Daily Note Headlines 14 November 2014
Transcription
Daily Note Headlines 14 November 2014
Daily Note AVG Research 14 November 2014 Athens General Market Turnover (EURm) Market Cap (EURbn) Market Cap / GDP* daily Y-t-d 883.5 % 1.29% % -24.01% 90.04 -7.2% 56.13 30.6% *2014 Headlines close Athens General Index Macroeconomic News 1,050 1,000 According to daily Kathimerini the Greek government submitted its proposals to the troika aiming to restart negotiations, while is taking action by legislating some of the requested reforms. Still, the return date of the troika to Athens remains unclear. 950 900 850 According to final data for the execution of the State Budget on a modified cash basis, the State Budget primary surplus for the first 10 months of 2014 amounted to EUR2.405bn, against the target for primary surplus of EUR2.449bn – State arrears increased in September to EUR4.79bn from EUR4.67bn in August. According to HEL.STAT. (Hellenic Statistical Authority) the seasonally adjusted unemployment rate in August 2014 was 25.9% compared to 27.8% in August 2013 and 26.1% in July 2014 - According to Ergani register (Ministry of Employment database) October presented net firings of 66,636 persons (vs. 34,999 in Oct 2013) while for the first 10-months of 2014 there were net hirings or 120,287 persons (vs. 130,703 in 10-month 2013). The Greek government tabled an amendment to Law 4305/2014 regarding the settlement of overdue obligations to the state and social security funds. The amendment concerns the revision of the Article 51 of the legislation that foresees that debtors who do not have overdue state (tax) obligations until October 31, 2014 cannot enter the new regulation provided by the aforementioned legislation. The government is expected to amend the draft legislation submitted to Parliament last week regarding corporate non performing loans, with press reports noting that draft legislation could be voted on by Parliament today. Note also that press reports indicate that the amendment has the full approval of the Troika. Corporate News Titan released a satisfactory set of 9-month results, in line with market expectations on operational level, while bottom line was boosted by favorable FX movement. The company reported net profits of EUR30.5m vs. EUR14.6m of losses in 9M:13. Additional Headlines 800 13 Oct 20 Oct 27 Oct 03 Nov 10 Nov ASE Indices & Sectors FTSE - 20 FTSE - 40 FTSE - 140 ASE - Banks ASE - Telecoms ASE - Industrial ASE - Construction close daily % Y-t-d % 285.4 831.8 685.5 110.9 2356.2 2102.1 2198.8 1.1% 0.9% 1.1% 2.5% -1.7% 1.2% 2.3% -25.9% -28.7% -25.8% -38.3% -11.5% -35.2% -18.0% FTSE ASE 20 Ratios* P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Dividend yield (%) 2013f 2014f 21.2 1.1 7.6 1.0 1.3% 20.3 1.1 6.3 1.0 1.9% 12-14f CAGR -4.00% -5.92% -16.44% -8.78% 43.64% *consensus FactSet ELSTAT is scheduled to release today provisional 3Q:14 GDP figures (12:00 local time). Bloomberg survey calls for 3Q:14 GDP growth of 0.7% y-o-y (median estimate of 7 economists). Cyprus Statistical Authority is scheduled to release today provisional 3Q:14 GDP figures (12:00 local time). Bank of Greece announced that residential property prices dropped by 7.0% y-o-y at 3Q:14 (provision data). Recall that residential property price dropped 7.7% y-o-y at 2Q:14 and 8.8% y-o-y at 1Q:14. Central Bank of Cyprus announced that Cypriot banks’ reliance on Emergency Liquidity Assistance stood at EUR7.68bn at end-October, unchanged from previous month. Note that dependence on ECB liquidity also stood unchanged at EUR920m. Bank of Cyprus announced that following the approval of the Central Bank of Cyprus, the Republic of Cyprus as Guarantor and holders of EUR500m guaranteed bonds issued on 14 November 2012, the maturity date of the Guaranteed Bonds has changed from 13 November 2014 to 13 November 2017 with effect from 12 November 2014. All the other terms of the Guaranteed Bonds remain unchanged and in force. According to daily Kathimerini, OPAP has chosen 4 companies (out of 8 that expressed interest) to provide VLTs. These companies are G-Tech, Scientific American, Inspired and Synot. Recall that OPAP plans to install 16.5k machines within 2015. However, it remains unclear as to the type of remuneration scheme for VLT providers, with OPAP also considering the revenue sharing option. Terna’s (Italy’s grid operator) CEO Matteo del Fante, during the 9M earning announcement reiterated the company’s strong interest in the IPTO (high voltage grid operator) tender. Recall that Terna has progressed to the final stage of the tender with the submission of binding bids expected in the first days of December. The other three entities that have progressed to the final stage are Elia System Operator (Belgium grid operator), PSP investment Board (pension fund) and China State Grid. Please continue overleaf…. Weekly Calendar FTSE ASE movers (last trading day) TOP National Bank of Greece Ellaktor SA MYTILINEOS HOLDINGS 5.6% 5.4% 3.8% BOTTOM SIDENOR HOLDINGS SA Frigoglass S.A. Forthnet S.A. -4.5% -4.0% -3.8% Foreign Indices / Rates / FX DJ Industrial Average Nasdaq Composite S&P 500 Euro STOXX FTSE 100 CAC40 DAX Austria ATX Russia RTS Turkey ISE 100 10 - Year Yield (DE) USD / EUR close daily % Y-t-d % 17652. 