Q05.
Higher dividend possible
The president has not ruled out a higher dividend (higher in relation to the 30% of net profit
planned) for 2005. If no major acquisitions are made this year, PKN Orlen will have surplus cash
from operating activity for 2005 .
Orlen Deutschland
The vice president of the management board announced that the company does not intend to sell
Orlen Deutschland assets. In accordance with earlier statements, the profitability of the retail segment in Germany could be improved due to a growth in the volume of sales. However, the recently
lost tender for the Q1 petrol station network and lack of information about the possible acquisition of
another network of petrol stations, places the propriety of a continued presence on the German
market into question.
Grupa LOTOS
Program PKRT
According to the president of the company, the realisation of the PKRT programme is on schedule.
However, the composition of the consortium financing 60% of the PLN 3.2 bn investment is still not
known. According to the president, negotiations will end by the end of 2006 at the latest.
Realisation of Rafineria Czechowice strategy
The new terminal for tank trailers was opened in the Czechowice refinery. The investment cost PLN
16 m. Construction of the new terminal (with an annual transhipping capacity of 750 thous tonnes)
is in line with the strategy presented for this refinery. Due to lack of State Treasury subsidies beginning in 2007, the company decided to stop refining petroleum in the second quarter of next year.
Among others, the company’s restructuring calls for opening a transhipping terminal to supply the
retail chain in the southern portion of the country (primarily the recently purchased chain of Slovnaft
petrol stations) as well as manufacturing candles (previously only paraffin was produced) and biofuels (a planed installation with a production capacity of 100 thous tonnes of esters annually).
7 November 2005
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Chemicals
Further privatisation in two or three years
According to the president of Grupa Lotos, further privatisation (strategic investor) will take place no
earlier than in two or three years. The company must first finally determine its model of activity. We
believe the participation of a sector investor would benefit the company and expect a further reduction in the participation of the State Treasury.
7 November 2005
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Pharmaceutical Manufacturers and Distributors
Pharmaceutical sales in September according to PharmaExpert
According to PharmaExpert, pharmaceutical sales increased by 7.2% in September in relation
to the same period last year (6.1% in August). According to the representatives of PharmaExpert, this is due to the beginning of the school year and falling temperatures. Expenditures on
refundable drugs grew by 12% (and budget subsidies by 5.1%). Each pharmacy had an average of 3.9 thous patients and therefore 15% more than in the corresponding period of 2004.
According to PharmaExpert, drug sales will increase 6% this year.
The result is in line with the expectations and shows the post-holiday recovery on the pharmaceutical market. This is largely conditioned by the change of weather. The September result
indicates an improvement in the sector’s situation in the final quarter of this year.
Pharmaceutical sales in September according to IMS
According to IMS Heath, pharmaceutical sales increased by 8.4% from January to September,
in relation to the same period last year. Moreover, the increased purchases from hospitals contributed to maintaining the dynamics. In the discussed period pharmaceutical sales on the hospital market grew by 11.8%, and by 8% on the pharmacy market. IMS Health estimates that
sales of vaccines against the flu to the end of September grew by 60% in relation to the corresponding period of 2004.
The information is in line with our expectations. The dynamics of the market growth maintains
stabile, despite the fact that the third quarter is usually weak. Therefore, we see no threats to
our full-year forecasts of results for pharmaceutical distributors.
Cheaper pharmaceuticals?
Rzeczpospolita daily, reported on the proposed changes of the outgoing Minister of Health,
Marek Balicki, in the system of refundable medicines. The most important change is the introduction of officially fixed medicine prices. Currently, these prices are maximum ones. This induces pharmacists to lower prices of some refundable medicines and sell them below the price
established by the government, frequently causing an unjustified demand for these medicines.
However, pharmacists are inclined to take up more radical steps. The Supreme Chamber of
Pharmacies suggests pharmacists completely resign from margins and instead collect only a
fee of PLN 1-2 for selling refundable medicines. Such fees are applied in Germany, the US and
South Africa. Pharmaceuticals would be sold at wholesale prices and could be 14-15%
cheaper. According to Andrzej Wróbel, the president of the Supreme Chamber of Pharmacies,
such activities would contribute to improving the way the market is organised. PiS MP, Bolesław Piecha, nominated for the position of Minister of Health, stated that he likes the idea of
fixed margins, but mainly in regard to pharmaceutical purchases by hospitals.
The introduction of fixed prices could lower the dynamics of pharmaceutical sales growth, but
on such a competitive market as pharmaceutical distribution, it appears that ways to get around
this regulation will be found. In turn, the proposals of the Supreme Chamber of Pharmacists
seem irrational from an economic point of view. Adopting them would worsen the financial
situation of pharmacies and lower the margin realised by them.
Pharmaceutical distribution – new competitor for traditional pharmacies
Gazeta Wyborcza cited AC Nielsen data concerning pharmaceutical sales outside of pharmacies. According to the data, the share of grocery stores and other retail distributors (petrol stations, kiosks, hypermarkets) that also sell pharmaceuticals is growing dynamically. From the
beginning of July 2004 to August 2005, purchases in these outlets totalled PLN 350 m, which
corresponds to a share of less than 2% of the entire market and a growth of 19.6% in relation to
the same period in 2004. Apart from pharmacies, Poles mainly buy vitamins and analgesics
outside of pharmacies. According to these data, the share of hypermarkets and supermarkets
in this portion of the market is still small, amounting to 8.8%. We assume that this is the group
of distributors that could be directly supplied by the manufacturers. Therefore, at present, the
threat to pharmaceutical distributors is limited.
Pharmaceuticals over the Internet
The NCI investment fund is investing in the development of pharmaceutical sales via the Internet. It acquired a 25% stake in the company Mito for PLN 515 thous, which is owner of the
online pharmacy Domzdrowia.pl. At present, the pharmacy sells OTC medicines, cosmetics
and diet supplements. Plans for this year assume generating revenues of PLN 3 m and noting
a loss. In 2007, the company should break even and at this time MCI wants to increase the
commitment in the company to more than 50%. In the context of the traditional form of pharmaceutical distribution, the development of pharmaceutical sales over the Internet, as in the case
of distribution in hypermarkets and other non-pharmacy retail sales outlets, it will not have a
significant influence on the market in the next several years, due to the limited scale of the phenomenon.
7 November 2005
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Securities
Farmacol
Dividend payment possible
According to information obtained by Parkiet daily, the company intends to pay a dividend next
year, if no acquisitions are made by the end of 2Q 2006. Moreover, the newspaper states that
following the first three quarters of this year, sales increased by almost 10% in relation to last
year.
We have not yet confirmed the information concerning Farmacol’s 3Q results. In our opinion,
both pieces of information, about a possible dividend and results, is a positive news. Considering the weakness of the market in July and August, maintaining the dynamics of growth in the
first three quarters gives a positive view on the company. In our forecasts we conservatively
assume a net profit this year amounting to PLN 63 m. With these forecasts, the payment of half
of profit to shareholders corresponds to a dividend of PLN 1.35 per share, or a dividend yield of
almost 4%.
Good 3Q expected
According to information obtained by Parkiet daily, company sales in 3Q will be similar to the
2Q result. This also means maintaining the dynamics of growth of results in relation to the
analogous month of the previous year. Moreover, the company confirmed that it is considering
the payment of a dividend, if no acquisitions are made by the end of 2Q 2006.
Data concerning pharmaceutical market growth in 3Q showed a slight worsening in the sector’s
climate. In this context, we view positively the company’s statements on maintaining sales on
the level noted in 2Q. Assuming that the profitability will be lower in this quarter, our forecasts
should not be threatened (revenues of PLN 3.06 bn and net profit of PLN 63 m).
Bioton
Investment loan
The company announced it concluded an investment loan agreement with Bank BPH S.A. The
PLN 25 m investment loan will be designated for covering the costs of realising the
"Establishment of a Manufacturing Base for the Production of Pharmaceuticals based on Biotechnology" project in connection with the contract concluded with the Ministry of Economy and
Labour on 14.09.2005 for granting financial support for the investment.
This information is in line with the market expectations and should have a neutral influence on
the company’s stock price.
SciGenu gets new major contract
SciGen announced a major contract was concluded for the delivery of Sci-B-Vac, vaccines
against viral hepatitis type B to the Chinese market. The contract includes the delivery of prepared forms with a minimum value of USD 210 m as well as an active substance with a value of
USD 145 m over the course of seven years. Following the publication of the information, the
price of SciGen’s shares on the stock exchange increased by almost 100%. Bioton currently
owns a 24% stake in the Singapore-based company and recently announced that it intends to
purchase an additional 18.6%.
The information is quite surprising. In our forecasts concerning Asian markets, we only assumed the sale of insulin. At present, it is difficult to evaluate the profitability of the contract and
its influence on Bioton’s finances. On the other hand, the price that Bioton will have to pay for
the subsequent stake of SciGen’s shares will probably be higher. Initially, it was expected to
amount to PLN 3.8 m in cash plus Bioton shares.
Additional information concerning the Chinese contract
SciGen announced that it expects initial revenues from the contract signed recently in 1Q 2008,
after the pharmaceutical is registered.
Winning this contract bodes well for the future, The entity that the company concluded the contract with is engaged, among others, in the distribution of imported medicines of such firms as
Hoechst, Eli Lilly and Bayer in China. It owns a network of 200 distributors and supplies 500
hospitals. The only remaining problem is earning revenues and profits in the more distant future.
Parkiet reported that Scitech Genetics reduced its stake in the associated company SciGen
Ltd. by 0.37%, selling its shares at the session on 10 October, when the new contract in China
was announced.
Three days later, SciGen provided additional information about the contract, among others, that
it expects initial revenues at the beginning of 2008. It is difficult to unambiguosly interpret this
information.
7 November 2005
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Broadening the product offer and changes in SC
The company will introduce diet supplements to its product offer, among others, Lakcillus,
which strengthens immunological system. As a result, the company’s profile of activity was
broadened during the recent EGMS. In addition, changes were made to the Bioton’s supervisory board and two new faces appeared: Wiesław Walendziak and Paweł Gricuk.
We view positively the broadening of the product offer. Mr. Walendziak’s joining the supervisory
board was to be expected after he became the vice president of Prokom Investments. In both
cases, the above information has no impact on the company’s stock price.
