hedging

Ailleron Above-average margins, prospects for double-digit earnings growth

Valuation and recommendation

Despite the dividend cut by PLN 1, we raise our target price from PLN 26 to PLN 28 and reiterate our BUY recommendation. A comparative valuation based on a group of global software houses yields PLN 36.3 per share. A comparison with Spyrosoft based on adjusted net profit for the last four quarters implies a valuation of PLN 36.0, but we note a rather temporary bottom in SPR's profitability and believe a certain premium, albeit not a large one, is justified.

Q3'23 Forecasts

We expect revenues of PLN 16m in FinTech and PLN 99m in Software Mind, where Q2 saw slightly higher revenues in the telecom sector, but we do not expect this effect in the current period, and furthermore, exchange rates have been the most unfavourable for the company's revenues in many quarters (average USD/PLN down 12% y/y and average EUR/PLN down 5% y/y). We forecast an operating profit of PLN 15m, the best q

Examining the Inflation Outlook: Anticipating a Summer Turnaround and its Impact on Bank of England's Monetary Policy

Examining the Inflation Outlook: Anticipating a Summer Turnaround and its Impact on Bank of England's Monetary Policy

ING Economics ING Economics 16.06.2023 15:49
The inflation story should start to turn over the summer Then there’s the inflation data itself. The dividing line on the committee right now seems between those hawks that are seeing persistent ‘second-round effects’ of higher energy/food prices, and the doves that think headline/core CPI is simply just lagging behind the wider fall in input and product price inflation over recent months (see a speech by BoE’s Dhingra). Elements of both are true. April’s CPI figures were undeniably ugly, though some of the drivers – higher vehicle and alcohol prices, for example – are unlikely to form long-lasting trends. We agree with the doves that food inflation should begin to ease back in line with producer prices, while services inflation (particularly hospitality) should come under less pressure now gas prices are so much lower. The BoE’s own Decision Maker Panel survey of chief financial officers suggests pay and price expectations have also eased noticeably over recent months. If nothing else, hefty base effects should ensure that the headline inflation rate comes down over the summer months and fluctuates around 6%, and to a lesser extent the same is true of the core rate. Barring some further unpleasant and consistent surprises in the services inflation figures over the coming months, we think a 5% peak for Bank Rate seems reasonable. That implies rate hikes on Thursday and again in August.  However, as we discussed in more detail in a separate piece, we think the downtrend in wage growth is going to be slow – even if it has probably peaked. Labour market shortages look at least partly structural, and we suspect wage growth could end the year above 5% (7% currently). While that doesn't necessarily require the Bank to take rates much higher, it does suggest rate cuts are unlikely for at least a year, not least given the mortgage market structure discussed earlier.   Sterling trade-weighted index pushes back to early 2022 highs   Sterling can hold onto gains in the near term Sterling continues to ride high. On a trade-weighted basis, it is returning to levels last seen in early 2022 before Russia's invasion of Ukraine. Barring a surprisingly soft May UK CPI on Wednesday, 21 June, it looks like sterling can largely hang onto those gains if the Bank of England does not push back against very aggressive tightening expectations. Our strong preference has been that sterling will enjoy more upside against the dollar than the euro. Currently, we have a 1.33 end-year forecast for GBP/USD and the near-term bias is for 1.30 given what seems to be bearish momentum building against the dollar. EUR/GBP has been weaker than we had expected. And next week's BoE meeting may be too soon to expect a bullish reversal here. Yet, consistent with our house view that the Bank Rate will not be taken as high as the 5.65% level currently priced by investors for the end of this year, we suspect that EUR/GBP ends the year closer to the 0.88 area, meaning that current EUR/GBP levels should make a good opportunity to hedge sterling receivables for euro-based accounts. 
B2Broker Announces Support for NFDs, Reduces Margin Requirements on Crypto CFD Pairs, and Enhances Liquidity Packages

B2Broker Announces Support for NFDs, Reduces Margin Requirements on Crypto CFD Pairs, and Enhances Liquidity Packages