8 4680.1 0.2% 0.1% 0.1% 0.3% 0.4% 0.2% 0.4% -0.4% -3.2% 0.6% 6.5% 12.1% 10.3% -1.6% -1.7% -2.5% -3.2% -14.1% -29.8% 19.3% 1.2% 0.0% 33.1% -9.5% 2039.3 309.3 6635.5 4188.0 9248.5 2188.7 1012.2 80876. 1 3.0% 1.25 Macros: 14/11/2014 - Import Price Index in Industry (Sep-14), Quarterly National Accounts (est.) (Q3-14) Axia Ventures Group - 4 Vas. Sofias Ave., 10674 Athens Greece, Tel: +30 210 7414400, Fax: +30 210 7414449, Web: www.axiavg.com Please refer to the last page for disclosures and analyst certification Daily Note Greek Economy – Troika Negotiations Fact: According to daily Kathimerini the Greek government submitted its proposals to the troika aiming to restart negotiations, while is taking action by legislating some of the requested reforms. Still, the return date of the troika to Athens remains unclear. Assessment: According to Kathimerini in an effort to unlock the standstill in the negotiations and prompt the troika to restart its review, the Greek government sent its answer/actions that it intends to take on the 19 prerequisites put forward by the international lenders. At the same time, the report indicates that it intends to bring to Parliament in the coming days a number of legislations related to these prerequisites. According to the same press report, the reaction of the troika to the Greek government’s response to the prerequisites is expected ‘in the coming hours.’ Troika officials have yet to indicate their return date to Athens. To this end, IMF press representative William Murray noted that negotiations between the troika and the Greek government still continue despite the fact that there is no “physical” presence of the troika in Athens. That said, he also noted that “I have no specific date to give” in respect of the return of the troika heads to Athens. As we have already indicated the Greek government is running against the time as it has to submit the final draft of the 2015 budget by November 21 (troika should approve it), while decisions over Greece’s next day are expected in the Eurogroup meeting on December 8 and during the EU summit on December 18. Name: Constantinos Zouzoulas e-mail: [email protected] Phone number: +30 210 7414460 Greek Economy – Budget Execution (Oct) Fact: According to final data for the execution of the State Budget on a modified cash basis, the State Budget primary surplus for the first 10 months of 2014 amounted to EUR2.405bn, against the target for primary surplus of EUR2.449bn – State arrears increased in September to EUR4.79bn from EUR4.67bn in August. Assessment: For the Jan-Oct period, State Budget net revenues amounted to EUR41.06bn or EUR1.8m below the budgeted target. Ordinary net revenues amounted to EUR37.55bn, that is EUR1.17m lower than the target with tax refunds standing at EUR2.844bn, increased against the revised target by EUR270m. Public Investment Budget revenues amounted to EUR3.5bn or EUR639m lower vs. the target. State Budget expenditures came to EUR43.767bn or EUR2.16bn lower than the target. Ordinary budget expenditures amounted to EUR39.64bn down by EUR2.23bn against target, mainly due to the reduction of primary expenditure that settled EUR1.455bn lower than the target. Military expenditure and net interest paid came also below the target by EUR304m and EUR400m respectively. On the other hand, Public Investment Budget expenditure amounted to EUR4.118bn, increased by EUR69m compared to the target. The State budget deficit for the first 10 months of 2014 amounted to EUR2.67bn against the target for a deficit of EUR3.053n, while the State budget primary balance amounted to a surplus of EUR2.405bn, against the target for a primary surplus of EUR2.449bn. The October budget execution numbers were a negative surprise for the government as net revenues came significantly lower than expectations. According to the Alternate Finance Minister Christos Staikouras the significant underperformance