Commitment in SciGen increased
Bioton and SciGen came to an agreement in regard to the former purchasing shares of the
Singapore-based company. The contract assumes the purchase of 18,2% of SciGen’s shareholders’ capital for the equivalent of AUD 7.55 m (PLN 18.7 m). This amount includes cash
(PLN 3.7 m) as well as a new issue of 2.02 m Bioton shares (PLN 14.95 m). In addition, Bioton
will announce a call for shares of SciGen in order to obtain a 51% stake in the company. According to information from SciGen, Bioton is obligated to invest an additional AUD 30 m (PLN
75 m) in the company, but these obligations are not yet binding. Therefore, a subsequent issue
of shares could be conducted to finance this investment. Moreover, the company announced
that, in connection with the acquisitions, it is cancelling earlier forecasts and that it will publish
3Q results on 4 November (earlier than initially planned).
The expenditures connected with the investment in SciGen are increasingly higher. According
to the information obtained from SciGen, the company will require further investment expenditures (PLN 75 m). However, the acquisition of this company creates good prospects for building
a position on the Asian market. The cancellation of forecasts is due to several factors, and the
investment in SciGen is probably only one of them. Another important factor is the fact that
plans to enter the Russian market (the registration of finished forms and obtaining the first contract on this market) have not been successful yet.
7 November 2005
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Monthly Report
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Bank Securities
Securities
Foodstuff Sector
Polmos Lublin
Forecasts of results lowered
In accordance with earlier statements, the company lowered the forecast of financial results for
2005. The new forecasts assumes revenues of PLN 327 m, an operating profit of PLN 9.5 m
and a net profit of PLN 1.9 m. According to previous forecasts, the company was to report results of PLN 458 m, PLN 25 m and PLN 18 m respectively. In addition, the management board
stated that sales revenues in 4Q are to increase by as much as 16% in relation to the analogous quarter of the previous year (i.e., to PLN 116 m).
The new forecast of the management board is in line with our expectations. Wódka Żołądkowa
Gorzka has lost a part of its market share, and the new vodka in the economy segment, Balsam Kresowy, has a lower profitability. This also explains the expectations of a dynamics
growth in sales in 4Q, despite the final quarter of last year being very good and accounting for a
high base.
Initial results for 3Q
According to initial estimates published by Polmos Lublin, in 3Q the company generated revenues of PLN 90.9 m and a net profit of PLN 1 m.
This information is in accordance with our expectations with the company’s communiqué presented earlier.
7 November 2005
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Monthly Report
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Other Sectors
Mondi
3Q results
The company’s results fell short of our expectations, which is due to our underestimating the
amount of the company’s operating leverage. The 15% drop in paper prices, with higher costs
connected with the increase in prices of wood (about 9%) resulting in the company’s EBITDA
margin falling to 13%. However, we see a real chance for a reversal of these negative trends
for the company, both in regard to the price of the raw material and products sold, which with a
10% growth in volume should significantly improve operating results in subsequent quarters.
Results for 3Q are much lower than those reported in the same period of 2004, which is largely
due to their incomparability. In 3Q 2004, the company generated profits on the sale of assets
and profits from exchange differences. Together, both items increased pre-tax profit more than
PLN 40 m.
Quarterly results of Mondi PP
(PLN m)
Revenues
EBITDA
margin
IIIQ2005
IIIQ2004
change
I-III2005
I-III2004
change
2005
2004
301.3
310.8
-3.0%
943.9
982.6
-3.9%
1 245.5
1 306.5
change
-4.7%
40.0
94.4
-57.6%
196.0
303.1
-35.3%
247.0
391.8
-37.0%
13.3%
30.4%
-56.3%
20.8%
30.8%
-32.7%
19.8%
30.0%
-33.9%
EBIT
13.0
63.5
-79.6%
116.1
219.8
-47.2%
140.7
272.3
-48.3%
Gross profit
Net profit
15.7
12.5
91.5
73.9
-82.8%
-83.0%
118.3
96.2
280.3
227.2
-57.8%
-57.7%
144.6
117.1
377.9
310.1
-61.7%
-62.2%
Source: Mondi PPS
Prices of wood and paper
Costs of wood and scrap paper account for approximately 25% of the company’s costs by
type, therefore an increase or decrease in them have a fundamental influence on the unit cost
of production and EBITDA margin. In 2005, due to the shortage of wood and aggressive price
policy of the National Forest Service, prices of the raw material increased significantly (7-10%).
The company notes that with the 10% increase in the volume of sales, the total cost of wood
purchases in 3Q, in relation to 3Q 2004, increased by 18%. According to the Central Statistical Office, the average price of wood sold by the forestry service in the period of the first three
quarters of the year was PLN 131 per m3, or 9.2% more than the previous year. Therefore, the
price of the raw material returned to the level prior to the price declines, which were a consequence of the increased supply of wood following the hurricane damage of the Piska Forest.
We expect prices of wood to stabilise next year on the current level .
The company has already concluded negotiations with the National Forestry Service for wood
deliveries next year. We do not know the details concerning the negotiations, but we do know
that the primary consumers of wood in Poland are benefiting to a greater extent than ever from
imports, which weakens the negotiating position of the monopolist in regard to the issue of
volume sales. This does not change the fact that the price of imported wood is still higher than
domestic wood and therefore the inclination of the monopolist to lower prices is marginal.
The recent downward wave is not so negative given paper prices expressed in Euro. Considering the uncertain political situation and zloty weakening, denominated in PLN, in October the
price of kraftliner increased by 3.3%, fluting by 5.1% and testliner by 4.9%.
Volume sales and revenues
Despite the difficult situation on the paper market in Europe, the company is able to place increasingly greater volumes of production on the market. In 3Q, the volume of sales increased
by 10% in comparison with the analogous period of the previous year. In relation to 2Q, this is
a 2% growth, which considering the over production should be considered a success. According to our estimates, the company will not acquire market share by lowering prices more than
the competition but rather by competing in terms of product quality (the decline in prices of
products sold compared with the decline in prices monitored by FOEX).
Operating result
The higher volume of sales largely offsets the decline in prices of paper products, which results in the company’s consolidated revenues being only 3% lower in comparison with 3Q
2004. However, on the level of the operating result, the company is influenced by the growth in
the unit cost of production resulting from the increase in wood prices, which together with the
decline in prices significantly lowers the margin on sales. Currently, high operating leverage
7 November 2005
50
Monthly Report
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BRE Bank
Bank Securities
Securities
Other Sectors
substantially lowers the company’s results, but we see a real chance of a reversal in the negative macroeconomic trends, which with the significantly higher volume of sales than last year
would result in a dynamic growth of EBITDA.
Operating flows and net debt
Despite the weak operating results, in 3Q the company repaid a significant portion of its debt,
which declined from PLN 94 m (net debt) at the end of June 2005 to PLN 24 m. In the past
quarter investments totalled only PLN 13.8 m, which including the first half of the year gives a
accumulated amount of PLN 39.4 m. Everything indicates that this year’s CAPEX will be lower
than our estimates (PLN 70 m).
Assets for sale
The company is conducting negotiations regarding the sale of two subsidiaries: Trans-Rem
Sp. z o.o. and Kemira Świecie Sp. z o.o. So far, the negotiations have not led to the prices
expected by the management board, therefore it is difficult to say whether the negotiations will
be finalised before the end of this year.
Prices of Kraftliner and Fluting
1600
2100
470
345
460
PLN/t
2000
PLN/t
1500
330
450
1900
Euro/t
1400
315
440
1300
1800
430
300
Euro/t
1600
410
285
400
1500
25.05.2004
26.10.2004
22.03.2005
16.08.2005
1100
Fluting
Kraf tliner
07.01.2004
1200
1700
420
270
1000
07.01.2004 25.05.2004 26.10.2004 22.03.2005 16.08.2005
Source: FOEX
7 November 2005
51
ING BSK
Price [PLN]
Year
The date of last recommendation's change
Market cap [PLN mn]
6 505
Book Value [PLN mn]
3 249
500.00
Interest income
Profit on bank.
oper.
[PLN mn]
869
822
840
[PLN mn]
1 530
1 584
1 714
2003
2004
2005P
2006P
*price/profit on banking operations
Gross profit
[PLN mn]
146
353
572
50
525
500
40
Volume [000] shares
Price [PLN]
475
450
30
425
20
400
375
10
350
ING BSK
Profit on bank.
oper.
Interest income
1400
11
1200
1000
10
800
9
600
8
400
7
200
6
0
2005-10-24
2005-04-26
Volume
BPH PBK
Price [PLN]
Year
2005-07-26
Kredyt Bank
0.45
511.0
375.0
P/BV
226.38
17.76
14.04
4.25
4.11
3.80
2.41
2.07
1.95
II Q'05
I-II Q'05
200
842
326
263
447
177
145
37 734
3 249
Price change:
Profit on bank.
oper.
[PLN mn]
1 105
1 278
1 405
[PLN mn]
2 356
2 842
2 977
Gross profit
[PLN mn]
543
980
1 178
700
500
650
Volume [000] shares
400
600
550
300
500
200
450
100
400
0
350
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
BPH PBK
1 month
6 months
12 months
dynamics
II Q'05/04
11.4%
151.2%
59.1%
25.1%
14.4%
-1%
17%
30%
Net profit
[PLN mn]
-1 567
185
363
262
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
No of sh.
[mn]
211
272
272
272
II Q'04
176
343
40
38
24 065
1 296
14 988
13 733
I-II Q'04
344
653
64
58
0.70
11.7
8.4
Valuation
Free float [%]
SUSPENDED
14%
P/E
P/PBO*
P/BV
-1.98
16.72
8.54
11.83
2.22
2.35
2.59
2.44
4.70
2.12
1.70
1.48
II Q'05
I-II Q'05
174
568
197
233
286
99
139
20 932
1 516
Price change:
Market cap [PLN mn]
18 493
Book Value [PLN mn]
6 521
Interest income
Volume
I-II Q'04
399
775
129
135
P/PBO*
1 month
6 months
12 months
dynamics
II Q'05/04
-16.6%
143.6%
266.1%
-13.0%
17.0%
1%
34%
30%
WIG
644.00
2003
2004
2005P
2006P
Pr
Volume [000] shares
Price [PLN]
Gross profit
[PLN mn]
-1 382
194
357
278
[PLN mn]
1 393
1 321
1 195
1 267
12
2005-01-25
II Q'04
202
401
71
91
30 154
2 839
22 116
11 612
P/E
Market cap [PLN mn]
3 097
Book Value [PLN mn]
1 516
[PLN mn]
2003
723
2004
635
2005P
662
2006P
683
2004-10-27
No of sh.
