Asseco Poland (OTCPK: ASOZF)(OTCPK: ASOZY) remains a compelling investment in the often overlooked Polish markets, presenting a high-quality yet under-the-radar opportunity.
The company has beneficial exposure to the cybersecurity sector, Israel’s defense budget, and its consulting and software services across the Visegrad, Baltic, and Balkan regions.
Additionally, favorable political developments have positively influenced the Polish Zloty, benefiting Asseco, given its significant income in PLN.
Strategic and Operational Highlights
Asseco Poland has diversified operations with significant involvement in the Polish tech consulting and software sectors, primarily generating revenue in PLN.
The company has successfully capitalized on digitalization trends, particularly in finance and healthcare, securing contracts for modernizing banking transaction systems.
A notable portion of this segment’s revenue comes from long-term recurring contracts, providing stability to its revenue streams.
Moreover, Asseco has gained traction in cybersecurity, consulting on NATO systems, and other defense-related projects, which aligns with global security needs and positions the company at the forefront of critical infrastructural technology.
Financial Performance and Market Dynamics
The company’s financial results show strong sector performance, although headline EBITDA has seen some fluctuations due to comparative effects from previous operational gains.
These are primarily attributed to one-off sales of property, plant, and equipment in its subsidiaries. The labor-intensive nature of the business and high wage inflation in Poland have somewhat constrained EBITDA growth.
Asseco International, another segment of the company, caters to Eastern European markets outside Poland.
This segment has seen growth in ERP solutions and financial and public institution engagements, similar to its Polish counterpart. The broader economic shift towards Eastern Europe, away from more traditional economic centers like Germany, has benefited Asseco, with increased transaction velocity boosting payment systems revenues.
Currency and Inflation Considerations
The Polish Zloty has performed exceptionally well in FY 2023, supported by renewed EU funding flows to Poland under a new, more EU-aligned government.
This has bolstered the public finance situation and strengthened the currency, providing a more favorable conversion context for Asseco’s PLN-denominated earnings.
Investment in Formula Systems
Asseco holds about 25% in Formula Systems (FORTY), which in turn has stakes in various businesses, many of which serve significant markets in Israel and are listed on NASDAQ, such as Magic Software (MGIC) and Sapiens International (SPNS).
These holdings expose Asseco to sectors like insuretech and cloud integration, adding a layer of diversity to its investment portfolio.
The ongoing considerations for a strategic sale of Sapiens International could potentially offer upside to Asseco’s valuation, given SPNS’s substantial contribution to Asseco’s market cap.
Valuation and Investment Outlook
Despite the challenges posed by inflation and currency dynamics, Asseco Poland maintains an attractive valuation relative to its tech consulting peers.
With a P/E ratio significantly lower than industry giants like Accenture (ACN), and a robust dividend yield of 4.48%, Asseco presents both growth and income potential.
The company’s strategic positioning and operational efficiencies, coupled with favorable regional economic shifts, make it a worthy candidate for investment consideration, particularly if the stock price retraces to more appealing levels.
Viable and Promising Investment Opportunity
Asseco Poland stands out as a strategically positioned company in the tech consulting and software sectors, benefiting from significant trends in cybersecurity and digitalization.
With its strong operational footprint in emerging Eastern European markets and sound financial practices, Asseco Poland represents a viable investment opportunity, especially for those looking to diversify into high-growth, underappreciated markets.
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Dean is a freelance content writer who contributes to various Digital Media Companies and independent websites all over the world. He has over 20 years of financial industry experience, so it’s safe to say he’s well informed.
