Professional Documents
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E Q U I T Y R E S E A R C H
DECEMBER 2009
I N V E S T M E N T B O O K D
EQUITY RESEARCH
21 December 2009
GREEK INVESTMENT BOOK 2010 INVESTMENT BOOK
Valuation ratios
Chng Chng P/E EPS chng P/BV EV/EBITDA Div.Yield GDP CPI Exch. 10-yr
WTD YTD 2010e 2010e 2010e 2010e 2009e Growth ‘10e Rate ‘09e Bond y.
(%) (%) (x) (%) (x) (x) (%) ‘10e (%) (% eop) (€ eop) ‘09e (%)
Greece 5.5 24.4 9.5 5.0 1.2 6.4 4.1 (0.3) 2.5 1.4 n.a.
* The exchange rate ‘09e applies to USD/EURO rate. Source: National P&K Securities, Finansinvest, ETEBA Romania and NBG estimate
**Valuation multiples are based on National P&K Securities Watch list.
***Closing price, WTD and YTD refer to the General Index.
EXECUTIVE SUMMARY
The end of the year finds Greece at a critical juncture. The dramatic widening in the budget
deficit to 12.7% of GDP in 2009 reflects the unwelcome combination of declining government
revenues and sizeable spending slippages. The international economic crisis made fiscal
constraints far more binding contributing to the rise of sovereign debt to record levels of 113%
of GDP.
The main challenge for the newly elected government is to implement measures of a
permanent nature including a revision of the social security system, as well as initiatives that
will help gain control of the extensively inefficient public spending regime, and measures that
will help curb tax evasion. An ambitious €2.5bn privatization program for 2010 will provide
additional comfort in meeting targets as will a commitment to growth achieved by tackling the
red tape and boosting liquidity.
On the other hand, investors have viewed government’s recent announcements with caution
given a row of successive revisions of Greek statistics, in the recent past. We subscribe to a
more positive view as we believe the Government has the clout and the social support that will
enable it to implement its proposed spending cuts and pension system revision initiatives.
Greece has successfully walked through a similar convergence path during the period of 1993-
‘99 in the run up for its Euro entry with Debt/GDP ratios above 100% and double digit deficits.
This time, EU supervision will ensure macroeconomic progress is followed through.
Key catalyst ahead is the Stability and Growth plan, to be released in January 2010, which will
detail the specifics for a successful implementation. This is the premise for our base case
scenario that calls for GDP decline of 0.3%, core inflation of 2.1% and a stock market upside of
roughly 20% for the FTSE 20 index over the next twelve months.
The recent underperformance of the Greek stock market has brought valuations to seven-year
lows relative to Euro stocks. Moreover, supportive factors for the key energy sector and
domestic concessions, improved balance sheets for Greek & Cypriot banks and opportunities
from a variety of early-cycle and defensive themes further increase our confidence in the Greek
market’s prospects. As the tides turn over the course of next year and the economic landscape
improves, we are looking forward with optimism to 2010.
Theodore Ritsos
Research Director
National P&K Securities
Macro Strategy
Nick Magginas, PHD Sizeable fiscal imbalances blur Greece’s growth prospects 4
Equity Strategy
Theodore Ritsos Upside potential will be fuelled by country wide reforms 8
Kostas Ntounas
Sector Updates
Banks - Spread management and asset quality improvement to drive both earnings and prices 13
Panagiotis Kladis, CFA higher
Theodore Ritsos Telecoms - Mobile pricing pressures likely offset by weaker fixed line competition 16
Kostas Ntounas Industrials / Materials - Stocks to start pricing in gradually improving business environment 17
Victor Labate
Victor Labate Oil & Gas - Recovery in middle distillates and petrol station network expansion 18
Ioanna Katsoula Retail/Consumer Goods - Tough macroeconomic conditions will put pressure on consumer 19
spending –value for money concepts will prevail
Selected List 21
Watchlist Statistics 23
Company Index
Aegean Airlines 24 Iaso 46
Agricultural Bank of Greece 25 Intracom 47
Alapis 26 Intralot 48
Alpha Bank 27 Jumbo 49
Autohellas 28 Korres Natural Products 50
J&P Avax 29 Marfin Popular Bank 51
Coca Cola Hellenic 30 Metka 52
Corinth Pipeworks 31 Motor Oil 53
Bank of Cyprus 32 Mytilineos Holdings 54
Duty Free Shops 33 OPAP 55
Ellaktor 34 OTE 56
EFG Eurobank Ergasias 35 Piraeus Bank 57
EYATH (Thessaloniki Water) 36 PPA 58
EYDAP (Athens Water) 37 PPC 59
Folli Follie 38 S&B Industrial Minerals 60
Forthnet 39 Sarantis 61
Fourlis 40 Sidenor 62
Frigoglass 41 Terna Energy 63
GEK Terna 42 Titan Cement 64
Hellenic Exchanges 43 Viohalco 65
Hellenic Petroleum 44
Hellenic Postbank 45
Key Figures
2008 2009e Latest 2010e
REAL SECTOR
Investment positives GDP per Capita (€) 21672 21140 … 21310
GDP growth (real, %, y-o-y) 2.0 -1.2 -1.6 (Q3) -0.3
The considerable improvement in liquidity conditions in the euro area in
conjunction with higher domestic inflation, will keep the cost of funding at
LEADING INDICATORS
attractive levels while Greek households are not going to experience an PMI 50.4 45 47.3 Nov …
austere de-leveraging process. Consumer Confidence -45. 8 -46.0 -38 Νοv …
Construction Confidence -9.6 -40.3 -31 Nov …
The economy will benefit from the improvement in international demand and
especially from the recovery of the economies in euro area and SE Europe,
EXTERNAL SECTOR
while the size of external imbalances of the economy will decline.
A very pessimistic scenario for the near and medium-term prospects of the
Greek economy has been already incorporated in valuations of Greek
financial assets and any progress in the front of fiscal consolidation or CA Balance (% GDP) -14.6 -10.5 -1.5(Q3) -8.5
structural reforms, could improve significantly the macroeconomic outlook of FDI (% of GDP) -0.7 -0.9 0.17(Q3)
...
the country.
Catalysts 10-yr bond yield (%, eop) 5.1 ... 5.12 (1-9/12)
…
TAX RATES
Corporate tax rate (%) 25 25 … 25
Personal income tax rate-
Central Bracket (%) 29 27 … 25
forec as t s
measures, credit to the private sector has further decelerated
6 6 to 4.4 per cent y-o-y in October from 5.4 in September
4 4 although it remained significantly higher than the euro area
2 2 refecting a high degree of uncertainty surrounding household
0
spending decisions and investment prospects. This further
0
deceleration reflected the continuing slowdown in household
-2 ‐2 credit (which grew by 3.3 per cent y-o-y in October) as
-4 ‐4 consumer and mortgage credit slowed to 2.4 and 4.0 per cent
-6 ‐6 y-o-y respectively, from 3.3 and 4.4 per cent in the previous
month, whereas credit to enterprises has also slowed to 5.4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009f
2010f
5 5 20 20
forec as t s
10 10
3 3
0 0
2 2
-10 -10
0 0 -20 -20
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 (e)
-2 -2
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009f
2010f
2009f
2001
2002
2003
2004
2005
2006
2007
2008
residential construction will take hold in early 2011, as the stock of
unsold houses remains high and new tax measures on real estate
property are implemented, whereas the correction in house prices, CA deficit (%GDP)
from their peak in Q4:2008, is expected to be of the order of 10 per
CA deficit, excluding oil & ships (%GDP)
cent (peak to trough).
Source: BoG and NBG estimates
Investment as %GDP
The international economic crisis made fiscal
35 35 constraints far more binding
30 30
The dramatic widening in General Government deficit to 12.7
forec as t s
25 25 per cent of GDP in 2009, from an upward revised 7.7 per cent
20 20 in 2008, reflects declining revenues as well as considerable
spending slippages. On the revenue side, the decline in
15 15
revenues by about 0.8 of a percentage point of GDP compared
10 10 with 2008 mainly reflects: i) weakening domestic demand; ii)
5 5 lower-than-expected return of revenue measures; and iii)
continuing weaknesses of the tax collection mechanism,
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
10 10
6 6
2 2
Source: NSSG and BoG
-2 -2
-6 -6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009f
2010f
AA+ BE BE
ES December 09
AA 5 IE
AA- PT
PT
A+ 3 IT IT
A GR
A- 1 January 08
BBB+ GR
-1
Further Catalysts
Detailed structural reforms will be included in the Stability & Growth Program, due
by mid-January. They are likely to provide further macro support and confidence in the
economic recovery.
Updated and/or new business plans are likely to be presented by new management
teams in key names like PPC and OPAP as well as OTE. Increased visibility and
clarity for investment cases will be partly offset by the risk of governmental
interference.
Concerns
Adverse macroeconomic conditions and public finances could impact corporate
earnings. The most exposed sectors include financials, construction and retail. The
gaming and telecoms sectors should be largely unaffected.
Limited credit expansion and deteriorating asset quality could materially affect the
banking sector and the housing market.
Lower disposable income, on the back of increased taxes and unemployment, will
negative affect financials and retail stocks.
Increased government interference in the banking sector and in key state-controlled
companies (e.g. OPAP, PPC) could negatively affect market dynamics.
6,000 400
18
5,000
16 4,000 300
3,000 200
14
2,000
12 100
1,000
10 0 0
2004
2005
2006
2007
2008
2009
8
Source LME, Metal Bulletin, Bloomberg.
6 More specifically, we expect a correction of 25% for copper prices
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 and of 15% for steel prices in H1’10, and then a subsequent
material increase in H2’10. We anticipate aluminium prices to
increase starting from beginning of 2010 as they remain below their
Greece (GR) DJ Euro Stoxx 10-year average. As a result, some companies that hold stocks of
copper and steel could incur inventory losses in H1’10 and make
Source: JCF
subsequent inventory gains in H2’10.
Gove
ernment inte
erference & Privatisation Program
mme
Banks: Restriction
ns, political in
nvolvement
The plan
p imposes certain
c restricttions on the baanks such as a cap to
their asset
a growth (c.15%) as w well as the dis stribution of dividends
(at 35
5%), bearing inn mind that lasst year, the fin
nance ministe er did not
Source: National P&K allow banks to payy dividends a at all. Howeve er, most of the banks
have already exprressed their w willingness to exit the govvernment
Coca Cola
C Hellenic is one of the Greek
G compan nies with high suppo ort plan; we expect the majority of the banks un nder our
exposurre to SEE. According
A to National
N P&K Estimates in coverrage to exit by H2 2010.