was the result of: 1) higher tax returns (by EUR270m); 2) the delay in the implementation of the new property tax (ENFIA) that resulted to a EUR885m gap – this amount will be eventually collected for 2014; and 3) (and the main reason) the procrastination of taxpayers as they were awaited the introduction of a more favorable tax payment scheme (new legislation that extends the number of instalments of overdue obligations to the state and social security fund) The performance of the State budget over the Jan-Oct challenges the government expectations that it will exceed the 1.5% general government primary surplus target for 2014 and actually reach 2% for the year (as mentioned in the draft budget). To this end note that final general government primary surplus for the 9-month period settled at 1.7% of the GDP (or at EUR3.1bn). Still, Staikouras noted that the government is very close to meeting and actually exceeding the primary surplus target for the year. We view that the last few months (starting in August) press and government statements prompted taxpayers to delay payments in anticipation of a more favorable overdue debt arrangements. As final legislations are submitted to the parliament this month the government has still 4 months of revenues (November to February, 2015) to meet its goals. Name: Constantinos Zouzoulas AVG Research e-mail: [email protected] Phone number: +30 210 7414460 Page 2 Daily Note Greek Economy – Unemployment (August) Fact: According to HEL.STAT. (Hellenic Statistical Authority) the seasonally adjusted unemployment rate in August 2014 was 25.9% compared to 27.8% in August 2013 and 26.1% in July 2014 - According to Ergani register (Ministry of Employment database) October presented net firings of 66,636 persons (vs. 34,999 in Oct 2013) while for the first 10-months of 2014 there were net hirings or 120,287 persons (vs. 130,703 in 10-month 2013). Assessment: The number of employed in August amounted to 3,551,148 persons. The number of unemployed amounted to 1,242,219 while the number of inactive to 3,334,759. The number of employed increased by 32,636 persons compared with August 2013 (a 0.9% rate of increase) and decreased by 15,698 persons compared with July 2014 (a 0.4% rate of decrease). Unemployed decreased by 112,186 persons (a 8.3% rate of decrease) compared with August 2013 and by 20,398 persons compared with July 2014 (a 1.6% rate of decrease). Inactive persons (persons that neither worked neither looked for a job) increased by 29,196 persons (a 0.9% rate of increase) compared with August 2013 and by 31,709 persons compared with July 2014 (a 1.0% rate of increase). Name: Constantinos Zouzoulas e-mail: [email protected] Phone number: +30 210 7414460 Greek Economy – Amendment to legislation regarding state debts Fact: The Greek government tabled an amendment to Law 4305/2014 regarding the settlement of overdue obligations to the state and social security funds. The amendment concerns the revision of the Article 51 of the legislation that foresees that debtors who do not have overdue state (tax) obligations until October 31, 2014 cannot enter the new regulation provided by the aforementioned legislation. Assessment: The objective of the amendment is to prevent taxpayers who until now have been consistently meeting their tax obligations, from entering the new regulation and taking advantage of the incentive of up to 100 monthly instalments. As a result this indicates that only the first instalment of the unified property tax, ENFIA, and the first two instalments of income tax will be part of the new settlement scheme. Furthermore, note that the objections regarding the new law stemmed from the Troika, as it was concerned the voted law provided taxpayers with incentives to defer payments over time. Moreover, press reports note that the Troika estimated that the government would receive by the end February 2015 only 30% from the property tax revenues, translating into a cEUR 1.0bn gap, hence putting at risk the 1.5% target primary surplus of GDP for 2014. In addition, note that article 54 of the same legislation regarding overdue debts to the social security funds is expected to remain unchanged, while sources from the Finance Ministry suggest that the amendment would be voted to Parliament today. Action: We view that although the amendment may contribute to a higher revenue collection it will potentially increase moral hazard as it does not provide reward incentives for taxpayers that have consistently met their tax obligations. From a political standpoint the government’s action