ECONOMY

Some Greek stocks look more promising than others in Europe

«Is the Athens Stock Exchange (ASE) an expensive or cheap market?» is a rather common, but misleading question; either answer would not fully encompass the present reality of a market where a picture of multiple speeds is evident throughout. The really meaningful question would be to ask which sectors and firms (as shown by their turnover and profit performance) are really competitive on a European or international level. Using the price-to-earnings (P/E) ratio as a guide (based on estimated after-tax profits) for 2003 and 2004, an investor would soon find that several big companies or entire sectors are and will remain competitive at international level. A characteristic example is the telecommunications sector where the projected P/E ratios of the two largest listed companies (OTE and its mobile subsidiary CosmOTE) remain at lower levels than the pan-European average. (The sector’s third largest company, Vodafone-Panafon, is to be delisted after the parent company completes an ongoing share buyback scheme). Indeed, their P/E is estimated as staying competitive in relation to the big European players in the sector in 2004 when they are expected to see the results of restructuring at all levels (investment, holdings, commercial policy). Specifically, compared to a pan-European average P/E of 14.3 in 2004, OTE’s is projected at 10.5 and CosmOTE’s at 13.5. The prices of two other two blue chips which figure in the portfolios of dozens, or even hundreds, of institutional investors abroad, the Public Power Corporation (PPC) and gaming operator OPAP, are expected to remain fully competitive. PPC’s P/E is projected at 10.7 for 2004, against a European average of 11.3, while OPAP’s is seen at 12.5, compared to 13.2 in Europe. To be sure, this positive picture does not apply to all the big Greek blue chips that attract the interest of international investors. A case in point is Coca-Cola Hellenic Bottling Company (CCHBC), whose estimated P/E of 33.2 contrasts sharply with the international average for the sector of 11.9. And this is despite the fact that the bottler, one of the largest in the world, is returning to profitability, absorbing a large part of the costs of an ambitious program of acquisitions and expansion in the emerging markets of southeastern Europe and Russia – including the costs of exchange differences. Stock market analysts say CCHBC would give a more competitive and realistic picture if comparisons were based on operating profits (that is, before taxes, interest and amortization). In most other sectors and individual blue chips, the picture is somewhere in between, the most characteristic example being banks. As shown on the table, three out of Greece’s six major banks are likely to verge close to (but still above) the European average P/E for 2004, which is seen at 11.8. National, Alpha and Piraeus are projected respectively at 12.2, 13.0 and 13.1, which would seem attractive for new placements. Indeed, investment portfolio managers evaluate Greek banks on the basis of estimates for 2004, as the year now ending is seen as a fresh starting point for their stock market performance after the unhappy developments of recent years.