March on the Warsaw Stock Exchange started with a strong charge of the bulls. The large-cap index WIG20 gained 5.5 percent in the first five days of trading and reached 2,389.37 points. The broad-market index gained 4.3 percent and closed the week at 40,354.28 points. It was the best week for both indices since the beginning of December 2009, when their weekly returns were 5.67 percent and 4.53 percent respectively.

The foreign stocks listed on the WSE were not so lucky in the first week of March. While their average weekly return was 2.1 percent, it was driven by a single stock, the supplier of car braking systems Automotive Components Europe (ACE). It rose by 32.8 percent within the week and reached PLN 10.16, the highest price in two years. Net of this stock, the average return in the segment was only 0.8 percent. The median of weekly returns of the foreign stocks, a better measure of their performance, was even lower at 0.6 percent.

Apart from ACE, Silvano Fashion also rose at a double-digit rate. The stock gained 10.2 percent and closed the week at PLN 5.51. None of the falling stocks lost as much. The worst performers were AmRest Holdings and Olympic Entertainment Group, down by 7.1 percent and 5.9 percent respectively.

The coming weeks give hope of better performance. The improved sentiment on the WSE in the first week of March followed a similar improvement on the leading world markets and contravened all scenarios of continued realisation of gains after the year-long rise. The current baseline scenario for the WSE is a return to the January highs. Only then can the bears be expected to strike back. However, the correction should be not so dynamic as at the turn of January and February. After the recent experience, any rapid fall of the indices will be treated as a buy signal. If there is another wave of realisation of gains, it will be spread over time. A potential correction of the large-cap index will target the support level at 2,000-2,100 points (more likely its floor and not ceiling). The next and last target is the support level of 1,770-1,790 points at the 61.8 percent retracement of the months long uptrend and the July 2009 low.

Astarta did not disappoint investors. According to preliminary unaudited data, the Ukrainian company generated an annual pre-tax profit of UAH 443 million in 2009, up by no less than 75 percent year on year. Astarta’s revenue increased by 40 percent to UAH 1.36 billion in 2009. The excellent performance was mainly driven by high sugar prices prevailing globally.

Silvano Fashion Group earned a consolidated net profit attributable to the shareholders of the parent company of EEK 5.1 million in Q4 2009, compared to a loss of EEK 159.53 million in Q4 2008. Following recent changes among its shareholders, the composition of the company’s Supervisory Board has changed.

MOL and Central European Distribution Corporation (CEDC) published new targets. The oil company plans to generate EBITDA of USD 4.1 billion in 2012 and invest USD 6.2 billion in 2010-2012. CEDC expects diluted earnings per share at USD 2.50-2.62 at the end of 2010 compared to its earlier target of USD 3.00-3.15. Pegas Novovens announced the start of construction of a new production line worth EUR 50 million. Asseco Slovakia closed the acquisition of 70 percent of the Hungarian company Statlogics. The Management Board of Cinema City signed a preliminary agreement to sell its property development assets in Bulgaria.

 

 

 

Automotive Components Europe was the star of the foreign stocks segment on the Warsaw Stock Exchange in the first week of March. The stock of the big European supplier of car braking systems rose by 32.8 percent to PLN 10.16, the highest price in two years.

The stock has gained 823 percent since the downtrend low of 9 March 2009 and may continue to rise. Last week, ACE broke out of consolidation which started in mid-August 2009 and traced a mildly upturned channel on the daily chart. The strength of the break-out and the accompanying buy signals may suggest a large room for growth, especially that the stock has not yet recovered even half of what it lost during the downtrend.

The break-out of the consolidation was one of the drivers of ACE’s price rise. Another driver were the results of Q4 2009 and the company’s improved outlook. ACE’s consolidated net profit attributable to the shareholders of the parent company was EUR 1.98 million in Q4 2009, compared to a loss of EUR 6.16 million in Q4 2008. The operating profit of the group was EUR 1.61 in Q4 2009 (a loss of EUR 1.21 million in Q4 2008) while its consolidated revenue was EUR 20.87 million (EUR 18.54 in Q4 2008).

Automotive Components Europe expects the group revenue to grow by 5–10 percent year on year in 2010. ACE continues modernisation and partial reprofiling of its business. The Management Board does not rule out acquisitions in the sector.

 

Marcin R. Kiepas

Financial Markets Analyst
X-Trade Brokers DM S.A.