to change the voted law can be explained as renegotiation starting point with Troika, in regards to the forthcoming country program review. Finally, note that there is no clear visibility as of yet whether the Troika has approved the new amendment or has additional concerns on the voted law. Name: Constantinos Zouzoulas e-mail: [email protected] Phone number: +30 210 7414460 Greek Economy – Amendment to draft legislation for corporate NPLs Fact: The government is expected to amend the draft legislation submitted to Parliament last week regarding corporate non performing loans, with press reports noting that draft legislation could be voted on by Parliament today. Note also that press reports indicate that the amendment has the full approval of the Troika. Assessment: The main difference from the previous version of the draft legislation is that SMEs, self-employed and large corporates in order to enter the new regulation should have settled their overdue state obligations first, thus will have to be included in the regulation provided under Law 4305/2014. Secondly, according to the previous draft legislation debtors with annual turnover up to EUR2.5m, in order to be included in the provision of the law, would have needed to have by June 30, 2014, total outstanding debts of up to EUR0.5m. Importantly, note that the proposed amendment removes this requirement and indicates that the maximum amount of write-offs for corporate debtors can reach up to EUR 0.5m. Name: Constantinos Zouzoulas AVG Research e-mail: [email protected] Phone number: +30 210 7414460 Page 3 Daily Note Closing Price (EUR) Market Cap (EUR m) 18.70 1441.1 Titan Cement Co. SA Cement / Greece Reuters / Bloomberg: TTNr.AT / TITK GA Fact: Titan released a satisfactory set of 9-month results, in line with market expectations on operational level, while bottom line was boosted by favorable FX movement. The company reported net profits of EUR30.5m vs. EUR14.6m of losses in 9M:13. 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Nov 13 Dec 13 Feb 14 Mar 14 Apr 14 Jun 14 Titan Cement Co. SA Cons. Est.* EV/EBITDA P/E P/B EPS (EUR) *FactSet Jul 14 Sep 14 Oct 14 ATHEX Composite (Rebased) 2013 2014f 2015f 11.1 9.8 66.4 1.09 0.28 7.7 24.8 1.04 0.75 1.09 -0.39 Assessment: Titan results on an operational level were driven by the rebounding demand in US market and Greece but low utilization rates in Egypt due to severe gas shortages had a negative impact. On the positive side, favorable sales mix (higher sales in Greece) and cost optimization efforts related mainly to energy costs in Greece and the successful second round of price increases within 2014 in the US supported profitability. The company reported for the 9M:14 sales of EUR879.7.5m (+3.3% y-o-y), EBITDA of EUR146.7m (0.1% y-o-y) and net income of EUR30.5m (vs. losses of EUR14.6m in 9M:13), while the company has booked FX gains of EUR19.7m (vs. losses of EUR13.1m in 9M:13) and depreciation charges of EUR78.4m (vs. EUR87m in 2013). Net debt at the end of the first 9 months of 2014 stood at EUR529m (vs. EUR490m in end Q2:14). In Greece, the growth witnessed from the beginning of the year continued driven almost exclusively by the public works with residential and commercial construction remaining depressed. The group continued its strong exports that kept the units utilization rates above 70%. The company benefited from lower energy costs, while USD denominated exports were favorably affected by FX. 9M revenues from Greece increased by 16.6% y-o-y at EUR220.8m and EBITDA stood at EUR29.4m (+131.5% y-o-y). US revenues increased by 12.9% y-o-y for the 9M:13 at EUR345.4m driven by strong demand across all regions and successful price increases during the year across all product lines and geographies. Nevertheless, operating profitability was limited by management’s actions in anticipation of strong growth in the years to come. EBITDA stood at EUR31.7m (up by 37.2% y-o-y). South-Eastern Europe provided a flattish performance top line with revenues coming in at EUR166.9m (+1.5% y-o-y) and stronger profitability with EBITDA at EUR53.1 (+9.7%). The profitability gains are attributed to improved pricing environment, sales mix and operational efficiencies. Finally in Egypt severe country gas shortages (especially) in Q2 and Q3 had a large adverse impact on Titan production lines, keeping utilization rates at low levels, while the imports to defend market shares and higher energy prices burdened profitability. On the positive side, demand is remaining strong reported at +4.0% ytd, while cement prices increase. The company is investing in solid fuel investments installing two new mills to face gas shortages with the first one expected online by the end of 2014 and the second by the end of 2015 due to slow permitting procedures. In the meantime the group will continue to cover demand through imports from its Greek and Albanian operations. 