2009 circa 46.5% of the EBIT will come from SEE S countries
namely the Developiing and the Emerging
E segments of the Electricity: Dependent on gove
ernment decisions
Group, excluding Niggeria. We exp pect this to inccrease in the PPC's erformance is highly depen
s financial pe ndent on govvernment
coming years with thhe turnaround of the econo omies in SEE decisiions as man nagement nee eds to securre state apprroval on
while we
w also noticee that despite e the crisis the Company variou
us issues, suchs as: a)) tariff incre
eases, b) corporate
manage ed to increasse its markett shares in the t sparkling restru
ucturing, c) pottential break-u
ups into separrate legal entitties, and
beveragges category in 2008 in Eastern Europe. Therefore, d) investment progrrammes.
we believe that the Company is well positione ed to capture
future growth
g opportunities in thesse countries where
w it also ernment anno
Gove ounced privattization progrramme
has exccees productio
on capacity. In rec
cent speechess and presenttations, the Prime Minister and the
Frigogllass has the highest exp posure in Easstern Europe Finance Minister re eferred to the
e implementattion of a privatization
among the companie es in our univeerse, with a 51% exposure prograamme that ca an result in re
evenues of mo
ore than 1% of GDP.
for the group and c. 70% for the ICM businesss. We believe Key holdings
h in liste
ed companiess are demonstrated below.
that the
e exposure to o Eastern Eu urope is bene eficial as the
penetraation rate remaains at lower levels vs. Wesstern Europe, Commpany Mcap (€) Stake
and theere is remarkaable potential for
f growth in markets
m such OPAAP 4,989 34.4%
OTE 5,147 20.0%
as Russsia. PPC 3,071 51.1%
Sideno or and the Viiohalco group have a 40 0% and 35% enic Petroleum
Helle 2,537 35.5%
Agric
cultural Bank of Greece 1,675 77.3%
exposurre to Eastern n Europe resp pectively. We believe that
Helle
enic Postbank 1,206 44.3%
construction activity is
i likely to pick up in the Ba
alkans before Athens Water 618 71.6%
any reccovery in Gree ece. Thereforre, we anticipaate Sidenor’s eus Port Authoriity
Pirae 388 74.5%
exposurre to Eastern Europe to increase and th he expansion Helle
enic Duty Free 326 20.1%
in the re
egion to drive volume growtth next year. Thesssaloniki Water 178 74.0%
Thesssaloniki Port Au
uthority 146 74.3%
Euroba ank EFG and d NBG are th he banks with h the largest Sourc
ce: National P&K Securities
S
footprint in the SEE E region andd Turkey. Given the low
penetraation of the banking
b sector in these ecconomies we
Accorrding to our base
b case sccenario, a feaasible revenuue target
believe that positive earning surp
pises are likelyy for the two
would
d be €2bn. In addition, one e could expecct additional re
evenues
groups in 2010. Mo oreover Bankk of Cyprus and Marfin
from a potential prrivatization of the Public Gaas Company (DEPA),
Popula ar are also baanks that deriive most of th
heir earnings
e the Greek State has 65
where 5% participation. According g to the
outside Greece; mosst importantly form Cyprus and to lesser
FY’08
8 published financial acccounts, DEPA A’s BV amo ounts to
extent form
f SEE and Russia.
€1.22
2bn and net inccome reached d €120.5m, upp 53% y-o-y.
Earnings
s surprises Main CO22 emitting seectors/compannies (as a % of total
20
Negative
e Positive
NAP) are:
15
¾ Electricity
E geneeration (PPC): c. 71%
¾ Cement
C (Titan and Lafarge): c. 16%
10
¾ Refiners
R (ELPEE, MOH): c. 6%
%
PPC’s ann nual free allow wance is 44,354,531 tones (or 68%
5
of the country’s total am
mount).
PPC’s CO O2 emissions in FY’08 amo ounted to 52.7
7mil MT,
0
c. 18.8% higher
h than itss free allowanc
ce limit.
Q1'08
Q2'09
Q3'09
FY ‘06
Q1 ’07
H1 ’07
9M ’07
FY ’07
H1 ’08
9M’08
FY ’08
Q1 '09
View After a very challenging year for Greek and Cypriot As it can be seen in the graph there is a strong correlation
banks, we believe that 2010 will be a better year. In 2009 we between the banks’ Earnings Yield (reciprocal of P/E) and the
witnessed: i) a significant margin squeeze as a result of the sovereign spread. Consequently, an improvement in the outlook
liquidity crunch, ii) a sharp slowdown in loan growth, iii) a spike for the Greek economy which would ease pressures on the
in the cost of credit due to the economic recession but also iv) sovereign spread is a necessary condition in order to see higher
strong trading gains after March. We believe that loan growth bank valuations.
will remain limited in the foreseeable future but margin
Valuations supportive At this point, valuations do seem to offer
recovery along with a gradual reduction in cost of credit, will
support as on a P/B relative basis compared to their European
prove to be adequate for higher earnings in 2010. Lately,
peers we are at lower levels even when compared to Q1 09,
concerns over the Greek macroeconomic environment have
when the spread of the 10year GGB versus the respective
come to the forefront, resulting in local banks’
German bund had reached 300bps.
underperformance relative to their European peers.
Greek & Cypriot Banks 12m fwd P/B relative to DJ Euro Stoxx Banks P/B
2.20
Recommendations In such an environment we are looking for
banks that: i) can better manage their NIM, ii) have already 2.00
with its local peers in all the above mentioned criteria. We also 1.20
favour EFG Eurobank due to its significant exposure outside of
1.00
Greece and Alpha Bank which combines a solid balance sheet
with a very attractive valuation. 0.80
15/10/2004 15/10/2005 15/10/2006 15/10/2007 15/10/2008 15/10/2009
0.000 0.00%
Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09
2
1800
1700
1600
1 1,480 1500
1,138
0
Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
Time Deposits - Households Time Deposits - Corporate
Mortgage Loans - (maturity >5yrs) Corporate Loans - (maturity >5yrs)
Source: Bank of Greece, National P&K Securities
Furthermore, any rate hikes from the ECB, which are projected Source: Companies’ Reports, National P&K Securities
towards the 2H of 2010 will also help bank NIMs. Finally, the
yield curve remains steep and is projected to remain so well Cost containment also supportive It has been a year since
into 2010. management teams made cost containment a priority. This
included freezing new branch openings and new employee hires
as well as efforts to rationalize and streamline general and
ECB funding not an issue Q3 results showed that Greek
administrative expenses. Early indications of this policy’s results
banks have already started implementing their own exit
are clearly identifiable in the last two quarters and we believe
strategies from the cheap ECB liquidity extensively used
that further signs of cost containment will be evident in the
during 2009. During Q3, we witnessed the largest Greek banks
foreseeable future. Overall constrained cost evolution will be
reducing their exposure substantially, i.e. c.30% qoq.
supportive for the bottom line since we estimate that these will
post marginal increases during 2009 - 2010 and in some cases
ECB Funding
(i.e. EFG Eurobank) we may even see a reduction in the overall
cost base.
€ 12.7bn
€ 11.8bn € 12bn
Q2 '09 Q3 '09
Regulatory Environment Following last year’s crisis in the
€ 9.5bn
€ 9bn
financial sector, it is highly likely that a stricter regulatory
environment will evolve. We believe that in 2010, regulatory
€ 6.3bn
bodies worldwide will decide on the new regulatory environment;
€ 6bn
bearing in mind that a grace period of several years will be
€ 3.8bn
granted in order for the banks to adjust. Furthermore, Greece’s
€ 2.6bn
€ 1.9bn
newly appointed government is currently amending the
regulatory environment in order to resolve issues concerning
longstanding overdue debts. In their attempt to be proactive in
NBG Alpha EFG Piraeus Marfin
light of this, the banks under our coverage have already
Source: Companies’ Reports, National P&K Securities enhanced capital bases, reduced loan to deposit ratios and
leverage whilst constantly seeking settlement and debt
In our view, as the unwinding of the ECB’s funding is expected restructuring with clients facing economic difficulties.
to be gradual and smooth, Greek banks will not face any Consequently, we do not see any serious impact from the above
problem in reducing their dependence. Moreover given that the mentioned regulatory changes.
12m Euribor currently stands at 1.23%, the impact in the
overall cost of funding will be limited and will be more than Banks will repay govt support by mid 2010 NBG, Hellenic
offset by the lower deposit rates. Postbank and Alpha bank have already proceeded with capital
increases, the latter exclusively to repay government preferred
securities. Most of the other banks will examine the repayment
Loan growth limited Given another stagnant year in Greece of government support by mid 2010 while the Bank of Greece
in addition to the fact that credit penetration is approaching has asked for any repayments to take place after May 2010. We
maturity levels, i.e. above 100% of GDP, we expect that loan believe that for the large part, banks will repay the government
growth will remain limited in the years to come. Loan growth support plan by the end of 2010; hence any government
therefore, will most likely surface from the banks’ SE intervention and more specifically restrictions on dividend policy,
operations. However, we believe that in 2010, Greek & Cypriot will cease to take effect.
banks will remain cautious. Hence, a mid single digit on a
Group level should be expected in our view for the next year.
View We believe that the Greek gaming sector is now close to a With regards to new products, a public consultation on a
series of structural changes including regulatory reforms as well scratch ticket Tender had already commenced under the
as new product introductions. The government’s need to raise former government. We believe that sooner rather than later,
additional funds in order to reduce widening budget deficits is the current government will move towards this direction as
expected to be the main driver behind any final decisions. well, whereby the viability of the scratch tickets Tender will rely
heavily on the upfront payment and payout structure of the
game.
Higher gambling taxation across the board We note the
growing trend for higher gambling taxation across the board that Lack of major privatizations in the next 6 months; higher
is hurting both domestic and global operators as seen in expectations in the medium-term In terms of the global
Bulgaria (where taxation rose to 15% from 10% previously) and operating environment, our thesis for 2009 regarding
Poland). In Greece, the Ministry of Finance postponed the international operators and their reduced risk appetite, has
application of the tax regime until 30.04.2010. We believe that proved to be correct as evidenced in cases such as Milli
although it will still hold negative implications, the new regime Piyango, Tote Tasmania and Camelot which attracted little
will be more positive for OPAP compared to the postponed investor interest. Despite a clear improvement in investor
measures. sentiment, we see little room for major privatization projects
taking place during the first half of 2010. Acquisitions or
buyouts are now more viable even in the short-term, with
Deregulation & instant tickets: Evolution during 2010 has
Camelot ranking as one of the first available targets. In the
higher chances Regarding evolution on the deregulation front,
longer term, we would expect to hear about the final decision
the debate between regulation and deregulation has still not
regarding the Illinois lottery privatization, clearly a landmark
provided any unanimous decision on a European level.
case for future developments in the US, during Q4 2010.
However, key countries such as France and Denmark are now
ready to follow a controlled liberalization model and open their
domestic gambling market. In addition, the Schleswig-Holstein Sill cautious on player spending recovery As for player
state in Germany has also expressed its intention to regulate its spending evolution, we stay cautious on European player
gambling market locally, which may lead to wider changes on a spending recovery. In doing so, we share Intralot’s
national level in the longer term. management’s view that any signs of an upturn on an
international level will be more evident in the US and Asia. In
With regards to the Greek monopoly issue, investors’ attention
our view, higher gambling taxation in SEE Europe could further
has shifted to the anticipated decision of the Greek Council of
State on Stanleybet’s appeal. The worst-case scenario for now hurt player spending in the region. On the positive side,
would be a referral to the ECJ, which in turn would mean that concerns over the Greek macroeconomic environment should
more time (in excess of 1-2 years) would be needed to reach a not have an impact on Intralot as more than 95% of our target
ruling. We believe that over the next two years it is more likely valuation derives from international operations.
that the Greek Government will begin a public consultation
regarding a controlled liberalization model. We therefore Top recommendations Overall, 2010 should be a year of high
reiterate our view that the Greek State will take regulatory volatility for the gaming sector. Although we prefer OPAP in
action ahead of any rulings from the ECJ. the short-term, we would also feel comfortable with a “buy on
the dips” approach for Intralot as well. Especially with regard to
changes on the regulatory front, any major developments
could eventually serve as good entry points for both stocks.
