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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.
Buy Greek Banks
Financials
ResearchGreece remains bullish on Greek banks following Q1 results, citing strong economic growth, fiscal discipline and resilient asset quality that support lending, fee growth and capital generation. Higher 2026-27 RoTE estimates have led to raised price targets: NBG (€12.3), Eurobank (€3.5), Piraeus (€7.8) and Alpha (€3.1). Distribution yields range from 7.5%-10.0%, with payout ratios lifted to 70% for NBG and 60% for Eurobank. NBG, with CET1 above 19%, has the highest payout potential and deploying its €2bn in excess cash is a key catalyst. ResearchGreece favours a mix of bolt-on, fee-generating acquisitions and increased shareholder returns.
Industrials
PPA reported strong 3Q24 results, prompting ResearchGreece to upgrade their earnings estimates for the second time in the last 30 days. The shares trade 6.6x EPS (ex-cash) and 4.3x EBITDA 2025E, with FCFE and dividend yield at 8% and 6%, respectively. TP increased to €48 (60% upside). If you think such a valuation is demanding, then consider the implied market cap of €1.2bn puts the shares on 6.5x EBITDA 2027, on ResearchGreece’s mid-single EBITDA growth estimates. If the shares stay at current levels, they will trade 3.3x EBITDA 2027E, with net cash at 38% of market cap.
Why are the share prices of Greek banks falling?
Financials
Recent weakness relates to investors pricing in steeper ECB rate cuts and lower rates in 2025 and 2026 than both before the central bank's Oct 17th meeting and compared to what banks have plugged in their RoTE guidance. However, ResearchGreece believes the market is overreacting to the potential earnings downgrade. If market expectations materialise, their earnings estimates are facing a 3%-7% downgrade in 2025 and 4%-6% in 2026. While a 40-100bps hit to their 2025-2026 RoTE estimates is not pleasant, it is not game changing either. ResearchGreece estimates P/TBV 2026 multiples at c.0.80x for Alpha and c.0.90x for NBG, Piraeus and Eurobank, implying 30% (NBG) to 90% (Alpha) upside from current levels.
Industrials
Trades on 5.5x EPS (ex-cash), 3.5x EBITDA 2023E, with a dividend yield >7%. PPA has produced a strong set of results for Q3 / 9M and the outlook for 2024-2026 is equally impressive. Undemanding growth can push EBITDA to €132m-134m and net income to €85m-86m in 2025-2026; with the valuation dropping to 2.5x EBITDA. More importantly, these numbers imply equity cash flow generation of c.€80m p.a. (15% yield), driving net cash to €285m (€235m incl. leases) or 50% of the current M/Cap. ResearchGreece initiates coverage with a Buy rating and TP €33 (50% upside).
Financials
The share price has rocketed up 65% since Paul Hollingworth turned bullish in Nov 22 when he could see that the Greek bank was over delivering and undervalued. FY22 data showed that CET1 and NPE reached 11.5% and 6.8%, respectively (vs. targets of 11% and 8%). Return on TBV also beat forecasts, coming in at 10%. The bank’s overall profile has been transformed over the last 18 months. Its PH Score™ currently stands at 10, putting it in the top decile globally (bullish signal for higher returns going forward).
Greek Banks: If not now, when?
Financials
What better time for the Greek state to dispose of its (sovereign crisis) leftover stakes in the country's banks? For totally risk adverse investors ResearchGreece recommends Piraeus Bank; sees ~50% upside based on RoTE/CoE estimated fair 2023 P/TBV of 0.55x. Investors worried about downside risk should go with NBG; sees 30% upside towards fair 2023 P/TBV of 0.80x. For all Greek banks, the current outlook points to RoTE >10% on higher NII offsetting additional MREL costs, controlled CoR (no recession), and the Mitsotakis administration renewing its mandate in the forthcoming elections.
Financials
It is remarkable that given the monumental restructuring / reorganisation (based on survival) a leaner de-risked bank has emerged with a solid sizeable revenue-generating model and ROE of 14%, LDR of 63%, NPL ratio of 5.6%, and CIR of 47%. 3Q22 results showed progress on several fronts and with €18bn of cash on the balance sheet, the shares are lowly valued. Franchise Value and PBV stand at 3% and 0.3x respectively. Given that TPEIR is now reporting better ratios and trends than peers, Paul Hollingworth argues it does not merit to trade at such a wide discount. A PH Score™ of 10 (out of 10) only increases his conviction.
