revenues

The results presented by the Company in the third quarter of the financial year 2022/23 (January - March 2023) turned out to be higher than our forecasts, especially due to better margins. At the same time, the Ambra Group once again managed to show a double-digit increase in revenues, which this time clearly exceeded the dynamics observed in the first half of the year (+22.0% y/ y).   The increase in sales was possible thanks to the earlier date of Easter (they fell on the second weekend in April - a week earlier than a year ago, which increased sales in March), regularly introduced increases in product prices and the low base from last year. Ambra positively surprised us, especially with an increase in the percentage gross margin on sales by 1.3 p.p. y/y, to 35.6% (we expected flat dynamics), and consequently also the level of operating profit (PLN 6.9 million vs. PLN 4.6 million) and net profit (PLN 2.6 million vs. PLN 1.7 million).     However, we believe that the following quarters may prove to be a greater challenge for the Group, especially when we take into account the high costs of purchasing raw materials, fuels and energy, or the deterioration of consumer sentiment caused by, among others, decline in real household income. Better-than-expected results in Q3 prompt us to raise our current forecasts. We believe that at the end of the current financial year, the Group's sales revenues will total PLN 882.3 million (13.8% y/y), EBIT will increase to PLN 95.4 million (10.9% y/y), and the net result will amount to PLN 55.8 million (7.7% y/y).       Assuming our estimated net profit in the financial year 2022/23, the Company is currently listed with a P/E ratio of 11.4. We are raising the valuation per share of Ambra from PLN 32.1 to PLN 33.6 compared to the last forecast, and we are reiterating our 'buy' recommendation. The change in the valuation of the Company was positively influenced in particular by a slight increase in our expectations as to its future results after a good third quarter, as well as a further increase in the level of ratios of companies from the comparative group.          

The results presented by the Company in the third quarter of the financial year 2022/23 (January - March 2023) turned out to be higher than our forecasts, especially due to better margins. At the same time, the Ambra Group once again managed to show a double-digit increase in revenues, which this time clearly exceeded the dynamics observed in the first half of the year (+22.0% y/ y).   The increase in sales was possible thanks to the earlier date of Easter (they fell on the second weekend in April - a week earlier than a year ago, which increased sales in March), regularly introduced increases in product prices and the low base from last year. Ambra positively surprised us, especially with an increase in the percentage gross margin on sales by 1.3 p.p. y/y, to 35.6% (we expected flat dynamics), and consequently also the level of operating profit (PLN 6.9 million vs. PLN 4.6 million) and net profit (PLN 2.6 million vs. PLN 1.7 million).     However, we believe that the following quarters may prove to be a greater challenge for the Group, especially when we take into account the high costs of purchasing raw materials, fuels and energy, or the deterioration of consumer sentiment caused by, among others, decline in real household income. Better-than-expected results in Q3 prompt us to raise our current forecasts. We believe that at the end of the current financial year, the Group's sales revenues will total PLN 882.3 million (13.8% y/y), EBIT will increase to PLN 95.4 million (10.9% y/y), and the net result will amount to PLN 55.8 million (7.7% y/y).       Assuming our estimated net profit in the financial year 2022/23, the Company is currently listed with a P/E ratio of 11.4. We are raising the valuation per share of Ambra from PLN 32.1 to PLN 33.6 compared to the last forecast, and we are reiterating our 'buy' recommendation. The change in the valuation of the Company was positively influenced in particular by a slight increase in our expectations as to its future results after a good third quarter, as well as a further increase in the level of ratios of companies from the comparative group.          

1Q2023 the effects of the slowdown and the high base of the previous year  Decrease in revenues and lower margin in TIM SA, net profit lower by over 50% y/y - as expected. Weaker results of 3LP (costs of launching new facilities), decline in EBITDA and negative net result - in line with our forecasts. Weaker operating CF (renewed increase in working capital: PLN +35 million q/q) and higher CAPEX - as a consequence, an increase in DN by over PLN 30 million. TIM's results are of secondary importance in the situation of the ongoing tender offer for 100% of the company's sharesat the price of PLN 50.69 per share.     Companies' results Sales of TIM SA in the first quarter of 2023 decreased by 8%, reflecting the deterioration of the market situation. In addition, the margin on goods fell (-1 pp y/y and similarly q/q), which the management explains by the intensification of competition and a change in the attitude of buyers (they no longer buy "in stock"). At the same time, operating costs increased (+10% y/y), mainly in external services (transport, warehouses +13% y/y). The balance of other activities and the balance of "financials" were not significant for the final result in TIM SA.    Unfortunately, the results of the logistics company 3LP fell short of our expectations. This entity showed a 2% decrease in sales to customers from outside the Group (to approx. PLN 16.5 million), generating a loss already at the EBIT level (PLN -0.7 million, for the first time in at least 2 years).   The EBITDA result was the lowest since Q1 2020 (below PLN 5 million). The negative impact of the "financials" was partly offset by positive exchange differences (balance of financial activities in Q1 approx. PLN -2 million). The net loss in the first quarter amounted to almost PLN 3 million. In the following quarters, the results should improve, as 3LP will use the newly launched warehouse space more and more effectively, however, the weaker results of TIM SA will be weighed down (decrease in the volume of orders). Throughout 2023, we expect an increase in EBITDA with lower EBIT and a slightly negative net result.     Renewed increase in inventories and receivables offset by slightly higher trade payables In Q1 2023, TIM SA increased the level of inventories by PLN 17 million and receivables by PLN 18.5 million. On the other hand, trade liabilities increased by approx. PLN 6 million, financing the increase in current assets only to a small extent. As a result, the net working capital (KON) increased by approx. PLN 30 million, and the cash turnover cycle increased to almost 50 days (parent data).     The quarterly value of the consolidated operating CF (PLN -10 million) was the lowest since mid-2015, mainly due to the decrease in EBITDA and the outflow of funds to working capital. Debt increased (+PLN 17 million q/q, the effect of launching new warehouses and showing long-term leases), with a clearly lower level of cash - the result is an increase in net debt (+PLN 32.5 million q/q). The increases relate mainly to 3LP, in TIM SA alone there is still net cash (PLN 12 million, but PLN 15 million less than in the previous quarter). The DN/EBITDA ratio in the Capital Group increased to 0.9x, but remains at a very safe level. The decline in earnings was expected by us (as a result of the downturn in the industry). We are negatively surprised by thepoor 3LP data, although we hope for an improvement in the coming quarters. We maintain our full-year forecasts. On the other hand, we are aware that until the ongoing calls are resolved (beginning of July 2023), the exchange rate will react poorly to information not related to the call itself. We assume that the tender offer will be successful (the proposed conditions are attractive for TIM SA shareholders), which will result in the delisting of the company's shares from stock exchange trading

The results for the first quarter of 2023 are in line with preliminary estimates and we assess them as weak. Revenues amounted to PLN 6.7 million, of which revenues from games generated PLN 5.8 million (the remaining part of revenues was generated for own needs). This is a decrease of 14.9% y/y and 0.6% q/q.   These values confirm that the pandemic boom in game sales is coming to an end. At the level of results, Vivid Games also disappointed, with an operating profit of just PLN 64k (decrease by 5.2% y/y), while the net loss amounted to minus PLN 17k (a year earlier the net profit was PLN 50k). On the other hand, preliminary estimates for April are optimistic. Monthly revenue from games increased to PLN 2.14 million (an increase of 8.1% m/m), and the net result was positive and amounted to PLN 0.32 million. This means a significant improvement compared to March and the entire first quarter of 2023.   However, the April’s enthusiasm related to the improvement of profitability was quickly brought down in May, when the Company received information about the suspension of financing the project from the National Center for Research and Development for a total amount of PLN 6.4 million (of which PLN 3.9 million was subsidized). The reasons for the suspension are unknown, while the consequences are clearly negative. In addition to the lack of the cofinancing amount in the category of other operating income, the Company will not receive cash in the assumed time (or at all), which worsens its liquidity.   Finally, we lower our valuation to PLN 0.90 (from PLN 1.05) per 1 share at the end of 2023, which results from a lower valuation both using the DCF and comparative method.    

Mostostal Zabrze operates in specialist construction, assembly and industrial production, and in all these areas, despite concerns about the economic situation, it still generates good results. Quarterly results Once again, Mostostal Zabrze recorded very good results. Revenues in 1Q23 increased by 51% y/y, EBITDA by 47%, and net profit by 94%.   In terms of revenue, all three basic operating segments recorded high growth, while at the level of operating profit, the Industrial Implementation and Design segment and the Machine Construction segment recorded high y/y dynamics, while the result of the General and Engineering segment, the construction segment, was lower than in the previous four quarters. In the latter case, the company cited a large part of the contract for POSCO as the reason, in which there were minor delays, which translated into a decision to take a more cautious approach in showing the current profitability of the contract. Lower backlog, as forecast At the end of April, the Group's order backlog amounted to PLN 841.9 million, which means a decrease by 29.1% y/y and at the same time is responsible for 72% of revenues from 2022.       This situation is in line with the announcements for 2021 and included in our forecasts from previous reports. Since the restructuring that took place a few years ago, the company has declared to avoid very high value individual contracts, which expose it to greater risk. Despite this, she undertook two large orders, which we wrote about earlier. One of these contracts is nearing completion and the other is half way through. After their completion, the company will continue to focus on smaller, but more profitable contracts.   New perspectives The cooperation between Mostostal Zabrze and ArcelorMittal Poland looks very prospective. Mostostal has been its partner in repair works for years, an example of which is the currently conducted general overhaul of the Blast Furnace, where it performs the largest scope of works. A company from the Mostostal Zabrze group also carries out conceptual and design work in the process of decarbonisation of steel production. Implementation of such projects is rather a question of "when, not if", and their value will be counted in billions of PLN.     The presence of the company in these projects from the very beginning, with its experience working for ArcelorMittal, gives a good chance to participate in these large contracts also in the future. Valuation and recommendation The favorable judgment in the Wood case and the increase in market valuations translated into an increase in the value of the company calculated by us.   The value of shares in the DCF model with the payment for the Śląski Stadium is PLN 3.80, without the payment PLN 5.60, while the valuation based on a comparison with other companies is PLN 5.80. This gives an average of PLN 5.30, which means that the buy recommendation for Mostostal Zabrze shares is upheld.    

Relatively good, compared to the broader market, retail sales results in the clothing and footwear category for the first quarter were also reflected in Monnari Trade's revenues. Despite the fact that the first quarter is usually the worst for clothing companies and the fact that Monnari Trade has reduced the number of stores and sales space, the Company generated a record-breaking quarterly revenue of PLN 67.5 million, which is partly due to higher prices of the products offered.     The Company also managed to maintain a relatively high gross margin on sales at the level of 55.4%. Nevertheless, the environment of high inflation in Poland also generates strong pressure on the Company's cost side. Selling costs increased by 21.2% y/y, although we perceive this rather as a consequence of higher revenues due to the fact that the cost of renting space in shopping malls is related to the sales revenue. On the other hand, the increase in general management costs by as much as 57.4% is based on growing wage requirements and the general increase in prices in the country, which we assess negatively.       On the other hand, we positively assess the fact that, despite the loss on operating activities, the Company managed to generate a positive net result at the end of the first quarter, which is partly due to high financial revenues (Monnari Trade invested surplus cash after selling part of Geyer's Gardens). Finally, we are lowering our valuation to PLN 7.3 (from PLN 7.8) per share at the end of 2023, which is mainly due to the decrease in the multiples of comparable companies.    

