Market Comment - In the Spotlight (M.Chatzidakis)

Market Comment

Greek stocks ended lower for the sixth continuous session on Monday, despite an initial positive reaction in the wake of Moody's upgrading of Greece's economy. General Index closed at 1,156.06, a 0.59 pct drop, after reaching 1,172.24 (+ 0.80 pct) earlier in the day. During the last six sessions of the ASE, General Index has registered losses totalling 4.82 pct. Turnover was at €92.30mn. Main source of weakness was once again the banking sector (-1.56%) as investors wait for final terms and conditions on which the ECB stress tests will run in October.

Short term oversold and foreign markets bounce may stabilise the market today. Selective interest on industrial blue chips may keep the index positive at the end of the day as investors focus on upcoming H1 results announcements in the following two days.

In the Spotlight

Greece: According to press reports, Brussels is considering stopping Troika’s operations in overseeing the economic reforms in Greece in order to aid Athens in executing its plans to strengthen the country’s economy in exchange for the gradual reduction of the Greek debt.

Greece/Economic sentiment index: Institute for Economic and Industrial Research (IOBE) said that Greece's economic sentiment index dropped to 102.3 points in July against 103.7 in June, largely reflecting a deteriorated climate in the construction sector (employment).

Greece/PDMA: Greece will sell €625mn of 26-W Treasury bills today. The yield in the previous auction stood at 2.05%.

Motor Oil: The company announced that it holds 88.5% stake of Cyclon Hellas

Mytilineos (Results 2Q/H1 2014):  Mytilineos is expected to announce its Q2/H1 tomorrow before market opens. We expect a sequential improvement in EBITDA and Net Earnings on strong METKA performance, flat Energy sector results while Metallurgy (Aluminium) is starting to gain momentum. Despite the reduction in domestic energy demand and the regulatory changes in ADMIE formula  energy sector is expected to post zero growth rates y-o-y in bottom line (Η1:€12mn) due to capacity payments increases (79K/ΜW vs 44K/MW) effective from January 1^st. We expect Metallurgy to post EBITDA €10mn and marginal losses. On the Group level we expect H1 sales to land at €650mn (-12%), EBITDA will reach €118mn (+26%) and net earnings at €24mn (+91%) on lower financials. Focus on the CC deleveraging, developments in Energy market, small PPC and Aluminium spot prices.

METKA (Results 2Q/H1 2014):  METKA will announce its Q2/H1 2014 results tomorrow before the opening of the market. We look for a strong Q2 in terms of EBITDA and net profits as the company accelerates the execution of EPC projects across all regions. In Q2 METKA should post 10% increase in Sales, 13% in EBITDA and -22% on Net earnings due to €12.5mn deferred tax booked 2Q:2013. Adjusting for DT we see net earnings up by 30%. We point out that since Q1 no new EPC projects were added reducing our estimated backlog to €1.3bn at the end of Q2. On the positive side we expect resilient operating margins helped by lower tax rate and rich cash position (Q1: €204m). Focus on the conference call (same day 17:45 GR time) will be on future projects award, participation in regional airports tender and business outlook in Syria. 

Conference call details:

¡  Greek participants +30 211180 2000

¡  UK participants + 44 (0) 800 3681063

¡  US participants + 1 866 288 9315

Mytilineos	Results H1 2014 (Estimates)
In thous. euro	2013	2014	Δ
Sales	730,799	650,000	-11.1%
Q2	371,755	305,420	-17.8%
EBITDA	93,869	118,000	25.7%
(% Sales)	12.84%	18.15%	+531 bps
Q2	44,514	50,749	14.0%
(% Sales)	11.97%	16.62%	+464 bps
Net Income	12,537	24,000	91.4%
(% Sales)	1.72%	3.69%	+198 bps
Q2	1,909	8,790	360.5%
(% Sales)	0.51%	2.88%	+236 bps

METKA	Results H1 2014 (Estimates)
In thous. euro	2013	2014	Δ
Sales	289,930	360,000	24.2%
Q2	155,937	170,940	9.6%
EBITDA	45,287	58,000	28.1%
(% Sales)	15.62%	16.11%	+49 bps
Q2	22,346	25,280	13.1%
(% Sales)	14.33%	14.79%	+46 bps
Net Income	46,401	49,000	5.6%
(% Sales)	16.00%	13.61%	-239 bps
Q2	30,303	23,560	-22.3%
(% Sales)	19.43%	13.78%	-565 bps

Autohellas (Results 2Q/H1 2014):    Group turnover in the first semester of 2014 reached €67.1 mil. from €68.6 mil. in the respective period last year. Revenues from Short and Long term rentals showed, for the first time in the last 4 years, a marginal increase of 0.45%.  Increased tourist arrivals during Q2 of 2014 with the addition of market share increase led into a substantial increase in short term rentals by 26.5%, outbalancing the decrease in long term rentals. The company proceeded in higher investment in new vehicles, which reached €46mn from €22mn in last year's first semester in order to cover the increased demand for the period July-September where 57% of total short term volume takes place. Earnings after tax for the first half of 2014 showed profits of €2.3mill versus losses of €2.3mill in last year's respective period. Foreign subsidiaries' turnover represents 22.7% of total group's turnover.

Autohellas	Results H1 2014
In thous. euro	2013	2014	Δ
Sales	68,558	67,129	-2.1%
Q2	39,562	39,014	-1.4%
EBITDA	30,204	31,173	3.2%
(% Sales)	44.06%	46.44%	+238 bps
Q2	17,864	19,257	7.8%
(% Sales)	45.15%	49.36%	+420 bps
Net Income	-2,364	2,270	196.0%
(% Sales)	-3.45%	3.38%	+683 bps
Q2	2,409	3,349	39.0%
(% Sales)	6.09%	8.58%	+249 bps