[mn]
13
13
13
SUSPENDED
20%
WIG
GRUPA KREDYT BANKU
Price [PLN]
11.40
Year
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
325
0
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
Volume
Net profit
[PLN mn]
29
366
463
Valuation
Free float [%]
WIG
Net profit
[PLN mn]
333
792
942
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
No of sh.
[mn]
29
29
29
II Q'04
307
769
310
278
49 572
5 442
29 811
25 035
1.05
655.0
427.0
I-II Q'04
622
1 311
487
415
Valuation
Free float [%]
SUSPENDED
25%
P/E
P/PBO*
P/BV
55.47
23.34
19.62
7.85
6.51
6.21
3.50
3.12
2.97
II Q'05
I-II Q'05
962
1 514
578
455
dynamics
II Q'05/04
58 959
6 521
36 120
32 451
Price change:
1 month
6 months
12 months
-2%
36%
38%
GRUPA PEKAO
Price [PLN]
Year
Market cap [PLN mn]
27 829
Book Value [PLN mn]
7 708
167.00
Profit on bank.
oper.
Interest income
[PLN mn]
2003
2 375
2004
2 260
2005P
2 185
2006P
2 213
Gross profit
[PLN mn]
1 276
1 513
1 624
1 761
[PLN mn]
4 073
4 135
4 231
4 447
190
5000
180
4000
Volume [000] shares
Pr
170
160
3000
150
140
2000
130
120
1000
110
Pekao S.A.
Profit on bank.
oper.
[PLN mn]
2003
558
2004
588
2005P
649
2006P
702
Gross profit
[PLN mn]
-41
352
291
189
[PLN mn]
953
1 464
1 190
1 125
5
10000
8000
4
6000
3.5
4000
3
2000
2.5
Volume [000] shares
Pr
4.5
0
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
MILLENNIUM
Profit on bank.
oper.
[PLN mn]
2003
829
2004
870
2005P
893
2006P
947
Gross profit
[PLN mn]
260
570
627
696
[PLN mn]
1 632
1 762
1 758
1 857
125
1000
115
Pr
P/BV
30.26
20.72
20.22
18.67
6.83
6.73
6.58
6.26
3.89
3.52
3.39
3.21
II Q'05
I-II Q'05
515
950
904
755
470
396
60 526
7 708
Price change:
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
No of sh.
[mn]
849
849
849
849
II Q'04
148
368
117
92
20 454
1 844
12 102
7 530
I-II Q'04
303
611
144
112
0.77
5.0
2.8
800
105
600
95
400
85
200
75
65
0
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
BZ WBK
1 month
6 months
12 months
dynamics
II Q'05/04
29.0%
7.2%
-5.3%
10.3%
-8%
26%
30%
Valuation
Free float [%]
SUSPENDED
19%
P/E
P/PBO*
P/BV
76.94
16.70
16.94
25.95
4.22
2.74
3.38
3.57
2.32
2.01
2.01
2.09
II Q'05
I-II Q'05
162
669
176
137
408
117
92
20 454
1 844
Price change:
Market cap [PLN mn]
8 536
Book Value [PLN mn]
3 167
117.00
Interest income
Volume
P/PBO*
1 month
6 months
12 months
dynamics
II Q'05/04
10.6%
-4%
63%
63%
WIG
WIG
Volume [000] shares
Year
I-II Q'04
1 081
1 970
705
638
1.44
187.0
124.0
Net profit
[PLN mn]
52
241
237
155
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
2
GRUPA BZ WBK
Price [PLN]
II Q'04
556
1 012
365
369
63 937
6 990
45 194
27 344
P/E
Market cap [PLN mn]
4 017
Book Value [PLN mn]
1 844
Interest income
Volume
No of sh.
[mn]
166
167
167
167
SUSPENDED
37%
WIG
GRUPA Banku Millennium
Price [PLN]
4.73
Year
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
0
100
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
Volume
Net profit
[PLN mn]
920
1 343
1 376
1 490
Valuation
Free float [%]
Net profit
[PLN mn]
129
444
498
554
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
No of sh.
[mn]
73
73
73
73
II Q'04
208
489
148
123
26 067
2 742
17 865
13 936
1.06
124.5
84.8
I-II Q'04
429
963
299
248
26.09.2005
Valuation
Free float [%]
HOLD
119.00
30%
P/E
P/PBO*
P/BV
66.24
19.21
17.15
15.42
5.23
4.84
4.86
4.60
3.36
2.83
2.55
2.31
II Q'05
I-II Q'05
218
437
351
288
195
169
29 301
3 167
Price change:
1 month
6 months
12 months
dynamics
II Q'05/04
31.5%
37.3%
12.4%
15.5%
-6%
27%
35%
BANK HANDLOWY
Price [PLN]
Interest income
[PLN mn]
2003
745
2004
899
2005P
840
2006P
759
Profit on bank.
oper.
[PLN mn]
1 891
1 918
1 973
2 020
Gross profit
[PLN mn]
392
477
527
541
200
85
160
Pr
75
Volume [000] shares
Year
Market cap [PLN mn]
7 800
Book Value [PLN mn]
4 927
59.70
120
65
80
55
40
0
45
2004-10-27 2005-01-25 2005-04-26 2005-07-26 2005-10-24
Volume
Bank Handlowy
WIG
Net profit
[PLN mn]
243
416
479
489
[PLN mn]
Interest inc.
PBO
Gross profit
Net profit
Assets
Sharehold. equity
Deposits
Credits
BETA (XI '04 - X '05)
Max. 52 weeks
Min. 52 weeks
No of sh.
[mn]
131
131
131
131
II Q'04
229
468
166
158
35 261
5 832
18 426
12 496
0.28
78.0
56.9
I-II Q'04
437
953
271
239
Valuation
Free float [%]
SUSPENDED
8%
P/E
P/PBO*
P/BV
32.17
18.73
16.30
15.95
4.12
4.07
3.95
3.86
1.31
1.27
1.54
1.47
II Q'05
I-II Q'05
251
1 097
357
278
579
211
159
34 707
4 927
Price change:
1 month
6 months
12 months
dynamics
II Q'05/04
23.7%
27.0%
0.7%
-1.6%
-15.5%
4%
-12%
-5%
AGORA
Year
05.08.2005
ACCUMULATE
Price [PLN]
62.80
Market cap [PLN mn]
3 564
Valuation
74.00
EV [PLN mn]
3607.8
Book Value [PLN mn]
1 049
Free float [%]
37%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
853.5
17.3
-5.0
7.2
123.2
56.8
495.05
27.33
3.35
4.18
25.68
0.00
2004
1001.1
95.7
78.3
71.3
110.9
56.8
49.99
19.56
3.17
3.56
17.46
0.03
2005P
1186.7
134.9
143.9
117.8
93.9
56.8
30.26
16.84
3.07
3.00
15.77
0.04
2006P
1215.8
241.9
242.8
197.7
89.8
56.8
18.03
12.40
3.05
2.93
10.88
0.07
Consolidated
75
1500
Consolidated
PLN mn'
70
1200
60
900
55
600
50
45
Net sales
Volume [000] shares
Price [PLN]
65
II Q'04
2005-04-26
Volume
margin
I-II Q'05
325.39
474.95
615.95
55.95
22.10
107.93
94.7%
17.5%
Gross profit
22.64
58.12
13.99
111.15
156.7%
18.0%
Net profit
21.09
48.18
128.5%
14.8%
11.78
91.18
Assets
1 380.32
1 561.07
Equity
1 070.16
1 189.12
Price change:
22.9%
BETA (XI '04 - X '05)
0.83
Max. 52 weeks
73.90
6 months
month
-8%
8%
Min. 52 weeks
48.10
12 months
33%
WIG
BUDIMEX
Year
dynamics
II Q'05/04
28.74
0
2005-10-24
2005-07-26
Agora
I-II Q'05
264.80
300
2005-01-25
I-II Q'04
EBIT
40
35
2004-10-27
II Q'05
20.09.2005
REDUCE
Price [PLN]
38.50
Market cap [PLN mn]
983
Valuation
38,1
EV [PLN mn]
734.9
Book Value [PLN mn]
512
Free float [%]
28%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
2146.9
-15.3
-10.5
-38.3
30.5
25.5
1.92
0.46
2004
2160.6
-119.5
2.9
0.8
24.5
25.5
1228.64
38.85
1.98
0.45
48.09
2005P
2500.0
10.0
17.0
9.2
23.0
25.5
106.84
30.53
1.92
0.39
22.27
0.01
2006P
2800.0
25.6
30.8
16.6
23.0
25.5
59.21
24.82
1.86
0.35
15.12
0.03
Consolidated
70
750
Consolidated
65
PLN mn'
Net sales
Volume [000] shares
60
Price [PLN]
II Q'04
500
55
50
45
250
40
2005-01-25
2005-04-26
Volume
Budimex
dynamics
margin
II Q'05/04
I-II Q'05
663.29
790.23
1 066.89
-9.76
-5.56
-13.41
-11.58
Gross profit
10.37
1.62
7.49
2.44
-84.4%
0.2%
8.14
0.52
3.19
0.68
-93.6%
0.1%
Assets
1 468.98