Fiscal position leaves little room for more generosity With public debt at 36% of GDP (almost entirely external FX, long maturity) liquid FX state savings (UFRD) at 11% of GDP and a recent increase in expenditures to an historical high of 36% of GDP, Uzbekistan has little room for further fiscal generosity. In 2022, the consolidated deficit narrowed by 0.5ppt to 3.9% of GDP on higher revenues, and for 2023-24 higher tax measures and cost control (following the constitutional reform) are planned, potentially leading to further reduction in the deficit to 2-4% of GDP. However, one third of the revenues are commodities-dependent and volatile, while high inflation may require extra social spending. The deficit is expected to be financed primarily via external borrowing, but the NBU expects the share of external borrowing to drop from 66% to 52% in 2023.   Key fiscal indicators (% of GDP)   Sum fails to benefit from geopolitical spillover Uzbekistan’s current account improved from its standard 5-7% of GDP deficit to just 0.8% in 2022 thanks to the inflow of remittances from Russia. However, the balance of trade did not improve, as higher exports of commodities (one third of exports) and extra trade with Russia (share of Russia in exports went up from 12% to 16%) were offset by higher imports (Russia share remained 20%).   That said, improvement in the current account failed to be absorbed by the FX market (unlike Georgia and Armenia), as UZS has gradually depreciated by 6% against USD since mid-2022 and is now 6% below end-2021 levels, like RUB and KZT. This suggests some pressure on the capital account but, on the positive side, Uzbekistani Sum’s depreciation risks seem to be under control.    Balance of payments and USD/UZS

Poland's 2023 budget deficit higher as government plans to reduce liquidity buffer Last week, the Polish government presented an updated fiscal plan for 2023 with a PLN24bn (0.7% of GDP) higher deficit target, mainly on additional spending. Higher borrowing needs are intended to be financed by the reduction of the liquidity cushion rather than new issuance.   Loose fiscal policy in 2023 and 2024 Last Friday, Polish authorities announced that the 2023 budget act will be amended and the state budget deficit limit on a cash basis will be increased by PLN24bn from PLN68bn to PLN92bn (0.7% of GDP). The main reason behind such a move is the intention to boost one-off expenditure in 2023 (by PLN20.8bn), which we link to upcoming general elections in Poland in the autumn of this year. The majority of the spending will be on one-off higher subsidies to local governments (PLN14bn) and one-off bonuses for teachers (excluding academics). Total state budget revenues are expected to be PLN3.2bn lower than previously projected, with tax collections PLN8.5bn lower than assumed in the budget act. VAT receipts are PLN13.4bn short of initial assumptions.   As a reminder, a few weeks ago the government released a plan to increase permanent spending from 2024 onwards on child benefits (from PLN500 per child to PLN800) and provide free pharmaceuticals for youngsters and the elderly (totalling 0.7% of GDP next year). We hold our 2023 general government deficit estimate unchanged at 5.2% of GDP in 2023 and around 4% of GDP in 2024, as we already assumed loose fiscal policy in the election year.   Higher borrowing needs for 2023 but issuance lower The budget amendment means that 2023 net borrowing needs will increase to PLN150.6bn from PLN110.5bn initially planned, but it is not necessarily bad news for Polish government bonds (POLGBs) given plans regarding financing. According to the amended plan, the issuance of PLN T-bonds will be PLN21.9bn lower than initially planned. MinFin plans to cover new borrowing needs from an exceptionally high cash buffer, which should be reduced by PLN64.3bn. At the end of May, the Ministry of Finance had PLN117.6bn on budgetary accounts – since the Covid-19 pandemic it has stayed at a very high level.   Downward pressure on yields as demand-supply balance likely to improve POLGBs issuance so far this year is close to PLN60bn and by the end of 2023 fiscal authorities may tap domestic markets with PLN30bn given the amended financing plan. Taking into account the planned reduction in the budget account balance (liquidity buffer) this year and a more open approach to Eurobonds issuance (the equivalent of PLN38bn issued in euros and dollars by the government so far in 2023) it is likely to boost banking liquidity. Along with poor demand for mortgage loans due to high interest rates, and the rising chance of National Bank of Poland rate cuts before the end of 2023, it should support demand for POLGBs and may push its prices up.

Whitbread Q1 24 – 22/06 – Premier Inn owner Whitbread has seen some notable gains this year, it's been one of the best performers on the FTSE100 year to date. When the company reported its full year results back in April the shares popped higher and have continued to go from strength to strength rising to 18-month highs earlier this month. Full-year revenues came in at £2.62bn, a 27% increase on 2020. Statutory profits after tax also saw a solid increase, rising to £279m, a 28% rise on 2020 levels, with the UK business outperforming.   The Premier Inn business saw revenue per room increase by 27% from 2020 levels, along with a rise in revenues to £2.5bn, despite occupancy rates in the low 80%. The German business has continued to underperform with an occupancy rate of 59.4% and is still operating at a loss, despite a sizeable increase in revenues. On the outlook, Whitbread said that UK sales at Premier Inn were 17% higher than the same period last year. On the inflation outlook management said they expect 7-8% in 2024, expressing confidence that higher sales and cost efficiencies would offset this. A final dividend of 49.8p was announced as well as a £300m share buyback to be completed in H1 of 2024.

FedEx Q4 23 – 20/06 – the FedEx share price has seen some modest gains since the company published its Q3 results. Managements main focus over the past few months has been on costs, which has helped improve profits, but done little to boost revenues, even as the company upgraded its full year earnings forecast to between $14.60 and $15.20 a share, a sizeable upgrade from the previous $13 to $14 range. Q3 revenue came in at $22.2bn, below forecasts of $22.7bn, while profits came in at $3.31c a share or $771m.   FedEx has been focussing on reducing the number of flights, grounding planes and reducing office space along with the intention to reduce headcount in the US by 25k. Cost savings for Q4 are expected to be in the region of $50m, while in April the company outlined plans to consolidate its express package and ground delivery units in an attempt to make a further $4bn in savings. A dividend hike of 10% was also announced. Q4 revenues are expected to come in at $22.75bn and profits of $4.89c a share. On an annual basis revenues are forecast to fall from $93.5bn to $90.96bn while profits are expected to fall to $14.86c a share.

In the past few years the company decided to shift f rom multiple small game production and instead focus on a few major titles with material budgets. Both this process of a change in strategy as well as ongoing wage pressure have t ranslated into lack of growth in recent y ears. That said, we expect that the company is currently entering a period of monetization, which will start with the r elease of Thief Simulator 2, a sequel to one of the top-selling Polish titles. In our model we assume the sales of the game to arrive at 10% higher levels than the predecessor on PC in the initial 12M.   At the same time, Ultimate Games is approaching the reveal of its next major games, which we expect to be a positive t r igger. The company is currently working as well on Ultimate Fishing Simulator 2 on mobile and the Ultimate Fishing Simulator China version, which we currently per ceive more as upsides to the core business. We forecast Ultimate Games r evenues in 2023E/24E at PLN 32.3m/PLN 54.8m and norm. net income of PLN6.0m/PLN 12.9m. On our forecasts, the company trades at a 2023E/24E P/E of 11.2x/5.2x, representing a high double-digit discount to its foreign peers. We upgrade our r ecommendation to BUY f rom HOLD, setting a FV at PLN 17.0 (33% upside).   Thief Simulator 2 is coming this summer According to the Steam webpage (we note that the dates may change), Thief Simulator is going to be released on 23 August 2023, published by Ultimate Games in cooperation with PlayWay. The game successfully passed the tests, including a prologue published on 3 May 2023 (83% positive reviews on Steam from 568 players, CC peak at 1.5k). As of now the game is in 135th place in SteamTop Wishlist rankings and has 11.2k followers. The game also garnered significant interest on YouTube (100-200k views for top materials), which suggest substantial chances for commercial success. In our forecasts, we assumed 240k copies sold in 2023E on PC, which represents a roughly 10% increase vs. Thief Simulator 1 in the same timeframe. As for Ultimate Games, the key will be the release on consoles (substantially higher revshare), which we expect to occur in 2024E with franchise sales for the company at PLN 15.4m in that year. We highlight that Thief Simulator is one of the best-selling games from PlayWay group, with over 2m copies sold on Steam alone.       Ultimate Hunting and ensuing games We maintain our expectations for one annual release of a larger game with potential sales of 150k copies in 12M since release, starting from 2024E. Currently the major pretender for best sellers (besides TS2) is Ultimate Hunting, which we expect to be released in 2024E. Nevertheless, we highlight that Ultimate Games is working as well on three other larger scale projects which still has been not announced and whose reveals could be visibly supportive for the sentiment to the stock.      

Financial results of KGL in the first quarter were better than our expectations, but above all they indicated a noticeable improvement compared to the poor last year. Particularly noteworthy is the return of the margin in the key production segment to a level slightly exceeding 20%.   If we combine this with a similarly satisfactory distribution margin of 12.6%, the company managed to achieve the highest gross profit on sales in history. There are many indications that a successful Q1 heralds a good year, although we remain cautious about the company's long-term prospects and the possibility of maintaining margins in the longer term.   Nevertheless, after a successful start to the year, we are raising our earnings forecasts for the full year. The company's results are supported both by the market situation in the form of a decrease in the prices of raw materials and energy, but also by the positive results of the optimization carried out. We are therefore increasing our valuation per KGL share from PLN 14.2 to PLN 16.6. At the same time, at the current price of PLN 14.5 per share, we maintain our accumulate rating.     Our valuation and recommendation assume stabilization of margins in the coming years at lower levels than at present. The strategic position of the company remains difficult due to the fact that its key suppliers and customers remain much larger than it, which means their strong negotiating position.   At the same time, the recently observed favorable environment due to the decline in the prices of petroleum products will not last forever. On the other hand, the company improved the management of selected risks that hit it last year and moved margins in the manufacturing segment to record lows.     In the medium term, KGL also benefits from the SUP directive adopted by the Polish parliament, which forces the replacement of polystyrene packaging used in gastronomy with products manufactured by the company. In distribution, a higher share of technical plastics in sales improves margins, albeit at a noticeably lower value of the segment's revenues.   In the longer term, however, the risk related to the possibility of introducing restrictions on selected categories of plastic products remains high. The Management Board of KGL undertook actions which led to the reduction of the company's debt. The concluded sale and leaseback transaction will result in a one-off profit on the transaction in the amount of approx. PLN 5 million, which will be booked in the second quarter. Therefore, it seems that the first half of this year will be very successful for the company.   Only later will it be possible to verify whether the optimization measures introduced by the company will actually achieve lasting success. Especially if in the meantime they were put to the test by changing the market environment to a less favorable one.   Risk factors: The most important risk factors that may affect the operations of KGL company include:     ❑ Regulatory risks. The EU tries to influence the limitation of the use of plastic and increase the share of its recycling through restrictions and taxes. The impact of these regulations on the company is difficult to determine at the moment without knowing the details of the regulations being implemented. The fact that plastic is negatively perceived by lawmakers is certainly a threat to the industry.     ❑ Risk of exchange rates and commodity prices. A significant part of goods and materials is purchased in foreign currencies (mainly EUR). Due to higher liabilities in EUR than receivables in EUR, the unrealized negative exchange rate differences with a 1% increase in EUR / PLN would amount to approx. PLN 0.5 million (sensitivity at the end of 2022). The prices of raw materials depend to a large extent on oil prices. As a result of the increase in oil prices, the company's revenues and costs are rising, but at the same time the margin decreases and the net effect is negative.     ❑ The risk of rising remuneration costs and shortage of employees. The share of employee costs in total costs in 2022 remained above 19%, despite a significant increase in the share of energy prices in the total cost. As a result of employee shortages and wage pressure, the increase in the cost of salaries reached as much as 27% in 2021. As a result of optimization, the company managed to reduce the growth dynamics in 2022, but it remained at a two-digit level of 10%. Due to demographic trends and high inflation, tensions in the labor market will continue.     ❑ The risk of a conflict of interest. In the company, four long-term managers and founders hold a total of 85.1% of votes at the company's AGM. Additionally, four members of the supervisory board have family ties to them. In such a situation, there is a risk of a conflict of interest at the expense of minority shareholders (mitigated by two independent members of the supervisory board).     ❑ Risk of over-indebtedness. After 4 years of intensive investments, the company significantly increased its interest debt, which reached the level of 5.1x EBITDA at the end of 2022. This ratio fell in Q1 to 3.8x EBITDA, but it should still be considered elevated. However, the company took steps to reduce it by concluding a sale and leaseback transaction.   The risks that we consider to be high include regulatory issues (political decisions are quite unpredictable and have a large impact on the company), indebtedness and the risk of commodity prices.  

Core business remains solid. We remain fundamentally positive on ATM Grupa, as we still consider it as a relatively cheap and decent long-term premium content exposure. Despite the hopefully temporary weakness of the premium content pipeline (which offers no major direct triggers for the core business over the short term), we expect the core business to deliver 7% adj. EBITDA CAGR over 2023E-2025E.     We anticipate another strong contribution from the real estate segment only in 2026E with another tranche recognised within Swedish project (till then the project should consume additional working capital). We could see an improvement in cash generation in the years ahead after some changes in approach to real estate or the potential disposal of the Boombit stake. We assume a dividend of PLN 0.30ps (DY of 8.5%) in 2023E, which includes a PLN 0.12ps advance payment in late 2023E versus PLN 0.08ps paid in 2022.   Overall, we forecast revenues at PLN 250m/265m (-17%/+6% y/y) in 2023E/2024E (excluding the real-estate segment we forecast the 2023E/2024E adj. core business top-line dynamic at +7%/ +5% y/y) and net profit at PLN 35m/36m (-20%/+4% y/y), down from our previous assumption of PLN 37m/44m (mainly due to lower number of premium projects to be recognised in 2023E/2024E than we assumed earlier). We maintain our BUY recommendation but decrease our FV to PLN 4.30ps (implying 23% upside) from PLN 4.50ps.       On our forecasts, ATM Grupa trades at a P/E of 8.4x/8.1x for 2023E/2024E. Small cut in 2023E/2024E premium pipeline. We perceive the management’s comments on the outlook for the premium content pipeline in 2023E/2024E, or the reluctance to develop on its own book new movie projects (or TV series) as a bit uninspiring. With no new major announcements and focus on documentary TV series projects or artistic movies we see a risk that the premium part of the business may not live up to its potential.   Overall we have reduced the number of premium TV series to be produced from 1.3x/2.0x to 1.0x/1.5x in 2023E/2024E respectively. As the demand for Polish content from OTT platforms remains solid, we consider it as more temporary issue rather than structural problem. We do not exclude that with the improvement of attractiveness of ATM Grupa’s developed projects the number of produced premium projects may increase.       Boombit’s never-ending strategic options review process. In our view, with each passing month, the likelihood of concluding the potential disposal of stake in Boombit (4.0m shares, 29.54% of Boombit’s equity) is becoming lower, especially, as the strategic review process has started back in November 2021.   Given company’s cash position, and apparent reluctance to take risks within premium content area, it seems there is no immediate need for the company to convert Boombit’s stake into cash. However, in our view company’s minority shareholders would welcome one-off extraordinary distribution from the potential Boombit’s disposal, rather than maintaining the current level of Boombit’s contributions to the company’s bottom line and dividend inflows.

