Jefferies: Remains bullish for Greek stocks and the Greek economy

Her Eleftherias Kourtali

Jefferies is particularly optimistic in today’s report on the course of Greek stocks and the Greek economy, despite the fact that the ATHEX has been moving hesitantly in recent months and the energy shock that followed the pandemic shock has hit the financial figures. As Greece’s strong creditworthiness emphasizes, the dynamic image of deposits, the business climate, the fall in unemployment and the significant improvement of the banking sector, are just some of the “weapons” of the country. What are the top picks from the ATHEX?

After the significant progress made by the Greek economy since the time of the debt crisis, it was then faced with one of the biggest shocks in Europe, that of the pandemic, with the tourist arrivals “disappearing”, affecting the income (the income from tourism was to 19% of GDP in 2019), and then the energy shock broke out which shook the trade balance. According to the house, Greece imports 40% of its natural gas from Russia (33% in January). With an energy dependency ratio of 71% (2017), renewable energy sources increased from 6.9% of gross final energy consumption in 2004 to 15.5% in 2017. In turn, this led the trade balance to “red” while the current account deficit was 6% at the end of last year.

Deflation, the catastrophe of the Greek economy in the last decade, has turned into an inflation problem (CPI 8.9% in March) and in turn the current account balance has deteriorated. Although the financial forecasts for 2022 have declined and now place growth at 3.2% this year, Greece has officially opened its doors to international tourists since March 1, while the growth of retail bank deposits is astonishing and a huge vote of confidence in the economy. Thus, as Jefferies points out, it remains bullish for Greece but also for Greek shares.

Despite the impact of the Russian invasion of Ukraine, Greece’s credit rating has not changed substantially, Jefferies points out, and based on most indicators, such as the CDS, has returned to pre-pandemic levels. The IMF estimates that the Greek economy will grow by a strong 3.5% this year, with inflation moving to the (optimistic) 4.5%, as it notes.

Greece has not escaped the danger posed by the recent shocks, however, it should be considered that it is making healthy and important steps forward, as Jefferies emphasizes. This can be seen from the vertical increase in bank deposits, while business confidence remains increased (113.2) and manufacturing is growing (PMI in March at 54.6 Mar) and the unemployment rate (12.8%) has decreased almost half as much as five years ago. The really good news is that the youth unemployment rate has dropped significantly and close to the lows of 2008, while the government has implemented significant reforms during the pandemic. Also, non-performing loans of Greek banks decreased sharply under the “Hercules” program and the successful securitization of NPEs, and the liquidity of the banking system has improved significantly. At the same time, according to the IMF, the debt-to-GDP ratio of Greece is expected to fall below pre-pandemic levels by 2023.

Bullish for the ATHEX – The top picks

The Greek stock market has been moving relatively hesitantly lately, as noted by Jefferies, however, presenting attractive valuation indices. Specifically, as he points out, the ATHEX trades with an estimated price index for 12-month p / e profits at 10.8x, with a price index for book value p / bv at 0.93x, with a price index for profit growth at 0.39x, with a dividend yield of 3.7% and a return on equity of 8.9%. For all the above, “we remain bullish for Greece in the global distribution of our assets”, as Jefferies emphasizes.

Jefferies ranks Motor Oil, National Bank, Alpha Bank, Eurobank and Mytilineos among the top performing stocks in terms of estimated profitability. In the shares with top performance in terms of return on capital it places IPTO, EYDAP, Plastics of Thrace, Jumbo and Autohellas, while in the list of shares-survivors of XA it maintains HELEX, OTE, Jumbo and Motor Oil.