Beta Sec – Daily report May 15, 2024- Market Monitor- Market Comment- In the Spotlight- Results

Market Comment

AthEx followed a mildly downward course on Tuesday, closing with moderate losses, as investors stayed in the sidelines awaiting fresh macro data from abroad. Selective buying contained losses in a week that is dominated by the corporate results of listed companies, including banks and major industrials, for the first quarter of the year.

General index closed at 1,471.78 points, shedding 0.29% from Monday’s 1,476.12 points. The large-cap FTSE-25 index contracted 0.33%, ending at 3,561.61 points. The banks index conceded 0.23% on Eurobank parting with 2.50%, while National rose 1.12%, Piraeus earned 0.47% and Alpha Bank stayed put. Cenergy Holdings added 1.69%, whereas Titan Cement sank3.84%, Terna Energy dropped 2.32%, Ellaktor gave up 2.17% and Quest Holdings fell 1.33%. In total 60 stocks secured gains, 58 endured losses and 43 remained unchanged. Turnover was the lowest of the last three weeks, amounting to €106.2m, down from Monday’s €119.1m.

All eyes on US April CPI figures that will shape the mood of the day. 

¢    In the Spotlight

MSCI: Athens International Airport and Optima Bank added to MSCI Small Cap Index. No changes in MSCI Standard Index. Changes effective from Monday, June 3rd. 

Greece/CPI: CPI in April 2024 at 3.1% vs 3.2% in March. On a monthly basis (April vs March) CPI accelerated by 0.5% vs +0.6% in March 2024 (vs February 2024). Food CPI at 5.4% vs 5.3% in March.

Greece/Import Price index: IPI advanced 1.3% in March 2024 against a decline of 2.7% recorded in March 2023 according to ELSTAT data.

Cenergy Holdings: Corinth Pipeworks will manufacture and supply steel pipes for an offshore project in the North Sea using ArcelorMittal’s hot-rolled coils. Specifically, 39km of 16-inch High-Frequency Welded steel pipes will be produced for subsea Pipe-In-Pipe application. 

MOH: Q1:24 results to be announced on May 28 after market close. CC to follow next day at 5:30pm local GR time.

Hellenic Exchanges: AGM June 12 to clear FY;23 gross dividend distribution €0.24/share.

Ellaktor: On May 14 the company bought 39,814 REDS shares at €2.7/share.

Optima: AGM on May 23 to approve FY:23 gross dividend €0.44/share. 

Avax (Analysts presentation): Backlog at 3.3bn with €243mn pending (to be signed) new projects signed and added to FY:23 backlog of €3.047bn. Guidance for FY:24 turnover growth of 30% to €588.9mn with construction EBITDA margin at 8% vs 6% in FY:23. Growth pillars will be construction, BOTs, SDYT and new businesses (Real Estate with projected 12% to 18% Equity IRR, energy with 10-15% equity IRR).

OTE (Q1:24 results review): The company reported a more or less expected set of Q1:24 financial performance with sales coming ahead of consensus estimates (positive +6.2% delta), EBITDA lagging -1.65 from consensus (in line) and Net income at +1.4% vs expectations. Top line supported by strong Greek performance aided mobile, TV and Broadband and ICT (RRF related) revenues, albeit at a lower margin. Positve trends recorded in major KPI’s with FTTH at 1.375mn houses, new record additions of +36K in the quarter and utilization rate at 22% from 18%. In more details:

§  OTE’s Consolidated Revenues in Q1’24 were up 9.2% to €877.6mn, fueled by sharp growth in Greece.  Revenues from Greek operations were up 10.3% to €812.3mn, benefiting from solid performances in Mobile, TV, Broadband, and particularly ICT. In Romania, revenues were down 4.1% at €66.2mn, mainly reflecting the impact of mobile termination rate (MTR) cuts and customer-retention promotions in prior periods.

§  Group Adjusted EBITDA (AL) was up 1.2% at €326.0mn, resulting in a margin of 37.1% (40.1% in Q1:23). In Greece, Adjusted EBITDA (AL) increased by 1.5% to €323.2mn, yielding a margin of 39.8% (43.3% in Q1:23), while Romania Mobile operations recorded an Adjusted EBITDA (AL) of €2.8mn in the quarter with a margin of 4.2% (5.1% in Q1:23) The significant contribution from ICT and low margin international wholesale revenue explains the lower Group Adjusted EBITDA (AL) margin in the quarter. Adjusted EBITDA included €9.9mn related to voluntary leave schemes vs €0.6mn in Q1:23.

