Daily report 29-07-2014 --- Manos Chatzidakis ~ Naked Monk

Market Comment

General Index ended slightly lower on Monday as investors took profits after a four-day rally which pushed the composite index of the market 5.71 pct higher last week. The index eased 0.11 pct to end at 1,213.31 points, off the day’s lows of 1,209.68 points. Turnover shrank to €71.41mn. Given the extend of last weeks gains the correction was moderate while investors interest was focused in non financial large caps (Titan, PPC, OPAP, Athens Water etc) which extended their short term gains.

Today we expect a stabilise session as yesterday volumes don’t indicate a sharp movement. Selective interest on companies with positive expectations for their H1 results may differentiate returns across large caps.

In the Spotlight

Greece: Greece will probably need more loans from European Stability Mechanism, on top of its €240b in bailout loans since 2010, to cover financing needs for next two years, Greek Parliamentary Budget Office says in quarterly report. It also warned that the matter of the country’s banks has not been resolved yet despite the capital injections. It added that several reforms are delayed, investments continue to decline, fiscal streamlining continues to run into obstacles, state debt is an omnipresent threat, exports are struggling and the economy remains vulnerable to contracting the crisis virus from other countries.

Greece/Privatizations: Emmanuil Kondylis and Pashalis Bouhoris will be the country’s privatization agency TAIPED new president and CEO respectively, replacing Konstantinos Maniatopoulos and Yiannis Emiris who have completed their terms in office, it was announced on Monday. Before their appointment, recommended by Finance Minister Gikas Hardouvelis, is finalized, the responsible parliamentary committee will have to express its opinion, according to the existing legislation.

Banking Sector: Greece wants the European Central Bank's health checks on its four biggest banks later this year to take account of their new restructuring plans rather than being based on last year's balance sheet data alone, a Greek finance ministry official said on Monday. Greek finance minister Gikas Hardouvelis expressed the concerns at a July 8 meeting of EU finance ministers, as Athens wants to avoid the ECB calling for new capital to be raised following the tests when restructuring plans are already in hand but not yet implemented.

Reportedly the minister told his counterparts that the ECB's check-up must not be based on a static snapshot of banks' end-2013 balance sheets but include EU-approved restructuring plans they submitted this year. The restructuring plans contain actions, including the divestment of non-core assets, that can further strengthen their balance sheets.

Hellenic Exchanges (Η1 Results): Hellenic Exchanges (HELEX) published its H1 2014 group results yesterday, after market close, which came spot in line with our sales and EBITDA estimates, but 4% above BETAe at the bottom-line entirely due to higher net financial income. A rather mixed first half picture as much lower rights-issues fees (on tough y-o-y comparisons), as well as the absence of CC Hellenic EUR10.8m re-listing income (booked in 2Q13) more than counterbalanced upbeat ASE equity trading revenues.

Key highlights:

¡ H1 group sales, EBITDA and net profits posted declines of 55%, 65% and 62% y-o-y to EUR26.8m (spot in line), EUR17m (1% higher vs BETAe) and EUR13.4m (3.6% ahead BETAe of EUR13.4m, respectively. This EUR0.4m net earnings miss (vs our forecasts) is due to higher than expected net financial income.

¡ In Q2, group sales fell 68% y-o-y to EUR16.4m mirroring: a) rights issues income 94% dive to EUR1.8m owing to tough y-o-y comparisons (as EUR29.5m were booked in 2Q13 following Greek banks unusually high capital raisings), but also b) the absence of EUR10.8m Coca Cola HBC (re-listing) off-exchange transfer revenue.

¡ As expected, Q2 equity business jumped 127% y-o-y to EUR7.6m, making up 46% of total HELEX revenues vs a mere 7% in 2Q13, thanks to a much improved trading activity. That said, ASE daily turnover average rose to EUR191.8m, 127% above 2Q13 levels of EUR84.4m, gaining extra momentum vs Q1 2014 (EUR107.5m per day) driven by improved market dynamics.

¡ On a further positive note, Q2 2014 derivatives (trading/clearing) revenues advanced 5% y-o-y to EUR1.1m, reversing first quarter’s negative growth trend (-14% y-o-y to EUR0.9m).

