Beta Sec – Daily report 15-11-2024 Market Comment – In the Spotlight

Selling pressure on banks and telecoms company OTE led the Athens Stock Exchange to close marginally lower Thursday, despite strong gains in other European markets. Overall the session had a positive balance as daily gainers outnumbered losers while some selective interest was triggered from Q3:24 performance and updated short term outlook.

General index closed at 1,417.50 points, a drop of 0.14%. Large Caps, dominated by banks, slipped 0.44%, while mid-caps gained 0.32%. Among non-financials, OTE dropped 3.02%, while toy retailer Jumbo and Lamda Development lost 0.80% and 0.69%, respectively. Cement producer Titan outpaced all blue chips, rising 3.68%. Gains exceeding 1% were also posted by metals group Viohalco, Motor Oil, Cenergy and Athens International Airport. The banking index dropped 1.34%. Among the big four banks, only Alpha ended with marginal gains (0.12%). Piraeus Bank lost 2.34%, National Bank 1.75% and Eurobank 1.42%. In total 64 stocks obtained gains, 47 reported losses and 50 remained unchanged. Turnover amounted to €142.0m, slightly down from Tuesday’s €143.5 m.

We expect another day of consolidation as investors are focusing on results and fresh information about next year’s prospects. Note also that November derivatives expire today. 

Bank of Cyprus:  Reportedly after the recent sale of a 6.06% stake by the US fund of CarVal, the placement of 4.86% of the Cypriot bank (21,467,719 shares) is now taking place.  The process is initiated by the liquidator of the former Laiki Bank, and Deutsche Bank is reportedly running the accelerated book building. Assuming yesterday’s close total value of shares is €98m.  in other news as of today, the trading of the 57,936 own (CR) shares of the company ceases and they are cancelled from the ATHEX. On November 15, 2024, the total number of the company’s listed shares amounts to 441,851,775 (CR) shares.

Cenergy Holdings: 9M:24 results out on November 18 followed by a conference call on November 19 15:00 GR-time.

PPC (Business Plan 2025 -2027): Based on the new business plan, PPC expects EBITDA to reach at €2.7bn in FY:27, of which €900m (34%) will come from the distribution network. Net profit is expected to reach no less than €800 million and the group forecasts a dividend distribution of 1 eur/share. In the previous business plan, PPC had in its 2026 targets forecast EBITDA of €2.3bn of which €800 million was the contribution of distribution while for net profitability had forecasted profits between € 700 – 800m. The plan forecasts the cessation of lignite-based power generation in 2026 while 27% of operating profitability will come from Balkan operations.

Looking at the profitability buildup in the three year plan the incremental bridge from the estimated operating profit of FY24 (€1.8 billion) to €2.7 billion (+47%) in FY27 will come from the increase of €600 million in new renewables, €200 million in distribution and €100 million from the closure of lignite plants (savings). Moreover, he shutdown of lignite plants will boost bottom line by another €100 million due to lower depreciation. Looking further ahead, PPC expects in 2030 its EBITDA to exceed €3bn. Dividend will increase from 0.25 eur/share in 2023 to 0.4 eur/share in 2024. The target is €1.0 in 2027 (55% payout), while from 2024 to 2027 the group expects total distributions of €2.8 euro per share.

Net debt increased to €4.6 billion (EUR +1.4 billion since the beginning of the year) in 9M:24 reflecting not only the level of acquisitions in Greece and Romania but also the implementation of the programme from existing RES generation licenses.  Total RES capacity excluding hydro increased by 200MW from the H1:24 to 1.7GW. All of the above has led to capital expenditure of €1.6bn (€380m from the half year) which, based on the plan, will reach €2.9bn at the end of the year (compared to €2.5bn in the 2021 business plan). Over the next three years, total investments will amount to a massive €10.1 billion with 62% being implemented in Greece, while most of the funds will be directed to RES (51%) and distribution (27%). RES target now is to reach 12GW in 2027. From where PPC currently stands is c6.3GW away. Out of this size PPC has 3.8GW in construction phase. The remaining capacity of 2.5GW will be from the existing 22GW license portfolio.

Based on management’s estimates, the company is trading at a PE of 7.4 times 2024 adjusted net income, 5.1x EV/EBITDA and has an expected dividend yield of 3.2%. PPC is a promising growth story that due to its size, industry and geographic spread remains one of our top picks.

The following table summarise results:

Helleniq Energy (9M/Q3:24 review): Helleniq Energy announced a soft set of Q3:24 results on the back of considerable lower refining margins though coming ahead of market estimates. Considering 9M:24 results and the outlook for the FY24 period, BoD decided the distribution of an interim dividend of €0.20 per share to shareholders. Reported figures were affected by the accounting of temporary Solidarity Contribution, which is calculated on the tax profits of FY23. In details:

§   Despite lower margins (3.6&/bbl vs. 7.5$/bbl in Q3:23) Adjusted EBITDA came in at €183m while Adjusted Net Income to €49m. On a nine-month basis amounted to €753m and €284m respectively. Performance has been positively affected by increased refining units availability, leading to higher sales and improved operations, partly offsetting weaker refining margins, while Marketing and Petrochemicals’ performance also improved in Q3:24.

