Report
Research Department
EUR 100.00 For Business Accounts Only

IBERIAN DAILY 26 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, AMADEUS, FERROVIAL, FINANCIAL SECTOR, GRIFOLS, INDRA, MELIÁ, NATURGY, PRISA, REPSOL.

MARKETS YESTERDAY AND TODAY

Market rally continues
The European stock markets posted gains of +3%/+4%, welcoming with enthusiasm the agreement on the US$ 2 Bn fiscal stimulus programme by the US, which was approved yesterday by the US Senate and should be ratified in Congress tomorrow. Today all eyes will be on the Eurogroup and the approval of a panEuropean fiscal package. Within the Euro STOXX, all sectors ended in the black, led by Construction and Energy, with Chemicals and Telecoms, seeing the smallest gains. On the macro side, Germany’s IFO contracted slightly in March vs. the preliminary data, although it does not show a severe impact from COVID-19 yet. In the United Kingdom, inflation fell by a tenth in February, in line with expectations (1.7%) and core inflation. In the US, February’s preliminary durable goods orders came in above expectations, although capital goods without the most volatile components contracted more than expected.
What we expect for today
After a two-day rally, today European stock markets would see a bearish opening Currently, S&P futures are down -1.2% (the S&P 500 ended -2.67% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 63.95%). The Asian markets are sliding (Japan -4.51% and Hong Kong -0.79%).
Today we will learn in the Euro zone, the M3 and the ECB monthly report, in the UK February’s retail sales, in the US, the final 4Q’20 GDP and weekly jobless claims. In debt auctions: Italy (€ 3.5 Bn in 2Y and 21Y bonds).


COMPANY NEWS

REPSOL. Savings that could add up to +11% to our T.P. of € 10.00/sh. (+37% upside). BUY.
The company announced yesterday a series of measures to tackle the effects from the COVID-19 crisis. It maintains its shareholder remuneration commitment for 2020 (€ 1.00/sh.; 13.7% yield) and it will complete the DPS’19 with a € 0.55/sh. payment in July in scrip format (in line with expectations, although questioned: 9% and 7.5% yield). The group also maintains its plan of cancelling the necessary own shares to offset the dilutive impact from the payment in scrip format. However, it has withdraw from the AGM agenda (08/05) the buyback and cancellation proposal of 5% of additional capital to be executed in the 2H’20, which is no surprise as it is in line with the decisions being made by its peers. We cut our EPS’20 by -52% and -30% on average in the medium-term. We expect a very positive market reception.
REP expects to reduce CAPEX’20 by €>1 Bn (-19%) vs. our estimate of € 750 M. Moreover, we stress other unexpected measures such as cutting OPEX by €45 years); the commuter profile of its users and the current environment of ultra low interest rates. As for the dividend payment, despite its robust liquidity position (€ 6 Bn vs. € 530 M dividend), we do not rule out the possibility of a reduction or cancellation, which would be fully justified by the current one-off situation.

GRIFOLS, BUY.
The company announced at yesterday’s closing bell that it has reached a collaboration agreement with the FDA, the BARDA (Biomedical Advanced Research and Development Authority) and other federal public health departments to collect plasma from recovered COVID-19 patients and produce hyperimmune immunoglobulin. Also, it will participate in several clinic trials to determine the efficacy of anti SARS-CoV-2 therapies based on immunoglobulins to treat COVID-19. Separately, it is working in Spain on a clinical trial with inactivated plasma from recovered patients (methylene blue) and is collaborating with a number of hospitals in the design of clinical trials for the use of immunoglobulines such as alpha 1 antitrypsin in order to assess its efficacy against COVID-19. Positive news. Although it was already known that GRF was working on the development of a treatment for COVID-19 based on plasma from recovered patients (with antibodies), the fact that the FDA and the US government have signed this agreement strengthens and validates GRF’s research. Separately, we recall that GRF already developed a treatment against Ebola in 2014 with plasma from recovered patients.

