The Polish Deep Value Week – 2024/50
Buybacks, a few signs of recovery, claims & court cases and transactions with majority shareholders
Companies mentioned
· Action (ACT)
· Bowim (BOW)
· Debica (DBC)
· Forte (FTE)
· Moj (MOJ)
· Monnari Trade (MON)
· Remak (RMK)
· Selena FM (SEL)
· Tesgas (TSG)
Benjamin Graham suggested that one barometer for market valuation of the overall market was to assess the number of net-nets available. When many such opportunities exist, it indicates a cheap market overall, while their absence suggests that the market is expensive.
Note though that today’s net-nets are not the same as Graham’s net-nets. We view most of these as un-investable being Chinese RTO’s, loss-making biopharma’s etc. There are also quite a few false positives with aged financials or de-listed companies still floating around in the database. But even though we would not touch most of today’s crop with a ten-foot pole we think it could be interesting to follow this raw number over time, and what percentage of total listed stocks qualify as a “naked” net-net without any type of quality adjustments to make them investable.
Below is this week’s net-net screen from Stockopedia.
Action – Strong margins, extends loan availability and buyback transactions
ACT │ New Report│ P/TB 0.70 │ Electronics Distribution│ URL / URL / URL
ACT announced preliminary turnover for November 2024 at 244 mpln, marking a 3.9% decrease compared to November 2023. Despite this decline, the company emphasized the continued strong performance of its margin, which is estimated at 7.8% for the period..
ACT also signed Annex No. 10 to its Multi-Product Agreement with ING Bank Śląski SA, originally established in March 2022. The annex extends loan availability and repayment periods to October 3, 2026. Additionally, the validity period for bank guarantees has been set until October 3, 2027, with a maximum commitment period of 12 months, while letters of credit will remain valid until April 3, 2027, with a six-month commitment limit. The
ACT also completed several share buyback transactions as part of its repurchase program. Between December 5 and December 11, 2024, the company repurchased a total of 6.4k shares, representing 0.04% of its share capital, at an average price of 17.99 pln per share. On December 5, the company purchased 2.4k shares for a total value of 42.1k pln at an average price of 17.91 pln. On December 6, it acquired 2.9 shares for a total of 52k pln at an average price of 17.99 pln. Finally, on December 9, the company repurchased 1.2k shares for a total value of 26.6k pln at an average price of 18.10 pln. Following these transactions, ACT now holds a total of 1.2m treasury shares, which account for 7.3% of its share capital.
Bowim - Extends credit agreement with mbank until 2026
BOW │ New Report│ P/TB 0.23 │ Steel Processing│ URL
BOWs announced the signing of an annex to its Framework Agreement for the Multi-Product Line with mBank S.A., effective December 11, 2024. The annex extends the validity of the agreement until December 22, 2026, while updating the financial covenants and requiring the Issuer to submit a declaration of enforcement in accordance with Article 777 § 1 item 5 of the Polish Code of Civil Procedure.
Dębica - Grants 200 mpln loans to parent company goodyear
DBC │ New Report│ P/TB 0.83 │ Rubber Tires│ URL
DBCs announced two new loan agreements with its parent company, Goodyear SA, totaling 200 mpln. Under the agreements, DBC will provide two separate loans of 100 mpln each on December 19, 2024. The first loan will be due on December 19, 2025, while the second will mature on February 3, 2025. Both loans carry an annual interest rate of 6.04%, based on WIBOR1Y + 0.45%. The agreements include provisions for early repayment rights for both parties and are backed by a guarantee from The Goodyear Tire & Rubber Company, headquartered in Akron, Ohio. With these new agreements, the total value of loans extended by DBC to Goodyear SA will reach 690 mpln as of December 19, 2024, excluding interest. As Goodyear SA holds an 87.251% ownership stake in DBC, the transactions are classified as significant due to their value and the involvement of the parent entity.
Forte – Sees marginal recovery amid industry challenges
FTE │ New Report│ P/TB 0.74 │ Furniture│ URL
FTE’s consolidated interim financial report for the six months ending September 30, 2024, highlights a net revenue increase to 478.9 mpln compared to 475.7 mpln in the same period last year. Operating profit turned positive at 13.9 mpln, recovering from a loss of 11.9 mpln in the prior period.
To address liquidity concerns and improve profitability, FTE implemented cost-cutting measures, including a workforce reduction of 237 positions, expected to save 17 mpln annually. The group also launched EasyKlix, a self-assembly furniture line, targeting increased sales and market share. Additionally, strengthened digital sales and partnerships aim to mitigate demand challenges.
Forte secured multilateral financing agreements in July 2024, ensuring liquidity through March 2027. While the overall market outlook remains uncertain due to geopolitical and economic factors, management expressed confidence in sustaining operations, emphasizing optimization strategies and exploring new sales avenues.
MOJ - Places orders worth over 2 mpln with karbon 2
MOJ │ New Report│ P/TB 0.37 │ Equipment│ URL
MOJ has announced placing orders totaling 2 mplngross with Karbon 2 Sp. z o.o. on December 10, 2024. The orders include raw materials such as bars, sheets, and angles for the production of forgings, including flight bars, locks, links, and half-links, along with repair services. Between July 23, 2024, and December 10, 2024, the total value of orders placed by MOJ with Karbon 2 for production materials and services has reached 10.7 mpln gross. Karbon 2 controls Fasing (FSG) with 60% of the shares, which in turn controls MOJ with 73% of the votes.
