IPO outlook: Global and Regional perspectives

Transcription

1 IPO outlook: Global and Regional perspectives 27 May 2014

2 Agenda 1 Short introduction to Rothschild 2 Global macroeconomic picture 3 Equity market performance and investors sentiment 4 Outlook of the global and regional IPO market 1

3 Rothschild s global reach Prague* W arsaw Tallinn* Riga* Vilnius* W arsaw Budapest Bucharest Sofia* Istanbul Athens 600 bankers in Europe, 125 in US and Canada, 90 in Asia, 35 in Australia, 25 in Latin America, 25 in Africa and Middle East Offices 2

4 What services do we offer? Introduction to Global Financial Advisory We provide impartial, creative and long-term advice and ideas to clients across the world Focused on clients M&A Expert Informed Equity Debt Long-term Restructuring Trusted and independent 3

5 Long term commitment in CEE and in the Baltic region Our activities date back to the early 19 th century as financier and investor European ECM No 1 Rothschild Lazard 44 3 STJ 24 4 Lilja 9 5 Greenhill 8 6 Gleacher 7 7 Evercore 5 8 Ondra 5 9 Hawkpoint 4 10 Perella 3 Source Company websites, Rothschild Note Deals >US$50m since Jan 2009 Selected CEE / CIS credentials MNV / Gedeon Richter Lenta $974m IPO of Lenta on LSE Adviser to company and selling shareholders 2014 EFG Eurobank Selected Baltic credentials Dinosol Disposal of Supersol to Agile Finance 2012 VAE Dinosol Disposal of Cashdiplo to Agile Finance 2012 TEO LT European M&A No 1 Rothschild Lazard Goldman Sachs BNP Paribas 93 5 Morgan Stanley 83 6 Deutsche Banks 79 7 JP Morgan 71 8 Barclays 71 9 Citi BoA/ML 61 Announced deals by number (1 Jan to 31 Dec 2013) Source Thomson Reuters 4 Jan m of Exchangeable Bonds into Gedeon Richter and concurrent tender offer Adviser to Hungarian National Asset Management Inc. ( MNV ) 2013 KGHM Disposal of the company to Spartan Capital Holdings for 4.5bn m disposal of 70% of Polbank EFG to Raiffeisen Bank International 2012 United Company RUSAL US$2.2bn IPO on the the Hong Kong Stock Exchange and offering of Global Depositary Shares on Euronext Paris Adviser 2010 Lithuanian Government agreement with Hitachi on regional nuclear power plant project 2011 Polska Grupa Farmecuetyczna Acquisition of a control stake in Lithuanian distributors of pharmaceuticals 2007 Fairness opinion in connection with offer made by TeliaSonera for 40% of shares in TEO LT 2009 PZU Acquisition of Nord / LB insurance operations from Nord / LB Bank

6 1. An encouraging macro picture for the IPO market

7 Global macroeconomic indicators 1. An encouraging macro picture for the IPO market The macroeconomic environment is more supportive for Developed equity markets than Emerging Markets GDP growth (%) - by major regions (2) OECD Emerging Markets United States Eurozone Central Europe and the Balkans Purchasing Managers Index 1 Positive signs that the industry is expanding across geographies Jan 10 Nov 10 Sep 11 Jul 12 May 13 Mar 14 China Manufacturing PMI US Chicago PMI UK Manufacturing PMI EC Manufacturing PMI Source Bloomberg Note 1 The Purchasing Managers Index is reported monthly and is based on 5 major indicators new orders, inventory levels, production, supplier deliveries and employment environment 6

8 Corporate earnings growth 1. An encouraging macro picture for the IPO market Higher expected corporate earnings growth increases investors confidence Net % of investors expecting growth for next 12 months Source Bloomberg US Eurozone Japan Apr-13 Current (5) EPS growth (%) (0.80) 2012/ / / /2016 Source Factset Europe United States Eastern Europe and risk appetite State Street investor confidence index Jan 10 Jun 10 Nov 10 Apr 11 Sep 11 Feb 12 Jul 12 Dec 12 May 13 Oct 13 Mar 14 US Investors European investors Asian investors Source Bloomberg as of 28/04/2014 (March 2014 data is latest available) Notes 1 This indicator represents the difference between positive and negative responses in a survey of about 350 institutional investors and analysts 2 The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long -term allocations to risky assets 7

