Greek consumer (G.RE.CO.) | Climbing a wall of worries
Industry bumps in 2022 – Greek consumer stocks are down c9% on average since the start of the war in Ukraine, weighed down by de-risking and rising uncertainty regarding the near-term outlook. Stocks more severely affected have been small caps/less liquid names, with OPAP and Jumbo standing out as outperformers thanks to solid operating momentum, more visibility around near-term earnings and – in OPAP’s case – a very compelling 2-digit dividend yield putting a cap on the downside risk.… with top line recovering to levels above pre-pandemic – From a top line perspective, all stocks (with the exception of Aegean) have recouped their COVID-induced losses as of Q2’22, but the timing of this has been rather mixed, depending on category exposure. Companies tilted to goods/consumables or exposed to the e-Commerce theme benefited from the spending binge during 2020-21 (e.g. Quest, Sarantis, Plaisio) naturally seeing softer trends in 2022. On the other hand, the strong pent-up discretionary spending for services has propelled the performance of Aegean and OPAP over the course of this year, with sequential momentum poised to be even stronger in Q3. CCH’s broad geographic footprint and price/mix initiatives led to a bounce above pre-COVID levels in terms of top line as soon as Q1’21 (along with the boost from M&A in 2022).
… but cost deleveraging weighing on margins – From a profit perspective the situation is far more complex, although in general most companies do seem to have been able to deliver higher earnings than in the respective 2019 period since H1’21. The squeeze in disposable income and the piling-up of cost pressures have eroded profitability primarily for Sarantis and Fourlis on a yoy basis. On the positive side though, earnings revision momentum looks to have stabilised, with 2022 estimates looking within reach and 2023 forecasts appearing feasible, barring a severe recession in Greece.
“GRECO-land”: How to position for 2023; OPAP and Jumbo top picks – With private consumption set to increase a mere 1.3% in 2023 (and be partly offset by a small decline in public consumption), Greek consumer stocks face a challenging backdrop as consumers tighten their belts. On the positive side, the logistics snafus are abating while energy-cost base effects will roll off. As such, top line performance and self-help actions will be key for positive leverage effects to materialize. Against this background, we have reprofiled our forecasts for 5 stocks within our broad consumer universe (Aegean, CCH, Plaisio, Quest, Sarantis), having already recalibrated our numbers in separate reports for OPAP, Jumbo and Fourlis. We also adjust our valuation methodology lifting our WACC assumptions to reflect the tightening of monetary policy settings. With risk premia likely to stay elevated, we retain our defensive posture and suggest investors should tilt their exposure towards quality parts of the market. We like short duration stocks offering high dividend yields (OPAP), names with limited downside earnings risk (OPAP, Jumbo) or positive earnings revisions (Jumbo). We also stress the notable value dislocation for Fourlis, arguing that the current share price leaves a positive risk-reward skew, although we do caveat that this value proposition may not be unlocked until more near-term visibility is restored and/or the REIC catalyst materializes. As for the stocks in our Sponsored Research program (Plaisio, Quest), we reckon they offer compelling value for long-term investors.
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.
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.
Plaisio Computers SA. Plaisio Computers SA is a Greece-based company that assembles and trades personal computers (PCs), telecommunication and office Equipment. The Company has three main segments of operation, product categories, namely: Office products, PCs and Digital Technology products, as well as Telecommunications products. In addition the Company has two more segments, the provision of service for the PCs and the provision of transportation services, included in the category, Other. Its products are distributed through a network of stores in Greece and Bulgaria and through the distribution of catalogues, as well as electronic stores. The Company has one wholly owned subsidiary, Plaisio Computers JSC, in Bulgaria.
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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