Riga-based financial research company CE Services has conducted an extensive study to determine best stock exchange quoted company in Baltic overall and in each country: Lithuania, Latvia, and Estonia. The project is organized in order to determine excellent companies in the Baltic stock universe and to motivate other exchange-traded companies to improve their corporate transparency, financial results and other aspects in order to become attractive investment targets.

To examine and assess excellence of the Baltic companies it was decided to choose the OMX Baltic Main equity list (as of the 1 April 2009) as the universe of the companies evaluated. This universe however was slightly adjusted as companies whose business model experienced significant changes or which started recently to be traded were excluded from the list (e.g. Merko Ehitus, Jarvevana, Luterma). All adjustments lead to the final list which consisted of 35 companies.

Key moment of the analysis was the assessment of the historical track record of each company based on three set of criteria: financials, business model and corporate governance. Upon receiving feedback on Baltic Corporate Excellence Award 2008 from participating parties and reading audience this year it was decided to decrease the weight of financials from 80% to 60%, while weights of corporate governance and business model were increased to 15% (from 10%) and 25% (from 10%) respectively. Each of the three top-criteria consisted of the certain number of ratios and tests applied resulting into more than 20 sub-criteria applied.


Source: SIA CE Services

The top 10 best excellent companies in the Baltic are dominated by the Estonian enterprises (60%), which in a way correspond to the situation in previous year, when 5 out of 10 best companies were domiciled in Estonia. The overall top ranking has experienced several significant changes compared to last year partly due to the weightings change and partly due to the adverse economic conditions, which dramatically influenced financial health of the corporations. However, the winners in each Baltic country remained the same: Eesti Telecom – in Estonia, Grindex – in Latvia, TEO LT – in Lithuania. Similar to the previous year, in 2009 the top winner is the Estonian fixed-line and mobile services provider Eesti Telekom mainly thanks to strong financial health, support by its loyal shareholder TeliaSonera, high corporate transparency and winning leader positions in Estonian telecommunication market. It is worth noticing that Latvian pharmaceuticals enterprise Grindex made a big jump in overall ranking from 6th position previous year to 2nd position this year, which is attributed to the improved fundamentals as well as active geographical expansion and entrepreneurial approach to the business. Eesti Telekom’s Lithuanian peer TEO LT was rated as the best Lithuanian company and third best in the overall ranking, though last year it had 2nd position in the total rating, which can be explained by Grindex’s faster results improvement. High positions of TEO LT are achieved owing to solid financial health, leading positions in fixed-lines in Lithuania and active conquering digital TV market.

It was interesting to notice that the stock prices of the last year winners outperformed the regional benchmarks during the year 2008.

Performance in 2008


OMX Baltic Benchmark GI


OMX Tallinn


OMX Riga


OMX Vilnius


Winners in 2008

Eesti Telekom






Source: http://www.nasdaqomxbaltic.com/

Research results made it possible to make also certain conclusions about the characteristic traits of the companies quoted on the Baltic stock exchanges. Neglecting the global economic downturn that has absorbed the turnover and profits of the companies, the weak sides of the Baltic companies could be stated as follows:

  • Corporate Governance – Board of Directors is heavily involved in the  daily business having high meetings rhythm (more than 8 meetings a year) and having large stakes in the companies, thus, demonstrating over-commitment and influencing the management decisions of the company;
  • Informative Transparence – Although financial and non-financial information disclosure has been improved, still it demands a further improvement (notes to financial statements, corporate governance, segment information);
  • Financials – The ability to generate enough cash flow to service the debt is yet relatively low  (e.g. average Net Debt / Operating cash flow exceeded the level of 3.5 as of the year end) that draws a certain risk in times of “liquidity crunch”;
  • Financials – Earnings quality of the Baltic companies is not as good as one could expect, as high profit is often achieved by selling fixed assets / subsidiary or by non-cash items, such as revaluation of property/assets.

Weak sides of the Baltic companies business are being offset by the positive traits:

  • Corporate Governance – Positions of CEO and Chairman of the Boards are separated among two persons that is in line with the best practices of Corporate Governance;
  • Informative Transparency – Companies have begun to disclose their compliance with the Governance Code of the listed companies;
  • Business Model – Many companies are able to compete on international scale as they have certain economic moat (e.g. SIlvano Fashion, Pieno Žvaigždes);
  • Financials – On average Baltic companies are having high return on invested capital and shareholder’s equity. From the perspective of capital structure, the companies are well positioned as the proportion of equity capital is at a relatively high level (above 40% as of the year end).