Exploring opportunities in Emerging Europe

We participated in the largest Emerging and Frontier Europe conference in Prague, which continues to attract a growing number of investors discovering the opportunities in a region where many stocks trade at record low valuations.

A productive and rewarding days filled with positive meetings - here are some key insights we’re taking with us into the new year.

Poland’s resilient growth agenda

Meeting with Polish Finance Minister Andrzej Domanski helped us understand that the Polish economy continues to develop in a positive direction and will stand out in Europe and globally during 2025 with an expected growth rate of 3.8%. It is clear that the minister understands markets very well and has the priorities right, including strengthening defense and security, driving energy transition with significant private investments supported by EU funds.

Technological transformation is also crucial for productivity growth, with a need for increased public sector spending for large investments. Infrastructure development, particularly in rail, and encouraging higher capital market participation are also key goals. Moreover, Poland's EU Council Presidency in 2025 aims for bold actions, focusing on less regulation and more emphasis on boosting growth.

Turkey: Continuing rebalancing the economy

For Turkey 2025 will be a year of continued rebalancing in the economy. We are likely to see annual inflation fall by more than 10% by the end of the year from the mid-40s in 2024, with monetary policy, wage policy, and fiscal policy aligning towards the goal of disinflation. Turkish corporates remain resilient with strong balance sheets and are prepared to brace for a cooling in consumption. In fact, we observed a chorus of support for the policy measures taken by the government and an appreciation for the mid-term and long-term benefits of macroeconomic normalisation. Still, only a select group of corporates were able to produce real earnings growth in Q3'24, and we continue to invest in those corporates that will be able to grow despite the macro challenges, while also taking advantage of the depressed valuations provided by the challenges.

CCC Group: a remarkable comeback

After several dozen meetings, what stood out was the meeting with the CEO and main owner of CCC Group, Dariusz Milek, and visiting CCC's largest and very busy store in Prague, "Half Price." The CCC stock has made a remarkable comeback in 2024, with a total return to us and other shareholders of 235% on the back of their successful revamp of the business model, focused on efficiency, increasing gross margin by eliminating the middlemen, and taking further steps towards growth.

Emerging Europe: A region of resilience and opportunity 

Increasing uncertainty in the global outlook can affect other small open economies in Eastern Europe. However, these countries and companies usually demonstrate great resilience and flexibility seeing attractive growth and free cash flow (FCF) generation in 2025 while being valued at record low multiples and at a discount to both developed and emerging markets. Therefore there is significant potential upside for Easter Europe equities in terms of reduction in the risk premiums associated with geopolitical risks.