- Natalia Svyriadi
- Nikos Athanasoulias CFA
- Stamatios Draziotis CFA
Greek Equity Strategy – 2023 outlook | Clear and rewarding destination, uneven journey
2022: The comeback – Greek equities staged an impressive comeback in 2022, outpacing most international markets with a 7% total return vs a 2-digit drop suffered by other European indices (and the S&P in EUR terms). Underpinning the ASE was certainly the better macroeconomic backdrop, with the Greek economy expanding by >5% in 2022 compared with c3% for the EU. Light positioning, healthy corporate profitability and more attractive yield gaps than in other regions were additional supporting factors, as was the low starting base following the significant underperformance of the Greek market in 2021.2023: More ways to win, fewer ways to lose – 2023 has started on the front foot (ASE +10% ytd) with investors entertaining the idea of a better-than-feared macro landscape in Europe in the light of retreating gas prices. Greece has also benefited from the continuing rotation to value, as indicated by the outperformance of the banking sector (GR banks more than +20% ytd), with domestic financials also underpinned by their higher sensitivity to rising rates than EU peers. The earnings growth profile of Greek equities looks attractive (banks core PPI c20% in 2023e, non-financials EBITDA +5%) with relatively limited downside risk against the background of a 1-2% GDP growth. Valuations also remain compelling, with non financials (c5.5x EV EBITDA) and banks (c0.6x P/BV) representing good value vs EU/periphery peers (c20-30% discount).
… but it feels as if investors are jumping the gun in fading political risk – The re-pricing of Greek assets from their recent trough is both a relative and an absolute trade in view of the well-telegraphed anticipated return of the country to Investment Grade status in 2023, however we feel the market may have been too complacent too soon in fading political risk. The upcoming elections in Q2’23 (April-May most likely) look poised to include 2 election rounds (assuming the first one results in a hung Parliament) and a somewhat more perplexed path to the formation of a govt, in the light of the increasingly polarized landscape. Our baseline remains that of a coalition between the 2 mainstream parties, but the path to that looks far from linear.
How to position – Overall, although we believe the asymmetry of risks is positive for Greek equities in calendar 2023 (and in the medium-term), we feel the picture is a bit more nuanced in the short-term, after the ytd rally. The downside risks look moderate given the resilient earnings profile for Greek equities, but we argue that the near-term upside is somewhat capped by the political developments. We continue to advocate for a portfolio with stocks with solid operating momentum and visible dividend yields (Mytilineos, Jumbo, OPAP) supplemented by Alpha Bank (attractive risk-reward given depressed valuation).
What if? With investors recently starting to see the glass half full on the war in Ukraine, the obvious question is the price action that would follow in case of a resolution in the conflict. Although our view is that investors should remain relatively defensively positioned until the elections, for market participants keen to tilt toward a riskier stance in anticipation of a shift in geopolitics we recommend PPC (beneficiary of falling gas prices), Fourlis (large valuation dislocation, with the OpCo being offered as free option) and Piraeus Bank (highest-beta play on positive macro).
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.
Alpha Bank is a banking and financial services group which is based in Greece. Co. is engaged in offering a range of services including retail, SME and corporate banking, credit cards, asset management, investment banking, private banking, brokerage, leasing and factoring. Co. is also active in international financial market, with a presence in Cyprus, Romania, London, Serbia, Albania, Jersey (Channel Islands), Bulgaria, former Yugoslav Republic of Macedonia and New York. Co. maintains a focus on retail banking in Greece and particularly loans to individuals and small business loans, and overall expansion in Southeastern Europe. Co.'s activities are divided into retail and wholesale banking.
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.
The Hellenic Exchanges is engaged in the following business sectors: trading, clearing, settlement, data feed, IT, exchange services, depository services, clearinghouse services, and other.
Hellenic Petroleum operates in the energy sector predominantly in Greece and the Balkans. Co.'s main activities include: refining and marketing of oil products ("R&M"); exploration, development and production, of hydrocarbons ("E&P"); manufacturing and marketing of petrochemical products; and power generation and trading. Refining, supply and trading are Co.'s core business and its main source of income and profit. Retail trading activities are split into domestic, comprising Co.'s Greek subsidiaries EKO and Hellenic Fuels, and International through local in-market retail subsidiary companies. Hydrocarbon exploration and production (E&P) Co. activities relate to Greece and abroad.
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.