BANKING SECTOR
According to the press, some market regulators in Norway, Switzerland, France and Germany have requested banks and insurers to cancel the dividend payment’19 and share buybacks to avoid an impact on their financial position. This takes place in the framework where the Swiss watchdog has confirmed the decision of the country’s financial institutions to cancel the share buybacks and requested caution in dividends. We also recall the ECB’s recommendation, urging financial institutions to make cautious decisions in dividends and earmarking the flexibility granted (i.e. in capital buffers) to finance the economies and absorb possible losses (i.e. increase in provisions) but not to increase remunerations or dividend payments. Furthermore, Unicredit’s CEO, Jean Pierre Mustier, also chairman of the European Banking Federation, has requested banks to communicate their view on this issue, either to continue backing shareholder remuneration or to support growth of the economies and have preserved capital in view of some potential losses. Negative news without a relevant impact given the current situation. Also we do not think it will affect the DPS’19 of the companies within our coverage universe, except in the case of those that have already announced it, such as Santander, which has postponed the interim dividend to be paid in Nov’20 until May’21, when the scrip payment is made and when the company would revise its payout policy (currently between 40% and 50% of Operating Net Profit). However, we do expect it to affect the DPS’20e, although to a greater extent in banks than in insurers. We believe that given the current situation, it is expected to some extent that banks will not pay the dividend to preserve capital levels in a scenario of complete uncertainty. Moreover, the high yield is not an argument for investment. At these trading levels (c. 0.5x P/TE in banks and c. 0.8x P/BV in insurance), the investor assumes the risk (with high volatility) due to the revaluation potential (c. + 50% from the current levels and vs. levels prior to the pandemic).
Underlyings
Accesso Technology Group

Accesso Technology Group is engaged in the development and application of ticketing, mobile and eCommerce technologies, and virtual queuing solutions for the attractions and leisure industry. Co.'s solutions include accesso LoQueue, accesso Passport, accesso Siriusware and accesso ShoWare. Co. primarily has operations or customers in the U.K., the U.S., Canada, Italy, Germany, Australia, Brazil, and Mexico.

Actividades de Construccion y Servicios SA

ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.

Amadeus IT Group SA Class A

Amadeus is a transaction processor for the global travel and tourism industry. Co. provides transaction processing power and technology solutions to both travel providers (including full service carriers and low-cost airlines, hotels, rail operators, cruise and ferry operators, car rental companies and tour operators) and travel agencies (both online and offline). Co. acts both as a worldwide network connecting travel providers and travel agencies through a processing platform for the distribution of travel products and services (through the Distribution business), and as a provider of a portfolio of IT solutions which automate certain business processes (through the IT solutions business).

Ferrovial S.A.

Ferrovial is a transportation company based in Spain. Co. is engaged in operations in the transportation sector. Co. specializes in the design, construction, management, administration and maintenance of transport infrastructures. Co.'s services range also includes the maintenance of parking lots, and land-, sea- and air-based transport networks. Co. is also engaged in the promotion and operation of short-stay parking lots, parking regulation and management services and promotion and sale of residents' parking.

Grupo Prisa (PRS SM)

Indra Sistemas S.A. Class A

Indra Sistemas is engaged in the design, development, manufacture, assembly, repair, and installation of computer software and applications. Through its subsidiaries, Co. is engaged in consulting, graphic design and multimedia, web design and marketing, internet development and electronic trade, systems integration and hosting geared business to business and business to consumer, as well as in internet financing and electronic marketing. Co. serves defense and security, transport and traffic, energy and industry, telecom and media, finance and insurance, and public administration and healthcare markets. Co. operates primarily in Europe, the United States, Canada, and Latin America.

Melia Hotels International S.A.

Melia Hotels International is the parent company of a group engaged in the acquisition, management and operation of hotels. Co. operates its hotel network in Germany, Argentina, Brazil, Bulgaria, Cabo Verde, Chile, China, Costa Rica, Croatia, Cuba, Egypt, Spain, United States, France, Greece, Netherlands, Indonesia, Italy, Luxembourg, Malaysia, Mexico, Panama, Peru, Portugal, Puerto Rico, United Kingdom, Dominican Republic, Singapore, Switzerland, Tunisia, Uruguay, Venezuela and Vietnam under the followings brandnames: Paradisus Resorts®, Melia Hotels & Resorts®, TRYP Hoteles® and Sol Hotels & Resorts®.

Repsol SA

Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.

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