Friday, September 05, 2014 - Market Monitor - Manos Chatzidakis

        Market Comment

General Index ended significantly higher on Thursday as market sentiment boosted by an ECB decision to begin an ABS purchase program, a covered bond buy program and to cut its base lending rate to an historic low of 0.05 pct. Bank shares remained at the focus of market attention driving the index to day highs at the closing phase. The composite index of the market jumped 1.92 pct to end at 1,181.41 points, after falling as much as 0.80 pct early in the session. Turnover amounted to €115.46mn, up from Wednesday’s €80 million.

Today we expect a positive opening and gradually market to digest recent highs (best index close since July 30). Focus on banking sector and Mytilineos group.

      In the Spotlight

ECB: The European Central Bank unexpectedly cut interest rates to spur economic growth and stave off the threat of deflation. The ECB’s 24-member Governing Council reduced all three of its main interest rates by 10 basis points. The benchmark rate was lowered to 0.05 percent and the deposit rate is now minus 0.2 percent.

Greece: Reportedly Greece’s creditors will hold a meeting in 14-15 November in Washington to discuss Greece’s issues with a focus on its debt.

Greece/Airports - Tourism: The major increase in air arrivals from abroad this year continued in August, provisional data from the country’s airports show, confirming that this will be a record year for Greek tourism.

Athens has done especially well, as the increase in foreign visitors to the country’s main airport in the period from January to August reached 550,000 from the first eight months of last year. On Corfu, air arrivals last month grew 15.8 percent year-on-year to reach 247,158, including an 18.5 percent rise in Russian visitors despite the general downward trend in tourism from Russia. Arrivals at Cephalonia’s airport rose by 13.1 percent from August 2013 to reach 51,041, and visitors were clearly not put off the destination by the earthquakes last January. More than half of the island’s visitors were from Britain (29,179), which saw 11.5 percent more tourists traveling to Cephalonia this August compared with last year. The overall annual growth during the first eight months of the year amounted to almost 7 percent. Zakynthos enjoyed an 18.3 percent increase to 144,462 foreign arrivals and Rhodes reported a 5.8 percent increase to 411,300 visitors from abroad, while domestic arrivals rose by 22.1 percent to 40,669. Foreign arrivals at Iraklio on Crete increased by 8 percent, amounting to 584,000.

Jumbo: Jumbo will release its FY/Q4 2014 group results on September 25. We expect FY 2014 (to June 30) group recurring EBITDA and net earnings to grow by 11% and 5% y-o-y to EUR148m and EUR102m, respectively, while sales figure was already announced on July 8 (up 8% y-o-y to EUR542m). On a reported basis, we see FY 2014 group EBITDA and net earnings up 34% and 38% y-o-y, respectively.

This means we look for Q4 2014 group sales and net earnings of EUR131m and EUR33m, rising 9% and 7% y-o-y. Our fiscal 2014e group EPS forecasts rest 6% and 23% above consensus and Jumbo’s guidance.

We consider the stock an attractive buying opportunity at current price levels as Jumbo appears compellingly priced (fiscal 2015e PE of 13.1x, EV/EBITDA 8.7x) versus its international peer group. On top, we like Jumbo’s fiscal 2015e net cash position of EUR79m (6% of mkt cap) from EUR53m at end-fiscal 2014 and EUR35m a year earlier, strong EPS growth outlook and a high ROIC (17%).

Mytilineos: Mytilineos Group held yesterday its annual presentation to analysts and institutional investors. The presentation took place at company’s headquarters and contacted by Mr. Evagelos Mytilineos CEO and chairman of the Group.  On Group level FY 2014 is expected to be the best year ever. Management expects a “healthy balance sheet” as deleveraging will continue at a faster pace.

Divisional highlights:

¡  Metallurgy: Strong prospects for the rest of 2014, above initial expectations on lower operating costs (-30%), improving LME prices (record level premiums at 800$/tn) and favorable currency (€/$ below 1.31). All in aluminum prices trade at 14 month high while the group has not hedged yes part of the production. Outlook for 2015 remains positive on market deficit and growing demand.

¡  Energy: Gas prices keep energy segment margins low, gas fired power units still not competitive to lignite plants. Mini PPC not a potential target as long as the terms of sale remain unclear. LAGΙE payments stabilized improving cash flow. Under current framework capacity certificates and direct sales contribute c70m of EBITDA.

¡  METKA: Focus on domestic market, negative trends for new international projects. Cash distribution to shareholders depending on new projects awards.

Overall positive impression as Aluminum of Greece takes the lead to drive profitability higher while new EPC projects award delay reducing backlog to €1.4bn.

Alpha Bank: The bank will reportedly launch a voluntary retirement scheme in September for 1,800-2,200 employees

Cyprus Airways: Nine firms have made non-binding bids for Cyprus Airways with Ireland's Ryanair and Greece's Aegean Airlines among those still interested in buying the loss-making national carrier.