As expected, the ECB changed the TLTRO III terms to eliminate the carry trade and wipe out the excess liquidity from the market, in its fight against inflation. It also lowered the interest rate paid on minimum reserves.
With Greek Banks holding E51bn of ECB funding, we estimate the impact to be a negative -15%/-21%/-214bps on their 2023 NII/PPP/RoTE – but is 100% muted by the equivalent positive impact from the interest to be earned on their E59bn deposits with the ECB. The only possible exception is Alpha Bank, which could be net negative.
The above is isolated to 2023 as most of their TLTRO matures in December. Still, it would not be a surprise to see early repayments, especially since the ECB added three additional such dates to the calendar. 10 TLTRO III auctions took place between Sep 2019 to Dec 2021, each with a maturity of three years. Greek Banks raised most of their TLTRO on ECB’s Dec 2020 auction.
What did the ECB decide? Recalibration of TLTRO terms and lower remuneration on minimum reserves…

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.

What’s new? Terna Energy reported H1 results with the most notable points being a) zero capacity additions vs. last year; b) load factor in Greece at 32.1% (from 28.9% last year); and c) FY 2022-2029 EBITDA guidance reiterated. Revenues/EBITDA/net income came in at E277m/E87m/E34m or +98%/+26%/+16% yoy. TEN reiterated May Investor Day targets for 3.3GW installed in 2025 (from 895MW now) and >6.4GW in 2029 with EBITDA >E700m (from E160m-E170m in 2022).
Conclusion: We reiterate our DOI and PT at E13.5 (from E13.8); we raise our 2022 EBITDA by +8% and above guidance to account for the contribution witnessed by the construction and trading segments in H1 (E15m). TEN’s current valuation is explained by the M&A premium embedded in the stock price. It trades at 14x-15x guided EBITDA 2023, higher than the 12.5x EBITDA of most comparable peer EDP RES, or 17x guided EBITDA 2023 on the speculated (press) M&A share price of E22-E23.
Valuation: The prevailing M&A bubble renders our conventional valuation approach rather…

What’s new? EYDAP published H1 results and held an analyst presentation. H1 numbers show clean operating EBITDA has collapsed. Contrary to this negative operating performance, management will decide whether to pay a special dividend by November.
Conclusion: We reiterate DOI. We are still not able to put a price target on the shares, given the uncertainty around RAB modeling and tariff increases. Our uncertainty has increased following lower water consumption and higher energy costs witnessed in H1. We do not account for Eastern Attica capex in our model (to be 90% subsidized).
Forecasts: We lower our EBITDA estimates by 24%-33% in 2022-2025 to account for higher opex. Shares trade 8x EBITDA 2023 or 13x EBITDA 2023 including healthcare and pension liabilities, on our estimates.