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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: constantinos.zouzoulas@axiavg.com
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: constantinos.zouzoulas@axiavg.com
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: constantinos.zouzoulas@axiavg.com
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: constantinos.zouzoulas@axiavg.com
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: constantinos.zouzoulas@axiavg.com
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: constantinos.zouzoulas@axiavg.com
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). Axia is authorized to provide investment services in
the United Kingdom and in Greece pursuant to its permissions under the Markets in Financial Instruments Directive and may also
provide similar services in other countries, inside or outside of the European Union, subject to the applicable provisions. Axia is not a
registered broker-dealer in the United States (U.S.) and, therefore, is not subject to U.S. rules regarding the preparation of research
reports and the independence of research analysts. In the U.S., this research report is intended solely for persons who meet the
definition of “major U.S. institutional investors” in Rule 15a-6 under the U.S. Securities and Exchange Act, as amended, or persons
listed under Rule 15a-6(4)).
Content of the report
The persons in charge of the preparation of this daily report, the names of whom are disclosed below, certify that the views and
opinions expressed on the subject security, issuer, companies or businesses covered by this research report (each a “Subject
Company” and, collectively, the “Subject Companies”) are their personal opinions and that no part of their compensation was, is or
will be directly or indirectly related to the specific recommendations or views contained in this research report.
Whilst all substantial sources of information for the research are indicated in this report, including, without limitation, bases of
valuation applied to any security or derivative security, such information has not been disclosed to the Subject Companies for their
comments and no such information is hereby certified.
All information contained herein is subject to change at any time without notice. No member of Axia has an obligation to update,
modify or amend this research report or to otherwise notify a reader thereof in the event that any matter stated herein, or any
opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the Subject
Company is withdrawn. Further, past performance is not indicative of future results.
Persons responsible for this report: Constantinos Zouzoulas (analyst)
Key Definitions
AVG Research 12-month rating*
Buy
The stock to generate total return** of and above 10% within the next 12-months
The stock to generate total return* *between -10% and 10% within the next 12Neutral
months
Sell
The stock to generate total return* * of and below -10% within the next 12 months
Under Review
Stock’s target price or rating is subject to possible change
Applicable Laws / Regulation and AXIA Ventures Group Limited policies might
Restricted
restrict certain types of communication and investment recommendations
Not Rated
There is no rating for the company by AXIA Ventures Group Limited
* exceptions to the bands may be granted by the Investment Review Committee of Axia taking into account specific characteristics of
the Subject Company.
**total return: % price appreciation –percentage change in share price from current price to projected target price plus projected
dividend yield
AXIA Ventures Group Limited Rating Distribution as of today
Coverage Universe
Buy
Hold
Sell
Restricted
Not Rated
Under Review
Count
Percent
10
100%
Of which Investment
Banking Relationships
Count
Percent
5
50%
Daily Note
Independence and objectivity, conflicts of interest management
None of the analysts in charge of this report are involved in activities within Axia where such involvement is inconsistent with the
maintenance of that analyst’s independence or objectivity. None of them has received or purchased shares in any Subject Company
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