1 966.36
Equity
511.58
519.98
Net profit
Price change:
38.3%
-1.1%
BETA (XI '04 - X '05)
0.25
month
-4%
Max. 52 weeks
54.00
6 months
-18%
Min. 52 weeks
38.50
12 months
-17%
WIG
COMARCH
Year
I-II Q'05
479.54
0
2005-10-24
2005-07-26
I-II Q'04
EBIT
35
30
2004-10-27
II Q'05
Price [PLN]
60.00
Market cap [PLN mn]
404
Valuation
-
EV [PLN mn]
394.7
Book Value [PLN mn]
109
Free float [%]
51%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
258.0
15.1
12.1
11.0
10.6
6.7
36.86
18.73
3.90
1.56
15.35
0.04
2004
330.0
18.2
15.0
16.1
8.0
6.7
25.07
16.75
3.43
1.22
15.64
0.04
2005P
2006P
90
300
85
PLN mn'
80
Net sales
Volume [000] shares
Pri
ce
[PL
N]
75
200
70
65
60
100
55
50
45
40
2004-10-27
2005-01-25
Volume
2005-04-26
Comarch
2005-07-26
WIG
0
2005-10-24
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
69.05
101.87
135.43
175.90
47.5%
EBIT
3.39
2.93
7.84
4.46
-13.4%
Gross profit
1.52
2.47
5.43
3.55
62.3%
2.0%
Net profit
2.13
8.07
5.75
9.33
279.7%
5.3%
Assets
239.50
312.51
Equity
108.94
141.40
Price change:
2.5%
BETA (XI '04 - X '05)
0.66
month
-4%
Max. 52 weeks
71.70
6 months
10%
Min. 52 weeks
51.80
12 months
-9%
COMPUTERLAND
Year
Price [PLN]
89.00
Market cap [PLN mn]
619
Valuation
-
EV [PLN mn]
619.4
Book Value [PLN mn]
206
Free float [%]
66%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
582.4
31.1
18.1
8.6
23.1
6.8
70.10
19.02
3.33
1.04
10.12
0.06
2004
739.8
49.7
21.6
13.7
25.0
7.0
45.21
16.01
3.12
0.84
8.12
0.08
2005P
2006P
150
300
140
PLN mn'
II Q'04
Net sales
Volume [000] shares
130
Pri
ce
200
120
110
100
100
2005-04-26
Volume
Computerland
margin
I-II Q'05
129.34
310.42
248.31
-27.1%
7.20
16.50
15.54
-14.7%
Gross profit
7.41
7.50
12.84
13.51
1.3%
5.4%
Net profit
6.46
6.29
10.54
10.95
-2.6%
4.4%
Assets
442.39
438.36
Equity
201.97
218.97
Price change:
6.3%
BETA (XI '04 - X '05)
0.50
month
-5%
Max. 52 weeks
128.00
6 months
-12%
Min. 52 weeks
85.20
12 months
-16%
WIG
ECHO INVESTMENT
Year
dynamics
II Q'05/04
8.44
0
2005-10-24
2005-07-26
I-II Q'05
177.32
80
2005-01-25
I-II Q'04
EBIT
90
70
2004-10-27
II Q'05
Price [PLN]
133.50
Market cap [PLN mn]
1 402
Valuation
-
EV [PLN mn]
2198.7
Book Value [PLN mn]
355
Free float [%]
38%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
312.4
78.6
42.6
28.7
20.9
10.5
48.77
28.24
4.12
4.49
22.37
0.04
2004
320.0
80.0
50.0
39.0
25.0
10.5
35.94
21.90
3.70
4.38
21.06
0.04
2005P
320.0
80.0
53.0
41.3
26.0
10.5
33.94
20.83
3.33
4.38
20.77
0.04
2006P
Consolidated
140
300
Consolidated
PLN mn'
120
Volume [000] shares
P
130
200
110
100
90
100
80
2005-01-25
2005-04-26
Volume
Echo Investment
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
80.58
0.00
153.44
57.18
23.29
0.00
86.51
93.40
0.0%
163.3%
Gross profit
10.07
45.27
57.51
120.39
349.6%
210.6%
7.53
37.58
398.9%
168.9%
Net profit
45.12
96.59
Assets
1 521.65
1 957.34
Equity
355.38
821.69
Price change:
0.0%
BETA (XI '04 - X '05)
0.02
month
0%
Max. 52 weeks
139.00
6 months
56%
Min. 52 weeks
70.80
12 months
62%
WIG
ELEKTROBUDOWA
Year
I-II Q'04
EBIT
0
2005-10-24
2005-07-26
II Q'05
Net sales
70
60
2004-10-27
II Q'04
19.09.2005
HOLD
Price [PLN]
33.20
Market cap [PLN mn]
132
Valuation
35.00
EV [PLN mn]
150.8
Book Value [PLN mn]
65
Free float [%]
63%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
228.8
8.0
5.0
3.1
7.0
4.0
42.53
13.05
2.00
0.58
10.06
2004
278.1
9.7
6.9
4.5
6.2
4.0
29.30
12.32
1.91
0.47
9.28
0.07
2005P
300.0
11.0
10.4
7.5
7.0
4.2
18.59
9.62
1.80
0.46
8.32
0.07
2006P
340.0
13.4
12.9
9.5
7.0
4.2
14.68
8.45
1.76
0.41
7.23
0.09
39
300
37
PLN mn'
Pri
35
Net sales
II Q'04
II Q'05
I-II Q'04
I-II Q'05
0.05
dynamics
margin
II Q'05/04
I-II Q'05
64.36
80.25
102.85
125.22
24.7%
EBIT
3.48
2.85
2.45
0.62
-18.1%
0.5%
31
Gross profit
2.94
3.44
1.70
1.41
16.9%
1.1%
29
Net profit
2.97
2.83
1.09
1.24
-4.8%
1.0%
Assets
152.26
164.43
Equity
59.96
61.80
33
200
27
100
25
23
BETA (XI '04 - X '05)
0.27
month
-4%
21
Max. 52 weeks
36.00
6 months
35%
Min. 52 weeks
22.60
12 months
15%
19
2004-10-27
2005-01-25
Volume
2005-04-26
0
2005-10-24
2005-07-26
Elektrobudowa
WIG
Price change:
EMAX
Year
Price [PLN]
91.10
Market cap [PLN mn]
309
Valuation
-
EV [PLN mn]
294.7
Book Value [PLN mn]
72
Free float [%]
25%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
222.8
24.5
17.1
10.5
5.1
3.4
29.37
19.78
4.24
1.39
10.77
0.08
2004
310.7
28.0
23.9
18.5
8.5
3.4
16.69
11.44
3.38
0.99
8.32
0.09
2005P
2006P
Consolidated
150
200
Consolidated
PLN mn'
140
Pric
e
120
Volume [000] shares
150
130
100
110
100
50
90
II Q'04
Net sales
2005-01-25
2005-04-26
Volume
dynamics
margin
II Q'05/04
I-II Q'05
79.96
133.48
149.05
-10.6%
5.66
0.60
1.70
1.55
-89.4%
1.0%
Gross profit
3.32
2.77
-0.49
3.28
-16.5%
2.2%
Net profit
3.27
2.23
-1.15
2.44
-31.8%
1.6%
Assets
196.29
200.08
Equity
71.78
74.15
BETA (XI '04 - X '05)
0.13
Max. 52 weeks
111.50
Price change:
6 months
month
-7%
-9%
Min. 52 weeks
85.00
12 months
-15%
WIG
FARMACOL
Year
I-II Q'05
89.44
0
2005-10-24
2005-07-26
Emax
I-II Q'04
EBIT
80
70
2004-10-27
II Q'05
06.09.2005
ACCUMULATE
Price [PLN]
36.00
Market cap [PLN mn]
842
Valuation
39.60
EV [PLN mn]
812.4
Book Value [PLN mn]
287
Free float [%]
36%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
2718.8
58.5
60.7
39.0
13.6
23.4
21.58
15.99
3.27
0.31
11.60
0.07
2004
2784.3
68.4
77.0
57.8
13.8
23.4
14.58
11.77
2.65
0.30
10.14
0.08
2005P
3059.4
77.2
81.5
62.9
14.9
23.4
13.39
10.82
2.47
0.28
8.88
0.09
2006P
3301.6
87.9
91.4
70.8
16.8
23.4
11.89
9.61
2.29
0.26
7.80
0.11
Consolidated
43
400
41
Consolidated
PLN mn'
39
300
Pri
ce
[PL
N]
Volume [000] shares
37
35
200
33
31
II Q'04
Net sales
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
675.51
735.91
1 365.83
1 500.57
EBIT
16.23
17.13
32.82
36.20
5.6%
2.4%
Gross profit
17.92
20.72
35.20
41.31
15.6%
2.8%
Net profit
13.56
16.81
24.0%
2.1%
25.56
32.00
Assets
829.68
937.54
Equity
287.48
348.41
8.9%
100
29
BETA (XI '04 - X '05)
0.06
month
0%
Max. 52 weeks
36.80
6 months
28%
Min. 52 weeks
27.70
12 months
16%
27
25
2004-10-27
2005-01-25
2005-04-26
Volume
0
2005-10-24
2005-07-26
Farmacol
Price change:
WIG
FORTE
Year
18.03.2005
BUY
Price [PLN]
11.75
Market cap [PLN mn]
284
Valuation
13.80
EV [PLN mn]
288.7
Book Value [PLN mn]
192
Free float [%]
65%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
348.4
25.3
19.4
12.6
13.2
17.3
16.20
7.90
1.76
0.58
5.97
0.11
2004
403.9
24.5
32.1
25.7