Ever-expanding scale of operations We increase our FV from PLN 4.15 to PLN 4.54 per share and downgrade our recommendation from BUY to HOLD, due to recent stock price performance. The company has reported revenues of PLN 159m in 5M23 (+21% y/y), supported by an increase in volumes. SFD has recently announced the launch of its Hummy brand (quick meals), as well as plans to continue development of its activity in foreign markets (with a new market still this year).     As a result, we expect the company to maintain growth of its top line with 2022-25E CAGR at around 17%. We find the lower cost of materials and freight supportive for gross margin; however, due to a competitive environment, we assume stabilization of this margin at comparable levels in the coming years.   Given launch of the new product, we assume a comparable EBITDA margin this year, while in the following years operating leverage should support improvement in profitability. We trim our EBITDA forecasts in 2023-24E on higher operating costs and increase it in 2025E and afterwards assuming higher growth rates of revenues (2022-25E CAGR of EBITDA at 31%).     Finally, we expect SFD to maintain its dividend policy (DPS PLN 0.10 recommended from 2022 results) and assume a DPS of PLN 0.13 in 2024E. 2022-25E CAGR of revenues at 17%. SFD reporte revenues of PLN 159m in 5M23 (+21% y/y). The company also announced the launch of its own brand Hummy (quick meals), which we expect to gradually support sales in the coming quarters. SFD also maintains its plan to develop its activity in foreign markets (own platforms and marketplaces) and plans to enter a new market already this year.   Given the launch of a new product line, we increase our revenues forecasts by 1% in 2024E and 3% in 2025E (our forecasts imply 2022-25E CAGR of 17%). We point out that our forecasts still remain below the company’s target of around PLN 600m in 2025. Stable EBITDA margin in 2023E and improvement afterwards. SFD reported improvement of its EBITDA margin in 1Q23 by 1.5pp y/y; however, we point to strong sales (+37% y/y in 1Q23) that supported operating leverage.     At the same time, we expect inflationary pressure on operating costs to remain, while the launch of new products and entry into new foreign market may place additional pressure on profitability in the short term. As a result, we trim our EBITDA forecast by 9% to PLN 24.4m in 2023E (margin up by 0.1pp y/y to 6.3%), while expected higher growth rates in revenues should translate to improvement of margins in the following years, to 8.6% in 2025E.   Dividends maintained despite additional capex ahead. During the recent afterresults conference, the management pointed out that it currently is searching for a landplot for new logistics center. We assume development to start end-2024 or beginning-2025 with capex of around PLN 40m. Nevertheless, we assume that SFD will maintain dividend payments and we expect a DPS of PLN 0.13 in 2024E and PLN 0.18 in 2025E.  

Strong performance of surgical robots continues In this report, we update our forecasts and valuation of Synektik after the publication of results for 2Q22/23. Based on the new upgraded forecasts and the current risk-free rate, we set our Fair Value at PLN 75.0ps, which implies 0% upside potential of the current share price. We downgrade our recommendation to HOLD. Synektik has an excellent business momentum in FY2022/23, the company has again increased its guidance for da Vinci system sales in Poland and Czechia.     We believe that the momentum will continue in the next years, as the device utilization in Poland building up. We now assume Synektik will deliver 18/14/12 da Vinci surgical robots in 2022/23E, 2023/24E and 2024/25E, respectively. After recent share price rally Synektik is trading at 8.9x EV/adj. EBITDA for 2022/23E and 8.9x for 2023/24E; we see that most of upside has materialized and further share price growth potential is limited, therefore we downgrade Synektik to HOLD. Da Vinci sales momentum continues.   In 1H22/23, the company booked a record ten deliveries of da Vinci surgical robots, and signed another eight contracts for deliveries in 2H22/23. We assume five robots to be sold in 3Q22/23 and three in 4Q22/23, in total 18 devices vs. our earlier assumption of 16. As the demand remains strong (also in Czechia and Slovakia), the geographic distribution of surgical robots in Poland is uneven and NFZ may expand the scope of reimbursement of surgical procedures using da Vinci, we have raised our sales forecasts for the following years: we assume 14 deliveries in FY2023/24 (previously 11) and 12 deliveries in FY2024/25 (previously 10).     In our opinion, the number of surgical robots in Poland can easily reach 50-60 in the next few years, which will support Synektik’s revenues on device sales, as well as increase recurring revenues from service and consumables. Adjusted EBITDA at PLN 65.4m in 2022/23E.   Since the current backlog for da Vinci systems exceeds our forecasts, we increase our sales forecasts to 18 devices from 16 previously. Consequently, we are raising our forecasts for FY22/23: we estimate PLN 359m in revenue (previously PLN 325m), PLN 65.4m in adjusted EBITDA (previously PLN 59.8m) and PLN 32.0m in net profit (previously PLN 28.2m). We assume that the DPS in the next financial year could almost double to PLN 1.1ps vs. the last payout of PLN 0.6ps. Recommendation and valuation.   We value Synektik using a 10-year DCF model. Taking into account the new financial and FX forecasts and the current risk-free rate, we are upgrading the company's Fair Value to PLN 75.0ps from PLN 56.7ps. The new valuation implies 0% upside potential relative to the current share price, and therefore we downgrade our recommendation to HOLD.       

Analysts at Freedom Finance Europe have highlighted several companies that investors should look out for in the second half of this year. One of them is Amazon (AMZN), which continues to grow revenues in key segments. "The company has too many positive catalysts to ignore, and the recent weakness provides an opportunity to enter into an attractive asset", says the speaker. In addition, despite the challenging macroeconomic environment, AMZN's revenues in the latest quarter exceeded the forecast range to $127.4 billion and operating profit was $4.8 billion. These results are due to growth in e-commerce. North American region, for example, saw double-digit sales increases and a return to profitability, while the international segment also saw strong growth. On top of that, company's cloud business revenues, Amazon Web Services were up 16% year-on-year.  "Management forecasts sales growth of 10%, to $133 billion in the next quarter, with operating profit expected to remain stable, at between $2 billion and $5.5 billion. These results and forecasts look quite compelling. The company has also built an unrivalled logistics network for parcel delivery, sometimes with same-day delivery", said the speaker. These factors take Amazon’s potential to a maximum target price of $220.  Next up is the well-known coffee chain Starbucks (SBUX). As the speaker explained, the company is considered an attractive and long-term investment due to its commitment to shareholder value, revenue growth and higher earnings per stock. SBUX had a solid quarter. In Q2 2023, Starbucks had revenue of $8.7 billion, up 14% year-on-year. EPS increased by 36% compared to the same period in 2022. Even more impressively, Starbucks quarterly sales and EPS were 38% and 49% higher than the same period in 2019 (before the pandemic). The company also has a rewards programme that rewards customers for repeat purchases. For example, there are currently 30.8 million active loyalty programme members in the US. That's an increase of 15% over last year.   "Coffee is an integral part of society and it is hard to imagine a scenario where Starbucks ever disappears. The company has almost 37,000 shops and the goal is to have 55,000 outlets worldwide by 2030", the speaker added. The fundamental potential for an average target price is at $114. Another company that may be worth taking a closer look at is Booking Holdings (BKNG), which operates in the online travel industry. In particular, it offers services through its Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and OpenTable brands. Data from the Economist Intelligence Unit shows that the segment is expected to grow by 30% in 2023 as the number of Chinese tourists abroad may increase. "In previous years, the 'zero COVID' policy has held back tourism from China, which has recently been a major source of growth. As the situation changes this year, Booking Holdings could benefit from this. In addition, the number of trips remains below 2019 levels, which leaves room for growth and continues a solid recovery", explained the speaker. BKNG's revenue increased by $4 billion in the last quarter, and it continues to benefit from a network advantage that has allowed it to maintain its agency model rather than move to a vendor model where the online travel agency would be responsible for paying the fees. Fundamental potential for an average target price of $2800.  

Sainsbury Q1 24 – 04/07 – despite posting a solid set of full year results in April the Sainsbury share price fell back before edging up to 14-month highs in May. Since those May peaks the shares have slipped back, with the March lows the next key area of support. Underlying full year profit before tax came in at £690m right at the top end of its guidance, down 5% from the previous year on revenues that were 5.3% higher at £31.49bn. Profits after tax saw a larger fall of 69% to £207m, but these are still 15% above pre-Covid levels. Cost of sales was 7% higher at £29.4bn, up from £27.5bn a year ago, pushing back against political accusations that supermarkets are profiting from the cost-of-living crisis. The main areas of outperformance were in grocery which saw annual sales rise 3%, and fuel which saw a rise of 23.4%. Clothing and GM was more of a drag declining 3% year on year. For 2024 Sainsbury says it expects to repeat and possibly exceed underlying profit before tax target of this year, guiding between £640m and £700m. The board proposed a final dividend of 9.2p per share.  The recent Kantar survey showed grocery price inflation eased slightly in June; however, it will be small comfort to consumers given it is still an eye-wateringly high 16.5%, with eggs and frozen potatoes showing the biggest increases. Kantar went on to say that the biggest winners in terms of sales growth were Aldi and Lidl. Tesco and Sainsbury maintained their position as UK's number one and two supermarkets by market share. Tesco Q1 results have given us a decent indication of the challenges facing the sector even as grocery price inflation has been showing signs of slowing.   Levi Strauss Q2 23 – 06/07 - when Levi Strauss reported back in April the shares fell sharply, eventually sliding to levels last seen in September 2020, before finding a base in May. The reason for the sell-off was due to caution over its Q2 outlook. For Q1 the company posted a 6% rise in revenue to $1.69bn and profits of $115m or $0.29c a share. All in all, the numbers beat expectations however there was some disappointment that the company left its full-year guidance unchanged, which was for annual revenue of between $6.3bn to $6.4bn. For Q2, revenues are expected to come in at a fairly lacklustre $1.34bn, before picking up in Q3 to $1.6bn. Investors will be hoping that this doesn't change, while profits for Q2 are expected to slow to $0.03c a share.          

Solid Q1 sees Sainsbury's share price slip back   The Sainsbury's share price has seen a bit of a pull back of late, having hit 15-month highs back in May, the shares slipped to 3-month lows last month, although we have rallied since then.     Recent full year results saw the UK's second biggest supermarket post underlying full year profit before tax of £690m right at the top end of its guidance, down 5% from the previous year on revenues that were 5.3% higher at £31.49bn.   The focus on profits has drawn criticism that supermarkets are profiteering at the expense of consumers. At first glance this might seem valid, particularly with respect to recent headlines around fuel prices.   However, in such a highly competitive market, which UK food retail is, and with the likes of Aldi and Lidl growing their own market share rapidly according to recent Kantar data, such an approach would be self-defeating.   Looking at the underlying numbers there is little evidence of what is now being described as, greedflation, although to get the best deals you need to shop with your Nectar card, or your Clubcard if you're in Tesco.   In last year's results profits after tax fell by 69% to £207m, while the cost of sales rose by 7% to £29.4bn, up from £27.5bn a year ago.     Today's Q1 results have seen the Sainsbury share price slip back despite reporting a similarly solid set of Q1 results. Like for like sales excluding fuel rose 9.8%, with grocery sales seeing an increase of 11%.   The one area of decline was in clothing sales which fell 3.7% with the supermarket reiterating its full year outlook of underlying profit of between £640m and £700m. Fuel sales also fell 21.4%, however the comparatives from the same quarter last year have likely played a part here. On an encouraging note, Sainsburys also said that food inflation is starting to fall, and that any savings would be passed on to customers.     The lack of a change to guidance comes across as somewhat cautious which may help explain today's share price weakness, however such caution is probably sensible given some of the criticism coming the sectors way with respect to accusations of greedflation, which is a helpful tool for politicians to distract from their own shortcomings.     That is not to exonerate the supermarkets where evidence exists of such practices, however one needs to remember that without corporate profits governments will struggle to raise the tax revenue for public services, and in both the case of Sainsbury and Tesco, we've seen their profits more than halve over the last 12 months.     By Michael Hewson (Chief Market Analyst at CMC Markets UK)

  US Retail Sales (Jun) – 18/07 – US retail sales growth has been broadly steady for the most part during Q2, rising 0.4% in April and 0.3% in May. All the while consumer confidence has been increasing while inflation expectations have been falling. All of this should make for a more positive headwind for US consumer spending. Expectations for June retail sales are for a gain of 0.4%, against a backdrop of a still resilient jobs market, despite concerns that the manufacturing sector slowdown will start to act as a significant drag on the more resilient services sector. Ocado H1 23 – 18/07 – having narrowly avoided being relegated to the FTSE250 in the last reshuffle Ocado shares recently jumped to their highest levels in March, as chatter about a possible Amazon bid drove speculation in the share price. One of their largest shareholders Lingotto Investment Management increased its stake in the business to 5% fuelling speculation that something might be afoot, especially given the lack of any pushback on the speculation by either Amazon or Ocado. In Q1 Ocado reported revenues of £584m a rise of 3.4% on last year, while average orders per week have risen 3.6% to 381k. Average basket value remained flat, despite a fall in basket size and a rise in active customers to 951k, a rise of 13.8% year on year. This trend continues to show that with ever rising prices Ocado customers, like a lot of other retailers, are spending more money and getting less. Ocado kept its full year guidance unchanged.           

