Monday, November 17, 2014 - Market Monitor by Manos Chatzidakis

Market Comment

Investors saw little reason to buy into Friday’s news of the country’s official return to growth as momentum remained weak taking the benchmark just over 890 points while trading volume ended at the lowest level of the last seven sessions. General index ended at 890.74 points, adding 0.81 percent to Thursday’s 883.54 points. On a weekly basis it declined by 2.17 percent.

 Turnover amounted to just €59.7mn, down from Thursday’s €90mn.

All eyes focus on the announcement of Troika’s arrival keeping the waiting stance in domestic market. Hellenic Exchanges Q3 results out after the session while Motor oil, Lamda Development and Geniki bank will publish results during the week. Finally we note that on Friday Fitch will report its scheduled assessment on Greek credit rating while November future contracts series expire.

¢           In the Spotlight

Greece/GDP: Greece's economy emerged from a prolonged austerity-led recession as early as the first quarter this year and expanded in the next two quarters as well, data showed on Friday. This is the first time published data has shown Greece emerging from recession it sank into when its debt crisis exploded, forcing the country to seek aid from foreign lenders.

The flash estimate on gross domestic product based on seasonally adjusted data showed the 182 billion euro economy expanding by 0.8 percent in the first quarter - the first time the economy has expanded since the second quarter of 2009. It then expanded 0.3 percent in the second quarter and 0.7 percent over the July to September period. Based on seasonally unadjusted data, the economy grew 1.7 percent from the same period a year earlier - above the average forecast of 1.3 percent growth according to economists polled by Reuters.

Athens and its EU/IMF international lenders project the economy will grow 0.6 percent this year. This is the first time that Greece has provided seasonally adjusted data since 2011, when it started publishing only the annual pace of changes rather than quarter-on-quarter GDP data.

Cyprus/GDP:  Cyprus’s recession-hit economy contracted by 0.4 percent in the third quarter, matching the drop of the previous three months, official figures showed on Friday. It was the 13th successive negative quarter for the Mediterranean island’s battered economy, according to a flash estimate from the state statistical service, which also revised the second-quarter drop to 0.4 percent from its initial estimate of 0.3 percent. The latest estimate shows that real GDP, based on seasonally and working-day adjusted data, shrank 2 percent in the July-September quarter from a year earlier. In April-July the economy contracted 2.2 percent. The Cyprus economy contracted 5.4 percent in 2013.

In other news Cyprus raised to B3 by Moody’s. The previous rating was Caa3. The outlook was raised to stable from positive. Moody’s sees Cyprus returning to [primary budget surplus form 2014, while public debt to GDP will level off in 2015. The government’s fiscal deficit will most likely fall to around 3% in 2014 form 4.9% in 2013 according to Moody’s.

Piraeus Bank: According to press reports, Piraeus Bank plans to offer a new Voluntary Redundancy Scheme (VRS) to employees hired before September 1, 2013. Acceptance period runs from November 17 until December 1, 2013.

¡  Employees of Piraeus Bank, ex-Agricultural Bank of Greece may choose to leave immediately. Piraeus Bank employees who choose immediate departure option will be entitled up to 42 monthly salaries - upper limit EUR170k.

¡  Meanwhile, under ’Sabbatical I’ option, employees, including from other merged entities, may leave work for 3 years, receive 50% of pay in 2015, 40% in 2016 and2017 then a single salary on full departure.

¡  In turn, under ‘Sabbatical Plus’ option, employees can depart for 2 years, receiving 50% of salary in 2015, 40% in 2016 and 9 monthly salaries on departure

Greek banks/X-S&P: X-S&P affirmed ratings on four Greek banks (Alpha Bank, Eurobank, Piraeus Bank & National Bank of Greece); outlooks remain stable. Tellingly, X-S&P after assessing latest ECB's report (stress tests), as well as other developments linked to Greek banks’ capital, earnings and risk positions, sees no significant impact on business and financial profiles, thus reaffirms 'CCC+/C' long- and short-term counterparty credit ratings on all four Greek banks.

