’If you cannot explain it simply, then you do not understand it well enough.’’ Testing ourselves, we share our understanding of each Greek investment case we cover within a few lines.
Conclusions: Our base case scenario is materializing, i.e., Mitsotakis administration renewing its mandate and Greece avoiding a recession. Equities have re-rated and are +36% YTD, so now…

The political risk has gone up following the train tragedy at Tempe on Feb 28. Elections moved forward by one month, Mitsotakis poll lead has come down to 3ppt (from 7-9ppt), and so have the chances of forming a one-party government in the second round.
Basic election math. Recent polls show Mitsotakis lead has narrowed down to 2-3ppt, managing 30-33% of the votes. Forming a government in the first round requires 45%* which drops down to 37-38%* in the second round thanks to bonus seats allocated to the first party.
Base case scenario. The above implies a) Greece will not avoid a second round and b) it will take more than one party to form a government. The base case is for the ruling party teaming up with KINAL, currently ranking third in polls at 9%-10%.

ResearchGreece Greek Politics_Election Date May 21

With this note we provide an awkward update on the political situation in Greece, considering the deadly train crash that took place in Central Greece (Tempe) on Feb 28, killing 57 people on board.
Much like the deadly fires in Attica back in 2018 weighed on 2019 elections, contributing to the overthrowing of Syriza (Tsipras), and bringing New Democracy (Mitsotakis) to power, we believe the forthcoming elections will also be defined by this tragedy.
Conclusion: a) the political risk has heightened significantly; b) the Mitsotakis administration has lost face; c) the coalition scenario has gained ground.

ResearchGreece Greek Politics Q&A_Mar 2023

What’s new? As more and more Investors are asking about the work done so far by loan servicers on Greek NPEs, managed either on behalf of the banks or on behalf of third parties, we are compiling all available performance data in this note. The numbers available are not always straightforward or sequentially comparable. The primary source is Bank of Greece.
Although the bulk of NPEs do not belong to banks anymore, the issue remains important because a) banks have kept senior notes from NPEs securitized on their balance sheets; b) the sovereign and its debt are on the hook for those senior notes because they are guaranteed by the state under the ‘Hercules’ scheme; c) cured NPEs could find their way back to banks’ balance sheets (if regulators/authorities approve) and from there to cash NII.
Market Snapshot & Conclusions. Our main findings are outlined below…

In this note we outline the investment summaries of all Greek names we cover. We start off with a few points on macro and politics and our OI rated names, highlighting any changes compared to our previous assessment in June 2022.

Inflation, inflation, inflation
Real GDP grew by +7.8% yoy in H1 reflecting strong domestic demand (+9.5% yoy) and rebounding tourism (beating record 2019), while the inflation rate ran +12% yoy in the 12 months to September, pushing nominal GDP even higher at +16.9% yoy. This is important because it dilutes the public debt/GDP ratio (from 199% in 2021 to 170% in 2023, IMF), without increasing the financing needs of the sovereign (1.5% GDP annual), as most of the sovereign debt is fixed at low rates (76% owed to official creditors), and it allows the government to spend both during the pandemic (20% of GDP) and the energy crisis (2% of GDP).

The catalysts for 2023 include GDP growth staying in positive territory, winning back investment grade and to avoid a political turmoil from scheduled elections. This is our base case scenario for Greece. However, we cannot escape our conservative disposition. Therefore, we keep a single OI rating among GR banks (NBG) while upgrading Bank of Cyprus to OI. We stick to our OIs on OPAP (dividend yield), PPC (renewables), Motor Oil (renewables) and Jumbo (valuation).
OTE looks more attractive below E16/share and the same goes for Hellenic Exchanges below E3/share, which we consider to be a proxy for the banks, assuming you can afford to invest in a such low market cap name. We urge readers to ignore any sirens singing ‘everything is a buy’ in Greece. We believe the day of reckoning is here and fundamentals play the key role. Our GR universe (x-banks) trades 6x EBITDA and 10x earnings 2023 while on a dividend yield of 5%. These multiples are cheaper than four months ago (6.7x EBITDA and 10.9x earnings) thanks -mainly- to the market de-rating.