To χρηματιστηριακό ημερολόγιο του μικρομέτοχου (24.9.2020) – 1


Today’s Headlines

·         7th Enhanced Surveillance Report (comments on numerous issues)

·         EU Recovery Fund (ECB proposes to make the RF a permanent tool)

·         Banks (7th Enhanced Surveillance Report comments)

·         Banks (ECB considers making a new website for the sale of NPEs)

·         Banks (BoG Head reassures banks of new bankruptcy framework)

·         Telecoms (MoF examines the suspension of the pay-TV tax: press))

·         OPAP (considers issuing a new EUR 200m bond: press)

·         Eurobank (trades ex-Cairo Mezz right) 

Market Comment

Despite a positive opening, ATHEX ended in negative territory for a fourth consecutive session. Specifically, the General Index declined by 0.37%, with the trading activity shaping slightly lower at EUR 44.9m. Banks were mixed, with Alpha Bank (-1.3%) underperforming the sector and NBG (+1.9%) outperforming. Beyond banks, OTE (-2.5%), EYDAP (-2.2%) and Terna Energy (-2%) were among the main laggards. On the flip side, CCH (+2.0%), ELPE (+1.7%) and Aegean Airlines (+1.4%) were among the main winners.

Macro Headlines 

In its 7th Enhanced Surveillance Report for the Greek economy, the EC concludes that although the Greek government has to date managed to contain the spread of the coronavirus outbreak, the impact on the economy is expected to be significant. Despite some delays in some reforms due to the pandemic (e.g. state arrears clearance and privatizations), Greece has made significant progress on a number of major reforms, most notably the finalisation of the long-awaited legislative proposal to completely overhaul the insolvency legislation and the forthcoming launch of the Target Model in electricity. Note that this review was not linked to a release of debt relief measures. The 8th enhanced surveillance report is expected to be published in November.   

  • In a research note published from the ECB, the Bank has called the EC to examine the options of making the EU Recovery Fund (RF) a permanent mechanism, which is characterised as an important step towards the economic unification of Europe. In the same report, the bank argued that: 1) a coordinated European policy response to COVID-19 is essential to avoid an uneven recovery and economic fragmentation, while promoting economic resilience in Member States, 2) it is essential to ensure that the fiscal support provided through the RF is not counteracted by the premature withdrawal of fiscal support funded at the national level and 3) while macroeconomic stabilisation remains a priority, it will be important to maintain fiscal sustainability throughout the recovery. 

Sector Headlines 

At the 7th Enhanced Surveillance Report, the EC pointed the following among others for banks: 1) banks have continued to build up their liquidity buffers, keeping the cost of funding at manageable levels, 2) loan moratorium measures put in place imply that the impact of the pandemic on asset quality will be limited this year and be evident only in 2021, 3) efforts to sustain access to finance during the crisis, are starting to bear fruit and are expected to mitigate the impact on the corporate loan book this year, 4) despite the reduction in NPEs, and the fact that new NPEs will only appear in 2021, banks are booking extraordinary provisions to reflect the worsening macroeconomic environment, 5) the already weak profitability outlook for the system will come under pressure by an increase in provisions, 6) low profitability coupled with the cost of upcoming securitisations may pose challenges for the banks’ capital position in the near future, 7) the sovereign-bank nexus has increased and this trend may continue over the coming months, 8) the quality of banks’ capital remains low, due to the high amount of DTCs in CET I capital, and finally 9) data shows that the recovery in bank credit to businesses has gained pace, due to both supply and demand conditions. 

Reportedly (Kathimerini), the ECB plans to create a new website for the sale of NPEs created from the pandemic. The aim of this site will be to facilitate the sale of these NPEs and in a way protect prices. As per the same report, the website will be similar to amazon or ebay and the plan will be discussed at the EC this Friday. 

Reportedly (To Vima.gr), in a letter sent to the Hellenic Banks Association, BoG head Stournaras praised the new government initiative over the new bankruptcy law, reassuring banks that the bill will be improved and will not allow the creation of a new wave of strategic defaulters. Same report adds that banks were opposing the option of restructurings on performing loans which is included in the bill and as per a study published by Deloitte, the new bill could lead to the creation of some EUR 10bn of new NPEs due to the changes introduced from the bill. Mr Stournaras clarified that the perimeter for the restructuring of performing loans has been significantly reduced adding that this will be based on strict income criteria and specific income events, adding that Deloitte estimate are excessive. All in all, praising the reform he advised banks to wait until the final version of the bill which will be significantly improved addressing all moral hazard issues raised from banks. 

According to capital.gr, the MoF is examining the suspension of the 10% tax on pay-TV subscriptions for one year (Oct 20 – Sep 21). The imposition of the pay-TV tax in 2016 had a negative impact on the number of net additions of OTE and Forthnet that according to the latest available data serve 563k and 460k subscribers respectively. We remind that the pay-TV tax is not applied on Netflix subscribers, creating an unfair competitive environment for OTE and other pay-TV providers. 