Average excl OTE 12.3 11.2 3.7 3.4 1.8 1.7 5.1 5.0
Premium(Discount) -27.0% -19.3% -8.0% -12.2% -12.1% -8.8% -17.5% -12.8%
Source: National P&K Securities, Factset estimates
View
Key themes in 2010
We believe that there will be a gradual recovery of demand for Upturn in Depreciation
commodity
Exposure
residential
Exposure
public
High Regional Diversified
USD vs. EUR leverage exposure operations
industrial products in 2010 driven by the pick up in economic prices sector projects
MYTIL - / + (*) - +
activity in Europe. We are already in the midst of observing METKA -
positive trends, such as positive GDP growth and the TITAN
S&B
- -
-
+ -
(US and Europe). Source:National P&K Securities, (*) lower base metal prices: negative, lower oil prices: positive
View
Motor oil respectively) and by expanding in SEE (Hellenic
Even though the economic environment could remain Petroleum).
challenging in Greece in 2010, refiners are expected to gain
The fundamentals for storage activity remain good at a global
from the improvement in refining margins. We expect an upturn
level and we expect Motor Oil in particular, to continue earning
in middle distillates spreads in 2010 driven by the global
stable income from this activity.
economic recovery, whilst on the other hand; we anticipate light
and heavy distillates to remain at their current levels. Moreover, Preferred refiner: Motor Oil
the Balkans’ petrol station network remains underdeveloped and
In such a difficult refining environment, we prefer refiners with a
we expect Greek refiners to gain from their expansion in SEE
high level of complexity which are geared to gain from the upturn
and from the development of their Marketing Units.
in middle distillate spreads. Motor Oil remains our preferred pick
Key themes in the Greek market. With a Nelson Complexity Index of 11.95
and the Crude Distillation Unit investment due to start next year,
Key themes are a) the gradual recovery in benchmark Med
the refiner can maintain solid refining margins and boost its
cracking margins from their current record low levels and the
production of diesel and jet fuel. Motor Oil is also trading at a
upturn in middle distillates spreads driven by the global
discount vs. its peers (see table below).
economic recovery, b) the weak USD vs. the Euro, c) the
relative stability of crude oil prices, d) the development of
Marketing, and e) gains from storage activity. Med cracking ($/bbl), Diesel, Gasoline spreads ($/ton)
Benchmark Med cracking margins are forecast to improve 14 350
gradually in 2010 from their current record low levels. We
expect that there will be a relative shortage in the production of
12 300
diesel and jet fuel and increase in demand for middle distillates.
As a result, we expect a material increase in diesel and jet fuel
10 250
margins next year. Meanwhile, there will be excess capacity at
a global level for the production of gasolines.
8 200
The weak USD is anticipated to be negative for refiners as
benchmark refining margins are quoted in USD whereas a large 6 150
portion of costs are incurred in Euros. Refiners are expected to
make foreign exchange gains in the short-run but in the longer
4 100
run, they are expected to suffer from the weak USD.
Crude oil prices are projected to remain at their current levels (c. 2 Urals Med cracking (left axis) 50
$75) in 2010, and we do not foresee a large shift upwards or Diesel spread (right axis)
Gasoline spread (right axis)
downwards next year. 0 0
We anticipate Greek refiners to continue to develop their 2004 2005 2006 2007 2008 2009
marketing activity by achieving synergies and economies of
scale (acquisition of BP and Shell by Hellenic Petroleum and Source: Bloomberg, IEA.
Prices as of Rating Target Price Upside Market YTD P/E EV/EBITDA P/BV Div Yield
December 16th Price 09/12/09 Potential Cap (€m) (%) 2009e 2010e 2009e 2010e 2009e 2010e 2009e 2010e
Hellenic Petroleum Neutral 8.2 8.3 -1.0% 2,537 49,8 14.0 x 11.8 x 10.3 x 10.1 x 1.1 x 1.0 x 5.5 5.6
Motor Oil Outperform 13.5 10.7 25.3 1,185 34.7 10.7 x 9.4 x 9.2 x 8.5 x 3.4 x 3.1 x 7.9 11.6
Neste Oil n.a n.a 11.6 n.a 2,956 9.0 31.2 x 17.4 x 11.2 x 9.4 x 1.3 x 1.3 x 1.7 2.9
Erg n.a n.a 9.9 n.a 1,420 16.1 19.1 x 23.0 x 6.1 x 0.8 x 0.8 x 4.2 4.2
Saras n.a n.a 2.1 n.a 1,933 -15.3 13.6 x 12.1 x 5.4 x 1.5 x 1.4 x 0.5 4.4
MOL n.a n.a 56.8 n.a 5,924 52.7 14.5 x 8.9 x 7.2 x 5.3 x 1.1 x 1.0 x 2.6 3.0
PKN n.a n.a 7.6 n.a 3,213 20.2 20.2 x 11.4 x 7.3 x 5.9 x 0.7 x 0.7 x 0.0 1.0
OMV n.a n.a 28.5 n.a 8,607 53.3 11.4 x 7.2 x 4.2 x 3.3 x 1.1 x 1.0 x 2.6 3.7
Tupras n.a n.a 12.9 n.a 3,301 74.6 9.8 x 9.3 x 6.8 x 6.9 x 2.0 x 1.9 x 8.0 8.7
Source: National P&K Securities Estimates, Factset consensus.
Private consumption has been negative for 3 consecutive Key trends/issues: Heightened Competition: The key target
quarters in 2009 and it is not expected to recover before mid for all companies in the current environment will still be winning
2010. Negative factors such as increasing unemployment and market share. We expect an intensification of competition with
decelerating consumer credit are counterbalancing any positive the focus shifting to offers/promotions as well as advertising
effects from real wage increases. For the remainder of the year, campaigns. Financially healthy companies are likely to weather
private consumption is expected to remain a drag on GDP the difficulties and prevail vs. smaller, more distressed family
growth as employment and disposable income are expected to run companies.
deteriorate. Going forward, the government’s fiscal adjustments Focus on inventory management: Destocking - keeping lower
including higher taxes in 2010, the containment of wage inventory levels –the risks of inventory write offs fade out as
increases and the fading positive effect from falling energy companies addressed this issue in 2009.
prices are expected to put downward pressure on disposable
income. Cost containment focus: Retailers and consumer goods
companies addressed their opex levels in 2009 and proceeded
Lower private consumption has had a pronounced effect on with cost structure rationalisation measures - however in 2010,
retail sales in 9m 09. there is little room for further cutdowns. In certain cases, cost
containment initiatives and their effects will be fully
Retail Sales Evolution
in constant prices materialised in 2010.
15.0% Attempts to lower debt levels: through WC capital
10.0% improvements.
5.0%
Value for money concepts: Private label products are likely to
0.0%
gain popularity amongst consumers.
Jan 08
Feb08
March 08
Jun 08
July 08
Aug 08
Nov 08
Dec 08
Jan 09
Feb09
March 09
Jun 09
July 09
Aug 09
Apr 08
May 08
Sept 08
Oct 08
Apr 09
May 09
Sept 09
-5.0%
-10.0%
External Factors: such as weather conditions, strikes, riots and
-15.0%
the H1N1 flu pandemic.
-20.0% FX fluctuations affecting both companies with a sales presence
General Index including fuels General Index Excluding fuels in other countries as well as companies sourcing products or
Source: NSSG, raw materials from countries with different currencies.
Relative valuation: the re-rating of the international peer group
Business climate having peaked in October, declined in
positively affected all retail companies in FY 09.
November, mainly on the back of a significant drop in the
Consumer Confidence indicator and the mild decline in the Concluding, we believe that the following year will be a tough
Retail Trade Confidence Indicator. Consumer confidence is year in terms of macroeconomic and market conditions. High
expected to remain low at least until H1 10, on account of the uncertainty around the impact of the new tax measures and
high uncertainty around unemployment and new taxes. the changes in public sector wages will be a drag on consumer
spending at least for H1 10. Consumer behaviour will remain
Consumer Confidence vs. Retail Trade volatile, affected in large part by the macroeconomic outlook.
-10
Confidence
130
This uncertainty/volatility, at least for the first half of 2010,
120 will be potentially reflected on our covered company stock
-20 110
100
prices.
-30
90
80
We expect that the key trends we witnessed in 09 will continue
-40
70 and that value for money concept strategies will prevail. In
-50 60
50
addition, we anticipate market share gains, store network
-60 40 expansion and product mix enrichment, as well as cost
containment initiatives, and in some cases, a favourable FX
environment. Faster international recovery could have a
Co n sumer Co nfidence (left axis)
Retail Trad e Co nfidence (right axis)
positive impact on companies with international exposure
Source: IOBE
and/or dependency on the tourism industry.
Our favourite stock in the retail sector would be Jumbo due
to its more resilient product offering, higher margins and
returns and healthier balance sheet.
Prices as of EV/EBITDA EV/EBITDA
Price Market Cap. Perf. Y-t-d P/E 09 e P/E 10 e DivYield 09 e DivYield 10 e
December 16th 09 e 10 e
Folli Follie 14.34 472 147.2% 4.7 4.9 6.1 6.1 0.85% 0.83%
Fourlis 8.60 438 72.0% 12.1 10.9 7.3 6.9 2.4% 3.5%
HDFS 6.18 326 7.7% 7.2 6.7 6.9 6.6 7.4% 8.1%
Jumbo 8.20 994 88.9% 10.9 10.3 7.7 7.3 2.8% 2.9%
Korres 6.80 79 31.3% 20.5 18.4 12.7 11.5 1.7% 1.9%
Sarantis 4.56 175 7.5% 11.4 9.7 7.9 7.0 0.7% 1.5%
DJ Euro Stoxx Retail 272.3 113,522 +25.1% 16.4x 14.6x 8.0x 7.2x 2.86% 3.08%
DJ Stoxx
Personal/Household 310.2 174,996 +36.9% 23.1x 19.2x 12.0x 10.5x 1.97% 2.08%
Source: Factset estimates, National P&K Securities
Metka
A story highlighted by excellent growth potential at relatively low risk. We buy the shares mainly on:
Significant growth potential anticipated from FY’10 onwards on impressive backlog accumulation.
Work-in-hand has reached record-high of €2.2bn, or 3.5x ‘10e sales, providing excellent visibility for
the years to come.
Well-diversified project portfolio.
The project assignments in Pakistan, Romania, Syria and Turkey prove that Metka can successfully
participate in international tenders winning new contracts.
Net cash position maintained in 9M’09.
High operating margins and economic returns, very low capex needs and decent dividend yield.
Attractive valuation at current levels. EPS CAGR ’09-’11 of 32%.
Kostas Ntounas, +30210 7720174, ntounas@nationalpk.nbg.gr
Bank of Cyprus
A strong balance sheet and favourable geographical exposure:
The group’s operating performance is improving on a gradually expanding NIM and better asset
quality trends.
In terms of geographical contribution, BoC’s regional operations - most importantly Russia and
Greece - turned profitable during Q3. We expect these trends to continue providing support to the
group’s profitability as regional economies are on a recovery path.
Upcoming growth opportunities, especially in Russia, likely to further support profitability given
BoC’s strong balance sheet, both in terms of capital and liquidity.
Dividend payments and business guidance highlight commitment to shareholders.
