Recent events, notably Greece’s switch to a more business-friendly administration after its General Election last weekend, continue to shift the prevailing political and economic winds in Minoan’s favour. This result followed the swing to the right in the Regional, Municipal, and European elections in May. This update provides a very brief summary of the current economic and political backdrop in which the group operates. We intend to follow this with a further more detailed note as the project’s value and realisation become more evident.
To recap, the previous Syriza government approved the group’s scheme in Crete in 2016, with all appeals cleared in 2017. That followed various approvals from all previous governments. This provided the green light for a projected €250m hotel, residential and leisure development.
However, the current equity valuation reflects the group’s long-running negotiations over legal and political issues during a 25-year period, as well as the risks inherent in financing and delivering a substantial scheme. Nevertheless, it appears to discount much of the potential upside when the project begins to be realised.
We now see the backdrop to Minoan’s plans as more stable, because of changes to various external factors:
- An improved political backdrop for business and investment post the various election victories by the more business-friendly New Democracy party
- More receptive international capital markets, particularly since the start of this year, reflected in a current record low yield on benchmark 10-year Greek government bonds (matching that of the US 10-year Treasury at just over 2%)
- The recent performance and relatively stable outlook for Greece’s economy. That has been mirrored in the performance of local hotel investment and development markets, and the outlook for tourism generally.
We set out some of this below and intend to provide a detailed analysis of the company’s investment proposition in the next update.