Forthnet: Reportedly Wind and Vodafone are in talks to acquire the company.

Lamda Development: The company announced the signing of the contract for the sale of 100% of the shares of Hellinikon by the buyer which is the Hellinikon Global S.A, and by the seller which is the Hellenic Republic. Fosun Group from China and Al Maabar from Abu Dhabi participate in the group of investors of the €8.0 bn project.

Hellenic Exchanges (Q3/9M Results):  Hellenic Exchanges (HELEX) 9M/Q3 2014 group results out November 17, after market hours. Q3 EBT seen up 54% to EUR6.1m on easy y-o-y comps, down 2% to EUR4.5m at net level as 3Q13 was flattered by positive deferred tax.

Key points:

¡  We expect 9M 2014 group sales, EBITDA and net earnings at EUR36.8m (-46% y-o-y), EUR22.2m (-58% ) and EUR18.1m (-56%), respectively

¡  On a Q3 basis, we see group sales rising 21% y-o-y to EUR10.1m thanks to a 99% y-o-y growth in equity business to EUR4.2m (albeit from a very low base). This, in turn, mirrors a 102% y-o-y jump in third-quarter trading volumes

¡  Tellingly, ASE daily turnover stood at EUR102m in Q3 2014, more than 2x up vs 3Q13 (EUR50m per day), but down 48% and 33% against 2Q14 (averaging EUR192m) and 1H14 (EUR150m)

¡  Derivatives (trading/clearing) revenues should grow by 5% y-o-y to EUR1m in Q3, maintaining second-quarter’s positive trend (+5% y-o-y)

¡  In turn, exchange services (rights issues fees) income is seen down 4% y-o-y to EUR1.3m compared with EUR1.4m a year earlier and EUR2.8m in 2Q14

¡  On our estimates, depository revenues, market data, settlements, IT and X-Net should represent 10%, 9%, 3%, 2% and 1%, respectively, of Q3 total

¡  Moving down the P&L, we look for a 7% y-o-y drop (to EUR2.2m) in Q3 staff costs, suggesting operating efficiency gains (total opex down 9% y-o-y to EUR4.4m)

¡  As a result, we look for a Q3 EBITDA jump of 65% y-o-y to EUR5.2m, EBIT up 72% y-o-y to EUR4.8m, respectively

¡  In the same vein, we estimate pre-tax profit to increase 54% y-o-y at EUR6.1m in Q3 2014

¡  Given that Q3 2013 bottom-line was flattered by positive deferred tax, we expect HELEX group net earnings down 2% y-o-y to EUR4.5m (EUR1.6m taxation, assuming a tax rate of 25.5%).

The company will host a conference call the same day at 17:30 (AthensTime), 15:30 (London), 10:30 (New York).Conference Call Details :

¡  GR 00800 4413 1378,

¡  US +1 866 819 7111,

¡  Other international participants +44 1452 542 301

Hellenic Exchanges	Estimates  9M 2014
In thous. euro	2013	2014	Δ
Sales	68.2	36.8	-46%
Q3	8.3	10.1	21%
EBITDA	52.3	22.2	-58%
(% Sales)	76.8	60.3	-1650 bps
Q3	3.2	5.2	65%
(% Sales)	38.2	51.8	+1360 bps
Net Income	40.5	18.0	-56%
(% Sales)	59.4	48.8	-1060 bps
Q3	4.6	4.5	-2%
(% Sales)	55.9	45.1	-1080 bps

Other Q3/9M results

Mermeren Combinant	Results 9M 2014
In thous. euro	2013	2014	Δ
Sales	12,317	14,785	20.0%
Q3	4,980	5,473	9.9%
EBITDA	4,353	8,532	96.0%
(% Sales)	35.34%	57.71%	+2,237 bps
Q3	1,881	3,407	81.1%
(% Sales)	37.77%	62.25%	+2,448 bps
Net Income	2,065	6,294	204.8%
(% Sales)	16.77%	42.57%	+2,580 bps
Q3	1,135	2,660	134.4%
(% Sales)	22.79%	48.60%	+2,581 bps