Monday, July 02, 2018

Prague Stock Exchange: stocks in the index

Lots of TRF readers have spare millions of dollars. Maybe you can buy stocks from the whole world. You may be underexposed to Czechia – which enjoys the growth above 4%, has a 2% unemployment, and its stocks generally look undervalued.

Patria.cz is one of the professional servers that cover the stock market. You may find the current prices (or prices delayed by 15 minutes) of the big Czech stocks, smaller Czech stocks (the "Free" market), Central and Eastern European stocks, Western European stocks, and the U.S.

The Prague index (PSE) oscillates around 1066 as of this moment. See the current composition.




The index is composed of 13 stocks right now. The economy is doing much better than a decade ago – but this index was actually near 1800 in 2007. A part of this decrease reflects the fact that some of the most important vibrant companies aren't included in the index – and are fully owned by Western owners (the net dividend outflows represent a stunning 5% of the Czech GDP). But some of it means that the stocks are generally undervalued.




Many of the 13 stocks are semi-primarily traded at a Western capital. Only 6 actually have a Czech (CZ) ISIN. The remaining 7 have ISINs of other countries – well, one of them, Philip Morris CZ, has the ISIN of Czechoslovakia (CS). So if you count CS as half-Czech, exactly one-half of the stocks have Czech ISINs.

Erste, VIG have Austrian ISINs – primarily traded in Vienna. Avast and Stock have the British ISIN – primarily traded in London. CETV has Bermuda ISIN and Pegas Nonwovens have the Luxembourg ISIN – up to recently, Luxembourg headquarters, too.

In the table, the first column is ISIN, the second is the total number of stocks (which includes the global number), then you have the free float factor, a coefficient up to one telling you what fraction of the stock is freely traded (globally), and then there's a reduction factor applied to some companies to make sure that the percentage that the company makes in the index doesn't exceed 20%.

So the "reduced market capitalization" in the last column divided by three (or so) happens to be the fraction that the company contributes to the index. Don't forget that one U.S. dollar is some 22 crowns, the euro is 26 crowns.

OK, here are the companies:

Erste, 20% of the index

Erste Bank is the first bank in Austria – and the owner of the important Česká spořitelna (Czech Sparkasse of a sort), the #2 bank in Czechia. (The #1 is ČSOB right now, The Czechoslovak Business Bank, owned by Societe Generale, the French. See the results of banks for 2017.) During communism, Česká spořitelna was the key mainstream bank for regular Joe savers. This Czech component is very important for Erste today.

The price of this stock tends to oscillate intensely. The before-tax dividend was EUR 1.20, the current price is about EUR 35.5 (or CZK 920 – and this price has already been "safely" above 1000, but years ago, it used to be much lower).

ČEZ, 20% of the index

The main power utility. The Czech government owns some 60%. The current price is CZK 520. It has been below 400 in recent years. But recommended prices exceed CZK 600, too. One-third of their energy is nuclear. They are somewhat active in the alternative energy stuff as well but it may be just to make their image more "modern". Coal is the king. The pre-tax dividend was CZK 33.

Komerční banka, 20%

The #3 bank, mostly dealing with businesses as clients. Well, it's almost #2-#3 tie with Česká spořitelna. Societe Generale (FR) owns a majority. KB has gotten lots of buildings of the central bank – the State Bank of Czechoslovakia – during communism which is why it may have mainly corporate clients today. Current price is CZK 935, the pre-tax dividend was CZK 47.

Moneta Money Bank, 9%

That's the new name picked by what used to be GE Money Bank. Yes, it was owned and sold by General Electric, and it's arguably doing much better than General Electric itself now. GE had acquired some banks that were making no profit around 2000, like Agrobank, and it turned into an amazing source of dividends. Moneta deals with lots of clients who have mortgages and similar things.

The dividends were CZK 8 before taxes – the current, post-dividend price is CZK 77. P/E is below ten. To make it more shocking, Austria's Raiffeisen Bank (6th bank in Czechia, 5th is Moneta itself) was heard as being interested in buying Moneta today. The price of the stock could easily jump by 20% or more, maybe even very soon.

Some Slovak billionaire Mr Krúpa was threatening Moneta with some terrible lawsuits about the privatization of Agrobanka. All these lawsuits have failed in the past and they're expected to fail again and again. Agrobanka has been settled, the central bank and courts have always agreed so far, and it had been almost worthless, anyway. The latest threats, some year ago, were probably used by this Slovak guy to buy 1% of Moneta with a 10% discount. He no longer has the motivation to harm the bank, I think.

VIG, 8% of the index

The second Austrian financial item in Prague. It owns numerous key insurance companies in the Czech market – and some others in the post-communist Europe. But the Czech market is the most important one, I guess. The current price is CZK 605, the dividend was CZK 24. Three years ago, the stock cost twice as much (and I lost a lot when it was falling, even though I only held it intermittently, in the search of the bottom) – but nothing has really changed. I do think this stock is undervalued, too.

