EUR 100.00 For Business Accounts Only

IBERIAN DAILY 21 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CIE AUTOMOTIVE, IAG.


Bad digestion after the Fed
European stock markets saw profit taking, led by cyclical sectors. In the STOXX 600, defensive sectors such as Food and Utilities were the best-performing industries whereas Autos and Banks were the worst performers. On the macro side, in the UK, the BoE kept the benchmark rate unchanged at 4.50%, as expected, with governor M. Bailey warning about lower rates but through a very gradual pattern. On another note, February’s number of unemployed rose above expectations whereas January’s (ILO) unemployment rate remained at 4.4% (in line). In the euro zone, C. Lagarde from the ECB showed her concern about the impact from the trade war on inflation (that could add up to +0.5 tenths) and growth (that could subtract -0.5 tenths). In the US weekly jobless claims rose slightly less than expected. March’s Philadelphia Fed index dropped less than expected and existing home sales rose unexpectedly in February. In Japan, February’s general inflation rose more than expected whereas the core data was in line with expectations. OPEC+ announced a new schedule for seven member countries (Russia, Kazakhstan and Iraq, among them) to implement oil output reductions to compensate for pumping above agreed levels.
What we expect for today
Stock markets would open with drops of as much as -0.5%, with some defensive sectors hit by the hike in debt yield. Currently, S&P futures are down -0.12% (the S&P 500 ended unchanged vs. the European closing bell). Asian markets are falling (China’s CSI 300 -1.72% and Japan’s Nikkei -0.1%).
Today in the euro zone we will learn March’s consumer confidence, in Germany the Bundesrat will vote the reform on the constitutional debt ceiling.


COMPANY NEWS

CIE AUTOMOTIVE, OVERWEIGHT
At yesterday’s closing bell, the company announced a TOB for 11.59 M own shares maximum (9.67% total) at € 24.00/sh. in cash (+6.9% vs. closing price). CIE will not cancel the shares, with the deal aimed at providing higher liquidity in an occasional fashion. Thus, the shares acquired could be subject to an orderly placement in the future. The deal is subject to approval in the AGM on 07 May. The price offered will be adjusted to dividend payments and a DPS’24 of € 0.46/sh. was announced (+2% vs. 2023, in line with expectations), payable on 15 July (2% yield).
Adjusted for the previous treasury stock and free-float, where we assume that the stable shareholders (52% of the shareholding structure; Riberas family with 15.7%, Antonio Pradera 10.0%, Egaña family 10.0%, Corporación Financiera Alba 10.0%, Mahindra & Mahindra 7.4%) will not accept the TOB (although the aim of the move is precisely that they do subscribe in order to subsequently increase liquidity), we assume that the bid is addressed to 18.6% of the capital, and thus, if the remaining shareholders accept the TOB, in the pro-rata the effective bid would represent a +1% premium. Thus, we do not foresee a relevant market impact and recommend not to accept the TOB as our T.P. (€ 33.50/sh.) widely exceeds the price offered.

IAG, OVERWEIGHT
Heathrow airport will be closed all day today due to an electricity outage caused by a fire in a substation. Operations are expected to resume on Saturday.
Negative news, as Heathrow is the main hub for British Airways (>50% of IAG’s capacity), although the impact is difficult to assess at this time, as we wait to see how long the airport’s closure lasts and how affected fliers are relocated in an airport that operates at the limit of its capacity. Thus, we understand today’s news should be felt on the share price, but considering it is a one-off and that all signs suggest everything will be back to normal soon, we think this could lead to a buying opportunity in the stock, given the positive trend on the operating level we expect. IAG is currently trading -31% below pre-pandemic highs (+35% higher EBIT vs. 2019 and with lower leverage), pricing in EBIT levels far below what was achieved in 2024 (-60%) and -50% below 2019.