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Baltic Investment

2012 Mar 1


Baltic Stock Exchange


Baltic stock exchange now belongs to the world gigantic stock exchange NASDAQ OMX, and now is called NASDAQ OMX Baltic. Historically Lithuania, Latvia and Estonia had their own national exchanges but those were acquired by OMX and that one was acquired by NASDAQ. 


Why am I writing about these tiny markets? Well, there are few reasons. One of those reasons is that Baltic markets are my home markets and I know these very well. The second reason is that even small markets have some real ‘pearl stocks’ that might be interesting for any small investor despite low the liquidity


Baltic Stock Market

As standard definition of Baltic markets should include three different markets: Lithuanian market, Latvian market and Estonian market, we will see those markets as one in here. I won’t describe economical environment because it would be too much of content in here, but I can assure you that economical position of Estonia is perfect, while Lithuanian and Latvian economies are in little worse shape, but still are doing well enough now according to the all European economical environment. 


For you, my friends, I picked those stocks that look for me as the most attractive investments. Some of those have higher liquidity some lower, but I do believe that all of them can be acquired and sold quite smoothly over longer period, and investing in stocks never was short-term thing…



Let’s look at those top stock picks:


1. Olainfarm – generic pharmaceutical company

Olainfarm is a small Latvian pharmaceutical company that manufactures various medicines and sells it mostly in Russia and other CIS countries. Sales in Latvian market constitute only 7 percent of total sales while 37% go to Russia and 26% go to Ukraine.


Active company’s management led to amazing financial results during last year and earnings are expected to increase further. Relative valuation of the company looks very attractive keeping in mind bright future prospects of the company.


Olainfarm financial data:

Stock price, EUR 4.30
P/E 6.2
EV/S 1.3


    2009 2010 2011
Sales mEUR 31.9 35.6 52.2
EBITDA mEUR 8.0 9.1 14.6
Net income mEUR 3.4 5.0 9.7
EBITDA margin   25% 25% 28%
Net margin   11% 14% 19%


2. Grindex – half generic / half patent pharmaceutical company


Grindex is another small pharmaceutical company based in Latvia. The structure of sales is very similar to Olainfarm (which is mentioned above) and sales in Russia accounted for 55 percent of total sales. The main weakness of the company is that it is highly dependable on the main product (Mildronate). 


The financial results of the last year wasn’t very impressive, and net income decreased during last quarter but good gross income shows the strong position of the company. Grindex has invested a lot during last couple of years in new manufacturing units and is consistently registering new medicines in new markets and has a lot of potential to increase profit


Grindex financial data:

Stock price, EUR 7.0
P/E 7.1
EV/S 0.9


    2009 2010 2011
Sales mEUR 76.2 92.7 99.0
EBITDA mEUR 8.1 16.6 15.2
Net income mEUR 5.1 10.1 9.5
EBITDA margin
11% 18% 15%
Net margin   7% 11% 10%



3. Silvano Fashion Group – lingerie manufacturing company

Silvano Fashion Group is based and listed in Estonia but it is not purely an Estonian business model. Silvano Fashion Group owns two main brands: Milavitsa and Lauma Lingerie. The first one is manufactured in Belorussia and the manufacturing of another is based in Latvia. Russian market accounts for 62 percent of total sales and Belorussia for 22 percent of sales. 


During last quarters company was affected by currency’s devaluation in Belorussia, however, the long term effect will be positive as company mostly exports products from Belorussia to Russia, so weaker currency in the production country is decreasing manufacturing costs. Stocks of the company are extremely cheap on price-to-earnings basis. 


Silvano Fashion financial data:

Stock price, EUR 3.3
P/E 3.1
EV/S 1.0


    2009 2010 2011
Sales mEUR 74.0 93.3 107.8
EBITDA mEUR 6.3 19.4 29.7
Net income mEUR 1.4 15.1 42.3
EBITDA margin   8% 21% 28%
Net margin   2% 16% 39%



The main criteria for selection of the stocks were attractive relative valuation (low valuation multiples) and good prospects for the future results. All the mentioned stocks are exporters and do not depend very strongly on local markets. However, all of those have high exposure to Russia which is booming on high oil prices. 


As you can see there were no stocks from Lithuania but it does not mean that there are no interesting stocks in Lithuania. But maybe another time about those…




In this article I provided the facts about some interesting stocks; but in neither way these facts or my opinion can be treated as an investment recommendation. You should make your own analysis of the stock and decide whether it is worth investing or not. 

An author of the article might have been invested in stocks/assets that are mentioned on the article directly or indirectly. 



By Rokas Lukosius


Read next article: How to Beat the Stock Market


Other articles you may like:

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