Recently, a new risk factor has surfaced, namely, a rising concern of the PFSA about the condition of the banking sector faced with unfavorable court sentences and forced to create tens of millions of provisions which, according to press, pushed the Polish regulator into works on a draft law compelling banks to offer agreements and thus discouraging borrowers from litigations. Whether the law will be proceeded is not decided yet, however, if this happens, a potential risk factor for Votum’s revenues may emerge in the upcoming years. Besides, the current circumstances (approaching parliamentary elections and lack of the CJEU final judgment in the case C-520/21 (likely to be issued this autumn)) don’t welcome new legislative initiatives.
We believe that the Company’s shares continue to be undervalued, which makes us keep our LT fundamental Buy recommendation intact. Votum’s recent financial results imply that the main driver of the Group’s profitability improvement is related to the rapid increase of court sentences in the segment of pursuing abusive clauses. We expect that the Group will be able to continuously improve financial results and margins in the upcoming quarters thanks to success fee revenues, and then to deliver much higher EBIT which can be sustained in the medium term on the back of the already built clients base. We also recognize the Company’s high dividend potential in the medium term expecting an inflow of judgments from the courts of appeals. We uphold our ST relative Overweight recommendation for the Company’s shares given (i) expected further improvement of the Group’s revenues, margins and profits in the next quarters, (ii) expected very strong 4Q22 results dynamics, (iii) rising willingness of FX borrowers to start litigations against banks after the CJUE advocate general’s favorable opinion.