Panagiotis Kladis, CFA +30210 7720185, kladis@nationalpk.nbg.gr
OTE Neutral 10.48 -11.9% 5,137 50.0% 13,918,457 -4.4% -0.7% 8.9 9.0 4.4 7.2% 3.0
Forthnet O/P 1.09 53.5% 169 66% 466,106 n.m. n.m. n.m. 48.5 6.8 0.0% 0.4
Telecoms 5,306 49.7% -20.6% 0.9% 8.7 10.3 4.9 6.9% 2.6
CC Hellenic Bottling O/P 16.30 72.1% 5,956 46.0% 6,397,025 -0.6% 7.3% 14.1 13.1 7.5 1.7% 2.0
Food & Beverage 5,956 46.0% -0.6% 7.3% 14.1 13.1 7.5 1.7% 2.0
Ellaktor O/P 5.27 23.1% 933 60.0% 1,587,096 -0.9% 12.5% 9.8 8.8 5.6 2.2% 0.9
J&P Avax O/P 2.97 30.8% 231 26.8% 107,853 41.1% 6.1% 7.8 7.3 6.8 2.5% 0.8
GEK -- 5.87 75.7% 504 58.1% 185,402 --
-- -- -- -- -- --
Construction 1.668 56.6% 7.2% 11.0% 9.4 8.5 6.2 2.2% 0.8
Intralot Neutral 3.76 25.3% 598 66.0% 2,763,398 -14.2% 6.4% 8.0 7.2 5.0 3.8% 1.6
OPAP O/P 15.64 -24.4% 4,989 65.6% 14,627,947 -15.7% 7.7% 8.1 7.5 5.0 12.0% 18.3
Lodging/Gaming 5,587 65.6% -15.6% 7.5% 8.1 7.5 5.0 11.1% 8.8
Hellenic Petroleum Neutral 8.30 53.7% 2,537 28.6% 1,501,977 n.m. 18.6% 14.0 11.8 10.1 5.5% 1.0
Motor Oil O/P 10.68 39.8% 1,183 38.5% 2,645,703 37.2% 14.8% 10.7 9.4 8.4 7.9% 3.1
Energy 3,720 31.7% 183.5% 17.2% 13.0 11.0 9.5 6.2% 1.3
Intracom Neutral 1.19 63.0% 158 55% 477,062 n.m. n.m. 48.0 n.m. 8.4 1.7% 0.4
Technology 158 53.6% n.m. n.m. 48.06 n.m. 14.4 1.7% 0.4
Titan Cement Neutral 21.58 55.3% 1,767 49.0% 2,082,240 -37.6% 28.4% 13.7 10.6 6.7 1.4% 1.1
Cement 1,767 49.0% -37.5% 28.4% 13.7 10.6 6.7 1.4% 1.1
Hellenic Duty Free Neutral 6.18 7.7% 326 22.0% 59,735 4.1% 6.5 7.2 6.7 6.6 7.4% 1.9
Jumbo O/P 8.20 88.9% 994 70.0% 1,694,907 16.1% 5.6% 10.9 10.3 7.3 2.8% 2.3
Sarantis Neutral 4.56 7.5% 174 55.0% 283,866 -39.8% 18.2% 11.4 9.7 7.0 0.7% 1.3
Fourlis O/P 8.60 72.0% 438 70.0% 751,195 -5.7% 11.3% 12.1 10.9 6.9 2.4% 1.8
Folli Follie Neutral 14.34 147.2% 472 50.0% 1,342,823 30.8% -5.4% 4.7 4.9 6.1 0.9% 1.1
Korres O/P 6.80 31.3% 79 30.0% 54,573 -1.9% 11.6% 20.5 18.4 11.5 1.7% 2.9
CG & Retail 2,483 59.6% 9.8% 1.4% 9.6 9.1 6.7 3.0% 1.7
Iaso O/P 3.55 -20.0% 189 79.0% 100,406 -19.1% 13.2% 10.9 9.6 8.0 3.2% 1.4
Healthcare 189 79.0% -19.1% 13.2% 10.9 9.6 8.0 3.2% 1.4
Terna Energy Neutral 6.58 70.5% 719 25.0% 363,076 -25.0% -11.0% 39.9 44.9 23.8 0.9% 1.8
RES 719 25.0% -25.0% -11.0% 39.9 44.9 23.8 0.9% 1.8
PPA O/P 15.52 59.7% 388 25.0% 222,018 35.9% 139.2% 51.0 21.3 9.9 0.6% 2.0
Transport 388 25.0% 35.9% 139.2% 51.0 21.3 9.9 0.6% 2.0
Aegean Airlines O/P 3.40 16.8% 243 25.0% 90,403 -4.6% 8.7% 8.6 7.9 8.9 8.8% 1.1
Airlines 243 25.0% -4.6% 8.7% 8.6 7.9 8.9 8.8% 1.1
Hellenic Exchanges O/P 7.80 41.9% 510 79.0% 2,990,251 -38.4% 18.9% 13.7 12.0 11.2 3.8% 2.8
Exchanges 510 79.0% -38.4% 14.5% 13.7 12.0 11.2 3.8% 2.8
Autohellas O/P 1.99 63.1% 72 27.0% 23,368 35.6% 11.4% 4.0 3.6 2.6 7.5% 0.6
Leasing 72 27.0% 35.6% 11.4% 4.0 3.6 2.6 7.5% 0.6
Watch List 56,801 61.7% 0.3% 5.1% 10.0 9.5 6.4 4.1% 1.2
Watch List (excl.
banks) 37,550 39.1% 38.8% 4.5% 10.4 9.9 6.4 5.3% 1.4
Watch List (excl.
Emporiki and PPC) -15.9% 9.7% 10.8 9.9 6.9 3.8% 1.2
General Index 2,222.14 24.4%
4.0 2400
Concerns about a weakening demand for leisure and business travel due to macro
economic downturn may impact capacity utilization for the sector as whole. 3.5
2000
3.0
1600
Weak load factors in the new international routes, yet improving as routes mature.
2.5
1200
Change in the competition structure in Greece following the privatization of legacy
01-09
03-09
05-09
07-09
09-09
11-09
player Olympic Airlines may lead to short term pricing pressures and lower yields.
Aegean Airlines S.A. Greece ATHEX Composite
Catalysts
Addition of state subsidized domestic routes (auctioned off in Q1 ’10) to add
network reach and boost customer loyalty Company description
Aegean Airlines is a full service airline passenger carrier with a
leading position in the Greek domestic route market and
Uptake in demand for tourism/leisure travel from gradually recovering central growing presence in the continental European market. The
European markets may raise passenger traffic and outpace yield pressures. company is currently running a fleet of 27 planes (8 Airbus
A320, 2 A321, 6 Avros RJ 100, and 11 Boeing 737 /300-400)
that will reach 31 planes by 2010 vs. 21 in 2006.
Retains untapped sources of liquidity; loan to deposit ratio at 100% Trading Data
Absolute 3m 0.15%
Investment negatives -¨ ¨- 12m 31%
Relative to ATG 3m 32%
Highest NPL ratio at 7.3% (>90days); NPLs accelerated lately -¨ ¨- 12m -4%
3m avg. daily trading vol. in € m 2.5
Pre-provision earnings highly correlated to market performance Weight in ATG 0.02%
State induced lending to SME’s could potentially lead to second wave of NPL Price performance
formation, which might offset benefits from restructuring efforts Share performance
3200
High proportion of Gov Preferred to common equity could lead bank to seek capital
2800
Politically appointed management; subject to changes upon political developments 2
2400
2000
Catalysts
1600
Better/Worse than expected macro environment could affect asset quality and cost
of funding 1200
01-09
03-09
05-09
07-09
09-09
11-09
Could play an important role on new government plan for ‘green’ investing ATEbank S.A. Greece ATHEX Composite
Company description
Agricultural Bank (ATE Bank) was founded in 1929 as a non-
profit organization with the target of funding the agricultural
sector. In 1991, ATE was converted into a commercial bank
and in 2000 the bank was listed in the ASE with a free float of
15%. The bank currently has the 2nd largest branch network in
Greece (458) and is the 6th largest bank in terms of loans to
the private sector and 4th in terms of total assets and deposits.
Stock Data
Investment positives 52 week low / high 0.38-0.93
Market cap in € m 863
The pharmaceutical market is expected to grow at a CAGR of 8.3% in the 2008- Reuters / Bloomberg ALAr.AT /ALAPIS GA
2013 period below the double-digit growth of the 2000-2007 period. Notably, the Free float (e) 70%
outlook for the generics market is more optimistic with a projected CAGR of 17.3% Institutional ownership (e) 60%
in the 2008-2013 period.
Expected return
Strong relationships with multinationals that give the company access to a wide Upside to price target Na
customer base Dividend yield estimate Na
Total return forecast Na
Diversified product portfolio, a wide distribution network , strong infrastructure and
production capacity Trading Data
Absolute 3m -34%
Consolidator in the fragmented pharmaceutical markets of Greece and SEE. -¨ ¨- 12m -34%
Relative to ATG 3m -25%
Potential for cross synergies between business units - enabling the creation of a -¨ ¨- 12m -52%
vertically integrated platform / one stop shop in healthcare. 3m avg. daily trading vol. in € m 4.5
Weight in ATG 1.46%
Many patents will expire within the following 3 years giving the company the
opportunity of launching more generics and to capture the first mover’s advantage. Price performance
Share performance
Investment negatives 1 3200
Significant delays in the down payment of receivables in the healthcare sector
2800
Expected changes imminently in the pricing regulation of pharmaceuticals could
2400
put pressure on the company’s profitability
2000
Execution risk – may not be able to penetrate as fast as we expect the market
through its generics portfolio- 1600
1200
Competition could intensify with adverse effects for the company
01-09
03-09
05-09
07-09
09-09
11-09
Potential loss of key contracts would materially hurt the company’s revenues Alapis S.A. Greece ATHEX Composite
Long history and strong brand name which has resulted in strong client
relationships Trading Data
Absolute 3m -20.0%
Limited exposure to consumer credit at 12% of total loans -¨ ¨- 12m 78.0%
Relative to ATG 3m -8.0%
A recent organization restructuring could enhance the group’s efficiency -¨ ¨- 12m 30.0%
3m avg. daily trading vol. in € m 24.9
Investment negatives Weight in ATG 6.59%
power 14 3200
Catalysts 12 2800
10
Better/Worse than expected macro environment could affect asset quality and cost 2400
of funding 8
2000
6
4 1600
2 1200
12-08
02-09
04-09
06-09
08-09
10-09
Alpha Bank A.E. Greece ATHEX Composite
Company description
Founded in 1879, Alpha Bank is the third largest bank in
Greece by market capitalization. The bank operates over 400
branches in Greece with a growing presence in SE Europe.
Highly fragmented and slow growing market renders operating profitability 2800
susceptible to cost controls and efficiency in operations 2.0
2400
1.5 2000
Catalysts 1600
1.0
Increase in penetration of corporate fleet in the total Greek car park (5% in Greece 1200
01-09
03-09
05-09
07-09
09-09
11-09
vs. 15-25% in EU) could significantly rise company’ fleet management car fleet
Autohellas S.A. Greece ATHEX Composite
Liberalization of the renting market (rent-a-van, chauffeur service, equipment Source: Company, JCF, National P&K Securities Research estimates
rental) will further enhance profitability
Company description
Autohellas is the largest R-a-C company in Greece and the
biggest national franchisee of Hertz International in Europe.
The company operates in Greece for more than 35 years
through 110 locations with a fleet exceeding 26,800 vehicles. It
runs similar, but minor in scale, operations in Bulgaria, Cyprus
and Romania.
Well placed to win new infrastructure projects in Poland and in the Middle East.
Trading Data
Healthy construction margins. Construction EBIT margin remained at quite decent Absolute 3m -18%
levels of 4.6% (vs. 4.7% last year) in 9M’09 despite a weaker than expected -¨ ¨- 12m 33%
margin in Q3. Relative to ATG 3m -6%
-¨ ¨- 12m -3%
3m avg. daily trading vol. in € m 0.1
Participation in major Greek BOOTs. The Group has following key participations in
Weight in ATG 0.4%
domestic concessions: 30.8% in the Attica Ring Road, 20.5% in Rio-Antirio bridge,
21.0% in Olympia Odos and 21.25% in Maliakos-Kleidi.
The group does not have any exposure in Dubai. Its construction projects in the Price performance
Middle East refer mainly to the Queen Alia International Airport, which is self- Share performance
financed awarded by the government in Jordan. There are also smaller projects of 3200
subsidiary Athena in Abu Dhabi and in Qatar. Avax’s backlog in the Middle East 4
accounts for c.14% of its total backlog. 2800
2000
Very high leverage and increasing debt servicing costs. Net debt/EBITDA ratio
(including income from participations) is estimated at c.4.2x by year-end ’09. 2 1600
1200
The Greek state - Avax’s key client - has been consistently exhibiting significant
01-09
03-09
05-09
07-09
09-09
11-09
payment delays.
J&P-Avax S.A. Greece ATHEX Composite
The expected re-tendering of the Attica Ring Road and the tendering of the Kasteli
international airport in Crete (budget estimated at around €1.0bn).