17.0
24.2
11.06
6.66
1.38
0.70
7.06
0.08
2005P
459.4
33.3
33.2
26.9
18.9
24.2
10.58
6.22
1.22
0.62
5.54
0.12
2006P
590.8
40.6
38.2
30.9
21.8
24.2
9.19
5.39
1.08
0.48
4.63
0.14
19
750
18
PLN mn'
17
Net sales
16
Volume [000] shares
500
Pri
ce
[P
LN
15
14
13
12
250
11
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
86.55
81.90
175.48
181.15
-5.4%
EBIT
4.44
1.57
14.15
7.30
-64.7%
4.0%
Gross profit
7.42
2.57
17.69
8.45
-65.3%
4.7%
Net profit
6.91
2.29
14.42
6.43
-66.9%
3.5%
Assets
371.44
377.00
Equity
212.09
228.36
10
BETA (XI '04 - X '05)
0.13
month
0%
9
Max. 52 weeks
14.25
6 months
1%
Min. 52 weeks
9.80
12 months
14%
8
2004-10-27
2005-01-25
Volume
2005-04-26
Forte
2005-07-26
WIG
0
2005-10-24
Price change:
HOOP
Year
18.03.2005
ACCUMULATE
Price [PLN]
11.75
Market cap [PLN mn]
152
Valuation
14.50
EV [PLN mn]
232.5
Book Value [PLN mn]
105
Free float [%]
24%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
30.50
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
351.6
20.0
10.6
5.0
22.9
13.0
2004
501.1
-1.2
-14.1
-10.3
40.0
13.0
5.47
1.44
0.43
5.42
5.13
1.73
0.30
5.05
0.09
2005P
528.9
16.3
6.9
5.6
35.4
13.0
27.10
3.72
1.62
0.29
5.41
0.06
2006P
554.9
19.0
10.6
8.6
35.8
13.0
17.71
3.44
1.51
0.27
4.54
0.08
Consolidated
15
500
Consolidated
PLN mn'
400
Pri
ce
[PL
Volume [000] shares
13
11
300
9
200
7
100
5
2004-10-27
2005-01-25
2005-04-26
Volume
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
161.47
177.15
262.78
269.96
9.7%
EBIT
4.38
15.26
5.00
14.26
248.3%
5.3%
Gross profit
1.90
12.18
-0.13
8.77
541.1%
3.2%
Net profit
1.30
8.30
1.32
4.81
540.3%
1.8%
Assets
449.60
444.23
Equity
108.89
95.95
BETA (XI '04 - X '05)
0.59
month
4%
Max. 52 weeks
13.30
Price change:
6 months
18%
Min. 52 weeks
8.30
12 months
27%
WIG
INDYKPOL
Year
Net sales
0
2005-10-24
2005-07-26
Hoop
II Q'04
SUSPENDED
Price [PLN]
55.50
Market cap [PLN mn]
173
Valuation
-
EV [PLN mn]
276.6
Book Value [PLN mn]
81
Free float [%]
32%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
555.4
29.5
17.2
11.7
16.2
3.1
14.88
6.22
2.71
0.31
5.89
0.11
2004
626.0
13.1
18.7
14.3
16.6
3.1
12.15
5.61
2.15
0.28
9.29
0.05
2005P
644.5
26.2
18.0
13.8
21.0
3.1
12.54
4.98
1.92
0.27
5.76
0.10
2006P
688.3
27.9
20.3
15.9
21.8
3.1
10.88
4.59
1.81
0.25
5.33
0.11
Consolidated
150
130
Consolidated
dynamics
margin
II Q'05/04
I-II Q'05
120
PLN mn'
110
Net sales
157.92
175.26
289.15
325.62
11.0%
100
EBIT
6.38
13.23
11.76
18.12
107.4%
5.6%
Gross profit
5.44
12.79
9.25
17.94
135.0%
5.5%
Net profit
3.36
9.66
6.17
13.23
187.6%
4.1%
Assets
288.98
316.27
Equity
102.77
123.44
80
70
50
60
Volume [000] shares
Pric
e
[PL
100
90
II Q'04
II Q'05
I-II Q'04
I-II Q'05
50
BETA (XI '04 - X '05)
-0.17
40
Max. 52 weeks
87.50
6 months
19%
Min. 52 weeks
42.30
12 months
-37%
30
2004-10-27
2005-01-25
2005-04-26
Volume
0
2005-10-24
2005-07-26
Indykpol
month
-19%
WIG
JELFA
Year
Price change:
25.02.2005
BUY
Price [PLN]
78.00
Market cap [PLN mn]
530
Valuation
70.00
EV [PLN mn]
515.3
Book Value [PLN mn]
336
Free float [%]
39%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
253.6
30.2
29.5
21.7
29.5
6.8
24.50
10.38
1.53
2.09
8.53
2004
274.1
15.3
12.5
9.6
27.9
6.8
55.25
14.14
1.57
1.94
12.63
0.03
2005P
277.9
20.8
19.4
15.7
31.5
6.8
33.78
11.24
1.48
1.91
10.36
0.04
2006P
291.5
28.5
27.4
22.2
30.7
6.8
23.94
10.04
1.39
1.82
8.63
0.06
80
300
PLN mn'
75
Net sales
Pri
70
Volume [000] shares
200
65
60
100
55
50
45
2004-10-27
2005-01-25
Volume
2005-04-26
Jelfa
2005-07-26
WIG
0
2005-10-24
II Q'04
II Q'05
I-II Q'04
I-II Q'05
0.06
dynamics
margin
II Q'05/04
I-II Q'05
64.65
80.70
111.99
130.15
24.8%
EBIT
5.68
12.02
7.26
3.03
111.6%
2.3%
Gross profit
5.82
12.84
8.24
4.65
120.5%
3.6%
Net profit
4.69
12.73
6.57
3.83
171.3%
2.9%
Assets
423.04
435.78
Equity
335.68
337.89
BETA (XI '04 - X '05)
0.22
month
6%
Max. 52 weeks
79.40
Price change:
6 months
41%
Min. 52 weeks
50.70
12 months
43%
GRUPA KĘTY
Year
04.08.2005
HOLD
Price [PLN]
131.50
Market cap [PLN mn]
1 213
Valuation
129.50
EV [PLN mn]
1313.2
Book Value [PLN mn]
628
Free float [%]
46%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
740.2
85.5
84.6
69.7
36.0
9.2
17.40
11.48
3.28
1.64
10.36
0.07
2004
729.0
114.0
108.0
92.0
38.0
9.2
13.19
9.33
2.81
1.66
8.51
0.09
2005P
713.8
99.3
106.3
89.8
37.0
9.2
13.51
9.57
1.93
1.70
9.70
0.08
2006P
807.0
125.0
121.0
97.0
42.0
9.2
12.51
8.73
1.75
1.50
7.86
0.10
Consolidated
180
300
Consolidated
170
PLN mn'
160
Net sales
200
Pri
ce
[PL
Volume [000] shares
150
140
130
100
120
110
II Q'04
2005-01-25
2005-04-26
Volume
Kęty
I-II Q'05
margin
I-II Q'05
176.69
387.97
342.84
-6.4%
32.34
28.64
59.84
48.19
-11.5%
14.1%
Gross profit
30.60
32.59
59.00
53.21
6.5%
15.5%
Net profit
26.62
27.95
50.28
45.33
5.0%
13.2%
Assets
599.03
797.55
Equity
393.34
555.30
BETA (XI '04 - X '05)
1.00
month
-1%
Max. 52 weeks
149.00
Price change:
6 months
22%
Min. 52 weeks
104.00
12 months
0%
WIG
KGHM
Year
dynamics
II Q'05/04
188.68
0
2005-10-24
2005-07-26
I-II Q'04
EBIT
100
90
2004-10-27
II Q'05
08.08.2005
REDUCE
Price [PLN]
46.50
Market cap [PLN mn]
9 300
Valuation
34.70
EV [PLN mn]
10715.0
Book Value [PLN mn]
3 962
Free float [%]
36%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
4740.8
357.9
569.3
411.6
295.8
200.0
22.60
13.15
2.32
1.96
16.39
0.03
2004
6158.0
1371.0
1447.0
1398.1
281.3
200.0
6.65
5.54
1.66
1.51
5.74
0.14
2005P
7492.3
2184.4
2252.5
2045.0
275.0
200.0
4.55
4.01
1.34
1.24
3.39
0.26
2006P
5404.0
520.0
629.0
697.0
332.0
200.0
13.34
9.04
1.20
1.72
9.07
0.07
49
10000
47
PLN mn'
45
8000
Pric
e
[PL
41
39
6000
37
35
4000
33
31
29
Net sales
Volume [000] shares
43
2005-01-25
2005-04-26
Volume
KGHM
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
1 849.71
3 280.94
3 521.17
7.6%
523.50
510.16
1 001.30
1 007.17
-2.5%
28.6%
Gross profit
608.41
541.62
1 070.06
1 095.57
-11.0%
31.1%
Net profit
537.57
495.57
-7.8%
28.9%
949.37
1 018.58
Assets
8 573.10
9 484.94
Equity
4 433.90
5 764.04
BETA (XI '04 - X '05)
1.31
month
1%
Max. 52 weeks
48.30
6 months
58%
Min. 52 weeks
27.60
12 months
47%
0
2005-10-24
2005-07-26
I-II Q'04
1 718.90
25
23
2004-10-27
II Q'05
EBIT
2000
27
II Q'04
Price change:
WIG
KROSNO
Year
Price [PLN]
8.15
Market cap [PLN mn]
206
Valuation
-
EV [PLN mn]
331.4
Book Value [PLN mn]
122
Free float [%]
29%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
342.6
20.7
14.7
10.4
12.0
25.3
19.81