§   Output in Q3:24 increased by 6% to 3.9m MT, while sales reached 4.2m MT (+8%), at the highest level since 3Q16, with exports corresponding to 46% of the total.

§   In Petchems Q3:24 Adjusted EBITDA improved by 46% y-o-y to €12m, primarily due to a recovery in polypropylene margin.

§   Domestic Marketing recorded improved comparable profitability, primarily due to higher sales across all markets (auto fuels, aviation, bunkering) as well as improved margins. Auto fuels’ market share improved, while the contribution from premium products increased y-o-y for yet another quarter, as well as sales from non-fuel products and services. At the same time, regulatory constraints on the retail gross margin remain in place.

§   Performance in International Marketing improved, with increased sales (+3%) and profitability (+14% in Adjusted EBITDA), due to network expansion (327 petrol stations vs 321 in 3Q23), higher margins and contribution from sales of non-fuel products and services.

§   In renewables EBITDA amounted to €13m. Installed capacity increased to 384 MW from 356 MW in 3Q23, while power generation stood at 190 GWh, +2% y-o-y).

§   The extraordinary contribution, on top of normal corporate taxation, amounts to €223m and will be paid in February 2025. The net impact on Q3:24 Reported Net Income amounts to €173m.

§   Net debt (incl. leases) at €2.17bn up 18% vs. end 2023.

§   Helleniq said that refining benchmarks in the beginning of Q4:24 improved vs. Q3:24. With regards to RES 1GW installed capacity is expected to be in operation by 2026; pipeline increased to 5.3 GW; on track to achieve zero net electricity balance on Group level. Management said that soon will decide on whether or not to drill an exploratory oil well in Crete by Q1:25 at the latest, depending on the completion of the seismic evaluation by its partner in the two fields, the US ExxonMobil. If the green light is given, then, if the necessary permits are granted, the first drilling is scheduled for 2025 – 2026.

§   With regards to DEPA Commercial a possible exit from the company is being considered, without however giving Helleniq providing a timetable. According to management a fairly likely development is the sale to the state of the company’s 35% stake in DEPA. The issue should be resolved in the next quarter. Note that reportedly it has been stated that the goal is for the deal to be completed by December 31, before the TAPED is absorbed by the State fund, which could lead to delays and lengthy procedures. The price for the 35% stake seems to have been locked in at €200 million.

Helleniq Petroleum trades at an adjusted EV/EBITDA of 4.2x and has an expected dividend yield of 10%. Interim dividend ex-date on January 20, 2025 payment starts on January 27, 2025.

The following table summarize results vs. consensus estimates

Attica bank: 25,619,382 warrants transferred from e-Efka to HFSF that will exercise them.

ElvalHalcor: 9M:24 results out on November 20. CC next day.

Alpha Trust Andromeda: As of today, the 18,981 new (CR) shares of the company  start trading on the ATHEX following the recent share capital increase due to the dividend re-investment program, exercised by 42 shareholders, at an issue price of €6.37 per share. On November 15, 2024, the total number of the company’s listed shares amounts to 3,647,742 (CR) shares.

Costamare: Listed €100mn bond cease trading as of November 20 due to its call option exercised by the issuer at 0.5% premium on face value of €100/bond. 

Aegean Air (9M:24 trading update): Following earlier this month announcement of top line the domestic air carrier reported headline figures for the other P&L lines. Load factor at 83.9%. In details:

§   Consolidated Revenue of €1.38bn, 4% higher than 9M-23. Aegean offered 15.3mn available seats and welcomed 12.6mn passengers, an increase of 5% compared with the same period last year, out of which 7.4mn passengers to/ from international destinations. AEGEAN in Q3 offered 6.3mn available seats, higher by 2% and welcomed more than 5.3mn passengers. Domestic Passenger traffic recorded a 6% increase, while the international network recorded a modest decrease of 3% compared with the Q3-2023, mainly due to the suspension of flights to Israel and Lebanon mentioned above.

§   Middle East crisis and Israel war impacted international traffic. The suspension of flights to/from Tel Aviv and Beirut due to the Middle East crisis (from end of July, up to 11 daily flights from Athens, Thessaloniki, Heraklion, Rhodes and Larnaca) resulted to a reduction of 3.5-4.0% of international traffic in Q3:24.The mandatory early inspections on Pratt & Whitney’s GTF engines grounded up to 10 new aircraft (i.e. 17% of jet fleet), restricting both AEGEAN’s capacity growth, as well as the cost benefits from their utilization (unit fuel cost/unit maintenance costs/seats per flight).

§   EBITDA stood at €330mn, down by 10.2% on a yearly basis.

§   Profit after tax reached €132mn, 23% lower YoY.

§   Net Debt at €514.9mn from €415.3mn in FY:23 impacted by higher leasing costs to cater for 5 new aircrafts under leasing to face P&W engine problem) and new aircrafts deliveries. Excluding leasing net cash position at €499.2mn from €485.9mn in FY:23.