Company description
J&P Avax is Greece’s second largest construction group and
The tendering of c. €5.2bn of new PPP projects. holder of three construction certificates. Furthermore, the group
maintains minority stakes in Greece’s major BOOT concessions.
J&P Avax is active in the following business areas:
Evolution of FX rates (particularly EUR vs. USD and Polish Zloty).
Construction: J&P Avax’s holds a leading position in the domestic
construction market while has expanded in CEE, Middle East and
Africa.
Concessions: The group holds stakes in Greece’s largest
concession projects while has geographically diversified its
concession portfolio in Cyprus and Jordan.
Other(Real Estate development & other): J&P Development
focuses on the development of residential and commercial
projects in Greece, Romania and Poland.
3200
The Company remains commited to innovation and product portfolio diversification
in order to boost pricing mix in most of its markets. 16 2800
03-09
05-09
07-09
09-09
11-09
Immediate Consumption Channel
Coca-Cola Hellenic Bottling Co. S.A.
Greece ATHEX Composite
Catalysts
Source: Company, JCF, National P&K Securities Research estimates
A turnaround in the economies of SEE will boost Company’s profitability - in 2009
SEE will account for circa 46% of Company’s EBIT according to our estimates Company description
Coca-Cola Hellenic is the second largest bottler of The Coca
Expansion in new geographical regions Cola Company in terms of revenues and the third largest in
terms of volume unit cases sold. Coca Cola Hellenic is primarily
engaged in the production, sale and distribution of non-
Potential acquisition that will enhance Company’s product portfolio in the alcoholic beverages. The Company's product portfolio includes
categories of juice and water sparkling beverages (Carbonated RTD Beverages excluding
sparkling water), Still Beverages (Non RTD juice, sport drinks,
tea, coffee and other Non-CSD products) and water (both still
and sparkling). The Company has operations in 28 countries
and serves more than 550 million customers. It operates in
three major geographical segments; the established, the
developing and the emerging segments.
Broadest product range of HSAW pipes in the market and pioneer user of X-80
steel grade. Price performance
Share performance
Investment negatives 3200
Global economic slowdown affects the construction of pipelines. 2800
2
Exposure to the price of oil and natural gas, and potential impact on orders if oil 2400
price goes below $40 a barrel.
2000
Dependency on the price of high-grade coil and bargaining power of suppliers.
1600
Catalysts 1200
01-09
03-09
05-09
07-09
09-09
11-09
New pipeline projects requiring high quality and technologically advanced pipes,
such as the Bourgas – Alexandroupoli pipeline in the Balkans. Corinth Pipeworks S.A. Greece ATHEX Composite
Addition of new high value added products and extension of the product range.
Source: Corinth Pipeworks, JCF, National P&K Securities Research estimates
Company description
Corinth Pipeworks (CPW) was founded in 1969, and listed on
the Athens Stock Exchange in 1998. It is specialised in the
production of steel pipe and hollow sections for the oil, gas,
water and construction industry. It has a global presence with a
representative sales network throughout the world. CPW
annual capacity is up to 700 KMT. Total annual sales in 2008
reached €385m and total annual volume 325 KMT.
Exposure to the promising Russian market through the underutilised network of Price performance
Uniastrum Bank Share performance
3200
6
Investment negatives 2800
Profitability is not diversified. More than 70% of net profit is generated from the 2400
Cypriot operations 4
2000
Cypriot economy is largely affected by the real estate market and tourism which 1600
both depend to a large extent on foreigners, mostly Russian and British. Both 2
sectors are still facing challenges in the after math of the global recession. 1200
01-09
03-09
05-09
07-09
09-09
11-09
Catalysts Bank of Cyprus PCL Greece ATHEX Composite
03-09
05-09
07-09
09-09
11-09
Hellenic Duty Free Shops S.A. Greece ATHEX Composite
Investment positives
Healthy fundamentals, defensive characteristics and a solid operating Expected return
Upside to price target 48.0%
performance despite adverse macro conditions.
Dividend yield estimate 2.2%
Total return forecast 50.2%
High construction backlog of €3.5bn (2.3x FY ’09e sales) provides good visibility
for 2010 and for the most part of 2011.
Trading Data
Stabilization of construction margins going forward. Absolute 3m -14%
-¨ ¨- 12m 32%
Strong revenue and profitability visibility from the Attica Ring Road. Relative to ATG 3m -1%
-¨ ¨- 12m -3%
3m avg. daily trading vol. in € m 1.5
Expansion of BOOT portfolio in SEE; preferred bidder in Romania’s €2bn first toll-
Weight in ATG 1.4%
road concession (50% partnership with Vinci). Well-positioned to become a key
player in the Balkans.
Price performance
Share performance
Quite attractive valuation to its peers (trades at a double-digit discount on any
valuation metric). 3200
2800
Investment negatives 6
2400
The Greek State - Ellaktor’s major client - has been consistently exhibiting
significant payment delays. 2000
1600
A rather complicated group structure with numerous participations in non-listed 4
companies and non-core activities. 1200
01-09
03-09
05-09
07-09
09-09
11-09
Uncertainty related to the substantial delays in the implementation of the Blue City Ellaktor S.A. Greece ATHEX Composite
project in Oman.
Source: Company, JCF, National P&K Securities Research estimates
Catalysts
The expected re-tendering of the Attica Ring Road and the tendering of the
Company description
Kasteli international airport in Crete (budget estimated at around €1.0bn). Ellaktor is a holdings company with operations in:
Construction: Aktor is the group’s key productive force and
The tendering of c. €5.2bn of new PPP projects. largest construction company in Greece. Aktor’s backlog is at
historical levels at c. €5bn.
Concessions: Aktor Concessions has the largest domestic
Continuation of restructuring and the completion of permitting process on concessions portfolio after totally absorbing the group’s
concession activities.
environmental issues in the Group’s mining activities in Northern Greece. Environmental: Helector is active in waste collection and
management as well as energy production from Renewable
Energy Sources.
RES: ELTECH Wind incorporates the group’s wind energy
operations following the recent restructuring in the wind energy
division.
Real Estate: REDS focuses on the development of shopping and
leisure centers, offices, mixed-use and residential projects.
Other Holdings: The group maintains minority shareholdings in
Hellenic Casino of Parnitha, European Goldfields and Hellas Gold.
Broad base presence, not particularly focused on one country, except for Greece. Trading Data
Absolute 3m -0.17%
Its future earnings power from SEE could be substantially higher than that of its -¨ ¨- 12m 55%
peers Relative to ATG 3m -5%
-¨ ¨- 12m 13%
Committed to financial innovation and client service 3m avg. daily trading vol. in € m 15.5
Weight in ATG 6.7%
Investment negatives
Price performance
High proportion of Gov Pfd capital to common equity. Repayment could lead to
equity offering. Company has repeatedly denied their need of fresh capital Share performance
3200
Limited capacity to further securitize loan book 12
2800
10
2400
One of the most exposed banks to consumer credit in our coverage 8
2000
Catalysts 6
1600
4
Economic recovery in the region, the bank has the most earnings power among 1200
domestic peers.
01-09
03-09
05-09
07-09
09-09
11-09
EFG Eurobank Ergasias S.A.
Better/Worse than expected macro environment in Greece could affect asset Greece ATHEX Composite
Company description
EFG was established in 1990 and is the 2nd largest bank in
Greece by market capitalization. Today, Eurobank EFG is a
European banking organisation that employs over 19,000
people and offers its products and services both through its
network of over 1,400 branches and points of sale and through
alternative distribution channels.
Key financials 2007 2008 2009E 2010E 2011E
Net Loans (€ m) 45,638 55,878 55,217 57,823 61,865
Deposits (€ m) 36,151 45,656 47,794 50,140 52,881
Revenues (€ m) 2,817 3,277 3,069 3,127 3,408
Pre-tax profit (€ m) 1,050 818 454 503 759
Net profit (€ m) 851 652 370 400 603
EPS (€) 1.67 1.24 0.70 0.74 1.12
EPS chng (%) 18.0% -26.00% -43.26% 5.89% 50.80%
ROE (%) 23.6% 16.6% 9.8% 9.8% 13.7%
ROA (%) 1.33% 0.87% 0.44% 0.47% 0.68%
P/E (x) 14.4 4.6 11.3 10.7 7.1
P/BV (x) 2.97 0.84 1.08 1.02 0.93 Panagiotis Kladis, CFA
Dividend yield (%) 3.37% 0.00% 2.16% 2.34% 4.23% Analyst/Financials
+30210 7720 185
Cost/income (%) 48.8% 47.8% 47.9% 48.6% 46.7%
Source: Company, National P&K Securities Research estimates
kladis@nationalpk.nbg.gr
The company has agreed with telecom providers in order to develop wireless Expected return /Valuation
network via the installation of base stations Upside to price target N/A
Dividend yield estimate N/A
Total return forecast N/A
Investment negatives
Water losses, reflecting the poor state of the existing distribution network, have a
detrimental effect on revenues
Trading Data
EYATH Pagion has not fulfilled its commitment related with the realization of the Absolute 3m -0.09%
-¨ ¨- 12m 18%
company’s investment program
Relative to ATG 3m -4%
-¨ ¨- 12m -14%
Cancellation of the tender regarding potential placement 3m avg. daily trading vol. in € m 0.25
Weight in ATG N/A
Catalysts
Payment collection from bulk customers such as municipalities
Geographical expansion
Price performance
Management change Share performance
8 3200
The advent of a strategic investor will result in synergies on a number of issues
2800
6 2400
2000
4 1600
1200
01-09
03-09
05-09
07-09
09-09
11-09
Thessaloniki Water Supply & Sewerage Co. S.A.
Greece ATHEX Composite
Company description
Listed in the ASE since September 2001, EYATH is the 2nd
largest water supply and sewage regional monopoly serving
more than 1,100,000 consumers in the Greater Thessaloniki
area, Greece’s 2nd largest city. The Greek state is the
controlling shareholder with 74.02% of outstanding shares.
Stock Data
Investment positives 52 week low / high 4.50-7.49
Market cap in € m 617.7
Resilient sector Reuters / Bloomberg EYDr.AT / EYDAP GA
Free float (e) 28%
Secure status under a regulated monopoly
Headcount reduction
Expected return /Valuation
Upside to price target N/A
Dividend yield estimate N/A
Investment negatives Total return forecast N/A
The Greek State has not fulfilled its commitment to cover 60% of capex, for
upgrades of the existing network
Trading Data
High receivables mainly in the face of municipalities Absolute 3m -0.03%
-¨ ¨- 12m 18%
Trades at a premium vs. its peer group Relative to ATG 3m 11%
-¨ ¨- 12m -14%
Water losses, reflecting the poor state of the existing distribution network, have a 3m avg. daily trading vol. in € m 0.32
detrimental effect on revenues Weight in ATG 0.9%
Catalysts
Price performance
Payment collection from bulk customers such as municipalities
Share performance
Geographical expansion 8 3200
2 1200
01-09
03-09
05-09
07-09
09-09
11-09
Athens Water Supply & Sewerage Co. S.A.
Greece ATHEX Composite
Company description
Listed in the ASE in December 1999, EYDAP is the largest
water and sewage regional monopoly in Greece serving more
than five million consumers in the Greater Athens area. The
Greek state is the controlling shareholder with 61% of
outstanding shares.
The group’s diversification in different sectors and markets gives a competitive Price performance
advantage vs. other retailers Share performance
Strong presence in the Far East, where consumer spending on luxury items is 3200
12 2400
Investment negatives 8
2000
1600
The efficient integration of all the subsidiaries, which will enable the company to
materialise the respective synergies, runs execution risks 4 1200
01-09
03-09
05-09
07-09
09-09
11-09
High leverage with limited visible improvement in WC needs Folli-Follie S.A.
