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Greek Equities: Adopting a more cautious stance
ResearchGreece revisits their stock picks and assesses the political outlook ahead of the next parliamentary elections. Macro conditions remain solid, with Q1 real GDP up 2.0% Y/Y, although inflation accelerated to 5.2% Y/Y in May (+0.0% M/M). With the Athens Index up +11% YTD, valuation multiples of non-banks in their universe have expanded to 13.2x P/E and 8.0x EV/EBITDA 2027, leaving more limited upside. Combined with polls pointing to a hung parliament, ResearchGreece is turning more cautious on Greek equities. Banks remain their preferred exposure (solid outlook - volume, rates, asset quality) as a leveraged Greek macro play. They prefer National Bank of Greece, Bank of Cyprus, Piraeus and Optima. Outside banks, they favour selective infrastructure, industrial and defensive names such as OTE, Titan, PPC and Piraeus Port over consumer stocks and cyclicals.
Financials
ResearchGreece was not surprised the bank raised its FY24 RoTE guidance to >24% from >17% following Q2 results (they had been expecting this ever since Q1). Meanwhile, management has announced its decision to list the stock on the ATHEX (and de-list from the LSE) which should improve trading liquidity. ResearchGreece reiterates their OWN IT (OI) rating and raises their TP to €5.8. This comes as the result of their higher estimates in 2024-2026. They expect dividends of €180m-€195m in 2024-2025 on 40% and 50% payout respectively, pointing to a dividend yield of >10% at current prices.
Financials
The bank has reported a super strong set of Q2 results, driven by the wide(r) loan-deposit rate asymmetry boosting NII +21% Q/Q / +164% Y/Y, with clean RoTE at 25% (vs. 21% in Q1). ResearchGreece raises their 2023 RoTE estimate to 19.6% (vs. management guidance of >17%) and reiterates their OWN IT (OI) rating with a TP of €5.9 (100% upside). Unless earnings are hit by a windfall tax, they expect the 30% minimum pay-out guidance to equal a 9% dividend yield next year and rise closer to 10% by 2025; shareholders will be pocketing c.30% of the bank’s M/Cap in the form of dividends during 2023-25.
Greek Equities: Impressive gains YTD
ResearchGreece’s base case scenario is materialising - Mitsotakis administration renewing its mandate and Greece avoiding a recession. With Greek equities +c.35% YTD they provide an update on the investment case for all the stocks under their coverage including:
Jumbo (BELA GA) - Working for the right reasons, namely valuation, balance sheet, management, business model, growth and dividends. The biggest risk: EU-China geopolitical issues affecting the firm's 70% merchandise sourcing.
Mytilineos (MYTIL GA) - Rating seems wrong, but concerns seem right, namely cash flow generation, corporate governance, energy crisis gains, cyclicality and low visibility. TP €17 (50% downside).
Bank of Cyprus (BOCH CY) - The best bank in Greece / Cyprus, worth >1.0x TBV based on RoTE >17% in 2023 (and >13% in 2025) and CoE of 12%. The first bank in the region to resume dividend payments (>8% next year). TP €5.7 (90% upside).
Financials
Not for turning - Board rejects Lone Star’s latest €1.51 per share offer. What should shareholders do? If you believe BoC’s RoTE will not exceed 5% by 2024 you are better off selling at any price close to €1.50. However, ResearchGreece’s base case scenario is that BoC’s RoTE will reach 7.5% in 2024 and rise to 8.3% in 2025 (both of which are below management guidance) and calculates the equity is worth €2.08-€2.19 per share (60%-70% upside). Sees no reason for the bank to trade below the average 0.43x P/TBV 2023E of its Greek peers or even below the 0.50x-0.54x of best NPE/CET1 positioned Eurobank and National Bank of Greece.