Holding Company ADMIE IPTO SA is a Greece-based company engaged in the electric utilities sector. The Company, through Power Transmission Operator SA, operates as a Transmission System Operator for the Hellenic Electricity Transmission System (Transmission System). The Company holds a concession for the Transmission System operation, maintenance and development. Its Transmission System mainly transmits electricity from Western Macedonia and consists of overhead, submarine and underground transmission lines.
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.
Lamda Development is a real estate development group based in Greece. Co.'s main activities comprise investment, development and maintenance of innovative real estate projects. Co. operates in Greece, as well as in other neighboring Balkan countries mainly Romania, Bulgaria, Serbia, Montenegro. Co.'s operations are organized along two business segments: Real Estate; and Marine Services. Co. is a subsidiary of Lamda Holdings.
Motor Oil Hellas Corinth Refineries operates in the oil sector with its main activities being oil refining and oil products trading. Due to its flexibility, Co. can process crude oils of various characteristics and produce a full range of petroleum products, complying with the most stringent International Specifications, serving major petroleum marketing companies in Greece and abroad. Apart from fuels, Co. is the only lubricants producer and packager in Greece. Base oils and finished lubricants produced, are approved by International Organizations, ACEA, API, the U.S. NAVY & ARMY.
Mytilineos Holdings is an industrial group engaged in the sectors of Metallurgy, EPC, Energy, and Defence. Co. and its subsidiaries are engaged in three main operating business segments: Metallurgy, Constructions and Energy. Co. and its subsidiaries monitor its performance on Metallurgy and Mining Sector through the subsidiaries Aluminium S.A. (Alumina-Aluminium) and Sometra S.A. (Zinc-Lead). Co., through its subsidiary, METKA S.A., is an EPC Constructor in Greece.
National Bank of Greece is a financial institution based in Greece. Co. maintains operations in the retail banking sector, with 509 branches and one premium banking branch, and 1,448 ATMs. Co. offers its customers a range of integrated financial services, including: corporate and investment banking; retail banking (including mortgage lending); leasing and factoring; stock brokerage and asset management; insurance; and real estate and consulting services. Co. is also involved in other businesses, including hotel and property management. Co. operates in Greece, U.K., South Eastern Europe which includes Bulgaria, Romania, Albania, Serbia, as well as, in Cyprus, Malta, Egypt and South Africa.
Piraeus Bank is a banking institute. Co. and its subsidiaries provide services in the Southeastern Europe, Egypt, as well as Western European markets. Co. and its subsidiaries operate in four main business segments: Retail Banking, which includes the retail banking facilities; Corporate Banking, which includes facilities related to corporate banking; Investment Banking, which includes activities related to investment banking facilities of Co. and its subsidiaries, including investment and advisory services, underwriting services and public listings, and stock exchange services; and Asset Management and Treasury, which includes asset management facilities for clients.
Public Power Corp. is a vertically intergrated electric utility engaged in electricity generation, transmission and distribution throughout Greece. At Dec 31 2014, Co. and its subsidiaries generated electricity in its own 62 power generating stations of Co. and from the additional stations which belong to its wholly owned subsidiary PPC Renewables S.A, facilitated the transmission of electricity through its own power lines of approximately 12,273 km and distributed electricity to consumers through its own distribution lines for Medium and Low voltage of 235,100 km which are managed by its wholly owned subsidiary Hellenic Distribution Network Operator (HEDNO S.A.) (Medium and Low voltage).
Terna Energy is a vertically organized renewable energy sources group based in Greece. Co. is mainly engaged in the energy and construction sector. Co. is active in Wind Energy, as well as Hydroelectric Projects, Solar PV and Integrated Management of Waste to Energy and Biomass Projects. Co. is also engaged in the research for the operation and construction of projects related to other renewable energy sources (RES). Co. maintains a class 6 contractor certificate and its activity in the construction sector relates to the construction of private and public projects as a main contractor or subcontractor or through joint ventures.
Titan Cement Co. and, its subsidiaries (collectively, the Group) are engaged in the production, trade and distribution of a range of construction materials, including cement, concrete, aggregates, cement blocks, dry mortars and fly ash. The Group operates primarily in Greece, the Balkans, Egypt, Turkey and the U.S. The Group operates in 14 countries in Europe, North America and the Eastern Mediterranean and is organized in the following four operating (geographic) segments: Greece and Western Europe, North America, South East Europe, and Eastern Mediterranean.
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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