Greece ATHEX Composite
Complex structure- the group owns three listed entities. Source: Company, JCF, National P&K Securities Research estimates
Catalysts
Further consolidation of the Greek market in favour of department stores and malls Company description
The Group consists of Folli Follie Standalone company and
Expansion of operations in new regions- US penetration with Folli Follie and Links holds 56% of Duty Free Shops Group (since July 06). Folli
Follie Standalone designs, produces and sells via a mainly
brands proprietary distribution network a wide variety of jewellery,
watches and associated fashion accessories. At the end of 9m
Penetration in new sectors such as children wear 09 it operated 365 POS in 24 countries with focus in Asia and
Japan.
Expected return
Investment positives Upside to price target 92.7%
Dividend yield estimate 0.0%
Exposure to the highly attractive Greek broadband market and incumbent OTE Total return forecast 92.7%
maintains relatively high market share.
Strong brand name and early mover advantage reflected in leading market shares Trading Data
in broadband and unbundled customers. Content and new pricing of Nova Pay TV Absolute 3m -33%
likely to support country-wide triple play offers and boost customer loyalty. -¨ ¨- 12m 76%
Relative to ATG 3m -23%
Improving market share momentum in new broadband customers and early signs -¨ ¨- 12m 28%
of easing pricing pressures as competitors struggle with financial burdens. 3m avg. daily trading vol. in € m 0.46
Weight in ATG (%) 0.27
03-09
05-09
07-09
09-09
11-09
Forthnet S.A. Greece ATHEX Composite
Catalysts Source: Company, JCF, National P&K Securities Research estimates
Further M&A among smaller players (HOL, On Telecoms) may improve industry
structure and reduce pricing pressures. Company description
Started as a major Internet Service provider, Forthnet is now a
major facility -based alternative fixed line operator employing
an expanding owned network to offer VoiP based broadband
services in voice, data, and video. It has recently completed the
acquisition of Net Med, sole Pay TV provider in Greece, to
support triple play services.
Key financials 2007 2008 2009E 2010E 2011E
Turnover (€ m) 118.8 211.8 377.8 411.7 443.3
EBITDA (€ m) -20.1 9.6 60.3 76.8 91.1
Profit after-tax (€m) -32.5 -40.5 -5.4 3.5 11.7
reported EPS (€) -0.84 -0.52 -0.03 0.02 0.08
adj.EPS chng (%) n.m. n.m. n.m. n.m. 235.6%
rep.P/E (x) n.m. n.m. n.m. 48.5 14.5
EV/EBITDA (x) n.m. 44.7 8.9 6.8 5.4
FCF yield (%) 2.3 0.3 0.4 0.4 0.4 Theodore Ritsos
DPS (€) 0.00 0.00 0.00 0.00 0.04 Research Director
+30210 7720 176
Dividend Yield (%) 0.0% 0.0% 0.0% 0.0% 3.8% t.ritsos@nationalpk.nbg.gr
Source: Company, National P&K Securities Research estimates
6 1600
Potential loss of franchise/exclusive brands
1200
01-09
03-09
05-09
07-09
09-09
11-09
Catalysts Fourlis Holdings S.A. Greece ATHEX Composite
Enrichment of product mix with further brands or items Source: Company, JCF, National P&K Securities Research estimates
Hellenic and other bottlers represent a barrier to entry for potential competition. 2400
6
2000
A large part of Frigoglass operations are based in emerging markets, where
political and economic unrest can affect Frigoglass operations 4 1600
03-09
05-09
07-09
09-09
11-09
High interdependence with Coca-Cola Hellenic
Frigoglass S.A. Greece ATHEX Composite
Reinvestment risk. Given the group’s strong cash flow generation, there is a
potential reinvestment risk relating to the use of cash. In the past, the management Source: Company, JCF, National P&K Securities Research estimates
proceeded either with capital return to shareholders or with acquisition during
periods of excess cash with the overall balance being positive.
Catalysts Company description
Frigoglass S.A.I.C. and its subsidiaries are engaged in the
Acquisition/joint venture in Asia, Middle East, North America manufacturing, trade and distribution of commercial efrigeration
units for beverage and dairy companies. The Group has
Further capacity additions in China manufacturing plants and sales offices in Europe, Asia, and
Africa. The Company is a limited liability company incorporated
New products targeting new clients and based in Kifissia, Attica. The Company’s’ shares are listed
on the Athens Stock Exchange.
Investment positives
GEK-TERNA is the third largest construction-concession group in Greece with a Expected return /Valuation
backlog of c. €1.8bn. In our view, the current backlog size ensures good revenue Upside to price target N/A
visibility over the coming 2-3 years. Dividend yield estimate N/A
Total return forecast N/A
The Group has an established construction presence abroad (Balkans and the
Middle East) with a well-diversified client base across geographical regions.
Trading Data
Early mover advantage in thermal electricity production as Heron is the first private Absolute 3m -0.06%
operational thermoelectric plant. In addition, a second 435 MW CCGT plant will -¨ ¨- 12m 89%
commence operations during Q2 2010. Relative to ATG 3m 8%
-¨ ¨- 12m 38%
3m avg. daily trading vol. in € m 1.08
GEK-TERNA is poised to benefit from the attractive growth prospects in the Weight in ATG 0.8%
domestic wind-energy market as capacity factors are relatively high and incentives
granted by the Greek State are very favourable
2800
Overseas competition could lead to bidding discounts and margin erosion. 6
2400
2000
Real estate property operations could be subject to revaluations in the future in the 4
case of unfavourable market conditions. 1600
2 1200
01-09
03-09
05-09
07-09
09-09
11-09
In the past, there have been significant delays on wind parks’ installation.
GEK TERNA Holding, Real Estate, Construction S.A.
Catalysts Greece ATHEX Composite
Following significant past delays, the long-awaited c. €1.8bn new tender of Attica Company description
Ring Road’s extension could be a meaningful contributor to the Group’s backlog. GEK TERNA is a holding company operating in energy,
concessions construction, real estate and industrials. GEK
The advent of a strategic investor will result in synergies on a number of issues. recently absorbed its construction subsidiary Terna while it
is active in the RES sector via a 47.4% in the listed
company Terna Energy.
High EBIT margin in the last years and a target payout ratio at 60%, with an
established policy to return excess cash to shareholders. Trading Data
Absolute 3m -0.1%
Investment negatives -¨ ¨- 12m 37%
Relative to ATG 3m 9%
Following the implementation of MiFid, alternative trading platforms were -¨ ¨- 12m 10%
established (ie Chi-X, Turquoise) that offer more attractive pricing. This is a threat 3m avg. daily trading vol. in € m 2.8
to all organised exchanges Weight in ATG 0.7%
Large concentration in large caps. Top 5 trade shares account for 56% of total
turnover in 2008. Given the establishment of the alternative platforms this can be a Price performance
serious threat
Share performance
Catalysts
3200
A potential new M&A wave in the sector globally. Given the fact that HelEx’s is the 10
2800
largest exchange in the SEE it could be a likely candidate in our view
8 2400
2000
6
1600
4
1200
12-08
02-09
04-09
06-09
08-09
10-09
Hellenic Exchanges Holding S.A.
Greece ATHEX Composite
Company description
Hellenic Exchanges supports the structure and operation of the
Hellenic Capital Market. The company was privatized in ’03,
following the disposal of the State’s stake (33.4%) to seven
Greek banks as well as retail & institutional shareholders
Key financials 2007 2008 2009E 2010E 2011E
Turnover (€ m) 161 108 78 86 96
EBITDA (€ m) 119 83 51 58 66
Profit after-tax (€ m) 91 65 39 44 50
EPS (Euro)) 1.29 0.92 0.57 0.68 0.77
EPS chng (%) 56.4% -28.7% -38.4% 18.9% 13.4%
P/E (x)* 18.2 6.0 17.9 15.0 13.3
P/E (excluding cash) 16.2 2.9 14.3 12.5 10.2
EV/EBITDA (x) 12.5 3.0 10.4 8.6 7.0
RoE (%) 53.0% 37.1% 24.2% 25.8% 25.3%
ROIC (%) 44.7% 35.8% 21.7% 21.6% 21.6%
Free Cash Flow yield (%) 5.4% 14.3% 5.0% 6.4% 7.3% Panagiotis Kladis, CFA
Analyst/Financials
Ord. Dividend Yield (%) 3.2% 8.2% 2.8% 3.3% 3.8%
+30210 7720 185
P/BV (x) 8.8 2.4 4.3 3.6 3.1 kladis@nationalpk.nbg.gr
Source: Company, National P&K Securities Research estimates
02-09
04-09
06-09
08-09
10-09
significant inventory losses Hellenic Petroleum S.A. Greece ATHEX Composite
Hellenic Petroleum’s Nelson Complexity Index stands below Motor Oil’s and below
or at par with the index of other European competitors Source: Hellenic Petroleum, JCF, National P&K Securities Research estimates
Catalysts
Hydrocracker and cocker investment to take effect by ’11 will improve the Company description
Hellenic Petroleum is the country’s largest refining and
company’s refining margins petroleum marketing company, with 70% of total domestic
refining capacity and a network of nearly 1,512 retail stations.
The company has also has a 54% stake in FYROM’s Okta
refinery and a 35% stake in Greece’s natural gas company
DEPA. The Greek state is the controlling shareholder with
35.5% of the outstanding shares.
Asset quality strong with NPL<1%, and over 100% cash coverage Trading Data
Absolute 3m -0.1%
Following the recent capital injection HP has a comfortable capital base -¨ ¨- 12m -10%
Relative to ATG 3m 0%
Investment negatives -¨ ¨- 12m -20%
3m avg. daily trading vol. in € m 3.2
Low earnings quality, very volatile income dependent on financial market Weight in ATG 1.4%
performance
Price performance
Politically appointed management; subject to changes upon political developments
Share performance
Catalysts 2800
2400
Strong financial markets could help bank generate abnormally high revenues.
4 2000
A strategy to enhance core banking revenues and gradually reduce dependency
on financial markets. 1600
1200
Better/Worse than expected macro environment in Greece could affect asset
01-09
03-09
05-09
07-09
09-09
11-09
quality and cost of funding
TT Hellenic Postbank S.A. Greece ATHEX Composite
Company description
The Greek Postal Savings Bank started operating in Crete in
1900. In 2002 it become a Societe Anonyme, in 2004 a new
management team was appointed and in 2006 it gained a full
banking license. The Greek state owns a direct stake of 35.2%
(following the IPO and placement) while the Hellenic Post holds
a further 10%. GPSB has excess liquidity enabling it to provide
competitive prices on household loans due to low funding
costs.
Key financials 2007 2008 2009E 2010E 2011E
Net loans (Euro m) 6,024 7,004 7,934 8,575 9,426
Deposits (Euro m) 11,156 11,211 12,679 13,162 13,707
Total Assets (Euro m) 13,182 14,898 16,313 16,832 17,700
Pre-tax profit (Euro m) 50 3 171 119 158
Net profit (Euro m) 43 3 135 93 123
EPS (€) 0.31 0.02 0.47 0.33 0.43
EPS chng (%) -68.3% -93.5% 2261.2% -31.1% 32.4%
ROE (%) 5.4% 0.5% 15.0% 7.2% 9.2%
ROA (%) 0.34% 0.02% 0.86% 0.56% 0.71%
P/E after tax (x) 40.2 277.9 8.9 13.0 218.3
P/BV (x) 2.36 1.51 0.95 0.93 0.9 Panagiotis Kladis, CFA
Analyst/Financials
Dividend yield (%) 2.0% 0.0% 3.9% 2.7% 3.6%
+30210 7720 185
Cost/income 73% 77% 54% 61% 57% kladis@nationalpk.nbg.gr
Source: Company, National P&K Securities Research estimates
Increased bed capacity with Iaso Pediatrics (65 beds) and Iaso Thessaly (169 Trading Data
beds) that raise Company’s bed capacity by 41% Absolute 3m -13%
-¨ ¨- 12m -20%
Valuation is attractive both on a multiples basis, as well as from a DCF Relative to ATG 3m 0%
perspective. Our €4.7/share is based on our DCF -¨ ¨- 12m -41%
3m avg. daily trading vol. in € m 0.1
Possitive FCFs with low Capex requirements in the coming years Weight in ATG 0.3%
Strong relationships with physicians who own 77% of the Company. Maintaining a
Price performance
high physician retention rate is key attracting new end customers and maintaining Share performance
market share.