¡ Despite EUR7.1m cash calls in Q2 2014 (namely Eurobank EUR2.9m, National Bank EUR2.5m, Piraeus Bank EUR1.75m), exchange services (including rights issues fees) revenues shrunk 91% y-o-y to EUR2.8m from EUR30.3m a year ago (first recap of Greek banks).

¡ All in all, HELEX exchange services, depository revenues, settlements, market data, IT, and X-Net represented 17%, 8%, 6%, 5%, 1% and 1%, respectively, of Q2 total.

¡ More importantly, Q2 staff costs were reduced 15% y-o-y (to EUR2.4m vs BETAe of EUR2.6m), indicating further improvements at the operating levels, while total opex (ex-one off items) fell marginally by 2% y-o-y to EUR2.1m.

¡ Adjusting for one-off operating expenses (EUR1m booked in 2Q13, EUR0.2in 2Q14), EBITDA and EBT declined 75% and 74% y-o-y to EUR11.2m and EUR11.8m, respectively.

¡ Likewise, recurring net earnings fell 73% y-o-y to EUR8.8m (compared with EUR32.5m in 2Q13), beating our forecasts by 7% due to stronger than expected net financial income (EUR1.1m vs BETAe EUR0.7m).

¡ On a reported basis, HELEX Q2 2014 group net earnings were down 73% y-o-y to EUR8.6m.

Hellenic Exchanges	Results H1 2014
*In thous. euro*	2013	2014	Δ
Sales	59,870	26,776	-55.3%
Q2	51,252	16,879	-67.1%
EBITDA	49,162	16,987	-65.4%
(% *Sales*)	*82.11%*	*63.44%*	*-1,867 bps*
Q2	44,673	11,021	-75.3%
(% Sales)	87.16%	65.29%	-2,187 bps
Net Income	35,818	13,439	-62.5%
*(% Sales)*	*59.83%*	*50.19%*	*-964 bps*
Q2	31,784	8,640	-72.8%
(% Sales)	62.02%	51.19%	-1,083 bps

Bank of Cyprus: The bank announced on Monday that it has successfully issued 1 billion euros of new stock, ahead of European Central Bank stress tests in the autumn. The bank said in a statement that it has successfully issued by private placement more than 4 billion new ordinary shares at a price of 0.24 euro. The new shares have been allocated to a wide range of institutional investors from Europe, North America and Russia, including investors attracted by WL Ross & Co LLC and the European Bank of Reconstruction and Development (EBRD). The conclusion of the issue of the new stock is contingent on a 20 percent clawback for existing shareholders, meaning that existing stockholders who have offered the price of 0.24 euro will have a priority to get new stock to a percentage of 20 percent of the total, provided they buy shares worth a minimum of 100,000 euros.

The deal will have to be approved by an extraordinary meeting of the shareholders to be convened possibly in August.BOC said its core tier 1 capital stood at 10.6 percent on March 31, 2013, and will top 15 percent after the issue of fresh stock.

Piraeus Bank: Piraeus Bank announced that on July 25th, Mr Michael Sallas Chairman of BoD, sold in the Athens Exchange 356,936 Piraeus Bank shares for the aggregate amount of €587,016.96 and 70,753 warrants for the aggregate amount of €62,719.84.

Cyprus/Cyprus Airways: Ryanair boss Michael O’Leary said on Monday that the airline was not particularly interested in acquiring troubled Cypriot carrier Cyprus Airways, which he said had huge legacy issues.

Other H1/Q2 results:

General Commercial	Results H1 2014
*In thous. euro*	2013	2014	Δ
Sales	12,495	12,258	-1.9%
Q2	6,747	7,025	4.1%
EBITDA	803	647	-19.4%
(% *Sales*)	*6.43%*	*5.28%*	*-115 bps*
Q2	489	523	7.0%
(% Sales)	7.25%	7.44%	+20 bps
Net Income	241	227	-5.8%
*(% Sales)*	*1.93%*	*1.85%*	*-8 bps*
Q2	166	224	34.9%
(% Sales)	2.46%	3.19%	+73 bps