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How the lockdown will affect OPAP, Jumbo, Fourlis, Sarantis, Kri-Kri, ELPE and Motor Oil

The effect of the new restrictive measures on listed companies will be different, according to an analysis by Pantelakis Securities.

Prime Minister Kyriakos Mitsotakis announced yesterday, as very much expected, that the whole of Greece will go into full lockdown between 6 - 30 November, with the aim to combat the second wave of the coronavirus outbreak. 

Although companies are better prepared to deal with the second lockdown of 2020, as they have the experience of last spring, it is clear that the restrictions will cause significant disruption to their business and possibly to the overall results of the year.

The nature of the business activity of a company is clearly very important, with Pantelakis Securities examining in its report the prospects and the "resilience" of seven listed companies: OPAP, Jumbo, Fourlis, Sarantis, Kri-Kri, ELPE and Motor Oil. 

Starting with OPAP, agencies remained shut for 2 months (Play stores for almost three) during the spring 2020 (much-stricter) lockdown. At the time, OPAP had warned that each month of full-scale lockdown shaved cEUR45m off EBITDA (net of cost mitigating actions) and resulted in cEUR20m cash burn. Admittedly, the impact this time will be much smaller, since a) the lockdown will be enforced for only three weeks, b) in contrast to spring, sports activity will continue for all major domestic/European leagues (facilitating betting activity), and c) OPAP has since raised its Stoiximan stake (to 69% from 37.5%, and soon to 84.5%, starting to fully-consolidate Greek and Cypriot operations): Stoiximan commands a c45% share in the online sportsbetting market, hence providing a natural hedge in these conditions.

Turning to retail stocks and focusing on Jumbo, this new 3-week outright lockdown, which involves the temporary closure of 52 stores in Greece (representing around 56% of group sales and 55% of selling space), out of 80 strong group network, should trim EUR4.6m from our FY20e net income EUR141.7m forecasts on EUR25.1m revenue loss. This figure includes also the extra four days of lockdown (kicked-off on 3 November) in Northern Greece, namely four stores in Thessaloniki and 1 in Serres, making up a bit more than 13% of domestic network selling space. In fact, we look for a massive domestic trading drop of 71% y-o-y in November, driving group sales 38% lower, compared to an impressive c13% growth in the previous month.

Still, having recovered 38% of the cEUR104m revenue lost (at a group level) during the 8-week lockdown thanks to a solid 10%-plus group top-line y-o-y increase recorded between 11 March and 31 October, we feel confident that Jumbo will score a double-digit sales growth in the crucial Christmas season largely due to pent-up demand.

Final point, besides government payroll subsidies to the tune of EUR1.9m, Jumbo stands to benefit from sharply reduced November rental costs since nearly all of 26 leased stores in Greece enjoy rental clauses based on actual sales generation (ie no rental fees as long as stores remain shut).

As for Fourlis, despite being cushioned by robust on-line business (in stark contrast to Jumbo), which contributed a massive 25% of homefurnishing revenue and up to 20% of athletic goods during the April-early May store closure period (compared to 10% and 6% in FY19, respectively), we expect November’s 3-week lockdown to hit hard top-line since Greece accounts for c64% of IKEA franchise sales and a large chunk of Intersport/TAF.

After recording a net loss of EUR7.2m in H1 (vs EUR1.1m loss a year before), Fourlis is in desperate need of operating leverage that works its magic in the all-important fourth-quarter. Actually, it is precisely due to upbeat Christmas season sales, which are more or less evenly split between late November and December, that fourth quarter, historically, contributes a staggering 47/50% of Fourlis annual net income. For that matter, Q4 traditionally accounts for 28/29% of yearly IKEA revenue, compared to first quarter’s 21% for example).

In all, outlook for the remainder of the year appears blurry, since besides the new Covid-19 induced lockdown taking a strong bite of sales, Fourlis needs to get to grips with the worsening domestic macro backdrop (after a disastrous tourism summer season), which could potentially hamper consumer spending in crucial Christmas period, hence compromising operating leverage.

On the flip side, Sarantis seems well placed to weather November’s country-wide lockdown given that c95% of sales are being channelled through the food retail chains and (to much lesser extent) pharmacies. In fact, we see domestic sales (represented gathering pace in November and rise at high-double digit, yet again driven by frenzy shopping for essentials (but also health-home care and personal hygiene) as witnessed at the onset of the coronavirus crisis (up by an illustrious 32% y-o-y in Q1).

On top, Sarantis enjoys a strong footprint across Central-Eastern Europe with international operations (key markets: Romania and Poland) representing no less than 64% of 9M20 group sales (+5% y-o-y to EUR183.2m amid the pandemic storm). 

Likewise, Kri Kri appears rather immune to the 3-week nation-wide quarantine measures, which kick-off tomorrow. This is especially true as far as fourth quarter is concerned due to intense ice cream seasonality in Greece. Thus, in contrast to what we experienced during the spring lockdown (ie crashed outdoor, impulse buying from kiosk), this time we see tight restrictions on movement to have a minimal impact on sales due to an exceptionally low demand for ice cream in late autumn-winter.

Bucking the trend, we expect consumption for yogurt in Greece-(and abroad) to gain traction during the quarantine, as was the case in the first lockdown, since people tend more time at home with family increasing food budget altogether at the expense of leisure/restaurants etc.

Finally, with regards to Greece’s two refiners, Hellenic Petroleum and Motor Oil, the full lockdown over the next three weeks will clearly severely impact demand for auto-fuels. Recall that during 2Q as a whole, consumption for both gasoline and auto-diesel went into free fall, diving 30% and 18% y-o-y respectively. Luckily this time round, the lockdown is planned to last for only three weeks. If indeed all restrictions in movements are lifted in December, we expect demand for auto-fuels in 4Q to drop by close to 10% y-o-y. 

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