Focus on Bulgaria’s Stock Market, with ELANA Trading CEO, Radoslava Maslarska


With one of the country’s largest IPOs in the past decade launching in two weeks, we wanted to take a closer look at Bulgaria and its SOFIX stock market index. While it is a small country in Eastern Europe with a population of just over 7 million, Bulgaria is nonetheless relatively wealthy compared to most of the frontier markets we look at.

Information in English is relatively hard to come by, but luckily we made contact with ELANA Trading, one of the first and largest brokerage firms operating in the Bulgarian stock market. Their CEO, Radoslava Maslarska, was kind enough to answer some of our questions. She has been with ELANA since 2001, and has been CEO since 2007. As a former head of their Global Markets department and a current board member of their parent company, ELANA Financial Holdings, she is uniquely situated with a keen eye on the local Bulgarian stock market.

We wanted to thank Radoslava for her extremely detailed responses, and also Isabella, ELANA’s Head of Corporate Communications, for helping this all come together. We actually had to edit down our interview to keep it within our usual length, but those interested to learn more can always contact ELANA for more information.

2014-RadoslavaMaslarska-15[Investment Frontier]: Since peaking in 2014, Bulgarian stocks have had a tough time with the SOFIX Index down over 10% in 2015 and over 15% over the past year. What has been the main driver for this downturn?

[Radoslava]: There are a couple of reasons explaining the negative developments onwards. Firstly, in June 2014 we witnessed the collapse of the fourth largest bank in Bulgaria coupled with political uncertainty. Luckily, this bank run did not affect the entire banking sector and it remained an isolated case. However, this bank crisis period made local investors uneasy and reluctant to riskier investments. Second, Ukraine/Russia and the consequences of the sanctions imposed have affected some of the blue chips on the market which made investors gloomy but, however, already opens up an excellent buying opportunity. Then came the Greek tragedy in 2015 and having in mind 40% of the local banks are Greek-owned, this brought reluctance again among foreign investors although fears were ungrounded due to the stricter local regulation and the series of proves of a stable banking sector. Thirdly, we had the overall global market volatility, including the latest issues in China, which again have made investors even more cautious and safety seekers.

[IF]: How do you see the outlook for Bulgarian stocks over the next year? Any catalysts to look for that could turn this around?

[Radoslava]: Valuation-wise Bulgarian stocks are among the cheapest frontier markets – the P/E of the local market is 8. Bulgarian companies have rebuilt fundamentals and continue their good performance both revenue and profitability wise. Ukraine/Russia crisis had negative impact on some industries and the prices have already reflected that, so now some of the favourites of investors are cheap.

[Some stocks and sectors they like:]

Some fresh listings on the Bulgarian Stock Exchange in the last years managed to make their way consistently in the minds of investors and win them over. Courier company Speedy doubled its price for less than 2 years and this was completely in line with growth in fundamentals. Its average return on equity for the last 5 years is 54%.

Over the next year and further, dividend stocks will remain the favourites for investors. Companies with sustainable growth and regular dividends as well as newcomers who will offer that – these are the prospective picks. To mention Speedy again as an example, its dividend yield for 4 years is 27%.

Agriculture-related investments have excelled during the last few years and are expected to continue their upward trend as the sector continues its steady development. Advance Terrafund REIT offered 5-year dividend yield of 12% and ELANA AgroCredit distributed its first dividend of 5.9%.

[Potential catalysts:]

Industries that suffered from the crisis in Ukraine and Russia, such as pharmaceuticals and tourism, are also opportunities ahead. These stocks are oversold and the first signs of recovery should be considered buy signals for investors.

Other potential catalyst is the long-awaited privatization of the state assets in the energy sector. It is stated in the governmental plans, yet we do not have any signs of specific planning so far.

And last but not least, a catalyst for growth could be the large amount of savings in the country – approx. EUR 21 bln. as of July 2015, which represents 48% of the 2015 GDP forecast. Bank deposits rates are going down every month and households tend to look around for higher return. Once they see the stock indices upwards, the money flow will follow.

[IF]: Bulgaria’s currency, the Lev, has been pegged to the Euro but the plan has been to adopt the Euro since joining the EU in 2007. Given the turmoil in the Euro, is Bulgaria still on track to join the currency union?

[Radoslava]: Bulgaria is on track to join the Eurozone and the government is fully committed to do it as soon as it is possible. Prior to that Bulgaria must finish its banking system asset quality review scheduled for 2016 and join the banking union. Once the latter two happen, it is more of a political decision to allow Bulgaria in the ERM II and then in the Eurozone. For Bulgaria, as the finance minister recently pointed out, the pros of joining the Eurozone are much more than the cons, so it remains among the top priorities.

[IF]: Let’s talk about the Sirma Group IPO, Bulgaria’s largest IPO in 8 years. We like seeing technology stocks in frontier markets, but is this one worth investing in?

[Radoslava]: Bulgarian IT sector is one of the fastest growing in Bulgaria with 1.74% contribution to GDP. Sirma is the biggest local ICT group with over 20 years of innovative projects that compete on the developed markets. The IPO is exciting also because Sirma will be the first representative of thе most successful industry.   The sector increased revenues 5 times in the last 10 years to approx. EUR 520 mln., with 60% of the sales abroad, with core markets USA, Canada and Western Europe. No surprise that one of the Top 10 IT deals in Europe in 2014 was for Bulgarian IT company Telerik – US Progress Software purchased it for USD 262.5 m.

Sirma is an excellent opportunity to invest in Bulgaria’s tech savvy talent. The group is very well-diversified – from system integration to electronic government and cloud infrastructures, to semantic technologies, CAD/CAM systems for packaging production, and others. IT projects have been implemented in Europe, US, Canada, Asia and Africa. The solid growth record of over 22% on annual basis should definitely be noted as well as over 35% EBITDA margin. The IPO will start mid-September 2015 and a total of 18 491 858 shares (16 mln. new) will be offered to investors in a price range of BGN 1.20 – BGN 1.65 (EUR 0.62 – 0.84) in the course of 30 days.

[IF]: Finally, what is one thing that makes you optimistic about Bulgaria’s future? And one thing that makes you pessimistic? 

[Radoslava]: I am generally optimistic about the prospects of Bulgaria. We have the EU compliancy in every dimension, the stability of the currency board and low debt – reserves are 150% of ST external debt and cover 6 months of imports as of June 2014. Investors can enjoy attractive business environment with flat 10% corporate and income tax as well as 0% tax on capital gains. Bulgaria went up to No 38 (from 58) in 2014 World Bank ranking for ease of doing business. Talented and cheap workforce is also among the advantages which in the last years made the country attractive outsourcing destination.

Export is the core driver of the economy and we can see the improvement in 2015 with 13% growth in spring compared to last year. EU is the main export market so the more recovery in Europe moves further, our economy will move accordingly.

Pessimism, as always, would come from the politicians. Bulgaria is in the beginning of large-scale reforms in major sectors such as judiciary, energy, etc. If we can see consistency in the political will to implement reforms, we might go back to the fast pace growth before 2008.

[IF]: Thank you for your time!


If you or your company are local experts in a frontier market economy and would be available for a quick interview with us, please send us an e-mail to and we will see what we can set up.

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