  • Company Headlines

Reportedly (capital.gr), OPAP is considering the issuance of a EUR 200m corporate bond, looking for an interest rate of 2.3%. We remind that OPAP had issued a EUR 200m bond in 2017 with an interest rate of 3.50%, which it repaid in full in March 2020. We remind that OPAP recorded debt obligations of c. EUR 1.15bn on 30 June 2020, out of which EUR 305m refer to short-term loans. 

Eurobank will trade ex-right for the Cairo Mezz shares distribution, today. Recall that shareholders will be receiving one new Cairo Mezz share for every 12 Eurobank shares they own.  Cairo Mezz shares will debut trading on ATHEX (alternative market) on Sep. 29. The implied value per of Cairo Mezz for each Eurobank share is estimated at EUR 0.0155/share while the implied value for each Cairo Mezz share at EUR 0.186/share.  

  • Details on Headlines

European Commission’s 7th enhanced surveillance report

Facts: In its 7th Enhanced Surveillance Report for the Greek economy, the EC concludes that although the Greek government has to date managed to contain the spread of the coronavirus outbreak, the impact on economy is expected to be significant. Despite some delays in some reforms due to the pandemic (e.g. state arrears clearance and privatizations), Greece has made significant progress on a number of major reforms, most notably the finalisation of the long-awaited legislative proposal to completely overhaul the insolvency legislation and the forthcoming launch of the Target Model in electricity. Note that this review was not linked to a release of debt relief measures. The 8th enhanced surveillance report is expected to be published in November.  

Comment: Other key highlights of the report:

  • Key economic indicators: In the base case scenario, 2020 real GDP is forecast to contract by 9% (vs. government’s forecast of -8% in the adverse scenario) and rebound fairly strongly (+6%) in 2021. The unemployment rate is expected to increase to around 20% compared to 17.3% in 2019. The CPI is expected negative in 2020 around 0.5%, turning mildly positive in 2021.

Fiscal policy: The overall size of the extraordinary measures expected to be adopted by the government in 2020 is EUR 20.4bn or 12% of GDP, having a EUR 9.3bn budgetary impact or 5.5% of GDP. The primary budget deficit is expected to reach 5.8% of GDP. These projections do not yet include the impact of the Council of State’s pension ruling from 14 July, neither the pending ruling of the Court of Auditors, the total cost of which is currently estimated at 0.8% of GDP. A full update of the fiscal forecast will be prepared in the context of the assessment of the 2021 Draft Budgetary Plans.

  • ArrearsIn June 2020, the stock of arrears amounted to EUR 1.5bn, EUR 667m above the targets. These developments only partially reflect disruptions in labour-intensive processes caused by the pandemic. The authorities will update their plan by end-October 2020.

Privatizations: The report acknowledges that despite government’s commitment there were unavoidable delays due to the pandemic, including the sale of 30% of Athens International Airport and the exploitation of 35% stake in ELPE for which the procedure has frozen until market conditions improve. The Hellinikon project has shown significant progress, with main pending issues for the financial closure the award of the casino license and a few judicial cases. The tender procedure for the sale of state’s 65% stakes in DEPA Infrastructure and DEPA Commercial is well on track with prequalified bidders getting access to the Virtual Data Room. Other privatization procedures showing satisfactory progress are the privatization process for Egnatia motorway and regional ports of Alexandroupoli and Kavala, and the award of a concession agreement for the use, development and operation of the Underground Natural Gas Storage in South Kavala for a period of up to 50 years following the licensing of the project.

  • Energy: The government will submit a proposal soon with respect to the pending issue of PPC’s competitors getting access to a certain share of its baseload generation (the EU will conduct a market test after receiving the proposal). The launch of the Target Model in November is considered a huge step in setting up a modern energy market. Although PPC’s retail market share of around 68% is far from the programme’s goal of 50% by 2020, the downwards trend in market share and increased competition indicate that it is in the right direction (the report implies no further actions on this issue).

Greece’s wholesale prices are amongst the highest in the EU, though its rapidly-changing energy mix might change this. On the other hand, retail prices are on the cheaper side at a European level. Finally, as the deficit in the Renewable Energy Source’s Special Account remains a concern for the future, the renewables market operator will be considering a new methodology for calculating inflows, to be more in line with the changing market (no details are provided). 

  • Calendar of Events

Macros

30/09/20 | Turnover Index in Retail Trade JUL & PPI AUG

08/10/20 | Unemployment Rate JUL

09/10/20 | CPI SEP & Industrial Production AUG

Results

25/09/20 | EYDAP (1H20)

28/09/20 | Aegean Airlines (1H20)

30/09/20 | GEK TERNA (1H20)

Distribution of shares

24/09/20 | Eurobank Holdings – Ex-rights to the distribution of 1 share of Cairo Mezz for every 12 Eurobank shares

29/09/20 | Debut of trading of Cairo Mezz shares on the ATHEX (Alternative Market – EN.A. Plus) 

Research Department
Equity Research 

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