Baltic Stock Market playlist 2023

22/12/23

🎄 The New Year is approaching, and we’re excited to uphold the Baltic Stock Market Playlist tradition—an enjoyable way to recap the most significant events on the Baltic stock market in 2023 while listening to a relevant playlist. 😊 Despite finishing the year in the green zone, the Baltic market, known for its value bias, still lags behind global stock markets. This year will be recorded in history for the rapid development of ChatGPT and other generative AI. To mark this extraordinary progress, we turned to ChatGPT for assistance in curating the perfect soundtrack.

Disclaimer #1 (placed at the beginning for everyone’s attention): This is a humorous write-up; don’t take it personally if you are an insider, shareholder, or any other interested party.

Banking Scroogies

🎩 Scroogie McDuck would be overjoyed if he owned a bank in these times, reveling in the influx of wealth due to increased interest rates. Baltic banks such as LHV, Coop, and Šiauliu Bankas stand as the primary beneficiaries of the current situation, reporting earnings increases of more than 100%. However, to be honest, we haven’t witnessed a substantial boost in their share prices this year. Nevertheless, the improved fundamental results may translate into a dividend increase next year. In this scenario, paying special attention to refinancing risk and bad credit risk is crucial.

Hunger for capital

💸 Cash burn is proceeding at full speed as Indexo strives to secure a license and disrupt the banking industry in Latvia. Over the first nine months of this year, Indexo has depleted its cash reserve, which declined from 7.2 million to 3.8 million EUR. The company is currently in the process of attracting capital through a Secondary Public Offering, aiming for over 13 million EUR after having secured 7.5 million EUR during the Initial Public Offering (IPO) conducted last year. The management has communicated plans to kickstart banking operations in April. Best of luck in attracting the capital! We eagerly anticipate the entry of fresh players in banking and the inclusion of sound companies (at FAIR valuation) on the Baltic stock exchanges!

Earning money blindfolded

Silvano seems to systematically ignore all the critics and continues to operate in Russia and Belarus having them as major markets. We are pretty sure that it wasn’t an easy decision (the only alternative is to close the company), but that’s the perks of dealing in dictatorship countries. We really hope its biggest shareholders are donating ZSU privately, otherwise its probably hard to get some decent sleep at night. The award of the most efficient ‘ignore’ status goes to Silvano.

Shit happens

The nomination goes to SAF Tehnika. The company’s situation began to deteriorate towards the end of last year and further expanded in 2023 across the entire region, as capital investments in the telecom industry moderated. The results for the first quarter of 2023/24 are as follows: sales down by 53%, with losses amounting to 1.5 million EUR. Apologies, dear investors; this time around, there are no dividends. And in the future, don’t forget to scrutinize cash flows—these serve as early indicators of potential issues.

Nothing special

In short, this is how the market perceived substantial pressure on the earnings of utility companies in the Baltics. The extremely high electricity and gas prices have subsided this year, resulting in the normalization of earnings for electricity companies. Coupled with the strain from depreciation expenses, given the heavy investment cycles of both Enefit Green and Ignitis, this translated into lower profitability. Nevertheless, the market doesn’t appear overly concerned, particularly in the case of Ignitis, as investors anticipate lucrative dividend cash inflows, aligning with the company’s stated dividend policy.

Good but need more

In a swift and hushed manner (or perhaps it’s our Latvian bias, considering the IPO was initially intended only for Estonian investors), the largest IPO of the year was successfully executed on the Tallinn Stock Exchange. By attracting over 35 million EUR, Infortar has ascended to become the 5th largest company on Baltic stock exchanges, expanding the total market capitalization of the region. Kudos, Infortar! Here’s to anticipating more IPOs next year! Latvia, it’s time to wake up—investors are eagerly awaiting the inclusion of State-Owned Enterprises in the stock exchange lists!

Good and Bad Divorce

In 2023, we witnessed the departure of two companies from Baltic stock exchanges. One of these separations proved to be a profitable breakup for investors. Hansa Matrix offered a fair buyout price, experiencing a 20% surge in January-February. There remains a glimmer of hope for the company to return to the stock exchange in the future, especially considering an IPO could be a viable exit option for the private equity fund that now holds the majority of HMX shares. On the flip side, Baltika shareholders had a less pleasant experience, watching share prices nearly halve before the company bid farewell to the stock exchange.

Roller coaster in Alt market

Those, who are being bored when investing in Baltic main list, you are welcome to the alternative list First North. The alternative market this year has been a rollercoaster, akin to navigating a minefield with its abrupt declines and swift increases. Feast your eyes on these daily movements: -20% for TextMagic, -21% for Hagen Bikes, and a whopping +22% for J. Molner. Adrenaline lovers, the trading floor is yours! 😊

Happy trading to you next year!

 

 

Disclaimer #2: This article is for information purposes only and constitutes neither an offer nor a recommendation to undertake any type of transaction or to buy or sell securities or financial products in the broadest sense. Alphinox Quality AS offers no guarantee of the completeness, correctness or security of this article. Alphinox Quality AS accepts no liability claims that might arise from the use or non-use of the content of this article. Alphinox Quality AS employees might have shares of the mentioned companies in personal investment portfolio.