3200
As doctors’ participation remains low in the Iaso General, the further development 2000
4
of diagnostic centres may be required for an increase in outpatients inflow
1600
Lack of growth in the birth count in Greece may lead to increased competition in
1200
the maternity sector in the following years (Gaia from Athens Medical Center as of
01-09
03-09
05-09
07-09
09-09
11-09
th
November 16 2009 - Rea hospital in Athens as of 2011)
IASO S.A. Greece ATHEX Composite
Euromedica, one of the main competitors, holds circa 10% of the Group’s share Source: Company, JCF, National P&K Securities Research estimates
capital. Additional stock sales from Euromedica could potentially limit near term-
upside for Iaso. Company description
IASO S.A. is a Greek company engaged in the provision of health
Catalysts and medical services. The Company currently operates one
obstetric, one general and one pediatric hospital units while it plans
to expand with the construction of two more medical units.
Development of diagnostic centers that will increase outpatients Inflow Iaso Maternity accommodates 333 beds. Iaso General
accommodates 237 beds. Iaso S.A. holds 97.07% of Iaso General.
Turnaround of Iaso General through increased participation of doctors’ in its share Iaso Pediatrics is a new hospital unit, which operates as a
capital department of Iaso Maternity and accommodates 65 beds in total.
Iaso Thessalias will operate as a fully equipped General and
Obstetrics hospital with Intensive Care unit. Iaso Thessalias will
accommodate 169 beds in total. The parent company will hold a
67.93% stake of Iaso Thessalias while doctors from the region will
hold the remaining 32.07%. The Group expects that Iaso Thessalias
will commence operations during Q1’10.
Key financials 2007 2008 2009E 2010E 2011E
Turnover (€ m) 170 184 180 201 212
EBITDA (€ m) 45 50 39 40 42
EBIT (€m) 37 42 30 29 30
EBT (€m) 34 36 28 27 28
EPS (€) 0.39 0.40 0.33 0.37 0.39
EPSchange % 53% 5% -19% 13% 5%
P/E (x) 27.0 11.0 10.9 9.6 9.1
EV/EBITDA (x) 14.5 6.9 8.2 8.0 7.5
EV/Bed 0.5 0.8 1.2 0.5 0.5 Iakovos Kourtesis
RoE (%) 15.8% 18.5% 14.0% 15.1% 14.8% Health Care Analyst
+30210 7720 251
DPS (€) 0.27 0.22 0.11 0.15 0.18
ikourtesis@nationalpk.nbg.gr
Dividend Yield (%) 2.6% 5.0% 3.2% 4.2% 4.9%
Source: Company, National P& K Securities Research estimates
Aggressive competition by low cost Chinese products in the SE European region 2.0
2800
03-09
05-09
07-09
09-09
11-09
Intracom Holdings S.A. Greece ATHEX Composite
Investment negatives
Legal and re-investment risk arising from the contractual nature of the business Price performance
Share performance
Betting contingent liability
6 3200
Catalysts 2000
3
1600
Structural reform of the gaming market
2 1200
New projects in Australia and online opportunities in Europe
01-09
03-09
05-09
07-09
09-09
Intralot S.A.
11-09
Greece ATHEX Composite
Company description
Intralot is a leading provider of integrated lottery systems,
operation and related services, globally. It ranks second in the
worldwide gaming lottery vendor/operator market, with its
competitive advantage to offer both the software and the
development and organization of lottery games.
Strong profit margins attributed to efficient product mix and low cost imports. Solid Price performance
free cash flow generation, strong return ratios. Share performance
3200
Efficient management with successful track record
2800
Investment negatives 8
2400
Dependency on importers - 80% of imports originate from China (currency,
6 2000
political, macroeconomic risks)
1600
Potential delays in the store rollout in Greece and the Balkans 4
1200
Dependency on consumer spending levels and trends; however product mix
01-09
03-09
05-09
07-09
09-09
11-09
skewed towards more staple products Jumbo S.A. Greece ATHEX Composite
03-09
05-09
07-09
09-09
11-09
Low stock liquidity due to relatively small free float Korres S.A. Natural Products Greece ATHEX Composite
Catalysts
Geographic expansion-penetration, with main focus remaining on the large Company description
Korres Natural Products is a rapidly developing Greek company
established markets (US, Germany, Spain). with roots in the first Homeopathic Pharmacy of Athens.The
company today offers a complete skin and hair care range,
Product licensing agreement with Johnson & Johnson for the distribution of Korres make-up, sun care products and herbal preparations. Based on
products in North America during 2011-2019. a legacy of 3000 homeopathic remedies of herbal origin from
the Korres pharmacy, the company today offers more than 500
skin and hair care products and herbal preparations. Korres
New product line/brand launches - Recently launched new patent pending has a goal to become a major international brand and already
revolutionary anti-aging line. has a presence in 30 countries at 4,800 POS globally and in ca.
5,600 pharmacies in Greece along with 4 stand alone stores.
Does not participate in any government support plan; hence no need to abide to Trading Data
any further restriction Absolute 3m -0.06%
-¨ ¨- 12m 29%
Affiliation to MIG provides access to a number of corporate and individual Relative to ATG 3m 8%
customers -¨ ¨- 12m -6%
3m avg. daily trading vol. in € m 12.3
Investment negatives Weight in ATG 3%
Lack of long history and track record. The group’s current structure was formed in Price performance
2007 after the merger of three small banks in Greece as well as other smaller
acquisitions in Ukraine and Russia. Share performance
3200
Margins have been crushed on banks strategy to gain market share
2800
Cypriot economy is largely affected by the real estate market and tourism which 2400
both depend to a large extent on foreigners, mostly Russian and British. Both
2 2000
sectors are still facing challenges in the after math of the global recession.
1600
Catalysts
1200
Affiliation to MIG, could lead to involvement in corporate actions.
01-09
03-09
05-09
07-09
09-09
11-09
Marfin Popular Bank PCL Greece ATHEX Composite
Better/Worse than expected macro environment in Greece could affect asset
quality and cost of funding.
Source: Company, JCF, National P&K Securities Research estimates
Company description
Marfin Popular Bank Public Co Ltd is a commercial bank
offering financial services such as credit cards, commercial and
consumer loans and advances, investment and insurance
services and other related products.
Well-diversified project portfolio that breaks down to: a) Projects abroad: 58%, b)
PPC: 27%, c) Endesa Hellas/Mytil: 15%. Trading Data
Absolute 3m +6%
The project assignments in Pakistan, Romania, Syria and Turkey prove that Metka -¨ ¨- 12m +62%
can successfully participate in international tenders winning new contracts. Relative to ATG 3m +21%
-¨ ¨- 12m +18%
Net cash position reaching €31m in the 9-month period. 3m avg. daily trading vol. in € m 0.6
Weight in ATG 0.7%
High operating margins and economic returns, very low capex needs and decent
dividend yield.
Attractive valuation at current levels. Our projections imply an EPS CAGR ’09-’11 Price performance
Share performance
of 32%.
3200
Investment negatives
10 2800
Execution risks associated with the implementation of new projects.
2400
8
Anticipated margin erosion going forward due to increasing competition and 2000
expansion into new markets.
1600
6
Significant delays, linked to external factors though, in the commencement of 1200
some projects.
01-09
03-09
05-09
07-09
09-09
11-09
Catalysts METKA S.A. Greece ATHEX Composite
Because of its high complexity and because of the availability of different suppliers
available in the area, MOH can continuously optimise its feedstock Price performance
MOH’s sales are in all three main markets works as a “safety net”, and they have Share performance
the ability to optimise their profit margins according the supply and demand in 3200
each market 12 2800
Even though MOH complies with the regulation for domestic sales, a large share 2400
10
of its sales is abroad and as a consequence its average inventory is significantly 2000
less than any other land-locked European refinery. Thus, Motor Oil is less exposed
8 1600
to the volatility of oil prices
1200
Investment negatives
01-09
03-09
05-09
07-09
09-09
11-09
Motor Oil Hellas Corinth Refineries S.A.
Soft benchmark refining margins Greece ATHEX Composite
Fluctuation in the USD and current weak USD vs. the Euro
Source: Company, JCF, National P&K Securities Research estimates
Catalysts
The CDU investment will allow Motor Oil to expand its production by ’10, to boost Company description
volumes and improve margins Motor Oil is the second refining and petroleum marketing
company in Greece, with c. 25% of total domestic refining
capacity and a network of nearly 575 retail stations. The group
is involved in crude oil refining as well as the wholesale and
retail marketing and distribution of refined petroleum products
through its subsidiary Avin Oil. The refinery located in Ag.
Theodoroi, 70km outside Athens, is equipped with a crude oil
distillation unit, a catalytic reforming unit, a hydro-processing
unit, catalytic and thermal cracking units, and a hydrocracking
unit. The group’s production includes lubricants, liquid gases,
gasolines, jet fuels, special products, diesels, and fuels oils. It
group has the only lubricant production complex in Greece.
Key financials 2007 2008 2009E 2010E 2011E
Turnover (€ m) 4,070 5,505 3,569 4,998 5,837
EBITDA (€ m) 296 191 202 248 314
Profit after-tax (€m) 150 78 110 126 174
EPS (€) 1.35 0.71 0.99 1.14 1.57
EPS chng (%) 17.2 -47.7 40.6 14.8 37.7
P/E (x) 11.7 10.8 10.7 9.4 6.6
EV/EBITDA (x) 8.3 7.9 8.9 8.4 6.7
Victor Labate
FCF yield (%) 6.7 22.9 8.6 -23.9 8.3
Oil & Gas / Industrials Analyst
DPS (€) 1.20 0.60 0.84 1.24 1.35 +30210 7720 076
Dividend Yield (%) 7.6 7.9 7.9 12.1 13.1 labate@nationalpk.nbg.gr
Source: Company, National P&K Securities Research estimates
Investment negatives
Price performance
Low visibility for the group’s metals and mining operations (mainly aluminium Share performance
smelting operation and zinc/lead smelter in Romania). 3200
2800
Increased uncertainty regarding Endesa Hellas’ shareholding structure and the 6
implementation of its strategy in the energy sector. 2400
2000
Unfavourable operating conditions in the domestic energy wholesale market.
4
1600
Catalysts
1200
Endesa Hellas’ shareholding structure and potential corporate actions in the
01-09
03-09
05-09
07-09
09-09
11-09
energy sector. Mytilineos Holdings S.A. Greece ATHEX Composite
Resilient sector
Investment negatives
Risk of losing market share from illegal betting competition as well as Internet
gambling. Price performance
Share performance
The liberalization of the gaming/betting market. 3200
24
2800
Dependence on the Greek State to approve new games. 22
2400
20
Taxation measures could have an adverse effect on player spending 2000
18
1600
Catalysts 16
1200
01-09
04-09
07-09
10-09
Governmental approval for new games
OPAP S.A.
Greece ATHEX Composite
Gambling market liberalization
Source: Company, JCF, National P&K Securities Research estimates
Investment positives
Trading Data
Cost cutting efforts in Greek fixed line in 2010 likely to offset customer Absolute 3m -9%
disconnections and top line pressure. -¨ ¨- 12m -18%
Relative to ATG 3m 4%
Synergies from procurement of terminals and CAPEX through Deutsche Telekom. -¨ ¨- 12m -40%
3m avg. daily trading vol. in € m 13.36
Potential for value addition/ revenue streams by exploring owned real estate Weight in ATG (%) 8.06
development (over €1.5bn in value).