Monnari Trade – Buybacks
MON │ New Report│ P/TB 0.46 │ Apparel│ URL
MON conducted multiple share buyback transactions in December 2024 under an agreement dated November 20, 2023. On December 6, 2024, the company purchased 1,620 shares (average price of PLN 5.20 per share, 0.005% of shares). On December 9, 2024, it acquired 666 shares (average price of PLN 5.24 per share, 0.002% of the shares). On December 10, 2024, 1,776 shares were purchased (average price of PLN 5.32 per share, 0.006% of the shares). On December 11, 2024, the company acquired 1,747 shares (average price of PLN 5.20 per share, 0.006% of the share). On December 12, 2024, the company purchased 1,711 shares (average price of PLN 5.16 per share, 0.006% of the shares). Following these transactions, MON holds a total of 5.1m treasury shares, constituting 17% of the company’s share capital and entitling it to 14.8% of the votes at the General Meeting.
Mercator Medical - Considers reopening thai factory amid positive market trends and shifting global demand & Insider purchase
MRC │ New Report│ P/TB 0.59 │ Medical Devices│ URL / URL
MRC is observing continued positive trends in the glove market and is considering restarting production at its oldest factory in Thailand. During a video conference, CEO Monika Żyznowska highlighted that the third quarter showed promising trends, particularly in the production segment, although profitability challenges persist in distribution. The ongoing tariff situation between China and the United States is expected to support these trends into the first half of 2025.
The company anticipates higher tariffs on Chinese glove imports to the U.S., pending President Biden's approval, which could shift global trade dynamics. This has already led to price increases for gloves produced at Mercator’s Thai facilities, with acceptance by American customers. However, the CEO cautioned that as Chinese manufacturers potentially redirect production to Europe, a price drop in the European market could occur, likely starting in the first quarter of 2025.
MRC is considering reopening its oldest Thai plant, Factory No. 1, to meet anticipated demand increases, with plans to launch four double production lines. Additionally, the company is expanding its range of non-woven products and complementary gloves, a strategy it plans to continue into next year. While glove prices have risen slightly in recent quarters, the company expects stable or slightly lower prices in distribution at the start of 2025, with continued price growth in the Thai production market.
Anabaza RAIF V.C.I.C. LTD, an entity closely associated with Wiesław Żyznowski, Chairman of the Supervisory Board, and Urszula Żyznowska, Deputy Chairman of the Supervisory Board of Mercator Medical S.A., disclosed two acquisitions of Mercator Medical shares on the Warsaw Stock Exchange. On December 3, 2024, a total of 2.5k shares were purchased at an average price of 49.61 pln. On December 4, 2024, another 2.5 shares were acquired at an average price of 52.17 pln.
Remak-Energomontaż Faces Legal Claim from Mostostal Płock Over Contract Dispute
RMK │ New Report│ P/TB 0.50 │ Engineering Services│ URL
RMK has received a legal claim from the District Court in Łódź filed by Mostostal Płock S.A., demanding payment of 8.1 mpln. The claim includes 7.1 mpln for substitute execution costs and 0.9 mpln as a contractual penalty for withdrawal from a contract. The lawsuit relates to work conducted on the expansion of the onshore part of the Liquefied Natural Gas Regasification Terminal in Świnoujście. Remak disputes the claim, asserting there were no valid grounds for the withdrawal or cost charges. The company believes the lawsuit is a reaction to prior legal actions it initiated to secure unpaid remuneration for completed work. Remak is preparing a response to the claim and intends to file additional damage claims against Mostostal Płock. The matter has been classified as significant due to its financial impact on the company. Per 2024-09-30, RMK had assets of 176 mpln, Equity of 71 mpln and net cash of 13 mpln.
Selena FM - Supervisory board member resigns
SEL │ New Report│ P/TB 0.92 │ Construction Material│ URL
SEL announced that Mr. Mariusz Warych, a member of the Supervisory Board, has submitted his resignation, effective December 31, 2024. No reasons for the resignation were provided by Warych.
Tesgas - Conversion of series a preference shares (voting rights) into ordinary bearer shares
TSG │ New Report│ P/TB 0.30 │ Engineering Services│ URL / URL / URL
TSG announced the conversion of 505k series A preference shares into ordinary bearer shares. This conversion followed a shareholder request under applicable legal provisions and was approved by the Management Board's resolution on November 28, 2024. Previously, each of the converted preference shares carried two votes at the General Meeting. After conversion, the 505k shares became ordinary bearer shares, each entitling to one vote, thereby removing their voting preference.
On December 9, 2024, TSG received notifications from shareholders Mr. Piotr Majewski and Mr. Włodzimierz Kocik regarding changes in their shareholdings, as a result from the conversion of 505k series A registered shares with preferential voting rights into ordinary bearer shares.
The writer may own shares of the companies mentioned. This communication is for informational purposes only.