  easyJet Q3 23 – 20/07 – having got off to a flying start to the year easyJet shares have plateaued and have settled at a steady altitude just below one-year highs. While there has been steady optimism that the travel sector will have its best year since 2019 as travel returns to normal there is also concern that higher fares could mean that capacity levels may never return to the levels, we saw pre-Covid. Travel disruption continues to be a factor determining, as well as deterring, a return to normal, nonetheless optimism remains high that easyJet will be able to see a return to profit this year. Its H1 numbers saw the airline report revenues in line with forecasts at £2.69bn, and a pre-tax loss of £411m, while costs were confirmed at £3.1bn. Airline ancillary revenue saw an improvement, rising 67% to £767m, with total revenue per seat rising 40% to £66.4m, although costs per seat were also higher at £77.6m, a rise of 19%. The airline's load factor was 87.5% over the half year, up from 77.3% a year ago with an expectation that this would move into the 90% during H2. Its H2 guidance of 56m seats, a rise of 9%, was left unchanged with Q4 capacity expected to come in at around pre-pandemic levels of 94%. The growing holidays operation continues to improve and expand, with customer numbers increasing to 0.6m during H1, a 0.4m increase on the same period last year. Revenues in this part of the business also improved, rising to £173m, with an expectation that the business will see an annual profit in excess of £80m. In the first half of this year the business generated a profit of £10m. EasyJet said it will also be expanding its holiday package market, with Switzerland being added this summer with a view to starting in early 2024. With the summer season well under way consensus forecasts for Q3 revenues to rise to £2.27bn, with passenger revenue rising to £1.75bn, with a load factor of 89.8%. This target might need to be revised given the amount of disruption seen so far this year due to French industrial action which also caused easyJet to cancel 1,700 flights earlier this month over the summer period.    

  Bank of America Q2 23 – 18/07 – despite a solid set of Q1 numbers the Bank of America share price has struggled for gains, languishing just above its lows this year. Q1 revenues and profits comfortably came in ahead of forecasts at $26.39bn and $0.94c a share respectively. Unlike some of its peers, the bank managed to increase its revenues from last year with FICC performing well, although equities trading was disappointing falling from $2bn last year to $1.62bn. Net interest income drove most of the improvement, rising by almost $3bn to $14.58bn as net interest margin rose from 1.69% to 2.2%. As we look towards this week's Q2 numbers revenues are expected to slow from Q1 to $25bn, while profits are expected to come in at $0.85c a share. The recent bank stress test results have prompted Bank of America to push back on the Federal Reserve's findings when it comes to the central banks findings in an adverse economic scenario, with the bank querying the Fed's more optimistic outlook. The improvement in NIM has prompted some pushback on the banks reluctance to pass on interest rate increases to savers, at a time when mortgage costs have been rising more quickly.    

  Goldman Sachs Q2 23 – 19/07 – share price wise it's not been a good 6-months for Goldman Sachs, with the shares down near their lowest levels this year, with all the optimism over higher rates at the end of last year, the entire banking sector has become susceptible to concerns over the wider impact when it comes to economic stability. When the bank reported in January there was a mixed reaction to the numbers. For the second quarter in succession revenues came in below expectations when the company reported in Q1, coming in at $12.22bn, although profits were above forecasts at $8.79c a share. Q4 revenues came in at $10.59bn, below expectations of $10.7bn. On the various business units, equities trading revenue fell 7% to $3.02bn, while FICC slipped back to $3.93bn, a fall of 17% from a year ago. Investment banking was also disappointing, falling 26% to $1.58bn. The bank also announced that it was selling its GreenSky unit, as it looks to withdraw from its foray into retail banking. The partial sale of its Marcus loan portfolio incurred a loss of $470m, with the rest of the loans set aside to be offloaded at a later date. The bank's costs also went up during Q1, rising to $8.4bn, and this is an area which the bank is struggling to come to terms with, along with what to do about its struggling retail business which is acting as a drag on profitability. As we look towards this week's Q2 numbers, revenues are expected to fall to $10.75bn and profits forecast to slide to $4.72c a share, with the focus remaining very much on the guidance for Q3, after last week's  warning that profits and revenues are likely to be lower than expected.    

  Tesla Q2 23 – 19/07 – when Tesla reported back in April the share slipped back after missing on revenues and profits, along with a miss on total gross margins, before finding a base at $150 for another move higher. Like he did in Q1 CEO Elon Musk has continued to tweak prices up and down in response to market forces, with the result that Tesla was able to deliver another record quarter of deliveries in Q2 of 466k, as well as producing 479k cars. Nonetheless the fall in gross margins to 19.3% in Q1 was still a big fall from a year before, which Tesla blamed on higher raw material, commodity, logistical and warranty costs. Tesla also mentioned the cost of ramping up production of 4680 cells. During the last quarter Tesla shares went on a record run of 13 successive days of gains, helped by reports that many of its peers like Ford, GM, Volkswagen and Mercedes would adopt its US charging standard. Tesla's full year production guidance was kept unchanged at 1.8m vehicles.     

 Barclays H1 23 – 27/07   Barclays has had a patchy quarter share price wise, although it hasn't as yet traded below the 2 and a half year lows it hit back in March at 128p. It has found it difficult to push back above the highs seen back on May at 161.50p.   In April the bank reported total revenues of £7.2bn, driven by a strong performance in its investment banking division which saw revenues come in higher than expected at £3.97bn, an increase of 1% from a year ago. FICC was a particular standout, generating £1.79bn, however equities trading was disappointing at £704m.   The bank also performed well in its consumer division which saw a 47% increase in revenues to £1.3bn. The bank set aside £524m in respect of credit impairment charges. Even though total operating expenses didn't change that much from last year, with last year's costs boosted by a £523m impairment, it is notable that operating costs this year increased by 15% to £4.1bn.   Net interest margin increased to 3.18%, with the bank saying they expected to see a full year NIM in excess of 3.2%. Profits attributable to shareholders rose 27% to £1.78bn.   H1 revenues are expected to see an increase to £13.88bn, from £13.2bn a year ago. Further impairments are expected in Q2, with another £581m set to be added taking H1 impairments to £1,182m.

Shell H1 23 – 27/07 oil companies have continued to remain at the forefront of politician's ire, even as oil and gas prices have slipped back from the record highs we saw during the middle of last year. With new CEO Wael Sarwan striking a much more belligerent as well as pragmatic tone when it comes to Shell's production targets there is a sense that big oil has become less cowed by the political discourse over renewables as well as the threats of higher taxation that has seen the size of their tax take go up. In Q1 Shell reported a much better than expected set of profits of $9.6bn, only a modest decline from Q4's $9.8bn, on revenues of $86.96bn. This is well above the same quarter last year, with integrated gas contributing $4.9bn to the overall profit numbers, a $1.1bn decline from Q4, but still the second highest number ever.   Shell also maintained its dividend at 28.75c a share and announced another $4bn share buyback for the quarter. Other key areas of outperformance were in chemicals and products which saw a big jump in profits of over $1bn to $1.78bn, primarily due to a big jump in margins. Renewables and energy solutions saw profits rise to $400m, from $300m in Q4.   On the tax front Shell paid $3.1bn during the quarter although there was no detail as to how this was broken down. In June Shell announced that they would be increasing the dividend by 15% as well as spending another $5bn in share buybacks during H2 of 2023. Shell also said it was planning to invest $10-15 billion across 2023 to 2025 to support the development of low-carbon energy solutions including biofuels, hydrogen, electric vehicle charging and CCS. New CEO Wael Sarwan also pushed back on the narrative of renewables at any cost, saying that "We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths" in a broadside at the some of the recent reckless narrative and almost hysterical calls to cut back on fossil fuel use whatever the cost. Spending on capex would be reduced to $22bn-$25bn for 2024/2025, with an enhanced focus on performance, and discipline. In a recent trading update Shell said that it expects Q2 trading to be weaker as lower demand and lower prices impacts on its operations. Shell also said that its chemicals division is likely to make a loss during the quarter.

Meta Platforms Q2 23 – 26/07   having seen some chunky share price losses in 2022, this year has seen a face-ripping rally in the share price, with the shares up over 140% year to date. The rebound came in two parts with its Q1 numbers prompting further gains, after strong Q1 numbers and an upgrade to guidance for Q2. Q1 revenues came in at $28.1bn, a rise of 3% and easily beating expectations of $26.76bn, while profits came in at $2.20c a share, or $5.71bn, a fall of 24% but also above expectations. Costs and expenses rose by 10% to $21.4bn. Q2 revenue guidance was adjusted higher to between $29.5bn to $32bn, while full year operating expenses are now expected to come in between $86-$90bn, a decline of $5bn, and a sum that includes $3bn to $5bn in restructuring costs. Profits for Q2 are expected to come in at $2.90c a share.   The Reality Labs segment or Metaverse continued to bleed cash, losing just shy of $4bn as revenues fell to $339m. The launch of "Threads" a competitor to Twitter has also seen lots of headlines and helped to drive the share price higher, adding millions of users, however, there has been little sign thus far that it has driven traffic away from Twitter in a sustainable fashion

Alphabet Q2 23 – 26/07 Google owner Alphabet also reported a solid set of Q1 results, driven by an uptick in advertising and increased demand for its cloud services. Total revenues of $69.8bn, and profits of $15.05bn, a modest decline from the same quarter last year, but above forecasts of $1.07c at $1.17c a share.   Cloud services saw an increase in revenue to $7.45bn, which helped offset modest declines in advertising and YouTube revenues. YouTube revenue fell 2.6% to $6.69bn, while advertising came in at $54.55bn.     The company also announced a $70bn share buyback, while also announcing it was taking a $2bn charge in respect of severance costs for the 12,000 job losses reported earlier this year, as well as another $564bn on top in relation to reduced office space.         

Lloyds shares slip back, despite raising guidance, as NatWest row rumbles on   By Michael Hewson (Chief Market Analyst at CMC Markets UK) It was always set to be a big week for the UK's banks with the release of their Q2 numbers with the expectation that their profits would come under scrutiny due to the low savings rates being received by their respective deposit rates. With mortgage rates surging and deposit rates lagging well behind several politicians have been calling for further windfall taxes on a sector that has by and large performed well over the last few years. Events have taken over and the resignation of NatWest CEO Alison Rose has been forced to step down due to a row over the leaking of details of the bank's relationship with Nigel Farage. The saga raises questions over the governance of the bank and more specifically the Coutts business. It also raises questions over NatWest chairman Howard Davies and the oversight of GDPR and other client confidentiality rules. Only 24 hours ago, Davies and the board expressed full confidence in Rose after she admitted being behind the leak to a BBC journalist. On any other level this behaviour would have invited a disciplinary procedure against a more junior member of staff and probable dismissal, yet for some reason the board adopted the position of nothing to see here.   This would suggest a deeper problem behind the bank's governance and the rules around the behaviour of staff, as well as the future of Howard Davies as Chairman. On what world would a junior member of staff have been allowed to stay on with a simple apology if they had been found to have committed a similar transgression? Howard Davies has serious questions to answer about the bank's disciplinary procedures. Do they not apply to senior management? This story may have some legs in it yet with the banks results on Friday likely to be overshadowed by the row.     Moving onto today's Q2 numbers from Lloyds Banking Group and shareholders will be looking for positive news given that the shares have been on a slow downward track since cresting at one-year highs in February and falling to 7-month lows in June. When Lloyds set its guidance in in February the bank said it expected to see net annual interest margin to improve to greater than 3.05%, up from its previous estimate of 2.8%, while operating costs are set to remain static at £9.1bn, rising to £9.2bn in 2024.     Today's H1 numbers has seen the bank raise its full year guidance on NIM to be above 3.1% while keeping operating cost forecasts unchanged.   Despite this more positive outlook the shares have slipped back after profits fell short of expectations. This miss on profits appears to be down to an increase in provisions for non-performing loans, which came in at £419m, and a fall in Q2 NIM to 3.14% down from 3.22% in Q1.      On the underlying business customer deposits fell by £5.5bn, an improvement on the £8bn fall in Q1, helped by an increase in retail savings balances. In a sign that loan demand is slowing lending to customers fell by £1.6bn in Q2 and by £4.2bn from a year ago.     Statutory profit before tax in Q2 came in a £1.6bn, pushing H1 profits up to £3.87bn on revenues of £9.54bn.   While today's decline in the share price is disappointing and has translated into similar weakness in the likes of the Barclays and NatWest share price, the reaction seems somewhat overdone given that on all the major metrics the bank is performing well.     Of course there are justifiable concerns over the outlook for the UK economy, with the increase in bad loan charges, but profitability is still strong, and margins are healthy as well as being above the levels we saw a few years ago when the share price was much higher.

