WSE assumes a loss of importance among Polish companies
In this strategy we focus on our core business, but in a new approach – this is how Marek Dietl, President of the Warsaw Stock Exchange, sums up the new strategy of the company he manages.
The GPW sets goals for the 2023-2027 strategy in the following categories: commerce, data, technology and new business models.
WSE wants to keep the trading share in shares of Polish companies above 80%. This means that it takes into account the erosion of its importance in this activity, since it is currently more than 90 percent.
WSE wants to expand debt securities markets. The plan includes a new market for Treasury bonds only for institutional investors — banks, insurance companies and mutual funds. It also wants to launch a market for mortgage securities, possibly available to retail investors. In the context of retail investors, you want to expand the offer of foreign stocks on GlobalConnect, as well as increase the number of ETFs (including ETC and ETN commodity booms). It wants to focus a lot on scaling derivatives.
– We have plans related to the development of this sector in each of the regions of our capital group, – confirms Isabella Olszewska, member of the Board of Directors of the Warsaw Stock Exchange.
It reveals that electricity and gas futures, agricultural market derivatives and stock options with physical delivery will appear.
Crowdfunding is licensed by the Polish Financial Supervision Authority
In the field of data, WSE clearly wants to expand its activities beyond the currently predominant part of typical session data. It assumes, for example, the distribution of reports of listed companies in XBRL format. It is already used in corporate annual reports from the main trading floor.
– Our added value will be to extend its use to companies from the alternative market. We also want to create a repository for these reports. This will help investors and analysts in their analysis, explains Isabella Olciewska.
It also advertises an unspecified range of informational products for traders, as well as researching emotional attitude towards companies, as those sentiments influence valuations.
The tokenized non-financial asset market will be launched “soon.” There are also plans for the Warsaw Integrated Digital Exchange – a project to tokenize financial assets. According to Marek Dietl, it will be a project related to the venture capital market.
– They do not have regulated access to an individual investor, – assures the head of the Warsaw Stock Exchange.
The crowdfunding platform will also be a new market.
– What distinguishes us from the platforms operating so far is that we want them to operate on the basis of the KNF license. An application in this case has already been submitted – reveals Izabela Olszewska.
WSE also wants to support issuers with ESG reporting and investor relations. The plan aims to provide exporters with software that enhances corporate governance.
– I assure you, it is possible to make money on it, and even very well, – says Adam Modkowski, member of the Warsaw Stock Exchange board responsible for financial affairs, about the whole new strategy.
Not annually, but on average
GPW Group revenues in 2027 are set to exceed PLN 157 million, which is close to the halfway point. Of this additional PLN 157 million, PLN 101 million will be allocated to new initiatives. According to Adam Modkowski, the new initiatives are also those launched under the current strategy, and only PLN 50 million will be allocated to completely new projects.
In the perspective of 2023-2027, GPW plans to achieve PLN 498 million in average annual revenue and PLN 215 million in EBITDA. EBITDA margin is set to increase to 50% in 2027. The previous strategy assumed PLN 470 million in revenue and PLN 250 million in EBITDA in 2022. This financial target was not achieved, and the difference between assumptions and reality was in no way cosmetic.
– It was a mistake to specify in which year the revenue will be. So now we’re talking about averages. Secondly, many projects have been delayed due to the pandemic, says Marek Dietl.
In his opinion, the failure to implement the assumptions was also caused by the delay in implementing the legal changes resulting from the capital market development strategy.
The new strategy assumes that in the perspective of 2023-2027, on average, 35% of the turnover of the GPW Group will be the so-called recurring income, that is, regardless of the value of trading in financial instruments, including for example data selling services and regular fees of the two exporters.
The intention of the WSE Board of Directors is to distribute dividends at the level of 60-80%. Consolidated net profit for a given financial year (current dividend policy is over 60%). Adam Modkowski states that acquisitions may result in smaller shareholder transfers, if the situation permits, however, payments above the 80 percent threshold are also possible. he won.
Through the eye of an expert
There are questions about the role of the Warsaw Stock Exchange in the economy
Head of the brokerage house
Depending on how we relate to the role of the stock exchange in the capital market, this is how we can evaluate the strategy offered for the WSE. If we look at the strategy from the perspective of a listed company with its commitment to maximizing shareholder profits, GPW’s new goals are to increase revenue, more specifically to increase EBITDA margin to the 50% level. Assuming a dividend payout ratio of 50 to 60% of consolidated earnings, investors may be happy. However, we, the capital market community, look at it in terms of the interest of the Polish capital market and the Polish economy. Then questions arise about the function, role and mission of the Warsaw Stock Exchange. The new strategy of the Stock Exchange (WSE) shows an increasing contradiction between the goal of the capital market, which is to support economic development and build the wealth of citizens, and the goal of maximizing profits for shareholders. It is in the interest of the market that the stock exchange strategy focuses not on maximizing profits for shareholders, but on contributing to the development of the capital market and the economy, because this is the primary role of the stock exchange. That is why we have long pleaded for a return to the original mission of the exchange, the one at the source of its creation – to concentrate trading volume, build liquidity, and provide cheap market infrastructure services.
Through the eye of an expert
It is not enough to attract new companies and investors
Managing Director of the Individual Investors Association
The strategy presented is not revolutionary, but appears to be a natural and appropriate development, striving at key assumptions for the picture that emerges from comparing WSE to several foreign exchanges, for example in terms of percentage of recurring revenue or share of revenue from services other than existing core services. Plans to improve and increase WSE’s cost effectiveness, or plans to increase revenue and improve EBITDA margin, as well as some of the other plans presented, can also be evaluated positively. However, it may seem that too little emphasis has been placed in the strategy on the issue of attracting new companies and new investors to the stock exchange, and therefore on a more expansive approach to the core business.
The stock price does not reflect your financial goals
Analyst at Erste Securities Polska
I treat strategy as identifying which direction the WSE is headed over a specific target point. However, the financial goals are very ambitious and certainly not reflected in the current valuation of WSE shares. It should be emphasized that the 2023-2027 strategy is more focused on what is already there. In the previous project, there were a lot of new projects starting from scratch. Some of them are already ready and some are underway, and they will be completed within the period covered by the new strategy. This gives it a better chance of success than the 2018-2022 strategy, when most projects were in the concept stage.