G.RE.CO. | Greek consumer 2020 outlook – Was it all just a bad dream?
In our new G.RE.CO. edition we update our thesis on Greek consumer names, arguing that household available cash flow is poised to increase at the highest rate in many years in the light of the modest fiscal stimulus embedded in the 2020 budget. At the same time, the 4pps reduction in the corporate tax rate arguably means c5-6% higher justified valuations ceteris paribus (largely explaining the increase in our PTs), but clearly there is further upside assuming that the tax cuts rekindle business appetite and are re-invested to bolster future corporate profitability. Overall, we estimate c5% operating profit growth for our GRECO universe in 2020e, filtering through to a >10% EPS growth, markedly higher than the growth envisaged for MSCI Europe.How to play the sector in 2020? – With most GRECO stocks trading at c15-25% discount vs. their EU peers, we do see some scope for further multiple expansion, especially given the stage of the Greek macro cycle. We caution though that earnings multiples are more likely to expand by an upturn in fund flows driven by improving corporate fundamentals and a confidence boost rather than by a further tightening in bond yields. Within the G.RE.CO. space we favor: 1) high dividend-yielding names (e.g. OPAP); 2) stocks with concrete catalysts (OPAP, Fourlis); 3) valuations that do not fully reflect growth prospects (e.g. Jumbo); 4) self-help names, which have visible paths to growth and are not too dependent on domestic macro (e.g. Jumbo).
Top pick – OPAP remains our top idea in this space, despite the recent price rally. We reiterate that the market overestimates the present value of tax payments that OPAP will make post 2021, taking into account the contractual terms embedded in the Extension agreement and the €1.8bn pre-paid tax over 2021-2030. On our estimates, this creates a tax-related hidden value worth > €2 per share and we expect this issue to dominate the investor agenda, in view of the termination of the current tax regime in the end of 2020. In the meantime, the high-dividend policy is poised to continue, with scope for further special cash returns on top of a sustainable c9% dividend yield.
Aegean Airlines is an airline carrier based in Greece. Co. is engaged in aviation transportation, providing services that concern the transportation of passengers and commodities in the sector of public aviation transportation inside and outside Greece, conducting scheduled and unscheduled flights. Co. provides full service, premium quality short and medium haul services. Co. maintains a network of 145 destinations, 111 international in 45 countries and 34 domestic destinations. Co. is a member of global airline network, the Star Alliance network.
Coca-Cola Hellenic Bottling Co. produces, sells and distributes an extensive portfolio of non-alcoholic ready-to-drink beverages. Co.'s business is engaged in producing, selling and distributing non-alcoholic ready-to-drink beverages under bottlers' agreements with The Coca-Cola Company. In some Territories, Co. also produces, sells, distributes and markets its own brands of juice and Water beverages. In addition, Co. bottles and distributes beer in Bulgaria and Former Yugoslav Republic of Macedonia and Co. distributes a selected number of third party premium spirit brands in certain central and eastern European operations.
Co. is engaged in the manufacture, import and distribution of electrical household appliances and the manufacture of FOURLIS kitchen hoods. In addition, through a subsidiary, Co. is engaged in the operation of a retail chain.
Co. is a consumer goods manufacturer and distributor engaged in operations in Greece. Co. produces consumer goods such as cosmetics, pharmaceuticals, households, pet products, car's accessories and apparel. Co. produces its own brand name of cosmetic products such as Prosar, Str8, BU99, Clochard, Carroten, Tokalon and others. Co.'s product portfolio also includes a range of international brands such as Estee Lauder, Clinique, Aramis, Donna Karen, Orlane, Montana Versace and others.
OPAP is engaged in the operating and management of numerical lottery and sports betting games as well as lottery games. Co. holds concession to operate and manage new sports betting games in Greece as well as a right of first refusal to operate and manage any new lottery games permitted by the Hellenic Republic. Co. operates six numerical lottery games, including Joker, Lotto, Proto, Extra 5, Super 3, and Kino; and three sports betting games consisting of Stihima, Propo, and Propo-goal. Co. is also engaged in designing new lottery games, including Bingo and Super 4. Co. distributes its games through an extensive on-line network of agents.
Hellenic Telecommunications Organization is a full-service telecommunications group. Co. provides local, long-distance and international fixed-line telecommunications services in Greece and Romania, and mobile telephony services through its Cosmote subsidiary in Greece, as well as in Albania, Bulgaria, the Former Yugoslav Republic of Macedonia and Romania. Co. also provides internet access services and Internet Protocol (IP) -based telecommunications applications, as well as information technology application development and hosting services using IP technologies. Also, Co. provides several other telecommunications services, including value-added services and public telephone services.
Jumbo is a trading company based in Greece. Co.'s main operation is retail sale of toys, baby items, seasonal items, decoration items, books and stationery. A part of its operations is wholesale of toys and similar items to third parties. Co. and its subsidiaries have four geographical segments: Greece, Cyprus, Bulgaria and Romania. At June 30 2015, Co. operated 72 stores in Greece, Cyprus, Bulgaria and in Romania and the on line store e-jumbo.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.
Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.
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