Shell share price slips as profits fall short   The Shell share price, along with those of the other major oil companies, has seen its share price decline from the levels we saw earlier this year, as lower oil and gas prices weighed on expectations when it came to revenues, as well as profits.     We already had an inkling that Shell's profits in Q2 might fall short when the company reported that its chemicals division would make a loss earlier this month, and so it has proved with today's results showing a sharp fall in profits. Yesterday the impact of the sharp falls in oil and gas prices was laid bare when Norway oil giant Equinor revealed a 57% decline in Q2 profits, when they released their latest numbers, and with BP results next week this is likely to be a familiar theme. The impact on profits also helps to explain the pivot away from the type of policies pursued by previous CEO Ben van Buerden by new CEO Wael Sarwan when he said earlier this year that "we need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths" in a broadside at the some of the recent reckless narrative and almost hysterical calls to cut back on fossil fuel use whatever the cost.        With Sarwan striking a much more belligerent, as well as pragmatic tone, when it comes to Shell's production targets there is a sense that big oil has become less cowed by the political discourse over renewables as well as the threats of higher taxation that has seen the size of their tax take go up.     Today's Q2 results saw adjusted profits fall to $5.07bn, below expectations of $5.61bn, and well below the $9.6bn in Q1. The company blamed lower prices, volumes as well as margins, along with weaker trading for the slowdown. As expected, its chemicals division had a difficult quarter sliding to a loss of $468m, although this was offset by a $917m profit on the products side, nonetheless the fall in profitability in this area was quite marked to the tune of 80% year on year. Profits in its integrated gas division fell to $2.5bn, a 34% decline from the same quarter last year and an almost 50% decline from Q1. Upstream the decline in profits was even more marked, with a 66% decline in adjusted profits to $1.68bn, from the same quarter last year, and a 40% decline from Q1. On renewables profits also fell to $228m, a 69% decline from the same period last year, and a 41% fall from Q1. The decline in profitability here serves to highlight the problems the big oil companies face with respect to the energy transition and the role the legacy business serves in funding this important area.     On the outlook Shell downgraded its expectations for capital expenditure by $1bn to between $23bn to $26bn, as well as announcing a 15% dividend increase as well as a $3bn buyback program for Q3. Earlier this month Shell said it was planning to invest $10-15 billion across 2023 to 2025 to support the development of low-carbon energy solutions including biofuels, hydrogen, electric vehicle charging and CCS.      By Michael Hewson (Chief Market Analyst at CMC Markets UK)  

Rolls-Royce turnaround continues apace By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Last week saw the Rolls-Royce share price soar on the back of a guidance update ahead of today's H1 numbers, which saw the company raise its estimates for full year underlying profits from between £800m and £1bn, to between £1.2bn and £1.4bn. Rolls-Royce also said that H1 underlying profit was expected to come in between £660m and £680m. This morning's announcement reconfirmed those numbers, while shining a greater light on the underlying business, which looks a completely different beast to the "burning platform" described by incoming CEO Tufan Erginbilgic at the end of last year.     Underlying H1 revenues soared to £6.95bn, an increase of over 30% and comfortably ahead of forecasts, while operating profits rose to £673m. Underlying operating margins also more than trebled to 9.7% while pre-tax profits rose to £524m.   The improvement was driven by the civil aerospace business which saw H1 revenues rise to £3.26bn, while defence also saw a strong first half with revenues of £1.9bn, however it was the improvement in profits and margins in its civil aerospace division which stands out, with operating income there rising from a deficit of £79m a year ago to £405m in this H1.   Rolls-Royce said it recorded 240 large engine orders in H1, compared to 96 in the same period a year ago. The orders included a record order from Air India for 68 Trent XWB-97 engines. This order pushed the overall order book for engines up to 1,405, with guidance for engine deliveries for this year left unchanged at between 400-500.   Large engine flying hours improved from 65% of 2019 levels in Q1, to 83% of 2019 levels currently, with full year guidance of between 80% and 90% of 2019 levels left unchanged. Defence also saw a strong H1 with new orders of £2.7bn, which included an order from the US Army for the engines for the Bell V-280 Valor tiltrotor helicopter.     The New Markets division which includes the new SMR nuclear reactor technology has remained a drag on profitability, however the Single Modular Technology has entered stage 2 of the Generic Design Assessment process, as it continues its progress through the regulatory process. Net debt was also reduced to £2.85bn from £3.25bn.     Today's update is another important milestone in the company's recovery story post Covid with the final relaxation of China covid restrictions the last piece of the puzzle at the end of last year. There is still a long way to go before the Rolls-Royce share price returns to the levels we saw in 2019, when we were above 300p, however today's update is an important milestone for a business that only three years ago was on the brink of bankruptcy.   

13:00BST Tuesday 22nd August 2023 Paying an ARM and a leg? By Michael Hewson (Chief Market Analyst at CMC Markets UK)   UK chipmaker ARM, which is owned by SoftBank has finally pulled the trigger on its US IPO, snubbing London, and testing the appetite of the market for new issues at a time when sentiment remains cautious as well as a little fragile given current trends of rising interest rates.   Having originally been listed here in the UK as well as on the Nasdaq back in 1998, ARM Holdings was delisted in 2016, when SoftBank acquired it for $32bn. Now looking to list the business for a price tag which could be as high as $70bn, SoftBank hopes to draw a line under an acquisition that has undergone mixed fortunes over the past few years, as well as trying to raise cash at a time when a lot of the value of its recent investments has declined sharply, prompting a loss of $29.5bn in last year's accounts.    Softbank still needs to buy back the 25% of the business it doesn't own to push the IPO through, and having posted such a huge loss, appears to be looking to free up some cash, after 5 quarters of losses. SoftBank initially tried to sell the business to Nvidia for about $40bn back in 2020, but that deal faced regulatory issues particularly when it came to national security, as well as fears it could give Nvidia too much of an advantage when it came to controlling the IP for chip designs in everything from mobile phones to data centres.    The UK based chipmaker could certainly do with a greater degree of autonomy, its performance under the stewardship of SoftBank has been mixed, swinging to a $65.5m loss in Q1. Total net sales declined 10.8% in the quarter ended 30th June, coming in at $641m, with most of the fall being down to a 19.3% fall in royalty revenues.    ARM generates a lot of its revenues from licensing its IP and the slowdown in mobile phone and other electronic device sales impacted its revenues in the most recent quarter. As the chip sector becomes even more strategically important with the development of AI, ARM is looking to develop new chipsets targeted at machine learning.   Earlier this year it introduced two new products, a CPU called Cortex-4, and a GPU called G720, which uses 22% less memory bandwidth than the chip it is replacing as well as better performance. There are risks and these were outlined in the proposal document including its China business which it has little control over.   As a fully functioning business there appears little risk that the company won't do well when it comes to generating cashflow, with the roadshow set to get underway in early September. The bigger question is what appetite there is for a company that is coming to market at a time when revenues have declined, and stock markets look toppy.   Investors will certainly want a piece of a business that could see its revenues grow quickly, as the enthusiasm for AI increases. The key factor will be getting the price right, as new investors may not want to pay an ARM and a leg for it.           

05:40BST Thursday 24th August 2023 Positive start expected after Nvidia knocks it out of the park   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Despite a raft of disappointing economic data from France, Germany and the UK which saw services activity slide into recession territory, European equity markets managed to finish the day higher yesterday. Rather perversely markets took these data misses as evidence that rate hikes were starting to work and that further rate hikes were likely to be unnecessary, sending bond yields sharply into reverse, as markets started to price an increased probability of recession. Yesterday's economic data will certainly offer food for thought for central bankers as they get set to assemble today at Jackson Hole for the start of the annual symposium, ahead of interest rate meetings next month where they are likely to decide whether to raise rates further to combat sticky inflation. If yesterday's data is in any way reflective of a direction of travel, then we could see a Q3 contraction of 0.2%. Of course, one needs to be careful in reading too much into one month of weak PMIs, especially in August when a lot of industry tends to shutdown or pare back economic activity, however the weakness in services was a surprise given that the summer holidays tend to see that area of the economy perform well.     US markets also underwent a strong session led by the Nasdaq 100 in anticipation of a strong set of numbers from Nvidia with the bar set high for a strong set of Q2 numbers. Back in Q1 when Nvidia set out its revenue guidance for Q2 there was astonishment at the extent of the upgrade to $11bn. This was a huge increase on its Q2 numbers of previous years, or any other quarter, with the upgrade being driven by expectations of a big increase in sales of data centre chips, along with investments in Artificial Intelligence.       Last night Nvidia crushed these estimates with revenues of $13.5bn, datacentre revenue alone accounting for $10.3bn of that total, a 171% increase from a year ago. For comparison, in Q1 datacentre revenue accounted for $4.3bn. Gross margins also beat expectations, coming in at 71.2% as profits crushed forecasts at $2.70 a share. Nvidia went on to project Q3 revenues of $16bn, plus or minus 2%. The company also approved an extra $25bn in share buybacks, with the shares soaring above this week's record highs in after-hours trading, with the big test being whether we'll see those gains sustained when US markets reopen later today.     On the back of last night's positive finish, as well as the exuberance generated by the belief that interest rate hike pauses are coming next month, European markets look set to open higher later this morning. The focus today is on the latest set of weekly jobless claims numbers which are set to remain unchanged at 239k, as well as July durable goods orders, excluding transportation, which are forecast to see a rise of 0.2%, a modest slowdown from June's 0.5% gain.      EUR/USD – bounced off the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – the 1.2600 area continues to hold with resistance still at the 1.2800 area and 50-day SMA. A break below 1.2600 targets 1.2400.        EUR/GBP – briefly hit an 11-month low at 0.8490 before rebounding sinking towards support at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – the failure to push above the 146.50 area has seen a pullback below the 145.00 level. This raises the prospect of a move towards the 50-day SMA at 142.70 area.     FTSE100 is expected to open 24 points higher at 7,344     DAX is expected to open 70 points higher at 15,798     CAC40 is expected to open 36 points higher at 7,282  

Harbour Energy slides to an H1 loss   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Coming on the back of yesterday's announcement by UK based oil and gas company, Ithaca Energy that production output and capex would be lower in the coming year, today's H1 numbers from sector peer Harbour Energy have outlined a similar outlook for the rest of its fiscal year.   Both companies have blamed the UK government's energy profits levy, or windfall tax with Harbour Energy today guiding the top end of their production guidance lower to 195kboepd, while also saying that total capex for the year would be reduced to $1bn. The share prices of both businesses have continued to struggle, both down sharply year to date. Harbour H1 revenues came in at just over $2bn, down from $2.67bn a year ago on the back of lower oil and gas prices. Profit before tax fell from $1.49bn last year to $429m this year, though after tax of $437m, this translated into a H1 net loss of -$8m, compared to a $984m profit last year, sending the shares lower in early trade.     Of the revenues $1.11bn came from crude oil, and gas of $759m, with the bulk of sales coming from its North Sea operations. International revenue accounted for a mere $98.1m in sales. The company announced an interim dividend of $100m or 12c a share, while saying that they expected to reach zero net debt by the middle of next fiscal year. This is a significant achievement given that at the time of the Premier Oil and Chrysaor merger the company was carrying net debt of $2.9bn.   Due to the windfall tax CEO Linda Cook said that the review of their UK operations had delivered annual savings of $50m from 2024, with Harbour growing its share of UK domestic oil and gas to 15%. The company says it continues to develop Tolmount East where first gas is expected to flow at the end of this year, while Talbot production is expected to begin around the end of 2024. The company also said its generating decent momentum in its two CCS projects which are expected to deliver a steady income stream.     Harbour Energy says it expects to complete the $84m sale of its Vietnam business by the end of the current tax year. There was no mention in today's statement about the reports in June that the company was reported to be in talks with US based Talos Energy, which it has a partnership with in the Gulf of Mexico.  

This year, the high season for the company started earlier, as evidenced by a significant increase in flight operations in May (approximately +25% y/y). In the second half of 2Q'23, three new Boeing 737 MAX 8 aircraft joined the carrier's fleet and Enter Air entered the most intensive period of the year with a fleet of 31 aircraft. According to our estimates, further improvement in demand for the company's services, combined with fleet expansion, has translated into a growth of around 30% y/y in the number of flights operated during 2Q'23. Throughout 2Q'23, we anticipate a progression of EBITDA MSSF 16 at approximately 27,2% y/y to PLN 143,1 million, along with a net profit of PLN 90,8 million (compared to a loss of PLN 31,0 million in 2Q'22).   These projected results exceed our expectations from the previous recommendation. As a result, we are revising our assumptions upwards for the upcoming periods as well, increasing the number of flight operations by Enter Air in 2023 from 25% to 30%, which translates to record figures for the company in this period. For the entire year 2023, we anticipate revenues at the level of PLN 2,7 billion, gross sales profit of PLN 287,4 million, EBITDA of PLN 468,4 million and a net profit of PLN 186,7 million.   We also point out on ENT's and TUI's plans to create a joint company offering aircraft leasing and charter services. We view this initiative positively, as it could potentially become a new source of revenue for the company in the future. Additionally, the decrease in the risk-free rate positively impacts the valuation. After updating our pricing model, we set the target price at PLN 59.8, which implies an upgrade from Accumulate to Buy.    