9 $bn 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 $bn Use of corporate cash 1. An encouraging macro picture for the IPO market US share buybacks Comfort that buybacks remain significant with material returns of capital, particularly in US technology (e.g. Apple and IBM) Announced M&A deals 2014 YTD Large scale M&A is surging which should lead to further market inflows in due course US Europe UK Japan EM Source Thomson Reuters 8

10 Scenario for Emerging markets growth in 2014 GDP growth per region 1. An encouraging macro picture for the IPO market Global Picture 10% 8% 6% 4% 2% 10% 8% 6% 4% 2% and the Baltic Region Latam Emerging Europe Asia Middle East and North Africa Emerging Markets - (2%) Latvia Lithuania Estonia Source Global Insight April 2014 Source Global Insight April 2014 Bull case Export growth off the back of lower exchange rates All risks already priced-in EPS growth from drive in cost cutting JPM: 2014E return on the MSCI EM forecast to be c.20% Bear case Threat of EM / USD weakening further Slowing down of the Chinese economy China debt default Eurozone deflation Geopolitical risk in Ukraine 9

11 2. Equity market performance

12 2. Equity market performance How are emerging markets defined? Investors have an overly simplistic view of emerging markets 1 Investors tend to aggregate emerging markets into one basket as it is easier to monitor and digest 2 Investors tend to define countries as emerging if they: Have relatively high GDP growth (usually > 5%) Have a rapidly growing middle class Have lower GDP per capita Have greater geopolitical instability Are smaller countries (e.g. Baltics, Croatia, Slovenia) Are contingent on neighbouring emerging markets (e.g. Baltics, Serbia) 3 In reality each emerging country faces different challenges, risks and opportunities The economic prospects of the Baltic region is dependent on: Growth and prosperity of neighbouring countries as well as Northern Europe Unfolding of the Russian / Ukraine geopolitical crisis 11

13 Index (Rebased to 100) Equity market performance Progressive return to pre-crisis level 2. Equity market performance Equity market performance since Volatility Emerging markets Developed markets CEE/CIS Middle East & Africa Source Bloomberg 12

14 (% of assets) Capital flows 2. Equity market performance Equities experiencing continued inflows at the expense of bonds Fund Managers allocations between asset classes underweight / (overweight) European equities continue to experience inflows (45 weeks straight) 70% 50% 30% 10% -10% -30% -50% -70% Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Equities Bonds Cumulative 12 month flow into equities by major regions Inflows to developed market equities at the expense of emerging markets, however recently EM funds have experienced a positive reversal 20% 15% 10% 5% - (5%) (10%) (15%) Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 US Western Europe Pacific EM Source Deutsche Bank Research EPFR, BAML Flow Show 13

15 Index (Rebased to 100) Ukraine s effect on equity markets The Baltics have been negatively impacted in the YTD period.. 2. Equity market performance MICEX has significantly underperformed other selected indices in the YTD period The Baltics have proved less resilient than Nordic equities and the European region as a whole YTD performance of selected indices Jan-14 Feb-14 Mar-14 Apr-14 May-14 Baltics Euro Stoxx 600 Nordics MICEX Source Bloomberg 14

16 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Baltic Rim stock indices 2. Equity market performance The Baltic states are all trading above 2011 levels They have significantly outperformed Finland and Poland Only Denmark equities have outperformed the European region as a whole Performance of Baltic Rim indices since EuroStoxx 600 as of 23 rd of May Denmark Estonia Finland Latvia Lithuania Poland Sweden EuroStoxx 600 Performance of Baltic Rim indices YTD Denmark 14% Estonia -5% Finland 4% Latvia -7% Lithuania 4% Poland 1% Sweden 7% -30% 0% 5% 30% Source Bloomberg Source Bloomberg EuroStoxx 600 as of 23 rd of May 15

17 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Central European stock indices 2. Equity market performance Performance of Central European indices since 2011 Performance of Central European indices YTD Central European stock markets have underperformed the Baltic states Czech, Poland, Hungary and CEESEG are all below 2011 levels and with negative YTD performance EuroStoxx 600 as of 23 rd of May CEESEG Czech Republic Estonia Hungary Latvia Lithuania -5% -1% 0% 3% 0% 4% CEESEG Czech Republic Estonia Hungary Latvia Lithuania Poland EuroStoxx 600 Poland 1% -30% 0% 5% 30% Source Bloomberg Source Bloomberg EuroStoxx 600 as of 23 rd of May 16