B2Brokers Group of Companies B2Brokers Group of Companies 19.06.2023 12:09
B2Broker is continuing to broaden its suite of liquidity services and solutions for the Forex and crypto markets with the addition of Non-Deliverable Forwards (NDFs). This new offering gives businesses an even wider variety of asset options as well as more effective risk management capabilities.   B2Broker delivers liquidity in all major asset classes with this launch. The company's liquidity now covers the following: Rolling Spot FX & Precious Metals Equity Indices Energies Commodities Crypto Derivatives/CFDs Single Stocks/CFDs ETFs NDFs    With the new expansion of services, B2Broker is firmly positioned to lead the industry in its commitment to meeting the needs of all its clients' liquidity requirements.   What are NDFs? NDFs are financial instruments used for hedging against the risk associated with currency exchange rate fluctuation. Through an NDF, both parties in a transaction agree on an exchange rate for their desired currencies before the actual transfer takes place. The difference between the agreed rate and the prevailing market exchange rate is settled in cash at a later date.  NDFs are useful for companies to manage risk in developing countries where it may not be possible or practical to use local currency forwards. It is a cost-effective way of hedging against possible losses from international business deals.   NDFs Supported by B2Broker B2Broker now gives their clients access to a wide variety of NDF currencies, giving them the option of hedging currency risk in a broad range of emerging markets. B2Broker's NFD currency pairs include: USD/BRL USD/CLP USD/COP USD/IDR USD/INR USD/KRW USD/TWD   Benefits of B2Broker's Liquidity Offer B2Broker has structured NDFs as Contracts For Difference (CFDs), providing clients with remarkable flexibility and convenience. While conventional NDFs typically have a settlement period of T+30, B2Broker clients can seamlessly receive their settlements on the next business day as CFD contracts. This advancement eliminates client settlement risks and expedites the process, ensuring efficiency and peace of mind. B2Broker provides its clients with highly competitive commission rates, focusing on delivering superior service to both institutional and retail brokers.     B2Broker Lowers Margin Requirements on 10 Crypto CFDs B2Broker has halved the margin requirement on selected Crypto CFD pairs, lowering it from 20% to 10%: BNB/USD DSH/USD TRX/USD XMR/USD ZEC/USD SOL/USD DOT/USD LNK/USD AVA/USD ATM/USD   Updated Prime of Prime Institutional Liquidity Offer B2Broker has enhanced its PoP institutional liquidity packages by adding Prime Margin Account connections such as OneZero, PrimeXM, and Centroid. Clients can enjoy the benefits of an STP / DMA (A book) trading ecosystem with precise market execution and full transparency, all while benefiting from monthly minimum liquidity fees against traded volume. Moreover, B2Broker ensures a seamless onboarding process, setting up the Prime Margin Account free of charge and also providing 24/7 technical support to ensure that the brokerage operation runs smoothly at all times.     About B2Broker B2Broker is the premier provider of technology and liquidity for brokerages and exchanges. With its suite of services, B2Broker gives clients access to 800+ trading instruments across 8 asset classes, empowering businesses with effective liquidity capabilities to offer traders favorable conditions and top-tier execution. B2Broker is committed to staying ahead of the curve and continually updating its products and offerings in order to provide its customers with the best possible solutions.
Peer Valuation: Toya's Position Among Global Power and Hand Tool Producers

Status of Grid Connection Applications by Operators in Poland: Expanding Market for Professional PV Installations

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 19.07.2023 08:48
Status of grid connection applications by operator in Poland (GW)   Industry trends indicate that the number of residential prosumer investments will decline in the coming years. The new formula for the "My Electricity" program, along with additional equipment, will promote calm and steady growth in new capacity and will be a form of hedging for the transition period before dynamic pricing for prosumers is implemented in 2024. According to the Institute of Renewable Energy, there will be increasing activity by companies to develop PV projects on the autoproducer model in response to energy price increases, particularly for industrial companies.   They have both adequate space and capacity to connect PV sources to the internal grid, and the prospect of developing this market segment is high (see investments by Stalprodukt, KGHM, Grupa Azoty, JSW). This will also be fostered by the development and construction of new facilities, both service and production, as well as the modernization of the current ones under uncharted energy and environmental requirements and standards. The entry into force of the EU border tax (CBAM) starting in 2026, which is driving investment in decarbonization, is also a growth factor.   The transition of companies to green energy is now one of the main business models and trends. With higher energy prices, interest in investment in professional large-scale PV installations should continue to grow.    
Argentine Peso Devaluation: Political Uncertainty Amplifies Economic Challenges

Argentine Peso Devaluation: Political Uncertainty Amplifies Economic Challenges

ING Economics ING Economics 16.08.2023 12:52
ARS: The only way is down Argentine officials devalued the Argentine peso (ARS) by close to 20% yesterday, which now means one US dollar buys 350 pesos. At the same time, the local central bank hiked rates by 21% to 118% in an attempt to get on top of inflation which is now running at 115% year-on-year. The reason for the step-change in the pace of the depreciation in the official USD/ARS rate was politics. Weekend primary elections saw surprising support for libertarian candidate Javier Milei, who has no interest in the ongoing lending plans from the IMF and recommends dollarising the Argentine economy. The peso came under pressure on the back of these results and with no FX reserves to resist this pressure, the central bank was forced to speed up the ARS devaluation. The result makes the outcome of October's general election highly uncertain and will question Argentina's path ahead with the IMF, where the Washington-based lender is currently reviewing whether to disperse the next $7.5bn tranche of a $44bn four-year programme. Argentina has had a tough year with drought hitting core exports of wheat, corn and soy and it clearly needs some help. For multi-national corporates, the peso has been incredibly difficult to hedge. The one-year USD/ARS outright forward is already close to 1000 and hyper-inflation accounting means that even if corporates have been able to create local ARS liabilities to offset ARS assets, the ARS depreciation of local entity is still running through quarterly P&L accounts. The road ahead looks a tough one for the peso.
A Bright Spot Amidst Economic Challenges