§  Net income settled at 134.8mn vs €135.3mn in Q1:23, -0.4% y-o-y but coming in better than consensus (€133mn) despite higher tax payments.

§  Greek KPIs: Fixed line numbers flat (-0.6%) with 2.69mn lines active. Broadband subscribers +1.1% to 3.58mn (from (2.33mn in Q1:23) of which fiber (FTTx) 1.565mn (+5.1% y-o-y) and FTTH 286.7K (+73% y-o-y). Pay TV subscribers +6% y-o-y (687.691K). Mobile subscribers -2.6% driven by customer base prepaid cleanup (-8.7% to 3.97mn) and healthy +6.3% postpaid growth (3.186mn, +57.282K quarterly net additions).

§  Romania KPI’s: -9.9% in mobile subscribers driven by 21.6% drop in prepaid and +45 in postpaid totaling 3.66mn total customer base.

§  Adjusted Capex amounted to €117.5mn, up 47.1% from Q1’23, reflecting the strategic focus on FTTH deployment. Capex timing in 2023 had been skewed toward the latter part of the year. Capex in Greece and Romania stood at €106.4mn and €11.1mn, respectively, in Q1’24.

§  Free Cash Flow (AL) stood at €127.1mn, down 43.8% versus Q1’23 despite higher profitability, mainly due to higher income tax payments and higher capex payments during the quarter. The company remains on track to deliver its full year Free Cash Flow target (€470mn). Recall that tax outflows in the comparable period of 2023 had benefited from an income tax refund.

§  The Group’s Net Debt stood at €521mn as of March 31, 2024, down 17.9% compared to December 31, 2023. The Group’s ratio of Net Debt to 12-month Adjusted EBITDA (AL) stood at 0.4x. The Group does not face any bond maturity until September 2026 (€500mn 0.875% Notes).

§  Outlook: Cost saving initiatives, efficiency gains and expiration of attractive energy contract will impact EBITDA which is expected to grow at a slower pace vs top line, as apparent in Q1:24 results. FCF €470mn (unchanged), CAPEX €610-€620mn (FTTH infrastructure mainly) while shareholders’ remuneration at 95% of 2024 FCF at €450mn broken down to €297mn cash distribution (€0.71/share) and €153mn share buyback and cancelation afterwards. Spin off of activities related to the passive infrastructure of mobile telephony towers into a 100% subsidiary, following similar spin offs of Customer Service, Shops and Field Technical Services units could generate further shareholders’ remuneration (among options if sold).

§  CC key takeaways: further governmental incentives expected by year end 2024 and 2025 onwards for further FTTH take up, currently 35% on OTE’s total domestic clientele base towards Q4:24 to boost demand and take up. ICT projects EBITDA margin at 20%. Strong mobile date growth in place for 2024 and 2025 due to Greek market lagging phase vs Europe in mobile internet and financial transactions access. Romania mobile subsidiary sale not close yet. A burden of €5mn (additional) related to new (higher) energy contracts to impact P&L from 2024 onwards (minimal impact).

The following table summarizes OTE’s Q1:24 financial performance vs consensus estimates:

ΟΤΕ

2023

2024

Y-o-Y

2023 Est.

Act. vs

EUR m.

Q1

Q1

(%)

Q1

Est.

Sales

803.6

877.6

9.2% 

826.4

6.2% 

EBITDA

322.0

326.0

1.2% 

331.3

-1.6% 

EBITDA Mrg

40.1% 

37.1% 

-292 bps 

40.1% 

-295 bps 

Net Income

135.3

134.8

-0.4% 

133.00

1.4% 

Net Mrg

16.8% 

15.4% 

-148 bps 

16.1% 

-73 bps 

Alpha Bank (Q1:24 results preview): Alpha is set to announce Q1:24 results tomorrow before the opening while a conference call is scheduled at 12:00 pm. Alpha is expected to post €191m net earnings on the back of lower core income q-o-q and normalized provisions following management’s guidance for 75bps impairment charges in FY:24 vs 82bps in FY:23. As it was the case for Bank of Piraeus and NBG we expect NII to drop by 4.3% courtesy of higher deposit cost and calendar effect. At the same time credit expansion was marginal pointing to lower fees while OpEx is seen higher at 9.5% reflecting inflationary trends. Alpha is trading at the low end of peers i.e at 0.53x its TBV. Focus on business plan update, trends in core income lines and provisions. Note that Alpha Bank has proposed 0.05 eur/share DPS which will be paid in 2024, subject to regulatory approval.

