I am a GPW shareholder. My point of view: Downside risk is quite limited (valuation, dividend), there is upside potential (growth in trading, new initiatives) and you are remunerated nicely to just sit and wait (high dividend).
GPW invests heavily in new initiatives and has a goal beyond financial goals (creating a regional leading exchange...). This seems to be an issue for the market, but personally, I think this could become a major catalyst for growth if whatever of these projects will lead exceptional success.
GPW has a unique DNA and mission which might include creating an independent, regional powerhouse.
New initiatives include the overall idea of establishing a fundamentally independent exchange.
Hence, a lot of IT development is done in-house instead of going with existing solutions. In my opinion, many initiatives (i.e. agriculture etc.) will not be value accretive in the short term. In other words, top line growth has been strong but was not translated into growing margins and income. Gross margins have been fluctuating around 44-52%, which is good, but given the strong trends in top line growth a small improvement of gross margin would be expected. Operating margin were also higher in 2015-2016 than in record year 2020. ROE strong and steady. Again, GPW follows both financial as business as political goals.
In this sense, the likelihood of a takeover is very low (Poland wants to create a national champion of regional significance). That might lead to somewhat lower valuations compared to stock exchanges that might become acquisition targets.
Overall, GPW invests heavily in these new initiatives (hiring more programmers etc.) and I think that makes the investment overall interesting for private shareholders: For large money managers, GPW is just too small and illiquid and many money managers look at shorter term catalysts while small investors like myself who report to no other than myself can wait for years without problem.
Looking forward to more of your articles! I am a fan!
Wow that are some really strong points. Thanks a lot! Seems like most of the developments are at least in the right direction.
I will release an "international opportunity" article once a week. If you have interesting ones feel free to write me on Twitter. I am currently working on a deep dive,but I am unsure when I will be able to release it.
I bought it but sold it for imho a better opportunity. The problem with GPW is that it has very slow growth in revenues, I am not sure why. Trading volumes and value on the Warsaw stock exchange are not growing very fast, valuations are cheap. Allegro was overvalued at IPO and lost value since. That may have turned many new investors in the WSE off. A decent dividend stock but there still has not been a shift to retail investing yet in Poland to support growth in GPW.
That is a fair point. There are a lot of better opportunities out there. The reason why I think GPW is attractive, is that it has a high dividend, a monopoly and is partially state owned. The company probably won't 10x in the next three years, but if believes in the continued rise of the Polish economy it is a great way to play it.
Great article!
I am a GPW shareholder. My point of view: Downside risk is quite limited (valuation, dividend), there is upside potential (growth in trading, new initiatives) and you are remunerated nicely to just sit and wait (high dividend).
GPW invests heavily in new initiatives and has a goal beyond financial goals (creating a regional leading exchange...). This seems to be an issue for the market, but personally, I think this could become a major catalyst for growth if whatever of these projects will lead exceptional success.
Thanks for providing more info. The article is more a quick overview, always great to get knowledge from a person who is more involved into a company.
I agree with you that the downside risk is quite limited, especially with that dividend being close to 6%.
Did you feel that those new initiatives are distracting current management from focusing on the main business or do they add value already?
GPW has a unique DNA and mission which might include creating an independent, regional powerhouse.
New initiatives include the overall idea of establishing a fundamentally independent exchange.
Hence, a lot of IT development is done in-house instead of going with existing solutions. In my opinion, many initiatives (i.e. agriculture etc.) will not be value accretive in the short term. In other words, top line growth has been strong but was not translated into growing margins and income. Gross margins have been fluctuating around 44-52%, which is good, but given the strong trends in top line growth a small improvement of gross margin would be expected. Operating margin were also higher in 2015-2016 than in record year 2020. ROE strong and steady. Again, GPW follows both financial as business as political goals.
In this sense, the likelihood of a takeover is very low (Poland wants to create a national champion of regional significance). That might lead to somewhat lower valuations compared to stock exchanges that might become acquisition targets.
Overall, GPW invests heavily in these new initiatives (hiring more programmers etc.) and I think that makes the investment overall interesting for private shareholders: For large money managers, GPW is just too small and illiquid and many money managers look at shorter term catalysts while small investors like myself who report to no other than myself can wait for years without problem.
Looking forward to more of your articles! I am a fan!
Wow that are some really strong points. Thanks a lot! Seems like most of the developments are at least in the right direction.
I will release an "international opportunity" article once a week. If you have interesting ones feel free to write me on Twitter. I am currently working on a deep dive,but I am unsure when I will be able to release it.
I bought it but sold it for imho a better opportunity. The problem with GPW is that it has very slow growth in revenues, I am not sure why. Trading volumes and value on the Warsaw stock exchange are not growing very fast, valuations are cheap. Allegro was overvalued at IPO and lost value since. That may have turned many new investors in the WSE off. A decent dividend stock but there still has not been a shift to retail investing yet in Poland to support growth in GPW.
That is a fair point. There are a lot of better opportunities out there. The reason why I think GPW is attractive, is that it has a high dividend, a monopoly and is partially state owned. The company probably won't 10x in the next three years, but if believes in the continued rise of the Polish economy it is a great way to play it.