After a strong underperformance in 2010-2019 vs. main Western markets due to the pension fund reform of the Civic Platform government as well as several scandals e.g. Getback, the Polish capital market has experienced a huge recovery so far this year, with stock market turnover in Jan-Jun 2020 reaching a 34.7% higher level than over the same period last year. In our view, the main reasons for this are (1) historically very attractive valuations (2) record-low interest rates, which in May 2020 were lowered to 0.1% for the first time ever (3) introduction of a QE by the Polish Central Bank NBP in 03/2020, and (4) first stock purchases by the newly created Employee Pension Plans (PPK).
As always, the good condition of the Warsaw Stock Exchange has also reinvigorated the IPO activity in Poland. In our view, the two most interesting companies, which have so far announced their plans for an Initial Public Offering in 2020, are Allegro Group and Canal+ Polska. Below we provide a short description of both:
Allegro Group: Allegro, whose business model is comparable to Ebay, is by far the largest player on the PLN 70bn/EUR 15.7bn Polish E-Commerce market (2019: PLN 50bn/EUR 11.2bn, exp. CAGR >10%), with a history dating back to 1999. The company, which was acquired from South-African technology group Naspers by the private equity funds Permira, Cinven and Mid Europa Partners in 2016 for USD 3.25bn, has more than >21m registered clients and displays 130m offers of 140,000 professional sellers. According to Similarweb.com, the website allegro.pl is the 5th most popular one in Poland with 214.5m total visits in May 2020. Apart from allegro.pl, the group also consists of ceneo.pl (the most popular price comparison portal in Poland with 55.1m total visits in May 2020) and ebilet.pl (No 1 web portal in Poland where users can purchase tickets for different kinds of events; 310k total visits in May 2020 but 1.95m in Feb 2020).
According to financial data from 2018, the most recent which is publicly available, Allegro Group had revenues of PLN 1.75bn/EUR 391.5m, EBIT of PLN 621.5m/EUR 139m and net income of PLN 230.1m/EUR 51.5m. Based on consensus estimates from CapitalIQ, Ebay, Allegro’s closest peer, is currently trading at an EV/Sales 2020E of 4.1x and EV/EBITDA 2020E of 10.9x. According to Bloomberg, the Allegro Group could also conduct a secondary IPO on a Western European stock exchange e.g. Euronext or LSE.
Canal+ Polska: Canal+ Polska (previously: nc+) is the first Polish provider of Pay-TV and has been present on the market since 1995. Its >170 channels, which broadcast movies, series, documentaries and sport events, are available through the Hot Bird satellite and as VoD. The offering is complemented by super-fast mobile LTE telephony. Canal+ Polska also acts as co-producer of Polish movies and sponsors the Polish soccer league. With currently c. 2.2m subscribers, it is the No 2 Pay-TV satellite platform on the Polish market. Canal+ Polska’s shareholders are French Canal+ (51%), Discovery Channel/owner of Polish TV station TVN (32%) and Liberty Global (17%).
Canal+ Polska’s closest listed peer is the Media/Telco group Cyfrowy Polsat, which is its largest competitor with currently 5m subscribers. Cyfrowy Polsat is currently trading at an EV/Sales 2020E of 2.3x, an EV/EBITDA 2020E of 7.8x and P/E 2020E of 13.5x. In 2019, Canal+ Polska had revenues of PLN 2.29bn/EUR 512.3m and net income of PLN 88.1m/EUR 19.7m.