UBM: we are still new kids on the block, our goal is to strengthen our presence on the stock exchange
UBM would strengthen its position on the stock exchange; the listed agricultural company aims to sell 1.8 million shares to give a wider audience the opportunity to participate in the long-term success of Hungarian agriculture, Balázs Janositz, Deputy CEO of UBM, told Portfolio, who also said that they see a realistic chance of being included in the BUX index, with the aim of achieving a daily turnover of several million forints.
UBM’s revenues are expected to grow by 24 per cent between 2020 and 2023 (CAGR), with an average growth rate of 9-15 per cent per year between 2023 and 2025. So there is growth, but what about dividends? Is UBM a growth or dividend story?
UBM’s dividend policy is currently being developed. Although the company has paid a substantial dividend in previous years, UBM is more of a growth story. Our three-year strategy outlined to investors this year is based on continued geographic expansion, further broadening the Group’s operating portfolio and continuous innovation. To maintain the growth rate mentioned in the question and to raise funds, we also want to take advantage of the opportunities offered by the national capital market, for which it is essential to increase the liquidity of our shares.
UBM aims to add thousands of private investors to the group’s shareholder base. How many small investors does the company currently have?
The proportion of free float, i.e. shareholders with less than 5 per cent ownership, is 13.38 per cent according to the Budapest Stock Exchange, however, this also includes founding shareholders. Our main objective is to increase the liquidity of the stock, and to achieve this we need a quantum leap in the number of investors: realistically, we expect 2-5 thousand private investors in the next 2-3 years. Our aim is to give a much wider group of people the opportunity than hitherto to share in the long-term success of Hungarian agriculture by selling 1.8 million shares.
Beyond the sale of shares, how and by what means do you plan to increase the investor base?
In June this year, we completed a split of UBM’s ordinary shares at a ratio of 1:20, which we decided to do in order to increase the turnover of ordinary shares, thus facilitating investment in the shares of the only agribusiness company on BSE. In addition, as a lesser-known player on the trading floor, we have put a lot of emphasis on raising awareness of UBM and investor communication over the past year. Not only did we visit institutional investors, but we also wanted to introduce small investors to UBM’s goals, strategy, story and the benefits of investing in agriculture in general. On investors.ubm.hu we discuss a lot about these, as well as our R&D results and company culture, for those interested in our shares.
How are potential institutional investors addressed? What are the plans there?
We keep in touch with institutional investors in person, organising institutional events and investor briefings for them. Furthermore, we would support our investors with independent assessment of UBM Group..
The turnover in UBM shares has been negligible in the two years since the company was listed. How much stock market turnover would you be satisfied with in 1-2 years?
The goal is to have as high a turnover as possible – in essence, the only criteria for inclusion in the BUX index that our stock does not yet meet are the turnover criteria, but we see a realistic chance of inclusion in the BUX index in the period ahead. Our objective is clearly to achieve a turnover of several million forints per day.
The company’s shares are currently listed in the Standard category of BSE. Is the aim to move papers into the Premium category? If so, over what timescale is this realistic?
We are still new kids on the block, so the short-term goal for UBM is to strengthen our presence on the stock exchange, increase our liquidity and become a stable player on BSE. Of course, we will not stop after achieving these goals, but we will be able to talk about the premium category in a year or two.
In addition to Hiventures, six private individuals are major shareholders in UBM, with the public holding only 13.4 percent. Are you planning to increase the free float? If so, when and how can this take place?
Yes, we explicitly want to increase the free float in order to increase liquidity, and it was in this spirit that the founding shareholders decided last year to increase the free float by 9%.
What are the company’s plans for the capital markets? Are you planning to issue shares or bonds in the next period?
In addition to the recently published annual report, the group has published its first ESG report and we are also working on our green financing framework. UBM thinks responsibly, as an agribusiness player we can do a lot to achieve the sustainability goals. Following this line of thinking, if there are programmes to support the issuance of green bonds, we will explore the possibility of participating, in order to achieve our sustainable growth goals.
Other means can be used to boost investor interest and stock market turnover. Are there plans for UBM to participate in the BSE’s market development programme, under which the shares of small and mid-caps are analysed and quoted by investment service providers?
Yes, discussions are underway with various think tanks.
What major global and local sector-specific risks do you see for UBM and its shares in the coming years?
Our current operation is stable and we are performing well on most of the key financial lines. A major challenge is to find and train the right people to achieve the growth targets, even to attract them home from abroad. There is also an increasing number of other players in the sector, such as artificial meat producers or insect protein producers – however, we see more opportunity in the latter, for example, which is why UBM has entered into a strategic partnership with the largest Hungarian insect protein investment company. Social relations are also becoming more and more important, this cannot be underestimated, and I think UBM can even serve as a role model for other companies.
In your opinion, at the current exchange rate, what is the market pricing at UBM?
The EV/EBITDA in the peer group was 9.5 a year ago, compared to 14.5 now. Meanwhile, UBM’s EV/EBITDA ratio is around 6. We can state that investors in global stock markets have already discovered the agri-business, and this is the story we offer to our potential investors. In my opinion, this potential is not yet priced by the market.
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