9M:14 revenues dropped 23.8% y-o-y at EUR146.6m, while EBITDA recorded a drop of 47.9% y-o-y to EUR32.5m. In the conference call following the results release management announced price increases in US across all product lines and geographic regions between $8/t and $15/t that combined with production optimization are expected to boost the contribution of the market and translate positive trend to commercial results. Note that the outlook of the US market remains positive and according to PCA (Portland Cement Association) is expected to reach 7.6% across US while in Florida where Titan holds significant assets demand is estimated at 21%. Regarding Egypt, the investment in alternate fuel product lines will have a positive effect on the utilization rates, while lower clinker imports from other company owned factories that carry significant lower profitability. The first plant that will convert to solid fuel is Beni Suef (December 2014), while the conversion to the other plant will be completed in Q3:15. In any case demand in Egypt should continue strong. Finally, in respect of Greece, demand in 2015 will continue to grow supported by infrastructure projects, while margins will be supported by cost efficiencies and lower energy costs. EURm Q3:13 301.9 Total revenues 58.2 EBITDA 19.28% EBITDA mgn 7.2 Net Income Source: The Company, AVG Research Q3:14 308.5 57.7 18.70% 27.6 y-o-y 2.19% -0.86% n.m. 9M:13 851.8 146.5 17.20% -14.6 9M:14 879.7 146.7 16.68% 30.5 y-o-y 3.28% 0.14% n.m. Action: All in all Titan released a satisfactory set of results confirming the trends witnessed in the previous quarters. We remain positive on the company’s ability to translate solid demand fundamentals in its markets to results, especially in respect of increased profitability, primarily in the US and in Egypt. Name: Constantinos Zouzoulas AVG Research e-mail: [email protected] Phone number: +30 210 7414460 Page 4 Daily Note Corporate and Macro Calendar Companies Earnings Announcements (Q3:2014) Macros - November 2014 Company Hellenic Exchanges Date 17/11/2014 Event For the month of Release date Sep-14 Lamda Development 20/11/2014 14/11/2014 Geniki Bank 19/11/2014 Quarterly National Accounts (est.) Q3-14 14/11/2014 Turnover Index in Industry Sep-14 OPAP 19/11/2014 25/11/2014 Commercial Transactions (prov data) Sep-14 25/11/2014 Fourlis 25/11/2014 Producer Price Index in Industry Oct-14 28/11/2014 Aegean Airlines 25/11/2014 Turnover Index in Retail Trade Sep-14 28/11/2014 Piraeus Bank 25/11/2014 Metka 26/11/2014 Mytilineos 26/11/2014 Rating Agency Release date Folli Follie Group 27/11/2014 FitchRatings 21/11/2014 Athens Water 28/11/2014 Moody's 28/11/2014 Thessaloniki Water 28/11/2014 Import Price Index in Industry Credit rating review on Greece Corporate AVG Research Company Fact Hellenic Exchanges AGM 19/11/2014 Date Bank of Cyprus AGM 20/11/2014 Piraeus Port Authority AGM 25/11/2014 Page 5 Daily Note Disclosures General information This research report was prepared by Axia Ventures Group Limited, a company incorporated under the laws of Cyprus (but is referred to herein, together with its subsidiary companies and affiliates, collectively, as “Axia”) and is authorised and regulated by the Cyprus Securities and Exchange Commission (authorisation number 086/07). 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House, Berkeley Sq. 1065 Nicosia, Cyprus 10674 Athens, Greece New York, NY 10022 London, W1J 6BD Tel: +357 22 742000 Fax: +357 22 742001 Tel: +30 210 7414400 Fax: +30 210 7414449 Tel: +1 212 7920255 Fax: +1 212 7920256 Tel: +44 20 78876080 Fax: +44 20 78876001 www.axiavg.com Research Constantinos Zouzoulas [email protected] +30 210 7414460 Louis Nikolopoulos [email protected] +30 210 7414463 Argyrios Gkonis [email protected] +30 210 7414462 Vasilis Korakis [email protected] +30 210 7414461 Stavros Agrotis [email protected] +357(22) 742000 Constantinos Koufopoulos [email protected] +30 210 7414422 Maria Mitsouli [email protected] +30 210 7414424 Elias Calfoglou [email protected] +30 210 7414429 Harry Smyrnopoulos [email protected] +30 210 7414425 Athanasia Markidi [email protected] +30 210 7414428 Ioanna Georgiou [email protected] +30 210 7414427 George Baroumis [email protected] +30 210 7414426 Equity Sales / Trading