G.RE.CO. (Greek Gaming, Retail & Consumer) | Greek consumer: positioning in the post COVID-19 world
Investment thesis – In our new GRECO edition we lower our estimates for our Greek consumer-related coverage universe, factoring in the slightly longer period of lockdown (until mid to end May in most cases) than previously assumed by our numbers (end April) which will lead to a >40% yoy decline in H1’20 EBIT. Most importantly, we reflect a more cautious outlook for H2’20, now envisaging a “swooshâ€-shaped recovery as ongoing govt-imposed restrictions and social distancing weigh on consumer spending.We argue that the main debate relates to the pace of recovery and extent of normalization in 2021. We do not expect full return to normality until a vaccine is developed, hopefully by early 2021. Our new baseline scenario is thus predicated on an extended period during which the economic activity will stall, following an initial bounce-back during the first weeks of the re-opening of the economy.
Against this background, we have lowered our 2021 operating profit estimates by 2-34%.The most pronounced downward revisions are for Fourlis (with the % change magnified by the relatively low base) and CCH (catching up with the latest data points). On our new earnings profile, 2021 EBIT will stand lower than 2019 levels for all our GRECO companies with the exception of OTE and Sarantis.
Long-term – structural shift? Besides the near-term impact, we think that the epidemic will bring about major structural shifts to consumer spending dynamics. Indicatively, besides the faster increase in e-commerce penetration, we expect a structural shift of spending from leisure activities towards such items as home furnishing & decoration, electronics and athletics. We see Fourlis as one of the main beneficiaries of these trends, while we expect Jumbo to be more challenged, albeit benefiting from the likely trading-down dynamic. We also see some headwinds for OPAP’s on-premise gaming business, which will be only partly offset by its online activities (16% of 2020 proforma revenues).
Top picks: OTE, OPAP, Fourlis – The downward revisions to our estimates result in downgrades to our PTs. The latter, coupled with the significant rebound in stock prices since the March trough, drives changes to our recommendations and order of preference in the GRECO space. In particular, we downgrade CCH, Jumbo and Sarantis to Hold on valuation, in the aftermath of the stocks’ bounce-back since the trough (33-64% respectively for CCH and Jumbo). We keep OTE as our top pick underpinned by the limited operational impact from COVID-19, strong balance sheet and yield support. We remain Buy-rated on OPAP, as despite the short-term challenges, we continue to view it as a dividend play with a concrete catalyst ahead (value crystallization from the change in the gaming duty regime). On Fourlis, we acknowledge near-term downside risks but view it as a quality long-term name for investors keen to embrace cyclicality.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.