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Time to buy Greece
Greece is healing - after a brutal 15-year wait, the country has finally regained its BBB investment-grade rating from Fitch. Despite chronic under-investment in infrastructure, Greek corporates have expanded at home and abroad and now boast strong balance sheets, often with net cash - a rarity in Europe. Ultra-low labour costs and the highest workload in the EU have boosted competitiveness, while political stability since 2019 has restored investor confidence. Yet Greek equities still trade at half their 2008 market capitalisation, leaving substantial upside for companies that are leaner, stronger and more agile than their European peers. AIR’s Buy-rated ideas include Athens International Airport, Motor Oil, National Bank of Greece and Sarantis, each offering 40-100%+ upside.
Industrials
Still the best infrastructure play in Greece - ResearchGreece raises their TP to €30.6 (from €26.9) following model updates reflecting recent milestones, including commencing operations at Attiki Odos, progress at Kasteli Airport and securing the North Crete motorway concession, with Egnatia Odos still pending. Following its energy JV with Motor Oil, GEK’s results will now focus on construction and concessions, with the power and supply business equity-accounted. ResearchGreece sees Attiki and Egnatia driving a doubling of Group EBITDA by 2028, valuing operating concessions, Egnatia and Kasteli Airport at €21/share, equivalent to ~90% of GEK’s current m/cap. Updated forecasts factor stronger motorway traffic and higher financing costs, with valuation led by concessions (69% of total) in their SOTP model.
Energy
MOH’s Q2 results were much stronger than what benchmark refining margins implied for the quarter. This is thanks to stronger gasoline vol & cracks and the higher naphtha-gasoline spread compared to Q1. ResearchGreece upgrades their rating on the stock to OWN IT with a TP of €28.5. The share price is down -15% since the government imposed another windfall tax on refineries in Jun. At 3.3x clean EBITDA 2024-2025E, there is enough valuation upside (+30%) to compensate for the low refining visibility and enough cash flow to support a solid dividend yield out of 2024 earnings (min. 5%) without raising net debt.
Energy
Following MOH's impressive Q3 performance, ResearchGreece makes big revisions to their forecasts. With refining market conditions expected to remain tight, they now estimate EBITDA of €1.5bn in 2023 (vs. previous estimate of €1.2bn), then €1.3bn in 2024 (was €906m) and €1.0bn in 2025 (was €627m). Furthermore, €1.9bn of total FCFE (post lease payments) is expected to be generated in 2023-26, which implies great dividend capacity (on top of investments). On a 20-40% payout ratio, ResearchGreece believes MOH can sustain a 7.0%-8.5% dividend yield. Valuation multiples (2024E): 3.5x clean EPS / 2.9x clean EBITDA. TP increased to €30.
Utilities
Announces the acquisition of Enel's assets in Romania for a total EV of €1.9bn - ResearchGreece likes the transaction because a) it was completed at a 50% discount to recent RES deals in Greece, namely Motor Oil’s €2.0m/MW or 12x EBITDA acquisition of Ellaktor wind assets; and b) it is evidence PPC is delivering on its business plan targets as laid out in 2021. ResearchGreece expects the same to follow with Greek RES targets (+5GW by 2026). TP €12.8 (60% upside).
Energy
Acquisition of ~30% stake in Ellaktor makes MOH the top RES / wind player in Greece and diversifies its investment case further away from the cyclicality of the refining business. However, it is MOH’s refining business that is currently thriving. Adjusted EBITDA in Q1 grew >2x y/y with refining EBITDA nearly tripling. This strong performance looks set to continue, resulting in ResearchGreece’s increased conviction re. leverage (net debt to max out at 3.0x group EBITDA in 2023) and dividend payments (6% yield) following the RES deal. Their EBITDA estimates are increased by 15%/53%/36% (2022-2024).