Price performance
Share performance
Investment negatives 16.0 3200
15.0
Possible management transition remains an untested decision making structure. 2800
14.0
Unsustainable but aggressive price wars in unbundled Greek fixed line and mobile 13.0 2400
12.0
--chasing market share-- weaken revenue streams. 2000
11.0
10.0
1600
9.0
03-09
05-09
07-09
09-09
11-09
Reflection of DT synergies on financials and M&A activity among smaller players Hellenic Telecommunications Organization S.A.
may result in industry rationalization. Greece ATHEX Composite
Annual guidance early in 2010 may provide further clarity and visibility about size
and timing of employee redundancies as well as the impact of competition in fixed
and mobile units. Company description
OTE is the incumbent integrated telecom services provider in
Greece, owns Cosmote, the leading mobile operator in Greece
in total customers and retains 54% stake in Romanian
incumbent Rom Telecom.
Branch network for the most part has not yet matured, leaving room for increase in Trading Data
franchise value Absolute 3m -0.3%
-¨ ¨- 12m 53%
Established a good presence in many SEE economies; in most of them banking Relative to ATG 3m -17%
penetration remains low -¨ ¨- 12m 12%
3m avg. daily trading vol. in € m 11.3
Weight in ATG 4.6%
Strong capital base (Core Tier I at 8.2%) and relatively low leverage (TE/TA: 5.5)
Price performance
Investment negatives Share performance
14 3200
Liquidity constraints as L/D ratio stands at 124%, and limited potential for
additional balance sheet securitization 12
2800
10
2400
Lower than peers’ provisioning policy on the back of different policy regarding 8
collaterals and lower pre-provision income 6
2000
4 1600
Catalysts 2 1200
Better than expected economic performance in SEE could lead to significant
01-09
03-09
05-09
07-09
09-09
11-09
upside.
Piraeus Bank S.A. Greece ATHEX Composite
Better/Worse than expected macro environment in Greece could affect asset Source: Company, JCF, National P&K Securities Research estimates
Low leverage: At debt to equity below 0.4x and EBITDA to interest cover over 10x Price performance
financial risk remains well under control. Significantly lower operating margins Share performance
relative to EU peers (c. 25% vs. over 30%) underpin restructuring opportunities: 18.0 3200
relatively low personnel productivity and inefficient operations, targeted by a recent 17.0
company-wide restructuring program, to be further enhanced by new terminal 16.0 2800
15.0
operations. 14.0 2400
13.0
12.0 2000
Investment negatives 11.0
10.0 1600
9.0
Significant influence imposed by the dominant shareholder, the Greek state, 8.0 1200
sustains certain limitations in employment status and lower operational flexibility to
12-08
02-09
04-09
06-09
08-09
10-09
PPA’s own operations (i.e. other than Cosco).
Piraeus Port Authority S.A. Greece ATHEX Composite
Sustained strike activity by dockworkers during overtime and weekends Source: Company, JCF, National P&K Securities Research estimates
employment for a great part of 2009 has significantly hammered recent financials
and may delay customer uptake for Piraeus Port remaining container operations.
Hard to predict timing and value of real estate property development.
Company description
Piraeus Port Authority (PPA) is Greece’s largest port operator
authority with a business portfolio in transport services,
Catalysts transport infrastructure and property development – all under
long-term concessions. It is among the world’s 50 largest ports
Long lasting agreement with employee unions about the new employment terms and the largest port in East Mediterranean in container
throughput, as well as Europe’s largest and third largest port in
will help realize efficiency gains and operating margin expansion for the operations
the world in passenger traffic (20 m passengers per year). PPA
run by Piraeus Port. has outsourced one (out of targeted three) container terminal,
with Cosco Pacific-- to assume full operations late H1 ’10.
Key financials 2007 2008 2009E 2010E 2011E
Turnover (€ m) 171.4 116.0 140.4 133.7 148.1
EBITDA (€ m) 43.1 18.4 26.2 42.6 51.1
Profit after-tax (€m) 24.6 5.6 7.6 18.2 23.7
reported EPS (€) 0.98 0.22 0.30 0.73 0.95
adj.EPS chng (%) 101.3% -77.2% 35.9% 139.2% 30.2%
rep.P/E (x) 30.6 43.4 51.0 21.3 16.4
EV/EBITDA (x) 16.7 13.5 15.7 9.9 8.0
Theodore Ritsos
P/BV 4.2 1.4 2.1 2.0 1.8
Research Director
DPS (€) 0.33 0.07 0.10 0.12 0.15 +30210 7720 176
Dividend Yield (%) 0.5% 3.4% 0.5% 0.6% 0.8% t.ritsos@nationalpk.nbg.gr
Source: Company, National P&K Securities Research estimates
1200
Speed up in RES capacity additions as green energy ranks very high in the
01-09
03-09
05-09
07-09
09-09
11-09
agenda of the new government and of the recently appointed management.
Public Power Corp. S.A. Greece ATHEX Composite
Pace of implementation of the announced investments, especially the ones related Source: Company, JCF, National P&K Securities Research estimates
to the decommissioning of existing old/carbon-intensive generation assets.
Stock Data
Investment positives 52 week low / high 4.18 - 7.69
Market cap in € m 137
Geographical diversification of the group’s operations globally, diversified product Reuters / Bloomberg BARr.AT / ARBA GA
portfolio, niche markets in which S&B operates, long-term relationship with its Free float (e) 23.5%
customers. The company has managed to maintain its market share and pricing Institutional ownership (e) 30.7%
power across all segments.
Minor exposure to the Greek market, where demand in key sectors is expected to
Expected return
remain weak in 2010. Well-positioned to benefit from a potential recovery in key
Upside to price target n.a
industrial sectors in Europe and in the US. Dividend yield estimate n.a
Total return forecast n.a
Divestment of commercial (non-core) activities Motodynamic and Ergotrak and
focus on the industrial minerals core business, an activity with significantly higher
margins.
Effective cost-cutting initiatives highlighted by continuing reduction in net operating Trading Data
expenses of €7.2m (down 15%) in 9M’09. Absolute 3m -7%
-¨ ¨- 12m -40%
Relative to ATG 3m +7%
Significant net debt reduction on the back of the successful €40.8m rights issue -¨ ¨- 12m -56%
and organic reduction. 3m avg. daily trading vol. in € m 0.05
Weight in ATG 0.3%
Normalization of bauxite production process and significant margin improvement
evidenced in ’09 following the favourable court ruling on bauxite mining in Central
Greece.
Price performance
Investment negatives Share performance
3200
Low economic returns that barely cover the cost of capital.
2800
Low organic growth with, however, the potential to grow through acquisitions in the
2400
key niche markets it operates. 6
2000
Low liquidity of the shares, limited free float.
1600
Catalysts 4 1200
01-09
03-09
05-09
07-09
09-09
11-09
Potential upturn in global economy and increasing demand in key industrial
sectors, such as: steel industry, foundries, construction sector and automotive S&B Industrial Minerals S.A. Greece ATHEX Composite
industry, will boost S&B’s sales and profits. Source: Company, JCF, National P&K Securities Research estimates
Oil prices, ocean freight rates and USD/EUR rate going forward.
Company description
S&B is engaged in the production of the specialty industrial
minerals of bentonite, perlite, bauxite and fluxes. It is an
internationally oriented company with nearly 93% of its
products either exported or produced abroad and more than
50% of its assets located outside Greece.S&B stock is included
in the following indices: Athex Composite Share Price Index,
FTSE/Athex Mid 40, FTSE/Athex International, FTSE/Athex
Basic Resources, Eurobank Mid Cap Private Sector 50 Index.
The upside in the Greek cosmetics market is limited- however the company’s 2400
profitability is highly dependent on the Greek market as it still accounts for 60% of 4
EBIT 2000
Strong competition in the sector with high marketing needs – Intensification of 1600
competition in SEE from multinationals could inhibit the targeted profitability 1200
improvement in the region
01-09
03-09
05-09
07-09
09-09
11-09
FX risk as it has high exposure in SEE (translation and transaction risks) Gr. Sarantis S.A. Greece ATHEX Composite
03-09
05-09
07-09
09-09
11-09
The steel industry is cyclical by nature.
Sidenor Steel Products Manufacturing Co. S.A.
High leverage. Greece ATHEX Composite
Investment positives
Trading Data
Favorable environment for wind energy in Greece
Absolute 3m 0.22%
Secure supply of turbines mid-term -¨ ¨- 12m 66%
Relative to ATG 3m 40%
Wind energy in Greece is a value-adding power segment with IRRs higher than -¨ ¨- 12m 21%
15% 3m avg. daily trading vol. in € m 0.36
Weight in ATG 1%
Net cash position of €81m
5 2000
Catalysts 4 1600
3 1200
New land planning law to lower litigation risk
01-09
04-09
07-09
10-09
RES tariff evolution Terna Energy S.A. Greece ATHEX Composite
Upside risk is higher than downside risk at this point of the cycle in the US market.
Trading Data
Strong performance in Egypt is expected to continue into 2010 due to solid Absolute 3m -6%
demand and good pricing. In addition, the new production line will increase Titan’s -¨ ¨- 12m 60%
production capacity in Egypt by 1.5mil MT to 5mil MT and will boost profit margins Relative to ATG 3m +8%
on the back of the replacement of imports with locally produced cement. -¨ ¨- 12m +17%
3m avg. daily trading vol. in € m 2.1
Weight in ATG 2.6%
Increased free cash generation going forward due to lower WC needs, completion
of major investments by yr-end ’09 and effective cost-cutting initiatives
implemented across the board.
Investment negatives
Heavy exposure to the residential sector will remain a drag on the group’s Price performance
Share performance
revenues and profitability, at least in the short run.
3200
26
Declining trend in the Greek housing market is maintained. 24 2800
22
Significantly increased debt position since 2008 raises some concerns on the 20
2400
company’s ability to meet debt covenants. Having said that and based on current 18
2000
data and projections, we think that leverage is not an issue at least for now. 16
14 1600
Accelerated competition and increased imports from Turkey are putting pressure 12
1200
on prices in the domestic market and in the SEE region.
01-09
03-09
05-09
07-09
09-09
11-09
Catalysts Titan Cement Co. S.A. Greece ATHEX Composite
2400
Complicated group structure with seven listed companies and numerous
participations in non-listed companies 4 2000
1600
Relatively high exposure to the construction sector
1200
Cyclical business
01-09
03-09
05-09
07-09
09-09
11-09
Catalysts Viohalco S.A. Greece ATHEX Composite
Profitable capacity additions Source: Viohalco, JCF, National P&K Securities Research estimates
Company description
Viohalco S.A. was founded in 1937 and was listed on the Athens
Stock Exchange in 1947. The group participates in
approximately 90 companies, six of which (Elval S.A., Etem S.A.,
Halcor S.A., Hellenic Cables S.A., Sidenor S.A., and Corinth
Pipeworks S.A.) are listed on the Athens Stock Exchange and
are leading companies in their sectors. Additionally, Viohalco
owns real estate including subsidiary Noval Real Estate. With
production facilities in Greece, Bulgaria, FYROM, Romania and
the United Kingdom, the companies specialize in the
manufacture of copper (Halcor S.A. and SofiaMed S.A.) and
steel products (Sidenor S.A., Stomana Industry S.A. and Corinth
PIpeworks S.A.) as well as cables (Hellenic Cables S.A. and
ICME ECAB S.A.).
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The views and recommendations for the companies mentioned in this daily report have various levels of risk depending on company, industry and market events. In addition, our
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