9.19
1.73
0.60
9.50
0.07
2004
397.0
40.0
24.5
18.6
13.0
25.3
11.09
6.52
1.53
0.52
6.02
0.13
2005P
445.6
35.9
28.1
22.1
24.2
25.3
9.31
4.45
1.28
0.46
6.27
0.10
2006P
502.7
59.6
48.5
38.7
28.0
25.3
5.33
3.09
1.04
0.41
4.19
0.16
Consolidated
18
1000000
17
PLN mn'
16
800000
Net sales
14
600000
13
12
400000
11
10
200000
9
8
2005-01-25
Volume
2005-04-26
Krosno
2005-07-26
WIG
0
2005-10-24
Volume [000] shares
Price
[PLN]
15
7
2004-10-27
Consolidated
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
98.55
86.38
197.04
175.52
-12.3%
EBIT
9.44
2.35
17.96
7.53
-75.1%
4.3%
Gross profit
7.19
1.92
13.61
5.40
-73.3%
3.1%
Net profit
5.94
1.82
11.25
4.72
-69.3%
2.7%
Assets
318.03
425.22
Equity
121.58
185.95
BETA (XI '04 - X '05)
0.10
month
-5%
Max. 52 weeks
13.20
Price change:
6 months
-30%
Min. 52 weeks
8.00
12 months
-37%
LOTOS
Year
05.09.2005
HOLD
Price [PLN]
40.50
Market cap [PLN mn]
4 605
Valuation
35.50
EV [PLN mn]
4100.9
Book Value [PLN mn]
3 778
Free float [%]
41%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
8658.3
407.5
372.4
289.5
132.6
113.7
15.91
10.91
3.02
0.53
8.76
2004
11193.6
641.5
718.6
572.0
139.5
113.7
8.05
6.47
2.21
0.41
6.06
0.14
2005P
8558.2
528.1
554.2
401.6
253.5
113.7
11.47
7.03
1.16
0.54
5.25
0.13
2006P
8553.5
476.4
498.4
373.4
307.4
113.7
12.33
6.76
1.06
0.54
6.08
0.10
45
5000
43
PLN mn'
4000
41
Pri
ce
[P
Volume [000] shares
39
3000
37
35
2000
33
31
II Q'04
Net sales
I-II Q'04
I-II Q'05
margin
I-II Q'05
2 146.04
3 631.88
114.17
198.36
5.5%
Gross profit
111.81
196.11
5.4%
88.59
141.35
3.9%
Net profit
Assets
6 123.50
Equity
3 778.50
1000
BETA (XI '04 - X '05)
0
Price change:
month
Max. 52 weeks
6 months
Min. 52 weeks
12 months
-5%
2005-09-07
Volume
LOTOS
WIG
MONDI
Year
dynamics
II Q'05/04
EBIT
29
27
2005-06-09
II Q'05
0.09
02.11.2005
ACCUMULATE
Price [PLN]
44.20
Market cap [PLN mn]
2 210
Valuation
49.00
EV [PLN mn]
2391.0
Book Value [PLN mn]
580
Free float [%]
19%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
1280.4
260.3
190.6
147.6
136.0
50.0
14.97
7.79
3.25
1.73
6.03
2004
1306.5
272.3
377.9
310.1
119.5
50.0
7.13
5.14
2.98
1.69
5.48
0.13
2005P
1245.5
140.7
144.6
117.1
110.5
50.0
18.87
9.71
3.18
1.77
8.75
0.06
2006P
1359.4
202.7
204.8
168.0
106.0
50.0
13.15
8.07
3.05
1.63
7.37
0.09
90
300
PLN mn'
80
II Q'04
Net sales
200
Pri
ce
[P
Volume [000] shares
70
60
50
100
2005-01-25
2005-04-26
Volume
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
316.13
670.93
642.26
-5.8%
93.05
60.17
156.01
102.52
-35.3%
16.0%
Gross profit
130.66
48.55
188.51
102.69
-62.8%
16.0%
Net profit
108.39
39.12
-63.9%
13.0%
153.17
83.80
Assets
1 437.47
1 282.89
Equity
897.72
917.73
BETA (XI '04 - X '05)
0.37
Max. 52 weeks
63.00
6 months
8%
Min. 52 weeks
39.20
12 months
-7%
0
2005-10-24
2005-07-26
MONDI
I-II Q'04
335.48
EBIT
40
30
2004-10-27
II Q'05
0.11
Price change:
month
0%
WIG
NETIA
Year
Price [PLN]
4.60
Market cap [PLN mn]
1 960
Valuation
4.50
EV [PLN mn]
1762.6
Book Value [PLN mn]
2 138
Free float [%]
100%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
701.1
-840.1
-728.8
-729.1
268.4
345.0
0.77
2.26
2004
897.2
85.8
113.7
159.2
238.8
426.0
12.31
4.92
0.86
2.18
4.98
2005P
900.4
98.8
113.0
96.1
245.1
426.0
20.39
5.74
0.89
2.18
5.15
0.06
2006P
994.2
135.7
148.3
108.3
236.9
426.0
18.09
5.68
0.88
1.97
4.13
0.09
0.05
Consolidated
6
20000
5
4.5
Volume [000] shares
Price
[PLN]
15000
10000
4
5000
3.5
3
2004-10-27
Consolidated
PLN mn'
5.5
2005-01-25
Volume
2005-04-26
Netia
2005-07-26
WIG
0
2005-10-24
Net sales
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
222.14
215.88
429.32
432.26
-2.8%
EBIT
22.24
28.19
50.42
52.98
26.8%
12.3%
Gross profit
37.07
32.16
73.98
60.01
-13.2%
13.9%
Net profit
36.69
31.78
73.37
54.89
-13.4%
12.7%
Assets
2 826.88
2 610.41
Equity
2 181.28
2 400.55
BETA (XI '04 - X '05)
0.72
month
1%
Max. 52 weeks
4.86
Price change:
6 months
14%
Min. 52 weeks
3.78
12 months
11%
ORBIS
Year
Price [PLN]
30.00
Market cap [PLN mn]
1 382
Valuation
-
EV [PLN mn]
1659.3
Book Value [PLN mn]
1 212
Free float [%]
45%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
811.0
55.0
68.0
47.0
87.5
46.1
29.41
10.28
1.14
1.70
11.64
2004
919.0
79.0
87.0
65.0
91.0
46.1
21.27
8.86
1.10
1.50
9.56
0.03
0.05
2005P
973.0
101.0
96.0
66.0
92.0
46.1
20.94
8.75
1.05
1.42
8.17
0.06
2006P
1038.0
113.0
96.0
79.0
91.0
46.1
17.50
8.13
1.02
1.33
6.78
0.08
Consolidated
33
Consolidated
PLN mn'
31
800
27
25
400
23
21
Net sales
Volume [000] shares
Price
[PLN
]
29
II Q'04
2005-01-25
2005-04-26
Volume
Orbis
I-II Q'05
margin
I-II Q'05
286.37
442.58
471.17
6.4%
41.66
47.48
26.59
30.63
14.0%
6.5%
Gross profit
44.26
44.71
31.98
25.65
1.0%
5.4%
Net profit
33.62
36.79
22.03
17.28
9.4%
3.7%
Assets
1 822.41
2 236.34
Equity
1 222.37
1 586.18
BETA (XI '04 - X '05)
0.39
month
-8%
Max. 52 weeks
32.70
Price change:
6 months
26%
Min. 52 weeks
20.70
12 months
30%
WIG
PGF
Year
dynamics
II Q'05/04
269.06
0
2005-10-24
2005-07-26
I-II Q'04
EBIT
19
17
2004-10-27
II Q'05
06.09.2005
HOLD
Price [PLN]
52.00
Market cap [PLN mn]
636
Valuation
58.10
EV [PLN mn]
936.3
Book Value [PLN mn]
170
Free float [%]
48%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
3568.7
73.4
64.7
36.8
16.6
12.2
17.29
11.90
3.87
0.18
8.73
0.09
2004
3643.2
63.3
58.6
42.4
19.8
12.4
15.20
10.36
3.38
0.18
9.71
0.08
2005P
3931.9
63.5
63.0
50.7
20.1
12.5
12.81
9.17
2.86
0.17
11.36
0.07
2006P
4165.9
70.7
70.3
56.6
21.6
12.6
11.60
8.40
2.48
0.16
10.37
0.07
Consolidated
85
500
Consolidated
PLN mn'
80
400
Volume [000] shares
Pric
e
[PL
75
70
300
65
200
60
55
II Q'04
Net sales
2005-04-26
Volume
margin
I-II Q'05
960.90
1 817.64
1 958.38
8.4%
11.49
40.80
33.26
-39.8%
1.7%
Gross profit
18.04
12.59
39.86
33.02
-30.2%
1.7%
Net profit
13.38
9.40
30.70
25.38
-29.7%
1.3%
Assets
1 262.36
1 327.96
Equity
169.79
187.13
BETA (XI '04 - X '05)
0.02
Max. 52 weeks
63.00
Price change:
6 months
month
-1%
4%
Min. 52 weeks
49.50
12 months
-14%
WIG
PKN ORLEN*
Year
dynamics
II Q'05/04
19.10
0
2005-10-24
2005-07-26
PGF
I-II Q'05
886.38
100
2005-01-25
I-II Q'04
EBIT
50
45
2004-10-27
II Q'05
05.09.2005
HOLD
Price [PLN]
58.70
Market cap [PLN mn]
25 107
Valuation
58.90
EV [PLN mn]
26050.5
Book Value [PLN mn]
12 957
Free float [%]
49%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
24412.0
1267.0
1219.0
987.0
1207.0
427.7
25.44
11.44
2.64
1.03
11.09
0.05
2004
30565.0