§   Gross cash €762.8mn from €706.3mn in FY:23.

§   OpCF €320mn, CAPEX €33.1mn, Financial Cash flow -€231.8mn.

§   Net Debt / EBITDA at 1.4x (1x in FY:23).

Austriacard (9M:24 results): Secure Chip and Payment solutions sales up 6.2% to €181.8mn from €171.1mn. Document Lifestyle Management up 16.2% to €95.4mn from €82.1mn. Digital Transformation technologies sales up 153.4% to €21.1mn from €8.3mn. WC at €77.4mn (19.9% over sales), up 32.9% vs FY:23 €58.2mn due to higher inventories, raw material increased costs and higher receivables. OpCF €18.9mn, CAPEX €12mn, Net Debt at €104mn from €95mn in FY:23. Net Debt/EBITDA at 1.9x. Gross cash at €24.5mn, gross debt €128.5mn.

OTE (9M:24 results review): The company reported an in line set of Q3/9M:24 set of financial results based on strong Greek performance in all segments (fixed, mobile, pay TV0 and persisting weak, yet not material Romanian mobile operations.

§   ΟΤΕ’s total Consolidated Revenues in Q3’24 were up 1.8% to €897.2mn, driven by positive momentum in Greece. Revenues from Greek operations were up 2.5%, benefiting from growth in Mobile, Broadband, TV, and ICT services. In Romania, revenues were down 6.6% in a highly competitive market, partly reflecting the impact of mobile termination rate (MTR) cuts.

§   FTTH subs exceed 355K, a 65% yoy increase. FTTH connection available now to 1.49mn homes implying a 26% utilization rate which is expected to further boost in Q4 due to FTTH Gigabit voucher program initiated. Target for FTTH access reaffirmed at 1.7mn homes and businesses by end 2024.

§   Greek mobile revenues +2.9% with postpaid (contact) customer base up 7%.

§   PAY TV additions in Q3 at +24K reaching a 710K total Pay TV customer base, enhanced by recent sports content-sharing agreement with NOVA and Netflix. Pay TV penetration rate of 30% vs EU leaves plenty of scope for further growth, both in subscribers and in revenues on €3/month additional charge to provide for the additional NOVA sports package.

§   Group Adjusted EBITDA (AL) stood at €350.1mn, down 0.7% for the quarter, as growth in Greek operations, up 1.5% to €353.1mn vs €348mn in Q3:23, was offset by pressure on Romania’s profitability, registering a quarterly loss of €3mn vs €4.6mn profit in Q3:23. Excluding the impact of items related to the Romania tax audit, Group Adjusted EBITDA (AL) would have been up 0.4%. The Group’s EBITDA (AL) margin for the quarter was 39.0%, as compared to 40.0% in Q3’23, due to a higher contribution from ICT revenues in the current quarter at the expense of margin.

§   CAPEX at €433mn in the 9m period, €159.4mn in Q3 vs €429.9mn and €183.3mn respectively (9m and Q3 2023). primarily due to lower spending on TV sports content, compared to the same period last year, following the UEFA broadcasting auction. Capex in Greece and Romania stood at €152.2mn and €7.2mn, respectively.

§   FCF (AL) at €343.5mn, down 11% yoy (€397.1mn in 9M:23) and €95.2mn for the quarter (€27mn in Q3:23), mainly reflecting lower income tax payments, Capex, and payments for voluntary leave scheme during the quarter.

§   Net Debt at €684.3mn vs €671.9mn a year earlier (+1.8%). The ratio of net debt to 12-month Adjusted EBITDA (AL) stood at 0.5x. The Group does not face any bond maturity until September 2026 (€500mn 0.875% Notes). Gross cash at €462.1mn.

§   FY:24 guidance: Initial FCF projection for €470mn downgraded to €435mn due to the one off extraordinary ad hoc payment of €33.5mn due to the tax audit completion in Romania. Group CAPEX 2024 range €600-€610mn directed to further FTTH deployment. Greek operations EBITDA trends for the FY:24 to align with 9M:24 results while on a consolidated level challenging Romania operational environment will impact (deteriorate) consolidated results metrics and KPI’s. regarding shareholders’ reward, which remains unchanged, OTE intends to allocate approximately €450mn for shareholder remuneration in 2024, consisting of €297mn in cash dividends, already paid out to shareholders, and approximately €153mn in share buybacks, with 80% of the amount already disbursed.

We think that the lack of growth plays a potential catalyst on OTE’s stock market performance and should be more acknowledged as a dividend play rather than a growth telecom stock.

The following table summarize results vs. consensus estimates

Other 9M:24 results:

Lavipharm (9M:24 results): Net Debt at €26.04mn. Exports +11.4%.

Petropoulos (9m:24 results): Net Debt at €32.573mn.

Web Sources: Bloomberg, Reuters, Euro2day, Capital, Liberal, Newmoney, Kathimerini, Energypress, Naftermporiki, Athens Macedonian News Agency , Oikonomikos Tahidromos, Mononews, Business Daily, Morning View, Economistas, Power Game, Insider, Bankingnews, Economico, AthEx.