WARSAW 2014 What is An independent stock market information company - - PowerPoint PPT Presentation

Marcin Przasnyski

WARSAW 2014

warsaw 2014

What is

 An independent stock market information company  Publishing a portal and a weekly newspaper  Approved by Polish Financial Supervision Authority  Targetted to individual investors

 Monthly reach 120k users, daily reach 20k users  Premium services: advanced analytical tools  Newspaper circulation: 10k print, 50k digital

 Supporting IPOs, SPOs, investor relations  Providing data solutions to corporate clients  Cooperating with TVs, radios, newspapers and online media as a

source of stock market data and opinions

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and predicting bankruptcy

 Evangelizing the use of Altman Z”-score since 2008  Providing calculation of Z”-score and its bond rating

equivalent for all listed companies, based on constantly updated and verified fundamentals

 Regular updates, comments, interpretation of Z”-score, and

in-depth analyzes of financial situation and financial performance of companies listed on stock and bond markets

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Bankruptcies on WSE

 74 public companies filed for bankruptcy since 2008  11 continue to operate under restructuring  35 are still traded on exchange [6 months legacy rule]

Out of total as of 10th of June, 2014

 456 stocks listed on regulated exchange  440 stocks in alternative system  497 bonds of 194 companies on bond exchange(s)

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Bankruptcies by year

11 6 6 24 20 7 5 10 15 20 25 30 2008 2009 2010 2011 2012 2013 2014

Number of filings by year

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Bankruptcies by top sectors

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Z”-score analysis 2008-2014

 Quarterly consolidated financial reports of 69 companies

that filed for bankruptcy

 Updated with restatements and audits  Calculation of Altman Z”-score for every period  Applying a Bond Rating Equivalent based on 2013 matrix

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US Bond Rating Equivalents Based on Z”-Score Model

Z”=3.25+6.56X1+3.26X2+6.72X3+1.05X4

aSample Size in Parantheses. bInterpolated between CCC and CC/D. cBased on 94 Chapter 11 bankruptcy filings, 2010-2013.

Sources: Compustat, Company Filings and S&P.

Rating Median 1996 Z”-Scorea Median 2006 Z”-Scorea Median 2013 Z”-Scorea AAA/AA+ 8.15 (8) 7.51 (14) 8.80 (15) AA/AA- 7.16 (33) 7.78 (20) 8.40 (17) A+ 6.85 (24) 7.76 (26) 8.22 (23) A 6.65 (42) 7.53 (61) 6.94 (48) A- 6.40 (38) 7.10 (65) 6.12 (52) BBB+ 6.25 (38) 6.47 (74) 5.80 (70) BBB 5.85 (59) 6.41 (99) 5.75 (127) BBB- 5.65 (52) 6.36 (76) 5.70 (96) BB+ 5.25 (34) 6.25 (68) 5.65 (71) BB 4.95 (25) 6.17 (114) 5.52 (100) BB- 4.75 (65) 5.65 (173) 5.07 (121) B+ 4.50 (78) 5.05 (164) 4.81 (93) B 4.15 (115) 4.29 (139) 4.03 (100) B- 3.75 (95) 3.68 (62) 3.74 (37) CCC+ 3.20 (23) 2.98 (16) 2.84 (13) CCC 2.50 (10) 2.20 (8) 2.57(3) CCC- 1.75 (6) 1.62 (-)b 1.72 (-)b CC/D 0 (14) 0.84 (120) 0.05 (94)c

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Example – Gant Development

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BBB BBB BBB BB BB+ BB BB+ BB+ BB+ CCC D D

• 1,00

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Altman Z"-score and Bond Rating Equivalent for Gant Development

Filing: 16 October 2013

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Altman Z”-score tracking

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• 3
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1 3 5 7 9

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SAFE ZONE GREY ZONE DISTRESS ZONE

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5.75 4.03

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Z”-score accuracy in Poland

Analysis of ’not safe’ scoring prior to filing

 39 companies 36 months prior  57%  49 companies 24 months prior  71%  58 companies 12 months prior  84% accuracy  68 companies less than one quarter prior to filing

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Z”-score migration between zones

Sample of 69 companies that filed for CH7 or CH11 since 2008. Timespan 12 quarters = three years prior to bankruptcy filing

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 36 33 30 27 24 21 18 15 12 9 6 3 Distress Zone Grey Zone Safe Zone

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Z”-score zones: not safe vs. distress

20% 30% 40% 50% 60% 70% 80% 90% 100%

36 33 30 27 24 21 18 15 12 9 6 3 Percentage of companies in grey or distress zone Percentage of companies in distress zone months prior to bankruptcy filing

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Type I and Type II errors

 Type I – false positive

 11 companies (16%) one year prior  1 company (< 2%) one quarter prior

 Type II – false negative *

 34% one year prior  3% three years prior  2% five years prior

* sample of 391 stock listed companies on main market

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Takeaways

 Altman Z”-score proved a successful tool to differentiate

companies listed in Poland in regard to their financial situation

 Mechanical calculations overreact to distress signals, and

need adjustments for sector and company-specific circumstances

 Democratic tool, available to everyone for free  Perfect in avoiding financially stressed companies  Not sufficient for definite investment decisions  Next step – time for a model for Poland?

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