2750.0
3016.0
2396.0
1219.0
427.7
10.48
6.95
2.15
0.82
6.93
0.10
2005P
35031.6
2983.6
2885.0
2305.8
1226.0
427.7
10.89
7.11
1.92
0.72
6.00
0.12
2006P
29369.1
2500.5
2528.0
2016.7
1275.2
427.7
12.45
7.63
1.80
0.85
6.68
0.10
Consolidated
70
10000
65
PLN mn'
60
8000
Pric
e
[PL
55
6000
Volume [000] shares
50
45
40
4000
35
30
2000
25
20
2004-10-27
Consolidated
2005-01-25
Volume
2005-04-26
PKN
2005-07-26
WIG
0
2005-10-24
Net sales
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
9 993.28
6 805.91
16 333.50
13 611.82
EBIT
749.99
791.33
1 277.44
1 598.86
5.5%
11.7%
Gross profit
872.85
769.86
1 365.48
1 555.94
-11.8%
11.4%
Net profit
716.80
628.21
-12.4%
9.3%
1 100.05
1 268.96
Assets
18 018.92
23 623.57
Equity
9 964.16
12 957.05
Price change:
-31.9%
BETA (XI '04 - X '05)
1.46
month
-13%
Max. 52 weeks
69.00
6 months
34%
Min. 52 weeks
34.40
12 months
65%
POLIMEX-MOSTOSTAL SIEDLCE
Year
19.09.2005
HOLD
Price [PLN]
51.00
Market cap [PLN mn]
750
Valuation
43.80
EV [PLN mn]
794.7
Book Value [PLN mn]
172
Free float [%]
76%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
1238.7
63.5
52.1
28.0
35.6
14.7
26.82
11.81
5.36
0.61
8.76
2004
1706.2
72.6
63.7
45.7
32.2
14.7
16.43
9.64
3.48
0.44
7.69
0.07
0.09
2005P
1805.9
67.4
59.7
41.9
32.2
14.7
17.92
10.13
3.07
0.42
8.08
0.08
2006P
1986.5
75.7
68.4
49.9
32.2
14.7
15.05
9.15
2.74
0.38
7.41
0.09
Unconsolidated data, 2003 - data not considering loss on internet assets
55
750
PLN mn'
50
II Q'04
Net sales
45
Volume [000] shares
Pri
ce
500
40
35
250
30
2005-01-25
Volume
2005-04-26
Polimex
POLMOS LUBLIN
Year
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
184.53
435.40
320.35
814.65
136.0%
18.91
22.89
25.88
39.72
21.0%
4.9%
Gross profit
14.69
24.29
20.71
37.75
65.4%
4.6%
Net profit
11.09
16.67
14.47
25.50
50.3%
3.1%
Assets
433.29
1 034.98
Equity
123.88
272.19
BETA (XI '04 - X '05)
0.58
month
11%
Max. 52 weeks
51.00
6 months
87%
Min. 52 weeks
24.80
12 months
38%
0
2005-10-24
2005-07-26
WIG
I-II Q'04
EBIT
25
20
2004-10-27
II Q'05
Price change:
22.08.2005
ACCUMULATE
Price [PLN]
33.00
Market cap [PLN mn]
150
Valuation
35.00
EV [PLN mn]
230.1
Book Value [PLN mn]
129
Free float [%]
46%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
304.8
10.9
8.7
6.4
2.0
3.0
15.58
11.89
2.70
0.33
6.09
0.14
2004
338.6
20.1
17.1
12.5
6.1
3.0
7.97
5.37
2.02
0.30
2.58
0.30
2005P
317.8
7.4
2.2
1.8
2.7
4.5
85.24
33.28
1.08
0.47
15.57
0.05
2006P
393.8
19.3
17.4
13.7
4.7
4.5
10.87
8.10
0.99
0.38
6.71
0.12
70
750
dynamics
margin
II Q'05/04
I-II Q'05
65
PLN mn'
60
Net sales
78.27
76.07
157.60
145.95
-2.8%
55
EBIT
6.38
7.57
7.82
8.81
18.7%
6.0%
Gross profit
5.55
6.74
6.62
7.47
21.5%
5.1%
Net profit
4.03
4.99
4.81
5.07
23.9%
3.5%
Assets
109.37
126.38
Equity
41.81
55.89
Pric
e
[PL
500
Volume [000] shares
50
45
40
250
35
30
II Q'04
0
2005-05-31
Volume
I-II Q'05
month
-7%
Max. 52 weeks
54.20
Price change:
6 months
-27%
Min. 52 weeks
30.80
12 months
2005-08-29
POLMOS LUBLIN
WIG
PROKOM SOFTWARE
Year
I-II Q'04
BETA (XI '04 - X '05)
25
20
2005-02-24
II Q'05
25.10.2005
BUY
Price [PLN]
121.00
Market cap [PLN mn]
1 681
Valuation
145.00
EV [PLN mn]
1637.2
Book Value [PLN mn]
750
Free float [%]
55%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
874.0
106.3
20.6
4.2
21.2
13.8
397.32
65.57
2.34
1.91
12.96
2004
900.0
71.8
31.3
25.4
25.0
13.9
66.17
33.35
2.27
1.87
18.92
0.06
0.04
2005P
1664.5
141.5
120.3
73.8
82.4
13.9
22.77
10.76
2.12
1.01
9.11
0.07
2006P
1922.2
201.8
186.9
114.7
84.9
13.9
14.65
8.42
1.91
0.87
6.69
0.11
190
750
PLN mn'
170
Net sales
150
Volume [000] shares
Pric
e
[PL
500
130
110
250
90
70
50
2004-10-27
2005-01-25
Volume
2005-04-26
Prokom
2005-07-26
0
2005-10-24
WIG
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
183.69
171.45
365.66
283.36
EBIT
7.26
7.97
38.79
17.34
9.8%
6.1%
Gross profit
3.23
1.12
27.76
4.17
-65.2%
1.5%
Net profit
1.11
1.61
20.98
3.50
45.7%
1.2%
Assets
1 351.68
1 374.90
Equity
750.32
766.25
Price change:
-6.7%
BETA (XI '04 - X '05)
1.10
month
7%
Max. 52 weeks
147.00
6 months
35%
Min. 52 weeks
87.10
12 months
-3%
SOFTBANK
Year
02.09.2005
ACCUMULATE
Price [PLN]
34.50
Market cap [PLN mn]
723
Valuation
36.70
EV [PLN mn]
742.8
Book Value [PLN mn]
126
Free float [%]
52%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
344.7
5.6
-0.3
2.2
12.2
21.0
327.35
50.30
5.64
2.10
37.90
0.01
2004
488.0
46.4
24.8
30.5
10.8
21.0
23.70
17.50
4.56
1.48
12.99
0.06
2005P
517.0
48.7
48.7
47.6
12.0
25.2
18.25
14.57
2.76
1.68
13.99
0.06
2006P
693.3
72.7
75.5
70.0
16.1
25.2
12.41
10.09
2.57
1.25
8.74
0.09
Consolidated
38
1500
36
Consolidated
PLN mn'
34
II Q'04
Net sales
32
30
28
26
500
24
22
Volume [000] shares
Pric
e
[PL
1000
TORFARM
Year
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
79.53
162.60
176.16
-9.3%
3.06
17.49
3.22
21.95
470.8%
Gross profit
-5.55
15.98
-2.14
21.62
12.3%
Net profit
-4.85
15.42
-1.82
20.13
11.4%
Assets
254.43
429.69
Equity
126.24
160.27
Price change:
12.5%
BETA (XI '04 - X '05)
0.88
month
7%
Max. 52 weeks
36.60
6 months
57%
Min. 52 weeks
21.70
12 months
44%
0
2005-04-26
2005-07-26
2005-10-24
Softbank
WIG
2005-01-25
Volume
I-II Q'04
87.72
EBIT
20
18
2004-10-27
II Q'05
06.09.2005
ACCUMULATE
Price [PLN]
40.60
Market cap [PLN mn]
110
Valuation
45.90
EV [PLN mn]
128.9
Book Value [PLN mn]
63
Free float [%]
24%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
1099.5
8.4
10.4
7.5
1.8
2.0
10.83
8.77
2.98
0.07
11.37
2004
1309.1
6.8
11.9
9.2
2.5
2.7
12.05
9.48
1.61
0.08
15.61
0.05
2005P
1471.3
8.8
12.6
10.2
3.6
2.7
10.79
7.99
1.40
0.08
10.43
0.07
2006P
1612.9
13.6
13.5
10.9
3.5
2.7
10.12
7.67
1.22
0.07
7.60
0.10
62
100
PLN mn'
58
Net sales
50
50
46
42
25
38
Wolumen [tys. szt.]
75
54
2005-06-16
Volume
I-II Q'04
I-II Q'05
margin
I-II Q'05
346.63
607.31
702.26
17.8%
1.15
1.69
3.76
2.75
46.4%
0.4%
Gross profit
1.98
3.72
5.15
5.35
88.1%
0.8%
Net profit
1.58
2.89
4.12
4.19
83.2%
0.6%
Assets
262.94
320.01
Equity
31.33
68.92
BETA (XI '04 - X '05)
month
-1%
Max. 52 weeks
46.00
Price change:
6 months
0%
Min. 52 weeks
32.30
12 months
2005-09-14
44
46.31
TPSA
Year
dynamics
II Q'05/04
294.26
0
2005-03-14
II Q'05
EBIT
34
30
2004-12-16
II Q'04
0.07
08.02.2005
HOLD
Price [PLN]
23.80
Market cap [PLN mn]
33 320
Valuation
19.50
EV [PLN mn]
47099.0
Book Value [PLN mn]
10 452
Free float [%]
46%
Sales
EBIT
Gross profit
Net profit
Deprec.
No of sh.
