’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…

What’s new? FY 2022 EBITDA came in E1.5m/-11% lower compared to our estimate for E14m, on E1.0m less revenue (post trading) and E0.5m higher opex (personnel). Weirdly enough, lower depreciation (E0.9m) and higher income from associates plus tax returns (total E0.6m) made sure pre-tax income came in line with our estimate for E10.5m. Helex announced DPS unchanged yoy at E0.15 or 3.4% yield at current prices.

RG_Hellenic Exchanges_FY 2022 update_Apr 2023

What’s new? We upgrade our rating to OI and raise our PT to E5.9 (from E4.2). 2023 has started off strongly in ADV terms. It reached E92m in Jan while Feb-to-date is at E120m. These are the strongest first two months since 2015. ADV throughout 2022 stood at E74m.
We have updated our estimates. In guestimating ADV we model a) the market cap of Greek equities and b) the velocity rate. And insert them in the following equation:

ADV = (market cap x velocity rate) / No. of trading days

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.

What’s new? Inspired by IMF’s recent blog, that places Greece among the 5 least affected EU countries from a full Russian gas cutoff, we outline our thoughts and arguments below as to why Greece is probably a better investment case than what is implied by the energy crisis, inflation- recession fears, and the ongoing impact from the pandemic.

Conclusion. Our base case scenario is that a) Greece can avoid a recession in 2023-2024 even if the war in Ukraine continues beyond 2022 and Russia cuts off the gas supply to Europe entirely; b) Greek banks should be net gainers from higher interest rates; c) ECB will continue to support the sovereign, lifting its chances to earn investment grade rating and d) New Democracy will win the elections whenever these take place (early or on time).

OI picks plus DOI picks at lower prices. In this context, we recommend investors own NBG, Alpha, OPAP, PPC, Jumbo and Motor Oil (our OI rated names) and consider OTE and Hellenic Exchanges below E16.0/share and E3.0/share respectively. We also reiterate our suggestions, flagged in our mid-year strategy update on June 2022 (‘War on Equities’), to switch from TEN (post M&A) and MYT to MOH and PPC; from ELPE to MOH; and from SAR and Fourlis to Jumbo.