Ahead of second phase of Software Mind expansion We initiate coverage for Ailleron with a target price of PLN 26 and a BUY recommendation. Following the capital hike at the Software Mind segment, the group rapidly increased the scale of operations thanks to a series of acquisitions in 2021-22 and as a result of organic growth. Ailleron's revenues grew 162% between 2020 and 2022, and we expect them to triple in the current year relative to 2020. The integration process of the acquired entities is nearing completion. The current phase of the market downturn creates good conditions for the second phase of expansion of Software Mind, which remains an undersubscribed entity. Despite the strong growth rate, the company was able to maintain margins at a higher level than its industry competitors.   The segment's operating margin is clearly higher than its WSE-listed competitors. In 2021-22, Software Mind's EBIT margin was 16% compared to 13-14% at Spyrosoft and 11-13% at Fabrity. Despite the normalisation of demand resulting in a lengthening of the 'bench' and a decline in margins in the sector in early 2023, Software Mind extended its lead in terms of profitability and generated almost 14% EBIT margin in Q1'23, against less than 10% at Spyrosoft and Fabrity. Ailleron's margin was also higher than the global leaders in the software house sector.     We expect a marked improvement in performance in 2024 We assume that Software Mind will suffer from the slowdown seen in the industry, with the strengthening of the PLN weakening margins in H2 '23. We expect sales growth to fall to +3% in H2 '23 and margins to fall to 12.5%. In 2024-25, we forecast a return to double-digit revenue growth at Software Mind of 12% and 18% respectively. We also expect the margin to fall from 16% in 2022 to 13% this year and gradually rebound to 14.5% in 2025. In the FinTech segment, this year's operating result will still be affected by the loss on the Pekao contract (we forecast PLN -1m EBIT burdened by one-offs), but in 2024 we already expect PLN 7m operating profit. The FinTech segment will focus on further growth in the services area, leveraging the product solutions developed in the group. We do not expect large capital expenditure in the coming years, as significant investments have already been made in products, including the SaaS version of the LiveBank platform. We assume an increase in FCF yield from 2% in 2022 to 7% in 2024, with long-term capex to revenue in the Ailleron Group below 3%. Upside in acquisitions. Although our forecasts do not include specific acquisitions, we do not rule out completing at least one major transaction in the coming quarters. A series of acquisitions in 2021-22 gives credence to the strategy of building shareholder value through acquisitions. Companies with exposure to the US and Western Europe, particularly the DACH and Nordic countries, remain targets.   Valuation. We base our target price of PLN 26 on the DCF model. A comparative valuation to the foreign group returns a value per share of PLN 32.4, while a comparison to Spyrosoft based on the adj. net result for the last four quarters implies a share value of PLN 29.5. On our 2024-25 forecasts, the company is valued at P/E of 10.0x and 7.9x, and at a target price of PLN 26, the P/E is 14.1x and 11.2x, respectively. Assuming a return to double-digit earnings growth, these values are not excessive in our view. Global industry leaders have been valued at forward P/Es in the range of 20-30x in recent quarters .  

High 2024 borrowing needs in Poland no longer fundable locally Poland’s government unveiled the 2024 draft budget bill with a cash-basis deficit of PLN164.8bn and record-high net borrowing needs. Next year’s deficit is boosted by a strong rise in spending, while revenues should grow slower due to disinflation. Given the high borrowing needs the Polish budget should become more reliant on foreign financing in 2024.   The budget draft The 2024 draft budget bill approved by the government envisages the central deficit (cash-basis) at PLN164.8bn (vs. PLN92bn targeted this year). The reasons behind the strong rise in the deficit are spending, which grew by 22.5% year-on-year, while total revenues are projected to rise by 10.5% YoY amid further disinflation. What is even more striking is a strong increase in borrowing needs. Net borrowing needs for 2024 are projected at PLN225.4bn (c.6% of GDP). This is up by 55% vs. an already high PLN143bn planned for this year and close to zero in 2020-21. Combined with maturing debt it means that gross borrowing needs are expected to exceed PLN400bn next year.     In 2023 net savings in banking sector covers substantial part of borrowing needs In 2023 the financing of (central budget) borrowing needs is based mainly on local sources, ie, the net savings in the banking sector. It grew fast as high interest rates trimmed demand for new loans, while deposits continued expanding. As a result, the net savings in the domestic banks are expected to cover around two-thirds of the state budget net borrowing needs this year, which are estimated at PLN143bn. Also, the government turned more open to external financing and tapped the Eurobonds markets more eagerly than in the previous year, so overall funding of the budget is very safe.   A strong rise of net borrowing needs requires more external funding on hard currency bonds and POLGBs Net borrowing needs and its financing in 2023 and 2024 (PLNbn)   In 2024 net savings of local banks to grow much slower, while borrowing needs rise and budget requires more external funding than in past years We estimate that in 2024 the net savings in local banking sector may reach an equivalent of about 30% of total borrowing needs, estimated at PLN225.4bn. That is why the Ministry of Finance changed the funding plan, which requires much more external savings. In 2024 the authorities plan to expand Eurobonds issuance by nearly PLN37.8bn vs. PLN13.3bn in 2023 (net). Also, foreign investors’ engagement in Polish government bonds (issued domestically in PLN) may also need to increase as the domestic banking sector may not have sufficient capacity to absorb supply of PLN160.7bn in new PLN-denominated government securities (compared with some PLN62.9bn this year). In detail, the net supply of PLN-denominated government securities is the following: (1) the government intends to sell over PLN54.5bn T-bills in 2024; they will be issued for the first time in a long time (are usually purchased by domestic banks), (2) the supply of POLGBs should reach PLN99.2bn vs. PLN48.2bn in 2023, and (3) the supply of retail bonds is expected at PLN7bn vs. PLN14.9bn in 2023. On the top of that the borrowing needs assumes raising PLN28.6bn from the EU Recovery and Resilience Facility. This source of funds is currently locked due to Warsaw’s conflict with Brussels over the rule of law in Poland.   Summary We expect the Ministry of Finance to keep sizable offers of POLGBs in the second half of the year to take advantage of favourable market conditions. Also, the high cash buffer of MinFin (over PLN130bn at the end of July) will be held and used as a safety buffer to prevent problems with funding. Yet, given that net savings in domestic banks may prove insufficient to cover high government funding in 2024, MinFin is likely to rely on foreign investors, who refrained from increasing holdings of POLGBs in past years.

The years 2021 and 2022 were also good in the European Union, in which we observed a significant increase in the useful area of non-residential buildings in the issued permits and notifications clearly above the level of 170 million m2 . In 2022, however, we were dealing with a decrease by 1.1% compared to 2021. Eurostat has not yet collected data for all EU countries for the first half of 2023, but data from Q1'2023 show a decrease of over 2% y/y.   We expect a slight slowdown in the value of orders in the second half of 2023/24 and in the 2024/25 financial year. We see a risk that the slowing economy will have a negative impact on the number of commenced constructions of cubature facilities. This should translate into orders for Mercor products with a delay, but the scale of the slowdown should not be large.   We estimate that sales revenue in 2023/24e will amount to PLN 643mn (+2.3% y/y), and in the following year it will decrease by 3.6% y/y to PLN 620mn. In the following years, we assume an increase in sales, but at a rather conservative level. We assume a 6-year CAGR (2022/23 – 2028/29e) of the value of orders and revenues at the level of 2.9% and 2.2%, respectively. Mercor looks decent in terms of gross profit margin on sales, which oscillated at around 25%. 1Q'2023/24 was slightly worse than 1Q'2022/23, gross profit margin decreased from 27.5% in 1Q'2022/23 to 25.4%, which may be a sign of deterioration of margins in the near future. In our forecast, we assume a decline in gross profit margin from 24.9% in 2022/23 to around 23% in the next two years. After this period, we assume an increase in the margin along with the expected improvement in the economic situation in the industry

2Q23 results summary The company posted its 2Q23 results on 25th August. Below are our key takeaways. Volumes: The company delivered 278 dwellings (-12% y/y) and pre-sold 141 units (+244% y/y) in 2Q23. Revenues: Marvipol Development revenues arrived at PLN 197.2m (-4% y/y). The result was driven by higher average dwelling price, which amounted to PLN 709k (+10% y/y) and a drop in deliveries. Gross margin: Marvipol Development’s 2Q23 gross margin increased by 12.0pp y/y, to 32.3%, which reflects the impact of an improved sales mix (the developer reported that it had delivered dwellings mainly in the Lazurova Concept and Apartamenty Zielony Natolin projects). Selling costs and result on JV’s: SG&A costs reached nearly PLN 9.8m (vs. PLN 11.8m in 2Q22). The SG&A to sales ratio amounted to 5.0%. The profit on JV activity stood at PLN 0.7m (vs. PLN 3.8m the previous year). EBITDA: EBITDA came in at PLN 59.9m, +64% y/y, which resulted in an EBITDA margin of 30.4%, up by 12.6pp y/y. Net profit: Net profit arrived at PLN 39.6m, (+59% y/y; we note that the company reported a PLN -7.9m net financial loss, vs. PLN -6.6m in 2Q22). OCF: Marvipol Development posted OCF of PLN 41.3m (vs. PLN -8.3m in 2Q22) derived mainly from the positive impact of the improvement in financial results. Net debt: Net Debt/ LTM EBITDA came in at 1.7x and net debt/BV arrived at 0.3x (-0.2x y/y and -0.1x q/q). At the end of 2Q23 Marvipol Development held PLN 189.6m in cash and cash equivalents.  

IMS is a growing dividend company operating on the sensory marketing market. The company's business model underwent a very difficult test during the coronavirus pandemic, which left a strong mark on the previously very good financial results of the entire group. The past year, however, showed that IMS's results did not collapse permanently and its good prospects largely remained in force. Unfortunately, the company's operating model results in limited opportunities for its development outside Poland, which over time will limit the dynamics of business growth. The Closer Music project, which has been developed since 2019, is to be the answer to these limitations. At the same time, however, the startup nature of the project causes great difficulties in its valuation, and therefore at the moment it should be treated as an interesting option, which in the future may, but does not have to, bring benefits to shareholders.   Cash generator by subscription model IMS's distinguishing feature is the subscription model of its key audio, video and aromamarketing segments. This ensures high predictability and repeatability of revenues. At the same time, the company has shown that it can systematically grow both through acquisitions and organically. All this took place with high profitability of the business and, as a consequence, made it possible to share profits with shareholders in the form of annual dividends. A crack on this picture was caused by the pandemic, which showed that the company's operating model is not bulletproof and remains sensitive to both the economic situation and the development prospects of the brick-and-mortar sales and service network. However, it seems that with the end of the pandemic, the situation is returning to the old ways and customers have returned to shopping centers. Thus, IMS faces a real chance to return to the growth path outlined before 2020. The market valuation seems more conservative in this regard, hence we start covering the company with a "Buy" recommendation.   Prospects of profitable growth with an option for more In our forecasts, we assume a gradual return of operating profitability to the levels achieved before the pandemic. In the longer term, we conservatively forecast a slight decrease, but systematically growing revenues will result in the progression of profit, which can be distributed in the form of dividends. Thus, we consider IMS to be an interesting investment option that combines the growing and predictable business of sensory marketing with a possible bonus in the form of the Closer Music project being developed. Due to the lack of financial data and the difficulty in assessing the likelihood of success by Closer Music, we valued it at the amount of costs incurred so far for the production of music content. It is of real value also for the IMS itself.      

Exchange rates Production realised in Poland represents approximately 45% of total sales, while the market share of sales in the Polish market is <30%. The ratio of raw material consumption costs to realised revenues is approximately 50% and purchases are mainly made in EUR and USD. However, a significant proportion of foreign currency costs overlap with realised revenues, and high exchange rate volatility makes it difficult to implement an optimal purchasing strategy. Competitive pressures In the past, weak market conditions have led to increased competitive and pricing pressure from some players, resulting in reduced margins in the industry. In addition, more aggressive pricing by competitors may lead to a redistribution of market shares among individual players. Raw material prices The market for raw material suppliers is highly consolidated and the company is therefore a market price taker. The company's multi-sourcing strategy - i.e. sourcing from a number of different sources depending on local market prices - allows it to optimise its purchasing structure to a large extent in terms of the margins it achieves. Situation in the construction market The company's sales are mainly focused on the housing and volume construction markets. High interest rates are leading to a reduction in the volume of new housing purchases and a reduction in the realisation of cubature investments, as investors find it difficult to access finance. In turn, high inflation limits the purchasing power of consumers, who postpone home improvements. Risk of unsuccessful M&A The Group's strategy is based on the acquisition of companies with a similar business profile (foams, adhesives, sealants) in markets where the Group's presence is negligible, as well as market shares in complementary product areas (e.g. glass wool). There is a risk that the acquired businesses will not meet the Board's performance expectations.        

