Stocks in Estonia, Latvia and Lithuania, including AB TEO LT and Tallink Grupp AS, may gain 25 percent this year as the region’s economic outlook is among the best in Europe and prices don’t reflect the companies’ earnings potential, according to Swedbank AB’s equity research.
The Baltic economies will be some of the fastest growing in the 27-member European Union this year, with Lithuania’s gross domestic product seen expanding 3.3 percent, Estonia’s economy growing 2.7 percent, and Latvia’s 2 percent, Marek Randma, the head of Baltic equity research at the Stockholm-based bank, told journalists in Tallinn today.
Baltic companies, which trade at their book value, will probably report gross profit margins of 34 percent this year after divesting less profitable businesses, Randma said, based on the median estimate for 17 listed Baltic companies covered by Swedbank. The ratio of net debt to earnings before interest, tax, depreciation and amortization was 0.5 at the end of last year, while return on equity was at 13 percent, the highest level since 2008.
The Nasdaq OMX Tallinn index declined 24 percent last year, while Lithuanian stocks lost 27 percent and Latvian equity market declined 4 percent, in line with a 23 percent fall for the MSCI Eastern Europe index. The markets are at about half of their peak levels hit in 2007.