G.RE.CO. (Greek Gaming, Retail & Consumer) | On war footing
What is embedded in current prices? – With the coronavirus still a developing story, we try to assess the potential impact on our GRECO universe’s top and bottom line and to provide our estimate of the fallout embedded in the prices. In short, we estimate that the coronavirus short-term effect has mostly been factored into the share prices, with current valuations incorporating just a minimal bounce-back next year (effectively assuming a recession) and a c150bps increase in Equity Risk Premium (ERP). In some cases (e.g. CCH), the valuation dislocation is quite pronounced given the implicit prolonged period of demand destruction.Updating estimates for COVID-19 – We are updating our estimates, seeking to reflect the near-term effect from the outbreak and the resulting disruption to economic activity (retail shop closure). As a summary, we cut our 2020 operating estimates 10-30%, incorporating a scenario of the disruption continuing throughout March and April, with containment measures starting to unwind in May and with a (partial) snapback in revenues in H2. We note though that the Greek govt has announced relief measures, including salary subsidies and rent relief programs, which will mitigate the effect from the suspension of trading during the lockdown. We down our PTs accordingly also edging up the WACC utilized in our models to reflect higher equity risk premia, as risk-off is likely to continue permeating investor sentiment.
Top picks in the consumer space: OTE, CCH and Sarantis – Following up from the changes to our estimates and PTs and taking into account the near-term outlook and the risk to our estimates, we have recalibrated our GRECO list of preference recommending a tilt to quality/defensive stocks with lower potential earnings volatility depending on the range of possible scenarios regarding the evolution of the outbreak. Our top pick is OTE, given the limited operational impact from COVID-19, strong balance sheet and yield support (c8-9% including buybacks and dividend). We also upgrade CCH and Sarantis to Buy on valuation. On CCH, we argue that the near-term demand hit from COVID-19 in the on-trade is likely to be mitigated by off-trade pantry stocking, while on Sarantis we believe that the defensive product mix will limit the effect from the demand hit.
OPAP – Even after a 27% hit on 2020e EBITDA under our new scenario (shops closed between mid March and end April), the stock is worth >€10 on our numbers. That said, with so much uncertainty about the timing of the unwinding of the containment measures, we believe that in the near-term the valuation dislocation will persist. In this note we also provide some granularity on the cost base and the extent to which costs can be curtailed.
Placing Aegean under review – Aegean has room for manoeuvre, as annual fixed costs are more than fully covered by the gross cash position, with mgt also working to secure additional lines of credit. That said, given the wide range of outcomes, the ultra low visibility and the high sensitivity to the assumed yield evolution, we place the stock under review.
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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