Avast, 6% of the index

Czechia is the world's antivirus superpower. Avast is one of the big producers after it merged with AVG. There were two Czechoslovak founders of Avast during the late communism. At least one of them is a dollar billionaire after he introduced the stock in London. The current price is CZK 64. The stock was freshly added to the Prague index. There may still be some growth of the stock if new indices are added and people copying them have to purchase the stock.

O2, 6%

O2 is one of the three largest telecommunication providers, perhaps the largest one – one that really evolved from the monopoly-owning communist telephone company. Czechia has somewhat more expensive Internet and phone services but we have the best covered territory in Europe. Look at this stunning map of Europe showing the availability of the 4G mobile data signal. Czechia is the ultimate green paradise. France, Poland, Italy, and others really look like deserts in comparison. Even Germany is visibly less green than Czechia.

O2 was or is co-owned by Petr Kellner, the richest Czech man who mostly owns some financial companies (also in Russia). In recent years, the value of the company went up dramatically (especially if you realize that the original O2 stock split in two, the other one is called CETIN). The latest dividend was CZK 21 before tax, the current stock price is CZK 255 after dividends.

Stock Spirits, 3%

A producer of strong alcoholic beverages located one mile from my home. Fernet, Domestic Rum, lots of Czechs' favorite titles. Some people could think that Pilsen is some kind of alcoholics' city because we depend on beer. But that's not true at all, we're also a key source of rum and similar things ;-)

But no, we're really not just about beer and rums. Another company near Pilsen, Bohemia Sekt, is the top Czech producer of sparkling wines.

Stock Spirits stock costs CZK 68 now, the latest dividend was CZK 1.45 (well, over CZK 2 with some dividend-like extra payments).

Philip Morris CZ, 2.5%

Cigarettes, smoking, this business continues just like decades ago. The boss of the company claims that there will be a transformation towards e-cigarettes etc. (cigarettes sent by e-mail, I guess), but I think that they're doing the good old business most of the time.

The stock costs CZK 15250. It was already near CZK 18000. Not surprising because the latest dividend was a whopping CZK 1080. Recently, the stock dropped by some 10% on top of the ex-dividend drop. I do think it could be a buying opportunity.

Unipetrol, 2.2%

A petrochemical company operating near the East German borders. The current majority owner is PKN Orlen, a larger Polish company of the same kind. I held some of it during 1/2 of its dramatic increase from CZK 140 or so. The current price is CZK 375 and looks overpriced to me but I could be wrong. I was already saying the same thing when it was CZK 300.

They had huge profits but decided not to pay dividends for 2017. There were dividends for the previous two years, and a desert for a decade before that.

CETV, 2.1%

The media company that owns TV stations in post-communist Europe, starting with the flagship, Czechia's TV NOVA, the first large commercial TV station in post-communist Europe (well, all such companies run many channels these days). The current price is CZK 90, it was above 100 but also below 60 in recent years. Time Warner owns much of it. Ronald Lauder has sold it, I guess. The station wouldn't be what it became without its Czech founder, Mr Vladimír Železný, but that's a long time ago. There is a potential for a takeover that could see the price go up. They haven't paid dividends for a decade, I guess.

Pegas Nonwovens, 0.5%

A Moravian company making some clothes or similar materials for industries which are not woven, I guess. They are opening a plant in South Africa, too. The trading volumes seem rather small. I owned it at the right time (catching two waves from CZK 800 to 900). The current price is CZK 900. The latest dividend was EUR 1.30 per stock before taxes, over CZK 30.

Kofola Czechoslovakia, 0.2%

The Czechoslovak competitor to Coke which tastes nothing like Coke. Some people hate it, others love it. Some research institute during the communist time got a task to find out what to do with some byproducts of the production of coffee and they found the fascinating solution. After the communism fell, a Greek-in-Czechia named Samaras revived it as a capitalist business and it become successful. The company airs lots of advertisements in the retro style (resembling the advanced communism), sometimes with nude boys who love some girls. The people who were kids during the late communism, like me, are hopefully teaching their kids to drink Kofola.

In Poland, its sales suck which is why they look at it in a gloomy way. A stockholder from Poland sold its 8% stake recently. It still has 12%. They crashed the price from CZK 380 to CZK 270 – where they sold those 8%. The price quickly recovered to 308 as of now. There's a big potential for the growth back to CZK 440 where the Samaras family was buying back those stocks (they took a loan for that) some year or two ago (and lots of recommendations there).

I owned a sizeable amount. The stock is spoiled by very small trading volumes. After the Polish shock price drop, the volumes spiked but they are low again. But the stock is too undervalued for that. The latest dividend was CZK 16.20, over 5% of the current stock price. Similar financial criteria look much more attractive than for other food companies.

The Czech currency weakened by a few percent in recent weeks. It's rather likely that it will jump on the strengthening trend again so you may benefit from that (on top of the expected increasing stock prices in CZK), too.

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