’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? 1.5 months after the release of flash note FY 2022 results showing record profits and a tremendous beat against consensus estimates, Mytilineos published its full IFRS 2022 report. We are halfway through the 444-page document. The most notable points are:
Point #1, CEO E141m pay. On p. 400 (English version), we see admin expenses went >3x higher vs 2021 at E270m, o/w E196m being ‘other employee benefits.’ The note explains that E141m relate to the contract implementation between the company and the CEO, as approved by the AGM in 2018.
• In other words, the CEO was paid E141m for…

What’s new? MYT published flash note results for the full year (2022), reporting record profits and a tremendous beat against our and consensus estimates. We will not be changing our forecasts and recommendation until the audited results, full report and notes are published on March 3. In the meantime, we outline our thoughts on the flash note results below.
• At first glance, the +E464m yoy increase in EBITDA seems to include c. E250m of war-crisis driven earnings. Namely, gas trading (+E108m), electricity supply (+E80m) and Aluminium (+E60m).
• The presentation reads ‘record financial performance despite global challenges.’ We argue the correct wording is ‘because of’ global challengers, not ‘despite’…

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? We have updated our model on MYT. Compared to our previous assessment (April 5 – ‘Too Many Modeling Assumptions’ – attached), AL prices have come down from $3,500/tn to $2,165/tn; USD has strengthened significantly; energy economics remain dislocated; GR government has imposed price caps and levies/taxes on energy producers; geopolitics have not improved (on the contrary); inflation rate keeps rising; monetary tightening has strengthened raising the cost of money; nevertheless, MYT business plan is progressing firmly with management being more bullish than ever.
Conclusion: MYT is communicating the best of all worlds: a) YTD 2022 AL prices allowed for 2023-2024 sales to be hedged at higher prices; sky-high billet premiums ($1,500/tn) are fueling 2022 EBITDA; b) AL electricity costs will be kept low even after the PPC agreement ends in 2023; c) the new gas power plant and solar capacity will push power EBITDA higher; d) regulatory intervention on the electricity market is manageable if not negligible; e) build-operate-transfer (BOT) solar MWs will generate strong EBITDA by 2025; f) previous net income guidance for E260m in 2022 will be substantially exceeded.