The following table summarise our estimates:

 

Alpha Bank

Act

Act

Est.

Overview

(In Million Euro)

2Q23

4Q23

1Q24

QoQ

YoY

NII

440.1

438.7

420.0

-4.3%

-4.6%

Fee income

97.1

99.2

98.0

-1.2%

0.9%

Trading

28.9

20.6

20.0

-2.9%

-30.8%

Other Income

13.0

9.7

10.0

Total income

579.1

568.2

548.0

-3.6%

-5.4%

Operating costs

-252.0

-189.1

-207.0

-9.5%

17.8%

Pre-provision-profits

327.1

379.1

341.0

-10.1%

4.2%

Core PPI

285.2

348.8

311.0

-10.8%

9.0%

Provisions

-73.4

-90.0

-72.0

20.0%

2.0%

Other results

-2.9

-13.5

0.0

PBT

250.8

275.6

269.0

-2.4%

7.3%

Corporate taxes

64.6

79.4

78.0

-1.8%

20.8%

Net profit (continued)

186

196

191

-2.7%

2.6%

Discontinued operations

5.2

-75.5

0.0

Net profit

191.4

120.7

191.0

58.2%

-0.2%

Minorities

0.0

0.0

0.0

Attributable net profit

191.4

120.7

191.0

58.2%

-0.2%

 

CC Details: Thursday May 16th, 12pm local GR time.

§  GR:             + 30 210 9460 800

§  UK & INTL: + 44 (0) 203 059 5872

§  USA:           + 1 516 447 5632

§  WEB            https://hdeu.choruscall.com/?h=true&passcode=91471311&info=company&r=true

 

Eurobank (Q1:24 results preview): Eurobank will announce Q1:24 results tomorrow after market followed by  a conference call is scheduled at 17:45 pm GR-Time. Eurobank is forecasted to continue its strong performance seen in Q4:24 with expected net profits of €263.1m pointing to >15% RoTE. Core income is seen lower reflecting NII and Fees drop related to increased deposits cost, marginal lending expansion and calendar effect. On the cost side Eurobank is forecasted to post flat OpEx Q-o-Q on back of VRS savings while ordinary provisions will reflect a 70bps LLPs charge. All in The group is expected to post €263m net profits up 64.6% q-o-q.

Hellenic Bank consolidation and outlook for the reminder of the year should be on the spotlight in the conference call Note that Eurobank has proposed 0.09 eur/share DPS which will be paid in 2024, subject to regulatory approval. Eurobank trades at 0.88x its FY:24 TBV and has the lowest NPE ratio of 3.5% amongst systemic peers with 86.4% cash coverage.

The following table summarise our estimates:

 

Eurobank

Act

Act

Est.

Overview

(In Million Euro)

2Q23

4Q23

1Q24

QoQ

YoY

NII

502.5

572.8

562.0

-1.9%

11.8%

Fee income

129.3

140.8

134.0

-4.8%

3.6%

Trading

-8.6

77.6

18.0

-76.8%

309.1%

Other Income

-4

-22

0

Total income

619.6

769.0

714.0

-7.2%

15.2%

Operating costs

-221.5

-229.1

-230.0

-0.4%

-3.9%

Pre-provision-profits

398.1

539.9

484.0

-10.4%

21.6%

Core PPI

410.3

484.4

466.0

-3.8%

13.6%

Provisions

-75.0

-90.0

-77.0

14.4%

-2.6%

Other results

-13

-12

-35

-191.7%

-161.0%

PBT

309.7

437.9

372.0

-15.1%

20.1%

Corporate taxes

73

98

108

10.0%

47.4%

Net profit

236.5

339.8

264.1

-22.3%

11.7%

Discontinued operations

0

-180

0

Net profit

236.5

159.8

264.1

65.3%

11.7%

Minorities

0

0

1

Attributable net profit

236.5

159.8

263.1

64.6%

11.3%

 

CC Details: Thursday May 16th, 17:45 pm local GR time.

§  GR:             + 30 210 9460 800

§  UK & INTL: + 44 (0) 203 059 5872

§  USA:           + 1 516 447 5632

 

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