Polish energy stocks have driven the EPOL up 36.5%
The Polish equity-tracking iShares MSCI Poland Capped ETF (EPOL) (SPOL) was up 36.5% YTD as on July 12, 2017, primarily driven by a 44.55% rise recorded by Polish energy companies which constitute 19% of the exchange-traded funds’ assets. Now, given the shakeup that is expected in Poland’s energy sector, local energy companies are sure to move up in investor watch lists.
| ADR ticker | % Weight in EPOL | YTD Return (as of July 12, 2017) | P/E | Dividend Yield% | |
| iShares MSCI Poland Capped ETF (EPOL) | – | – | 36.48% | 18.07 | 2.12% |
| Energy Sector | – | 19.84% | 44.55% | 8.74 | 1.8% |
| Grupa Lotos SA (WSE: LTS) | GPOLY | 2.03% | 58.21% | 7.53 | NA |
| Polski Koncern Naftowy Orlen (WSE: PKN) | PSKZF | 12.91% | 48.88% | 7.06 | 1.77% |
| Polskie Gornictwo Naftowe I (WSE: PGN) | POGWY | 4.47% | 32.06% | 14.81 | 2.72% |
3 Polish energy companies to watch
We looked at three Polish companies that are currently prominent oil & gas players in the country. State-owned oil & gas company, Polskie Górnictwo Naftowe I Gazownictwo aka PGNiG SA (WSE: PGN) (POGWY) has already returned 32.06% to investors so far this year. Polski Koncern Naftowy Orlen’s (WSE: PKN) (PSKZF) Warsaw-listed stock is up 48.88%, and Grupa Lotos SA (LTS) (GPOLY) has gained a whopping 58.21% YTD.
Valuations are attractive
From a valuation perspective, PGNiG SA (WSE: PGN) (POGWY) may seem expensive as compared to its peers if you look at the current P/E ratio (in the table above). However, forward valuations indicate higher earnings potential on offer at a lower price for the company (see YTD chart above). Forward earnings-per-share, as indicated by the green line above is clearly turning upwards, while the forward price multiple is low.
Too long, too late
Investors should not fail to notice the slight upturn (circled in orange) we’re beginning to see towards the end of the Forward P/E ratio line. This signals that positive expectations with the company may soon drive the stock price up, relative to its earnings. We see a similar valuations scenario with the company’s peers, namely, Polski Koncern Naftowy Orlen’s (WSE: PKN) (PSKZF) and Grupa Lotos SA (WSE: LTS) (GPOLY). Forward earnings-per-share reflect an upward trend, while forward price multiple is relatively low; albeit at a turning point, it seems. So, waiting for too long may be too late. Sure enough, with the Polish government looking to shake up things in the energy sector; including diversifying its energy sources and reducing carbon emissions by moving towards cleaner energy; the three stocks discussed above will command increased investor attention.