4Q22/23 net loss much higher than expected due to goodwill write-off Skarbiec Holding released 4Q22/23 (calendar 2Q23) figures with the following highlights: In 4Q2022/23 (calendar 2Q23) Skarbiec Holding reported net loss of PLN -16.5m vs. our expectations at PLN -0.9m (and vs. net loss of PLN -1.2m in calendar 1Q23 and PLN -3.0m in 2Q22). Deep net loss was driven by goodwill write-off (PLN 15.6m). Revenues came broadly in line with our expectations and slightly higher costs were offset by slightly better net financial income. Excluding write-off, net loss came broadly in line with our expectations.    Fixed fee decreased -3% y/y, but improved 12% q/q with margin on average AUM at 1.08% (vs. 1.02% in 1Q23 and 1.07% in 2Q22). Quarterly growth of fixed fee was driven by rising AUM (5% y/y, 2% q/q) coupled with rising share of equity funds in AUM (41% in 2Q23 vs. 39% in 1Q23 and 40% in 2Q22).  Success fee in 2Q23 came in at PLN 0.7m (vs. PLN 0.4m in 1Q23 and PLN 0m in 2Q22).   Distribution costs came in at PLN 5.8m (-4% y/y, 6% q/q) and represented 41% of fixed fee (vs. 43% in 1Q23 and 41% in 2Q22). Total HR costs increased 11% y/y (7% q/q) and other costs declined -10% y/y (7% q/q).   At the end of 2Q23 AUM of Skarbiec TFI came in at PLN 5,340m (5% y/y, 2% q/q). Y/y growth was driven by rising assets of equity&mixed funds (9% y/y) and debt funds (6% y/y). AUM of portfolios were broadly flat (1% y/y) and dedicated funds saw -11% y/y drop. On a q/q basis rising AUM of equity (9% q/q), debt (3% q/q) and dedicated funds (4% q/q) were only partly offset by declining assets of portfolios (-6% q/q).   In 2Q23 net flows to Skarbiec TFI came in at PLN -7m vs. PLN 45m in 1Q23.    Our view: NEUTRAL 2Q23 (calendar) was another quarter in a row with net loss of Skarbiec Holding. While loss was much higher than expected, it was driven by write-off of goodwill (of Skarbiec TFI), that we perceive as one-off. Revenues came broadly in line with our expectations and slightly higher costs were offset by slightly better net financial income. Excluding write-off, net loss came broadly in line with our expectations. Quarterly improvement was driven by improvement in fixed fee (12% q/q), that was only partly offset by higher costs. Fixed fee was supported by rising AUM (5% q/q, 2% q/q) coupled with rising share of equity funds in total AUM.   We find the calendar 2Q23 numbers of Skarbiec Holding as neutral. In our earnings estimate we had assumed, that Skarbiec Holding would be able to generate positive quarterly results more permanently not earlier than in mid-2024 (apart from calendar 4Q23 supported by success fee). Fund managers are being helped by declining interest rates and neutral or supportive market environment. We point at rising AUM of Skarbiec TFI also in calendar 3Q23 (13% y/y, 1% q/q) and positive net flows (PLN 28m). We assume Skarbiec Holding to report PLN 4.1m net profit in 2023/24e. At the end of 2Q23 Skarbiec had PLN 103m of cash on the balance sheet (vs. PLN 110m in 1Q23) vs. current MCAP of PLN 139m.        

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.    

Pre-sales: The company reported pre-sales of 213 units in 3Q23 (+384% y/y and +51% q/q; the value of units sold amounted to PLN 134.2m, implying average value of ca. PLN 630.0k). As a reminder, the company had dwelling offer of 607 units as of end-2Q23. Deliveries: At the same time, the company delivered 37 units (vs. 73 flats in 3Q22; with value of PLN 75m) mainly related to Rotunda Dynasy (7 units), Lazurova Concept (12 units) and Apartamenty Zielony Natolin project (17 units). Revenues: We estimate that revenues arrived at PLN 75.2m (-12% y/y), which is in line with company’s current report, driven by two factors: drop in number of handed over apartments and increase in the average dwelling price (+74% y/y). Gross margin: Given the above-mentioned deliveries mix, we expect gross margin to arrive at 37.5% (vs. 25.0% in 3Q22 and 32.3% in 2Q23). EBITDA: We assume that the company will report ca. PLN 10.3m in SG&A costs (vs. PLN 9.7m in 3Q22). Thus, EBITDA could come in at PLN 19.1m (-7% y/y). We predict that profit on sales could reach PLN 18.0m (+55% y/y). Net profit: We expect that net financial profit amounted to PLN 6.2m, vs PLN 4.4m in 3Q22. Thus, the net profit should arrive at PLN 18.6m (-2% y/y).  

Revenues Revenues in 3Q23 amounted to PLN 50.7 million (-12% y/y). Insulin sales fell 18% y/y. Declines were seen in both domestic and export sales. The decline in the insulin business was offset by higher revenues from commodity sales - the implementation of new drugs Sitagliptin and ComboDiab, and higher sales of Metformin segment drugs Avamina and Avamina SR (up PLN 5.8 million) and Other PL commodities, including products from the gastrology line (up PLN 4.6 million). The share of "Gensulin" in the market for classical insulins in Poland at the end of September 2023 was about 34.55%, indicating that Bioton will continue to maintain its position as the market share leader in this segment as measured by sales of the product to pharmacies. Bioton introduced another oral drug for the treatment of type 2 diabetes, belonging to the DPP-4 inhibitor group, to its portfolio.  

Miraculum reported its 3Q23 results with EBITDA of PLN 715k and net profit PLN of PLN 159k (both above our expectations) driven by improvement of gross margin by 4.0pp y/y and operating costs maintained under control. Below please find key highlights: • Revenues came in at PLN 10.8m (-4% y/y), in line with monthly data including PLN 3.2m in July (-6% y/y), PLN 3.6m in August (+7% y/y) and PLN 3.9m in September (-9% y/y). Miraculum reported a 25% y/y increase in sales of perfumes to PLN 3.2m (supported by Chopin brand), while shaving and makeup cosmetics deteriorated by 6% y/y and 20% y/y, respectively. The company informed that export sales declined by 23% y/y to PLN 3.1m and accounted for 29% of total sales (impact of high base in 3Q22 driven by contracts to Saudi Arabia). • Gross profit reached PLN 4.2m (+7% y/y), implying gross margin of 39.3% (+4.0pp y/y). The improvement was mainly related to sales-mix and higher share of high margin Perfumes segment (margin of 45%). • EBITDA came in at PLN 0.7m (+25% y/y), resulting in EBITDA margin of 6.6% (vs. 5.1% in 3Q22). SG&A costs increased by 2% y/y to PLN 3.8m at that time. • Net profit amounted to PLN 159k (vs. our forecast PLN 20k) with net financial costs of PLN 35k. • Operating cash flow amounted to PLN -566k (vs. PLN -501k in 3Q22). The company had inventory of PLN 13.1m as of end-3Q23 (-4% y/y), resulting in reduction of inventory cycle from 171 days in 3Q22 to 155 days in 3Q23. Miraculum had net debt of PLN 19.0m as of end-3Q23 (-10% y/y).   Positive, as reported results were above our expectations on improved y/y gross margin (driven by high-margin perfumes segment) and SG&A costs kept under control (4% below our estimates). Additionally, the company has managed to y/y reduce its inventory and net debt levels. We point that 9M23 EBITDA reached PLN 1.5m (vs. PLN 0.9m in 9M22), that is already above our FY23E forecast of PLN 1.4m. Finally, we note that the company reported solid revenues of PLN 5.0m in October (+8% y/y, slightly above our assumptions)        

  Vodafone H1 24 –14/11 – the Vodafone share price has been in a slow decline for the last 5 years, falling to a 25-year low, below 70p in the summer of this year. Since those lows, we've seen a slow recovery as new CEO Margherita Della Valle looks to try and turn the ailing business around. Almost all of its European businesses have proved to be a drain on the balance sheet, which makes the decision last year to reject an €11bn bid last year by Iliad for its underperforming Italian business.   That is now ancient history with the new CEO looking to focus more on the UK business, after announcing last month a €5bn deal to offload its Spanish business to Zegona for €5bn. The increased focus on the UK and German businesses has seen the company agree a deal with Hutchison Holdings take over the running of its UK Three network, while also agreeing an 18-year roaming deal with 1&1 Mobilfunk in Germany.  In Q1 the company reported revenues of €10.74bn, a decline of 4.8%, with declines in all its major markets except the UK, which saw organic services revenues rise 5.7% to £1.7bn. Germany, Italy and Spain all saw revenues decline by 1.3%, 1.6% and 3% respectively. Its smaller South Africa market managed to see a gains of 9%. For H1 revenues are expected to come in at €21.6bn with organic services of €18.4bn, a 5% decline from the same period last year, with Spain expected to see the biggest decline of -3.4%. The UK business is forecast to see a 5.78% rise in organic growth to $2.8bn.   Burberry H1 24 – 16/11 with the share price hitting record highs back in April the outlook was looking good for Burberry, with the shares getting a lift on decent returns from the likes of LVMH, Hermes and the wider luxury sector as Asia demand surged in the wake of the relaxation of lockdown measures in China at the end of last year. Those heady highs seem a long way away now given the sharp declines seen in the luxury sector in the months since then, on the back of a sharp slowdown in demand across all of its markets, and China in particular, with the shares slipping to one-year lows earlier this month. When Burberry reported in Q1 the retailer reported an 18% rise in Q1 sales, pushing quarterly revenue up to £589m, which was below consensus forecasts.   Mainland China saw an increase of 46%, while south Asia Pacific rose 39% and Japan 44%. A poor performance from its US markets saw an 8% decline and it was this that appeared to disappoint along with the fact that various other luxury retailers have reported sharp slowdowns in luxury spending that appears to have dragged the sector lower. Burberry also left full year guidance unchanged in Q1 saying that they still expected to see low double-digit revenue growth for full year 2024.       

Walmart Q3 24 – 16/11 – has been a significant stand out when it comes to the US retail sector, the shares have made strong gains this year with the shares hitting record highs earlier this month. The US consumer has held up well this year with Q3 seeing personal consumption contributing 4% to US GDP growth. There is a danger however that could be as good as it gets as we head into the final quarter of 2023 and Q4. When Walmart reported in August they crushed expectations, growing revenues, and profits. Q2 revenues rose 5.7% to $161.63bn, while profits came in at $1.84c a share. Total same-store sales rose by 6.3%, with the retailer raising its forecasts for the full year. Walmart said it expected Q3 profits to come in between $1.45 to $1.50c, while raising its full year profit forecast to between $6.36 to $6.46 from between $6.10 and $6.20 a share. Full year net sales were raised to between 4% and 4.5%. Target Q3 24 – 15/11 – while Walmart has been sweeping all before it, Target has gone in the other direction the shares slipping towards their 2020 lows, the retailer has been struggling with higher costs, and several cuts to their guidance, with management warning of "shrinkage" impacting its margins, given that several of their stores are in less salubrious geographic locations. Q2 revenues slowed to $24.38bn, falling short of expectations, although profits saw a solid increase to $1.80 a share, comfortably beating the top end of forecasts of $1.70 a share. Target also downgraded its full year profits forecast from $7.75 to $8.75 to between $7 and $8 a share. The retailer also projected Q3 profits of between $1.20 and $1.60 a share, although it is noteworthy that there has been an improvement in operating margins, which would appear to account for the better profit numbers and could prompt a surprise to the upside in this week's numbers. Q3 revenues are expected to come in at $25.1bn.   Home Depot - Q3 24 – 14/11 – in the leadup to Home Depot's Q2 numbers the share hit a 6-month high, however those gains quickly disappeared with the shares sliding to their lowest levels this year at the end of October. The sharp falls in the aftermath of the Q2 numbers were somewhat surprising given that the results came in ahead of forecasts. Back in May the company cut its full year forecasts sending the shares sharply lower. Q2 revenues saw a modest decline from last year to $42.9bn, as same store sales growth declined by -2%. Profits also beat consensus coming in at $4.65c a share. The outlook for the second half of the year is more uncertain with the company reaffirming its guidance from May for same store sales to decline between 2% and 5%. The retailer also outlined a new $15bn share buyback, however this wasn't enough to stop the shares from sliding back, with the uncertainty offered for the second half of the year perhaps the main reason for the share price weakness seen since then. Q3 revenues are expected to come in at $37.87bn, while same-store sales are expected to decline by 3%. Profits are forecast to slow to $3.82c a share.

Event: Preliminary 3Q23 financial results released – NP in line with our forecasts. On Monday, during the WSE trading hours, Action released preliminary 3Q23 financial results. • 3Q23 revenues at PLN 641.0 million (up 11% yoy) are almost in line with the earlier published preliminary figures (PLN 643,0 million). • The gross margin on sales reached 8.5% and was in line with our expectations while materially higher than monthly preliminary readings (7.7%).The Company’s adj net profit reached PLN 8.1 million (down 14% yoy) vs our forecast at PLN 8.3 million.     Expected impact: Neutral; as the information was released yesterday during the market hours. The Company’s preliminary financial results are in line with our forecasts. Final 3Q23 figures will be revealed on November 29.

