Citi: The outlook and shares of 2022 – The new forecasts for the Greek listed companies and the favorite trade

Her Eleftherias Kourtali

Following Citigroup’s recent European Market Outlook report, which estimates that the sell-off caused by the new Omicron variant was normal and expected but investors will have to buy the correction, the US bank gives the new the estimates for the course of the European listed companies in 2022 as well as for the Greek shares.

According to Citi analysts, Operating cash flows for European listed companies will reach an all-time high this year, while in 2022 they will continue if strengthened significantly. This will finance an expected 13% increase in capital expenditure in 2021, with the semiconductor, mineral and automotive industries leading the way.

Citi analysts predict large increase in dividends for 2021 (+ 28%), with a slowdown to + 3% next year. They expect that tstock buybacks from listed companies will also be boosted significantly and in 2022 will cover the lost ground of 23021, increasing by 30%. The shares of the consumer sector, the luxury goods sector and the mining sector are the ones that will dominate the front of the own stock markets.

More specifically, as Citi points out, operating cash flows are projected to reach a record high in 2021, with an increase of 17%, followed by a + 11% increase in 2022. All cyclical sectors (excluding commodities) are expected to increase cash flows by double-digit next year, he estimates.

Mentioned specifically for the telecommunications sector, a significant improvement is expected, highlighting OTE’s share. According to Citi, it expects a continuous recovery in investments in supervisory fibers, especially in countries that initially invested in FttC (Fiber To The Cabin network) and are now in the process of investing in FttH (Fiber to the Home lines). These include the United Kingdom, Germany, Italy, Greece and Belgium, while Switzerland may also see higher capital as part of regulatory constraints on network architecture. In addition, it expects Vodafone, Telenet, Virgin / O2 (co-owned by TEF) to raise investment in fiber optics. In addition to on-balance sheet investments, many listed companies use off-balance sheet instruments to accelerate investment.

According to Citi, OTE offers the best growth in the European telecommunications industry with the lowest valuation. It has the “weapons” for further growth of shareholders’ returns despite the higher investments in FttH and fully owns every part of its infrastructure. With the strongest balance sheet, it remains the best investment choice in a world of potentially higher bond yields and / or higher inflation, given its pricing power. OTE generally has three options according to the American bank: a) use of financial partners, b) co-investment with other players in the market, but c) given its strong balance sheet and the production of free cash flows, it is more likely to fully finance the investment. The latter is Citi’s baseline scenario.

Returning to the prospects of European listed companies in general, Citi points out that 2021 was the year in which capital expenditures finally increased and is heading to be the first year since 2012, when total capital expenditures of listed companies in Europe increased by double digits. + 13%) percentage. In 2022 an increase of 6% is forecast. Semiconductor companies are expected to lead the way, with companies in the automotive and mining industries likely to invest heavily in ESG-related efforts.

In terms of buybacks, in more detail, in 2021, the shares of European listed companies are projected to be 25% lower than the activity before the pandemic. Citi models, however, point to a 30% increase next year, with consumer, luxury and mining stocks likely to be the protagonists. Citi analysts expect dividends to recover by 28% this year, slowing to just 3% next year.

Estimates for Greece

Citi also presents its updated estimates of international market valuations. In the case of Greece, the American bank estimates that the earnings per share of Greek listed companies (including banks) will increase by 29.1% – an improved forecast compared to the 25% previously forecast, which will be the higher growth in Europe, but also relative to the average in emerging markets, developed markets and the US.

Thus, he estimates that the profitability of European companies will increase in 2022 by 4.8%, of emerging markets by 5.2%, of developed countries by 6.9% and of American companies by 7.1%.

The estimated P / E index in the Greek market for 2021 is set at 12.1x, while for 2022 it will move to 10.1x. By comparison, the P / E in the US market, from 23.2 this year, will move to 21.6 in 2022, while in Europe from 14.5 this year to 15.1 in 2022.

Finally, it significantly expects the dividend yield of Greek listed companies to move significantly to 6.4% from 3.7% before, well above the average in Europe, USA, world markets and emerging markets, which is placed at 3, 2%, 1.7%, 2.3% and 3% respectively.