Uncertainty Weighs on Trading Activity; Earnings Distribution Remains High

 

Strong Q4'15 Performance - with sales at €12m, 8% higher y-o-y, supported by the fees related to the recapitalisation of the Greek banks in December. EBITDA rose by 58% to €7m, also aided by the 24% OpEx drop, however net profit declined by 7% y-o-y to €3.5m, negatively impacted by €0.4m from the revaluation of real estate assets and €0.2m from the de-recognition of bonds. Excluding the one-off losses, Q4'15 adjusted net income increased by 9% y-o-y to €4.1m.

 

2016-17e EPS Cut by 10-20% on Lower ADT & MCap Assumptions: The delays in the completion of the Greek 1st programme review has added further uncertainty to the domestic market, as reflected by the YTD drop in ADT by 16% to €72m. As a result, we downgrade our 2016-17e ADT (to €75-95m from €85-98m previously) and MCap (to €46bn in 2016e from €59bn, rising to €58bn in 2017e) assumptions, which leads to 10-20% cuts in our EPS forecasts over the same period. We expect the gradual restoration of investor appetite on Greek assets to support the ADT and shares' prices from H2'16e onwards, subject to the full lifting of the capital controls and the successful 1st programme review.

 

Underleveraged BS with 2015 Net Cash of €141m - leaves room for lucrative distributions. Following the total 2015 cash distribution of €0.32/share (total yield at 6.3%), we expect 2016e total distribution of €0.36/share (DPS of €0.12 and capital return of €0.24), that yields 7.1% on current price. We now estimate the total 2016-17e cash distribution to reach €0.78/share (64% through capital return) from €0.75/share previously. Additionally, we forecast net cash of €1.9-2.0/share in 2016-17e and FCF of €0.17-0.19/share (3-4% yield), which provide good scope for positive surprises in the future.

 

Remains Equalweight / TP Cut to €5.00 (from €5.20) - due to our earnings downgrades (WACC unchanged at 10.7%). Our TP, together with the 2015 total DPS of €0.32, implies a total expected return of 5.3% from current price level. Ηence, we reiterate our Equalweight rating. Note that for every €10m delta in our 2016e ADT assumption of €75m there is c€0.3/share sensitivity (c6% on average) in our TP. In our view, despite the demanding valuation (2016e cash adjusted P/E of 20x, at 25% premium vs the 2011-15 historic average), Helex's underleveraged BS (net cash at 43% of the market cap) leaves good scope for generous distributions over 2016-17e (yields at 7-8%).

 

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