BacterOMIC approaching partnering window We reiterate our BUY rating for Scope Fluidics with the new FV set at PLN 230.2ps, 40% above the current market price. Following the sale of the PCR|ONE project to Bio-Rad in 2022, Scope Fluidics is focusing on work related to preparations for the launch and sale of the BacterOMIC project to a strategic investor. An Early Access Program should launch in 1Q24E and a partnering window should open in mid2024E. At the same time, the company is working on early-stage projects in internal Venture Studio Scope Discovery. Scope Fluidics should generate revenues from the PCR|ONE and BacterOMIC partnerings in 2024-2027, and should have several new projects in development simultaneously, allowing it to deliver regular exit transactions by the end of the decade.   PCR|ONE – awaiting the first milestone payment In August 2022, Scope Fluidics sold a 100% stake in its PCR|ONE project to Bio-Rad Laboratories for a USD 100m upfront payment and up to USD 70m in milestone payments. We assume that PCR|ONE may start FDA and CE registration in 2H24E. In our baseline scenario, we assume a first milestone payment of USD 10m in late 2024. Our valuation of PCR|ONE is PLN 110m or PLN 40 per share.   BacterOMIC – lead asset, key value driver In our view, the disposal of BacterOMIC is the most important potential price catalyst for Scope Fluidics. BacterOMIC is a diagnostic system for assessing the drug susceptibility of microorganisms. Antimicrobial resistance (AMR) is one of the major causes of morbidity and mortality worldwide, and WHO has declared it one of the top 10 global public health threats facing humanity. The project is nearing the start of the Early Access Program, through which the BacterOMIC system will be further tested with customers and Scope Fluidics will gain the feedback needed for final adjustments before the production version. The company ordered BIT Analytical Instruments to manufacture 10 analyzers, most of which will be delivered in 1Q24. We believe that the partnering window will open in mid-2024E after CE certification for new panels, and we assume the deal will likely be signed in 2025E. Our valuation of BacterOMIC is PLN 425m or PLN 156 per share.   Scope Discovery – a source for new projects One of the pillars of the company's strategy is the establishment of Scope Discovery, an internal organization operating under the Venture Studio model. Scope Discovery will be responsible for recruiting early-stage projects, from which the best will be selected for further development within the group, and sold at a later stage to a strategic partner. In 1H23, Scope Discovery recruited 12 projects. In our view, the first project could be approved for further development in 2Q24E, while the second is likely to be approved in 2025E.   Recommendation and valuation We decrease our FV to PLN 230.2ps from PLN 235.8ps mostly on new FX forecasts and as the new FV implies 40% upside vs. the current price, we maintain our BUY rating.    

Dr Martens PLC H1 24 – 30/11 – hasn't performed well so far year to date. The markets stuck the boot in in January after the company issued a profits warning, with the shares slowly drifting lower over the course of the rest of this year, falling to new record lows earlier this month. The bootmaker blamed supply chain issues in its US operation which it said reduce wholesale revenues by £15m-£25m, and EBITDA by around £20m. For the full year the company says it expects to see EBITDA in the region of between £250m and £260m below estimates of £285m. In June the company reported full year revenues of £1bn, however net profits fell short of the £140m estimate, coming in at £128.9m. This was due to a £3.9m impairment charge, as well as a £10.7m hit in relation to FX effects on euro bank debt    Looking forward their sole concern now is resolving supply chains issues and reversing the decline in profitability. H1 revenues are forecast to come in at £414m, with a stronger performance expected in H2. H1 adjusted EBITDA is expected to come in at £62.8m.

  Frasers Group H1 24 – 07/12 – has seen some decent share price gains in what has been a challenging year for UK retailers. When the company reported its full year numbers for 2023 back in July, the Sports Direct owner reported a 15.8% increase in revenues to £5.56bn despite gross margins slowing modestly to 42.6% from 43.8% the year previously. Sports retail performed particularly well with a 16.7% rise in revenues, however there was also strong growth in "Premium Lifestyle" helped by the opening of new Flannels stores. With the addition of Gieves and Hawkes and Amara Living management expect further strong growth in this area. The company has also made further strategic investments in the likes of Boohoo and ASOS over the past 6 months as well as already owning stakes in the likes of AO World and Currys. Operating costs were one of the main reasons for the slide in gross margins as they rose to £1.93bn, however profits on property sales helped to offset the hit here. Reported profits after tax rose to £501.3m. For full year 2024 Frasers Group said it expects to see adjusted profits before tax to be in the range of between £500m and £550m.                Broadcom Q4 23 – 07/12 – has spent most of this year making new record highs, coming to within touching distance of $1,000 a share back in November, after breaking above the previous record highs at $925 set in October. At its previous set of numbers Broadcom reported Q3 revenues of $8.88bn, while profits rose to $10.54c a share, with chip sales accounting for $6.94bn of that figure. In the aftermath of those results the shares dipped a little, after the chip maker projected Q4 revenue of $9.27bn, which while a record, prompted some profit taking. Nonetheless the dip proved to be short-lived as optimism over AI related sales saw buyers come back in. Not even a delay in completing its $70bn merger with VMWare saw the shine come off the shares, with the deal finally completing last month when Chinese regulators finally approved the deal subject to conditions. Full year revenues are expected to come in at $35.8bn and profits of $42.13 a share. Semiconductor sales are forecast to rise to $27.79bn, up from $25.8bn.          

  Ocado Q4 23 – 16/01 – the Ocado share price saw some big swings last year falling to lows of 342p during the summer before surging to peaks of just over 1,000p in July before finishing the year only modestly higher from where it started 2023. During that summer surge there was speculation that Amazon might look at making a bid for the business after one of its largest shareholders Lingotto Investment Management increased its stake in the business to 5%. This speculation proved short-lived and while it has settled its patent dispute with Autostore, attention has once more shifted towards whether the business will ever turn a profit. The focus in recent months has been on its robotics division as it looks to increase automation at its various fulfilment centres around the country. Its joint venture with Marks and Spencer also appears to be seeing an improvement in revenues after a slow start and could well return an annual profit. In November Ocado agreed a deal to sell its robotic technology to Canadian health care provider McKesson Corp.    

  Morgan Stanley Q4 23 – 16/01 – a late rally in the last quarter of 2023 saw US bank shares finish the year on a high, with Morgan Stanley shares recovering from a two and a half year low in October to finish close to the peaks in July, and up over 9% on the year. As last set of trading numbers the bank reported Q3 revenues of $13.3bn and profits of $1.38c a share, both of which were slightly ahead of forecasts. Drilling down into the numbers they were some notable misses, with wealth management falling short at $6.4bn, even as FICC and equities trading revenue was better than expected. Equities trading saw revenues come in at $2.51bn, and FICC at $1.95bn. For Q4 equity trading is expected to see revenues of $2.25bn and FICC of $1.5bn with overall revenues expected to see a modest rise to $12.85bn. For the full year revenues are expected to increase to $54.06bn, although higher costs are expected to see profits fall to $5.57 a share. This week's numbers will also be the last set of numbers for James Gorman who is leaving as CEO to be replaced by Edward "Ted" Pick.    

Goldman Sachs Q4 23 – 16/01 – up until the last quarter of 2023 it hadn't been a great year for the Goldman Sachs share price, however a strong rally off the October lows managed to see the shares finish the year on a high, closing at a one year high. A disappointing Q2 trading update saw the bank take a $584m impairment tied to its GreenSky operation while there was also a $485m in respect of real estate write-downs. In seeking to further cast off its foray into retail banking, management finally agreed to sell the business to a private equity group. The banks Q3 numbers reflected this with profits falling to $5.47 a share, a sharp fall from last year's $8.25c a share. Q3 revenues also declined slipping to $11.82bn, however this was still ahead of expectations. On the plus side there was an improvement in its equities division, which grew revenues by 8% from last year, as did investment banking. FICC revenues slowed modestly by 6% to $3.38bn. The bank set aside $7m in respect of credit losses, with the focus this week expected to be very much on the outlook for 2024. For Q4 expectations are for revenues of $11bn with a modest decline in FICC revenue to $2.6bn, however equities are expected to have seen an improvement in Q4 to $2.26bn. Profits are expected to come in at $4.64 a share taking total profits for 2023 to $23.72 a share.

esla set to skid after missing on revenues and profits By Michael Hewson (Chief Market Analyst at CMC Markets UK)   Having found itself caught up in the big Nasdaq 100 sell off in 2022 as its share price fell from peaks of $400 to as low as $102 in 2022 the Tesla share price managed to rebound to just shy of $300 in the summer of 2023, before establishing a short-term base just above $190 a share in October last year. Since posting those lows in the wake of its Q3 numbers back in October the Tesla share price has chopped sideways as investors mull the prospect of whether we've seen peak Tesla when it comes to EV growth and profitability.   Wherever you look there are signs of EV fatigue as Tesla's first mover advantage starts to wane, and the costs of owning an electric vehicle start to become apparent to all but the most affluent buyers. Rising insurance costs relative to ICE cars, as well as higher repair costs mean that while running costs might be cheaper on a day-to-day basis, the financial barriers to owning an electric car are still high, while the same concerns about range anxiety remain. While Musk is acutely aware of this given that he has indicated that he wants to look at producing a cheaper model at the company's Austin factory, the market is also aware that the days of big margins on EV sales are very much in the rear-view mirror.   A year ago, when Tesla CEO Elon Musk outlined his sales target for the whole of 2023 the ambition was to push total sales to as many as 2m vehicles, which at the time seemed eminently feasible. Increasing competition along with supply chain disruptions made that task harder and while it should meet that target in the upcoming fiscal year, having sold 1.8m in 2023 the days of big margins appear to be long gone.   We still saw total revenues rise to a record $25.17bn in Q4, a 3% increase year on year, however this was short of forecasts of $25.9bn, with annual revenues coming in at $96.7bn. Profits were also below expectations coming in at 71c a share, pushing the shares sharply lower in afterhours trading, towards the lows we saw back in October.  The problem for Tesla is any significant attempt to boost sales and revenues from here on in will probably need to be achieved at the cost of further falls in operating margin, due to having to compete with BYD in China, one of its biggest markets, as well as increased competition elsewhere.   We've already seen the evidence for this over the past few months which has seen Tesla cut prices sharply across all its markets dragging operating margins down from 16% a year ago to 8.2%, while operating expenses have also gone by 27% to $2.37bn.   On an annual basis operating expenses rose to $8.77bn from $7.2bn while automotive gross margin fell from 28.5% to 18.2%. Total automotive revenues rose 15% in 2023, however the main growth area came from Tesla's energy generation business which saw revenues rise 54% to $6bn, while services grew 37% to $8.32bn. Energy generation will be a key area of revenue growth as electric vehicles become more mainstream with pay per use supercharging points likely to help drive profits going forward, with the company looking to ramp up its charging infrastructure.   Deliveries of the first batch of the Cybertruck also began during Q4 from its Austin facility in Texas, with the initial aim of 125,000 capacity. As we look ahead to the upcoming quarter and the new fiscal year Musk came across as particularly downbeat, declining to offer any specific full year targets, although Tesla did project that automotive volume growth was likely to be lower than 2023, and that the outlook for revenue in energy storage is expected to be better.

This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 4.0     Event: Selected preliminary financial results for 2Q23. On September 12, during the WSE trading hours, Brandt24 released its selected consolidated 1H23 financial results featuring (i) revenues at c. PLN13.1 million vs PLN 10.3 million in 1H22, (ii) EBITDA at c. PLN 4.0 million of vs PLN 2.6 million in 1H22, (ii) EBIT at c. PLN 2.7 million vs PLN 1.4 million in 1.4 million in 1H22. After deducting 1Q23 results we are able to estimate some preliminary 2Q23 figures (see the table below).     2Q23 sales implied at PLN 6.7 million (up 25% yoy and 5% qoq) are a tad (by c. 3% or c. PLN 200,000 in absolute categories) higher than we expected (PLN 6.5 million), while EBITDA at PLN 2.1 million1 (up 52% yoy and 7% qoq) implies an increase of the EBITDA margin by c. 5 pp yoy (and qoq comparable increase) which indicates that in 2Q23 a yoy/ qoq growth of all the Company’s operating costs (excluding amortization) at 16%/5% was lower/ comparable to a yoy/ qoq growth of the Company’s revenues at 25%/ 5%. Brand24 will publish final consolidated 2Q23 and 1H23 results on October 2. We believe the implied preliminary figures are good and constitute some positive surprise, hence our slightly positive perception. On the other hand, the market’s reaction seems to have been overwhelmingly positive (a strong growth of the Company’s share price followed the release during Tuesday’s session), albeit by now this information should have been already discounted.

WSE, Warsaw Stock Exchange SA, Analytical Coverage Support Program 4.0, financial results, preliminary results, 2Q23, Brandt24, revenues, EBITDA, EBIT, sales, operating costs, amortization, market reaction, share price.     Event: Removal of the Company's shares from the monthly portfolio. We remove Brand24’s shares from the long list of our monthly portfolio. Brand24 is the company we prepare reports about commissioned by the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 4.0.   The rationale behind the removal: (i) following the release of selected 2Q23 financial figures we do not see any ST positive catalysts for the Company’s share price, (ii) while oscillating around the current market level the PLN/US$ rate will exert (ceteris paribus) significantly negative impact on the Company’s 2H23E yoy results dynamic.