18 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 South Eastern European stock indices 2. Equity market performance Performance of SEE indices since 2011 Performance of SEE indices YTD Performance in SEE has been more mixed with Bulgaria and Slovenia the stand out performers EuroStoxx 600 as of 23 rd of May Bulgaria CEESEG Croatia -6% -1% 20% Greece -3% 30 Romania -1% Bulgaria Croatia Romania EuroStoxx 600 CEESEG Greece Slovenia Slovenia 16% -30% 0% 5% 30% Source Bloomberg Source Bloomberg EuroStoxx 600 as of 23 rd of May 17

19 Valuation perspective Still room for further re-rating? 2. Equity market performance 1 year forward PE of selected indices Forward PE ratios Current 10y av Diff Euro 15.2x 12.3x 3.0x S&P x 14.8x 1.3x CEE / CIS 12.1x 10.5x 1.6x +2.4x +5.0x The EuroStoxx 600, S&P 500 and MSCI CEE / CIS PEs are all trading above their 10 year average x 6 Jul-2008 Jul-2009 Jul-2010 Jul-2011 Jul-2012 Jul-2013 EuroStoxx 600 S&P 500 CEE / CIS May Source Bloomberg Note 1 The cyclically adjusted PE ratio is the current price divided by the average of the last 12 years earnings (adjusted for inflation)

20 3. IPO market: status and outlook

21 IPO issuance since IPO market: what outlook? European IPO volumes since 2008 Back to normalised IPO volumes $25bn $20bn $15bn $10bn $5bn The wider CEE region tend to replicate European IPO trends with a higher volatility 20 $0bn Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q CEE/CIS IPO volumes since 2008 $5bn $4bn $3bn $2bn $1bn $0bn Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Q4 Q1 Q2 Q32010 Q4 Q1 Q Q3 Q4 Q1 Q Source Dealogic Market closed Rest of CEE/CIS Baltic Region

22 What did investors recently buy in IPOs? A clear preference for growth assets and recovery play 3. IPO market: what outlook? LTM European IPO value by sector LTM European IPO value by geography Other 26% Transportation 16% Other 21% Utility & Energy 6% Telecoms 6% Professional Services 8% Retail 11% Finance 14% Real Estate / Property 13% Norway 4% Switzerland 4% Italy 4% Denmark 5% Spain 6% France 6% UK 50% Source Dealogic Source Dealogic 23

23 4. IPO market and outlook How did recent IPOs perform? Recent IPO performance vs. equity markets European IPOs have participated in the broader recovery of equity markets IPO issuance evolution in EMEA YTD 28.2 US$80-100bn expected in FY 2014 Euro Stoxx 600 European IPO index (US$bn) Source Bloomberg Note Bloomberg European IPO Index is a capitalization-weighted index which measures the perf ormance of stocks during their first publicly traded year. It includes all companies with a market v alue of at least 50m at IPO

24 Value Value of of deals deals ( bn) ( bn) Number of deals What happened in the CEE and Nordic region? 3. IPO market: what outlook? CEE ECM activity vs the Nordic region since ECM activity has slowed since 2010 and 2011, which were unusually high due to large scale recap Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q Source Dealogic CEE (excl. CIS) Nordics 21

25 UK and rest of Europe 4. IPO market and outlook IPO outlook: current pipeline H H Strong market sentiment has driven current investor appetite for new market issuances Source Media releases, MergerMarket, IFR, Company filings, Press rumours CEE Nordics 29

26 Index (Rebased to 100) Volatility (%) 3. IPO market: what outlook? Dealing with market volatility: Lenta s $974m IPO Extremely unfavourable market backdrop on Pricing Day..but deal still got done Lenta $974m IPO of Lenta on LSE Adviser to company and selling shareholders 2014 Evolution of equity markets, RUB/USD exchange rate and European volatility during IPO execution Rothschild appointment All-Parties Early Kick-off Look 1 Site Visit 1 Early Analyst Look 2 Presentation ITF Price Range Pricing Settlement Decline in EM currencies including RUB Market sell-off following fears Fed will signal taper Spike in emerging market volatility as US Fed decides to continue tapering Geopolitical crisis in 50 Ukraine due to tension over of Russian involvement 40 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May Source Bloomberg FTSE 100 MICEX USDRUB Lenta V2X 25