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[PLN mn]
[mn]
P/E
P/CE
P/BV
MC/S
EV/EBDIT
EBIT/EV
2003
18309.0
2994.0
1443.0
925.0
4360.0
1400.0
36.02
6.30
2.40
1.82
6.40
0.06
2004
18564.0
3494.0
3065.0
2209.0
4195.0
1400.0
15.08
5.20
2.07
1.79
5.68
0.08
2005P
18676.0
3618.0
2448.0
1780.0
4058.0
1400.0
18.72
5.71
2.02
1.78
5.57
0.08
2006P
18486.0
3295.0
2372.0
1725.0
4052.0
1400.0
19.32
5.77
2.01
1.80
5.83
0.08
Consolidated
20000
28
16000
Pric
e
[PL
24
22
8000
18
16
4000
14
2005-01-25
Volume
2005-04-26
TPSA
0
2005-10-24
2005-07-26
WIG
Volume [000] shares
12000
20
12
2004-10-27
Consolidated
PLN mn'
26
Net sales
II Q'04
II Q'05
I-II Q'04
I-II Q'05
dynamics
margin
II Q'05/04
I-II Q'05
4 600.30
4 601.00
9 188.30
9 042.00
0.0%
EBIT
911.44
1 070.00
1 920.44
2 034.00
17.4%
22.5%
Gross profit
813.69
734.00
1 649.69
1 391.00
-9.8%
15.4%
Net profit
585.98
534.00
1 168.98
946.00
-8.9%
10.5%
Assets
35 234.81
34 446.00
Equity
14 555.48
17 381.00
BETA (XI '04 - X '05)
1.58
month
-6%
Max. 52 weeks
26.30
Price change:
6 months
37%
Min. 52 weeks
16.45
12 months
50%
Selected Midcaps listed on WSE
2004
Company
Price
NP
2004
Forecast
ZN 2005
Forecast
ZN 2006
Industry
Amica
Apator
Boryszew
Cersanit
Dębica
Duda
Ekodrob
Elzab
Forte
Groclin
Hoop
Hydrotor
Indykpol
Jelfa
Jutrzenka
Kęty
Krosno
Mennica
Mieszko
Relpol
Ropczyce
Sanok*
Sokołów
Wawel
Wilbo
Wólczanka
Żywiec
19.60
145.00
18.00
125.00
63.20
9.95
4.55
16.10
12.45
90.00
11.75
22.50
54.00
78.00
75.70
134.00
8.00
72.70
2.73
52.80
21.00
122.50
4.81
134.00
2.11
29.60
480.00
40008
34958
80299
104272
94017
12940
-3903
743
25042
42722
-10324
4035
13321
9388
8161
90750
18484
37936
167
6066
10067
43455
41033
18715
-1620
2111
276854
22190
28000
70600
118202
150000
39100
Wholesale & Retail
Eldorado
Farmacol
Alma Market
LPP
PGF
31.80
35.70
24.00
860.00
52.90
14581
57794
19085
45592
42434
18600
62932
9532
64500
50735
22000
70834
Construction / Real Estate
Budimex
Echo
Orbis
Polimex
39.00
135.00
30.00
51.50
770
34686
49715
40494
9200
41300
66000
41900
16600
59.50
89.50
91.90
35.50
14026
13807
9255
29369
14000
77800
20350
47597
18800
4.77
159802
96100
IT
Comarch
Computerland
Emax
Softbank
Telco
Netia
13640
P/E
P/E
2006
EV /
EBITDA
P/E
EV /
EBITDA
7.72
16.62
3.04
14.06
5.82
1.10
5.50
12.56
4.87
1.68
9.12
4.59
0.76
3.04
12.49
1.57
7.91
5.70
10.97
11.46
27.34
2.92
5.38
7.61
4.94
9.53
8.65
17.87
4.50
5.85
4.66
12.20
33.78
17.40
15.67
0.91
3.57
10.31
6.78
10.32
1.78
10.59
23.94
10.58
14.51
0.52
3.39
9.11
4.33
8.43
1.22
28.61
4.62
25.15
8.28
3.27
7.87
18.59
7.47
12.60
14.67
6.84
5.39
7.80
3.17
9.99
11.75
25.21
19.65
3.55
8.49
1.77
9.86
5.52
2.28
11.39
2.89
6.82
8.12
7.93
7.98
9.08
12.50
10.66
9.30
2.02
7.57
9.60
4.17
5.32
5.76
7.73
8.28
8.34
8.10
10.10
14.47
4.82
4.05
32.13
15.25
6.13
10.16
3.60
20.77
8.27
11.34
13.27
10.62
22.71
12.76
5.16
9.07
5.24
13.79
7.74
1293.08
40.87
27.80
12.21
11.45
8.48
11.49
108.23
34.32
20.94
22.80
70008
28.54
43.92
33.66
25.32
14.76
8.17
8.59
13.13
108300
10.28
5.70
70700
133000
4559
26881
43200
5626
30932
57200
8608
13830
15700
12042
89800
22140
15936
22159
19800
97000
38651
3900
9765
3846
6000
38245
13700
5000
48257
17100
94800
56595
79000
49900
BRE Securities forecasts
If BRE Securities forecasts are not available, an average of market forecasts is used
* data concerning year 2003 come from the period 07'2002-06'2003, and respectively for the year 2004
4.28
13.98
2.52
15.94
9.28
2.52
2005
EV /
EBITDA
27.12
8.61
11.59
13.96
12.67
56.50
25.67
15.51
1.09
12.59
111.34
7.44
9.61
9.57
11.75
10.74
4.94
4.88
last 4 quarters
EV /
EBITDA
P/E
6.94
9.50
4.37
15.80
14.30
2.57
PEG
-0.10
15.75
19.10
4.54
8.31
2.39
9.71
7.11
1.95
11.03
2.55
6.71
8.17
5.95
7.10
12.18
14.30
6.91
10.07
2.65
6.89
10.31
5.43
6.18
6.32
11.06
8.37
5.79
6.09
9.34
15.38
12.86
5.94
26.28
18.15
5.65
10.37
4.58
16.31
9.91
0.63
-0.13
12.29
29.56
18.15
9.40
7.75
10.00
20.20
9.00
9.46
9.66
1.94
5.51
-0.52
9.94
13.43
13.86
12.17
15.27
77.10
13.31
16.26
1.68
9.79
10.21
11.55
12.27
21.93
9.49
9.59
11.79
4.07
7.97
15.45
11.44
9.21
7.02
30.17
13.37
7.16
9.59
59.98
20.49
17.50
19.14
6.78
8.85
29.12
7.87
15.31
15.63
13.82
5.79
6.54
12.25
21.69
12.39
10.62
8.37
22.59
42.98
24.13
14.13
17.97
5.02
15.95
4.64
11.58
-0.28
1.23
-1.73
0.74
1.35
1.05
0.46
4.58
0.02
0.77
1.39
-2.44
0.73
0.98
3.55
1.07
-0.61
0.47
Monthly Report
BRE
BRE Bank
Bank Securities
Securities
Institutional Sales and Research:
Analysts:
Tomasz Mazurczak tel. (+48 22) 697 47 35
DISA Director
Tomasz.Mazurczak@dibre.com.pl
Strategic Analysis
Jacek Borawski tel. (+48 22) 697 48 88
Senior Analyst
Jacek.Borawski@dibre.com.pl
Technical Analysis
Michał Marczak tel. (+48 22) 697 47 38
DISA Deputy Director
Michal.Marczak@dibre.com.pl
Telekomunikacja, surowce, metale, media, hotele
Marta Jeżewska tel. (+48 22) 697 47 37
Analyst
Marta.Jeżewska@dibre.com.pl
Grzegorz Domagała tel. (+48 22) 697 48 03
DISA Deputy Director
Grzegorz.Domagala@dibre.com.pl
Sales:
Michał Skowroński tel. (+48 22) 697 49 68
Michal.Skowronski@dibre.com.pl
Emil Onyszczuk tel. (+48 22) 697 49 63
Emil.Onyszczuk@dibre.com.pl
Marzena Łempicka tel. (+48 22) 697 48 95
Marzena.Lempicka@dibre.com.pl
Grzegorz Stępień tel. (+48 22) 697 48 62
Grzegorz.Stepien@dibre.com.pl
Joanna Niedziela tel. (+48 22) 697 48 54
Joanna.Niedziela@dibre.com.pl
Aleksander Mazur tel. (+48 22) 697 48 69
Aleksander.Mazur@dibre.com.pl
7 November 2005
Andrzej Lis tel. (+48 22) 697 47 42
Analyst
Andrzej.Lis@dibre.com.pl
IT
Krzysztof Radojewski tel. (+48 22) 697 47 01
Analyst
Krzysztof.Radojewski@dibre.com.pl
Pharmaceuticals, others
Sławomir Sklinda tel. (+48 22) 697 47 41
Analyst
Slawomir.Sklinda@dibre.com.pl
Chemicals
Przemysław Smoliński tel. (+48 22) 697 49 64
Analyst
Przemyslaw.Smolinski@dibre.com.pl
Dom Inwestycyjny
BRE Banku S.A.
ul. Wspólna 47/49
00-950 Warszawa
skr. pocztowa 21
www.dibre.com.pl
52
BRE
BRE Bank
Bank Securities
Securities
Monthly Report
List of abbreviations and ratios contained in the report.
EV – net debt + market value (EV – economic value)
EBIT – Earnings Before Interest and Taxes
EBITDA – EBIT + Depreciation and Amortisation
PBA – Profit on Banking Activity
P/CE – price to earnings with amortisation
MC/S – market capitalisation to sales
EBIT/EV – operating profit to economic value
P/E – (Price/Earnings) – price divided by annual net profit per share
ROE – (Return on Equity) – annual net profit divided by average equity
P/BV – (Price/Book Value) – price divided by book value per share
Net debt – credits + debt papers + interest bearing loans – cash and cash equivalents
EBITDA margin – EBITDA/Sales
Recommendations of BRE Bank Securities S.A.
A recommendation is valid for a period of 6-9 months, unless a subsequent recommendation is issued within this period. Expected
returns from individual recommendations are as follows:
BUY – we expect that the rate of return from an investment will be at least 15%
ACCUMULATE – we expect that the rate of return from an investment will range from 5% to 15%
HOLD – we expect that the rate of return from an investment will range from –5% to +5%
REDUCE – we expect that the rate of return from an investment will range from -5% to -15%
SELL – we expect that an investment will bear a loss greater than 15%
Recommendations are updated at least once every nine months.
The present report expresses the knowledge as well as opinions of the authors on day the report was prepared.
The present report was prepared observing principles of methodological correctness and objectivity, on the basis of sources available to the public, which BRE Bank Securities S.A. considers reliable, including information published by issuers, shares of which
are subject to recommendations However, BRE Bank Securities S.A., in no case, guarantees the accuracy and completeness of the
report, in particular should sources on the basis of which the report was prepared prove to be inaccurate, incomplete or not fully
consistent with the facts.
BRE Bank Securities S.A. bears no responsibility for investment decisions taken on the basis of the present report nor for any damages incurred as a result of investment decisions taken on the basis of the present report.
Copying or publishing the present report, in full or in part, or disseminating in any way information contained in the present report
requires the prior written agreement of BRE Bank Securities S.A.
The present Monthly Report exclusively contains information previously published by BRE Bank Securities S.A. and only comprises
a comprehensive presentation of unaltered data. The information, including recommendations, contained in the Monthly Report has
been published in separate reports, the publication dates of which are located on page 4 of the Monthly Report.
In connection with the above, BRE Bank Securities S.A. does not consider the Monthly Report to be a recommendation as understood in the Order of the Council of Ministers, dated 21 April 2004, in regard to information comprising recommendations concerning
financial instruments or their issuers.
Individuals who did not participate in the preparation of recommendations, but had or could have had access to recommendations
prior to their publication, are employees of BRE Bank Securities S.A. authorised to access the premises in which recommendations
are prepared, other than the analysts mentioned as the authors of the present recommendations.
Strong and weak points of valuation methods used in recommendations:
DCF – acknowledged as the most methodologically correct method of valuation; it consists in discounting financial flows generated
by a company; its weak point is the significant susceptibility to a change of forecast assumptions in the model.
Multiple – based on a comparison of valuation multipliers of companies from a given sector; simple in construction, reflects the current state of the market better than DCF; weak points include substantial variability (fluctuations together with market indices) as
well as difficulty in the selection of the group of comparable companies.
7 November 2005
53

So - Wirtualna Polska

Transcription

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