A Bright Spot Amidst Economic Challenges

Ipek Ozkardeskaya Ipek Ozkardeskaya 25.09.2023 11:05
A bright spot If there is one bright spot in Britain with all this, it is the FTSE100. First, the rising energy prices are good for the energy-rich FTSE100. Second, softer sterling makes these companies more affordable for international investors, who should of course think of hedging their sterling exposure, and third, more than 80% of the FTSE100 companies' revenues come from oversees, which means that when they convert their shiny dollar revenues back to a morose sterling, well, they can't really complain with a stronger dollar. Consequently, if a more dovish BoE is bad for sterling, the combination of a hawkish Fed and a dovish BoE and a pitiless OPEC is certainly good for the FTSE100. The index has been left behind the S&P500 this year, as the tech rally is what propelled the American index to the skies, but that technology wind is now turning direction. The FTSE 100 broke its February to September downtrending trend to the upside and is fundamentally and technically poised to gain further positive traction, whereas, the S&P500 is heaving a rough month, with technology stocks set for their worse performance this year, under the pressure of rising US yields, which make their valuations look even more expensive.   Interestingly, the US 2-year yield peaked at 5.20% after the Fed's hawkish pause this week and is back headed toward the 5% mark, but the gap between the US 2-year yield and the top range of the Fed funds rate is around 40bp, which is a big gap, and even if the Fed decided not to hike rates, this gap should narrow, in theory. If it does not, it means that bond traders are betting against the Fed's hawkishness and think that the melting savings, the loosening jobs market, tightening bank lending conditions and strikes, and restart of student loan repayments and a potential government shutdown could prevent that last rate hike to happen before this year ends. And indeed, activity on Fed funds futures gives more than 70% chance for a third pause at the FOMC's November meeting, and Goldman Sachs now sees the US expansion slow to 1.3% from 3.1% printed in the Q3. KPMG also warned that a prolonged auto stoppage may precipitate contraction. And if no deal is inked by noon today, the strikes will get worse.   One's bad fortune is another's good fortune  The Japanese auto exports surged big this year, they were 50% higher in yen terms. The yen is certrainly not doing well, but yes, you can't have it all. That cheap yen is one of the reasons why the Japanese export so well outside their country. And in case you missed, the BoJ did nothing today to exit their hyper-ultra-loose monetary policy. They didn't even give a hint of normalization, meaning that the yen will hardly strengthen from the actual levels. In the meantime, Toyota, Mitsubishi and Honda shares are having a stellar year, and the US strikes will only help them do better. 
Robust 1Q24 Performance: Strong Revenue Growth and Improved Operational Efficiency

Ailleron: Above-Average Margins, Double-Digit Earnings Growth, and Favorable Valuation

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 20.10.2023 18:00
Ailleron Above-average margins, prospects for double-digit earnings growth Valuation and recommendation Despite the dividend cut by PLN 1, we raise our target price from PLN 26 to PLN 28 and reiterate our BUY recommendation. A comparative valuation based on a group of global software houses yields PLN 36.3 per share. A comparison with Spyrosoft based on adjusted net profit for the last four quarters implies a valuation of PLN 36.0, but we note a rather temporary bottom in SPR's profitability and believe a certain premium, albeit not a large one, is justified. Q3'23 Forecasts We expect revenues of PLN 16m in FinTech and PLN 99m in Software Mind, where Q2 saw slightly higher revenues in the telecom sector, but we do not expect this effect in the current period, and furthermore, exchange rates have been the most unfavourable for the company's revenues in many quarters (average USD/PLN down 12% y/y and average EUR/PLN down 5% y/y). We forecast an operating profit of PLN 15m, the best quarter so far this year and comparable to the excellent Q3'22. Part of the FX exposure is still hedged. We expect a slight decline in net profit due to the absence of Pekao contract revenues, with some drag from team costs. This effect is expected to fade by the last quarter of 2023, with virtually no impact on the P&L from next year onwards. Traditionally, we expect the strongest results in the Ailleron group in Q4.    

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