Balance…until the next jump!

By Demosthenes Triga

The approach of hitting 1 billion in operating profit (EBITDA) for the Mytileneos Group came as a surprise to many, who did not realize its true value. A little earlier, precisely about a year ago, the inclusion in the MSCI benchmark index brought it closer to the eyes of large investment funds, causing the stock to jump from 14 euros to 36 euros (if profits are included, the price exceeds 37 euros), i.e. a return of more than 164%! Did the profitability continue and thus the rise in the stock? How is it evaluated relative to similar companies abroad?

The Group’s renewables activities have the highest multiple EV/EBITDA, exceeding 12x 2023 Operating Earnings (EBITDA), with several transactions (company sales) up. The rest of the group’s energy-related activities have a multiple of no more than 6 times 2023 EBITDA earnings (trading and production).

At the same time, the group’s traditional business, aluminum, gives a comparable industry rating of about 5.6 times based on an EV/EBITDA ratio, effectively lowering the overall rating as well. In the same vein, the projects it offers on a turnkey (EPC) basis also shows a lower multiple, at 3.7 times estimated operating earnings (EBITDA) for 2023.

In this context, by doing the necessary operations, the valuation of the Mytilineos Group ends up in line with the competition when it is done with an enterprise value to operating profit (EBITDA) ratio, i.e. EV / EBITDA, about 6.2 times 2023 earnings. On the other hand, when compared on the level of share price to earnings per share (P / E), the company trades at 20%, as it does not exceed 20 times the discount.

Another comparison, which might convince even the most skeptical of a company’s value when compared to the competition, is the dividend yield. The reduction as a percentage of total profits, the dividends from aluminum, mainly reduces the circularity of profits, which leads to smoother profitability and at the same time a more stable dividend policy. The group’s dividend yield, despite the jump in the stock, reached 4%, slightly above the average of the sectors in which the group operates (3.7%). More specifically, for 2023 the dividend, according to Bloomberg estimates, is estimated to be close to €1.38 (dividend yield 4%), while in 2024 the dividend will rise again, estimated to be close to €1.5 (dividend yield 4.3%)!

For the full year 2023, market estimates indicate a turnover of €5.45 billion, an operating profit (EBITDA) of €0.95 billion and a net profit of €0.55 billion. Moving forward, in 2024, market estimates call for a turnover of €5.7 billion, an operating profit (EBITDA) of €1.03 billion and a net profit of €0.6 billion, limiting the price-to-earnings (P/E) ratio to just 8.2 times.

In conclusion, yes, the stock may have outperformed the competition in a short period of time (one year or so), but getting into MSCI and discovering the stock through strong portfolios has sent it up. Essentially, the rule that the stock discounted its 2023 dividend was checked several months ago. Continuity is expected to be positive, but without the increase in profitability and share as in previous months. Finally, taking a look at the FTSE 100 in London, the market capitalization of around 5 billion euros leads to the 85th position in an index tracked by the most powerful portfolios in the world! Buy stocks to dream, buy bonds to sleep!

Bank profits rose despite higher provisions

The financial industry was at the heart of the market last week, with 6 of the 12 S&P 500 companies reporting second-quarter earnings belonging to this sector. The banking sector, which is part of the broader financial industry, had the highest gains among the rest of the sectors, with Citigroup, JPMorgan Chase and Wells Fargo reporting an increase in profits by 25%!

The increase in profits becomes even more impressive if we take into account that banks “wrote” higher forecasts in the second quarter of 2023 than in the corresponding quarter of last year. As is known, the effect of provisions is to reduce profitability, not the revenues of the banks.

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JPMorgan “wrote” $2.9 billion in loan loss provisions in the second quarter of 2023, compared to $1.1 billion in the corresponding quarter last year, an increase of 163%!

And according to the set of facts, the projections made in the second quarter of 2023 (including estimates of banks that have not yet published their results) for the 15 banks participating in the S&P 500 amounted to $ 9.9 billion, compared to $ 4.9 billion in the second quarter of 2022, an increase of more than 100%!

Finally, if $9.9 billion is the actual number for the second quarter estimate, it would be the third highest in the past five years, or 20 quarters.

Agenda (25/7/2023 – 30/7/2023)

All eyes are on Titan and Mytileneus’ second-quarter financial results
Today, Tuesday, ADMIE, Blue Cedars AEEAP and Real Consulting Associates held an Ordinary General Meeting, while ELSTAT announces the Building Materials Price Index for New Residential Buildings for June. AS shares will trade on Wednesday without the right to distribute dividends for 2022. Aegean Airlines and Sarandopoulos Rolling Mills have called an ordinary general meeting, while Alpha Trust Andromeda has called an extraordinary general meeting. With the main topic being the approval of the Dividend Reinvestment Program (Dividends) for the period 2023-2028. On the same day, the Bank of Greece announced bank deposit financing for the month of June. On Thursday, Titan announced financial results for the first half of 2023. Mytileneus publishes a quick note of financial results for the first half of 2023. Alpha Services and Shares held an ordinary general meeting, while Trastor called an extraordinary general meeting. With the main topic of buying real estate. On Friday they held an ordinary general meeting. The National Bank, Ecter and Optronics, while ELSTAT announces the producer price index for the month of June.

In focus are economic outcomes and interest rates in euros and dollars

Outside on Tuesday, the Ifo Institute publishes an index of business climate based on July data in Germany, while in the afternoon it releases its consumer confidence index in the US for the same month. Financial results are published on the same day by 3M (Dow Jones), Dow (Dow Jones), General Electric, General Motors, McDonald’s (Dow Jones), MSCI, Verizon Communications (Dow Jones), Alphabet (Dow Jones – MtK), Microsoft (Dow Jones – MtK), Mondelez and Visa (Dow Jones – MtK). On Wednesday, the Federal Reserve announced interest rates on the dollar, with estimates talking about an increase of 25 basis points, i.e. in the range of 5.25% -5.5%, while in terms of economic results, Boeing (Dow Jones), Coca-Cola (Dow Jones), Moody’s ranked. On Thursday it was the turn of the eurozone and the European Central Bank to announce interest rates on the euro, with market estimates calling for an increase of 25 basis points, or 4.25%. On the same afternoon, the US June Durable Goods Orders were announced, while the most important news is the publication of the change in US Q2 GDP, where market estimates speak of an increase of more than 2% (GDP is now Atlanta). In terms of financial results, Honeywell International (Dow Jones), Amazon.com (MtK), and Intel (Dow Jones – MtK) rank up. Friday is inflation day for the entire eurozone for the month of July, in the afternoon the personal consumption index (proxy for inflation) for June in the US is released, while the week closes with short- and long-term inflation and consumption expectations for the US. Finally, in terms of financial results announcements, AbbVie, Chevron (Dow Jones), Colgate-Palmolive, Exxon Mobil, and Procter & Gamble are leading.

* Demosthenes Tryngas is a BETA Stock Exchange Certified Stock & Market Analyst – [email protected]

** Republished from Kefalio Newspaper