According to the sixth edition, the local capital market (regulated segment and multilateral trading system – SMT) reached a market capitalization of 211 billion lei in 2022, down 15% compared to the previous year amid geopolitical and economic uncertainty. of the report “Valuation ratios of companies registered on the Bucharest Stock Exchange and the local market of mergers and acquisitions” conducted by PwC Romania. The downward trend in market capitalization continued during the first three months of 2023 compared to the same period of the previous year, but reversed after the successful completion of the listing of energy company Hidroelectrica in July 2023.

“Since the outbreak of the pandemic in 2020, the economic context in Romania has been unstable, contributing to uncertainty among investors and in various sectors. Although there were no new share listings on the main segment of the Bucharest Stock Exchange in 2022, SMT continued to be attractive to investors and small/medium-sized companies, registering a total of 11 new share listings. 2023 is distinguished by the success of Hidroelectrica’s listing on the main segment of the stock exchange, a fact that brings BVB closer to Morgan Stanley Capital International’s emerging market qualification, implicitly becoming a much more attractive stock exchange for foreign investors,” said Sorin Petre, partner of PwC in Romania.

The market capitalization of BVB’s main segment for the year ended March 31, 2023 was 204 billion lei, registering a decrease of 5% compared to the same period in 2022, while the average monthly trading value for the same period almost halved.

“Although in the first three months of 2023, the stock market capitalization had a downward trend compared to the same period of the previous year, in July 2023, the listing of the largest green energy producer, Hidroelectrica, was successfully completed, which brought an important plus. liquidity and confidence in the local capital market. In this way, BVB has entered attractive international stock exchanges, especially since Hidroelectrica’s listing is the largest IPO conducted in Europe and the third in the world between January and July 2023. It is also the largest share listing in BVB’s history, surpassing the BVB share listing. Electrica in 2014 (the value raised from Hidroelectrica’s listing was 6 times higher than from Electrica’s IPO). Analyzing the latest data, we see an increase in capitalization on the regulated segment of the BSE to 270 billion lei from 197 billion lei in 2022,” said Raluca-Alexandra Capacina-Stoica, senior manager at PwC Romania.

As for the value of trades, on the regulated market it increased by 16% in 2022 compared to the previous year to 12.8 billion lei. Over the past 15 years, the lowest value of trades was recorded in 2009 (5.1 billion lei), when investor confidence was severely affected by the large corrections of 2008, while the highest level was recorded in 2007 (13.8 billion lei), before the financial report crisis.

Other findings of the study

• The top five best-selling stocks on the regulated market in 2022 included oil and gas and financial services stocks, namely OMV Petrom, Fondul Proprietatea, Banca Transilvania, BRD Group Société Générale and Romgaz.
• The capital market’s incremental return above the risk-free rate, which rewards investors who took on more risk by choosing capital market investments, was 1.2% for the BET Index during the period from December 31, 2012 to March 31, 2023 and 9.8% in the case of the index BET-TR Index.
• BSE’s market capitalization to GDP was 14.9% as of 31 December 2022, which is below the level seen in other stock markets in the region such as Greece, Croatia, Czech Republic and Bulgaria.
• With a significantly larger number of listed companies and an average market capitalization of €115 million, BSE-listed companies are smaller compared to those listed on other regional exchanges, with the exception of Slovakia and Cyprus.
• Green and social finance have recently gained more traction in the local capital market, becoming increasingly attractive to local and international investors, as well as companies and local governments.
• In 2022, the EBITDA multiplier (average) of companies listed on the BVB main market was 6.0x, and on the SMT Premium category it was 8.2x. The EBITDA ratio (average) based on the analysis of successful deals in the local market in 2022 was 9.6x. This gap can be explained by the fact that listed companies on the BSE tend to be stable companies, while private deals often involve companies with lower profits but higher growth prospects.

About research

The study presents trends in valuation multiples over the period 2007-2022, based on an analysis of 82 companies listed on the main segment of the Bucharest Stock Exchange (BVB), focused on the following sectors: consumer goods, oil and gas, financial services, healthcare, industry, materials and electricity. For the mergers and acquisitions (M&A) market analysis, the report is based on 510 completed deals for which relevant financial information was available. Learn more here.

Article supported by PwC Romania