IBERIAN DAILY 29 APRIL (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, BANKIA, DIA, AENA, ENCE, IAG, IBERDROLA, NH HOTELES, REPSOL, TELEFÓNICA, TOURIST SECTOR.MARKETS YESTERDAY AND TODAY
Consolidating levels
It was a new session of gains at both sides of the Atlantic. In the Euro STOXX, all sectors with the exception of Pharma and Telecom ended in positive territory, with Banks and Insurance leading gains. On the macroeconomic level, in Spain, the unemployment rate rose less than expected to 14.4%, with 579,000 people affected by the temporary redundancy plan brought by the Covid-19 crisis. Meanwhile, P. Sánchez presented the new asymmetrical confinement measures by sectors and regions, which will be carried out in 4 stages from now until the end of June. In France, April’s consumer confidence fell less than expected. In the US, April’s consumer confidence dropped more than expected to 2014 lows and April’s Richmond Fed manufacturing index fell to record lows, with the services index hitting the low from 2008. In US Results Pfizer, Alphabet and Merk & Co came in better than expected while Caterpillar and Polaris worse than expected.
What we expect for today
The main European indices would open with slight gains of up to +0.5%, driven by the expectations of a progressive elimination of lockdown measures. Currently, S&P futures are up +0.98% (the S&P 500 was down -0.37% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 33.57%). Asian markets are mixed (Japan -0.06% and Hong Kong +0.16%).
Today in the euro zone we will learn March’s M3 and April’s economic climate indicator, in Spain March’s retail sales, in Germany April’s inflation, in the US the Fed meeting, the 1Q’20 GDP and March’s pending home sales. Debt auctions: Italy (€ 6 Bn in bonds due 2025 and 2030, CCT 2023). In US business results, Mastercard, Bank United and Silicon Laboratories, among others, will release their earnings.
COMPANY NEWS
ENCE. 1Q’20 results slightly above expectations. BUY.
The company released at yesterday’s closing bell poor 1Q’20 results that were slightly above expectations on the EBIT level (€ 16.8 M vs. € 14.8 M BS(e) and € 16.4 M consensus) thanks to higher sales (+12% vs. BS(E) and +8% vs. consensus), and also in cash generation (€ 534 M of NFD vs. € 553 M BS(e)). We expect a neutral or somewhat positive market reception. With the revision of estimates we are planning, in a scenario of V-shaped recovery (-40% in EBITDA’20e and -18% on average over the 2021-22 period), we would cut our T.P. to levels of € 3.8/sh. (+29% upside) and in a scenario of U-shaped recovery (-50% in EBITDA’20e and -35% on average for 2021/22) to € 3.40/sh. (+16% upside), meaning that we reiterate our BUY recommendation. The share price has beaten the IBEX by +11% from February’20 highs, when the Covid-19 crisis started.
IAG. Releases preview of its 1Q’20 results below expectations. BUY.
Recurring EBIT came in at €-535 M (vs. €-225 M BS(e) and €-199 M consensus) due to a worse performance in costs (no details were given). The company expects a “significantly higher†operating loss in 2Q’20 (due to lower capacity levels, already know; -94% in April/May vs. -10.5% in 1Q’20). The company believes that demand levels will take a few years to recover (in line with sector comments) and that restructurings will be made (possible staff reduction affecting ~12,000 employees in British Airways; ~20% of its staff). The company’s liquidity position stood at € 9.5 Bn as of 31 March (€ 6.95 Bn of cash vs. € 7.35 Bn on 12 March; meaning cash burn of €~17 M/day; €~530 M/month). This set of results does not reduce the uncertainty weighing on the share price and we expect the company to give further details on 7 May. We maintain our T.P. Under Revision. From market highs pre-Covid-19, it has shed -70% (-37% vs IBEX), rallying from March lows by +12% (similar to the IBEX).
REPSOL, BUY
According to the press, REP would have incurred a loss of € 180 M (€ 135 M net of taxes BS(e)/11% of Net Profit’20e) after being forced by derivative contracts to purchase Treasury stock (30 M shares + 23 M shares) at € 13.69/sh. (+75% vs. current trading levels) and € 11.56/sh. (+48%) on 19 March and 23 March, respectively, which, in turn, were sold in subsequent days. In any case, this loss will not be accounted in the 1Q’20 results (5 May) because it would be charged to equity according to the CNMV’s new accounting criteria. According to the source, a number of derivative contracts affecting another ~17 M shares at high prices still remain, meaning that the loss could still increase by another € 40-50 M according to our estimates.
Negative news that would mean a drop in REP’s value of -1.4% in terms of valuation and of -2% on the market cap level, despite not being shown in the results. We expect a negative market reaction today.
Results highlights next week.
Of the stocks releasing their 1Q’20 results next week, we expect a positive impact in Arcelor Mittal, where after assuming that operating visibility is quite low and with a significant impact on EBITDA’20 (-25%/-30%), the results should show the company’s financial robustness and low cash break-even point, which would act as a driver. On the negative side we would highlight Applus, where we expect the impact from Covid-19 to continue to increase uncertainty in the short term, and Dominion, where we expect sales to slow and margins to deteriorate, and this could catch the market by surprise.
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.
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.
Aena SME SA, formerly Aena SA, is a Spain-based company primarily engaged in the airports operation. Its activities are divided into four segments: Airports, which comprises Aeronautical subdivision, responsible for the management of airports, jetways, security, handling, cargo and fuel services, among others, as well as Commercial subdivision, including duty-free and specialty stores, restaurant services, car rental, as well as banking services and advertising; Services outside the terminal, which manages real estate assets, such as parking lots, warehouses and lands; International, which comprises operations of Company's subsidiary, Aena Desarrollo Internacional SA, that invests in other airport owners principally in Mexico, Colombia and the United Kingdom; and Others, encompassing corporate activities. It manages tourism, hub and regional airports, as well as heliports and general aviation areas. Furthermore, its destination range comprises Europe, the Americas, Asia and Africa.
Bankia is a financial institution based in Spain. Co. is primarily engaged in operations in the banking sector. Co.'s business operations are structured into seven areas: Retail Banking, Business Banking, Private Banking, Asset Management and Bancassurance, Capital Markets and Holdings. Co. offers financial products and services to various customer segments, such as individuals, small and medium enterprises, large corporations, as well as public and private institutions. As of Dec 31 2014, Co. had total assets and total customer deposits of Euro233,648,603,000 and Euro106,806,698,000 respectively.
Distribuidora Internacional De Alimentacion is a supermarket and convenience store group based in Spain. Co. is engaged in the retail trade of food through cut-price self-service supermarkets and franchise establishments. Co. is engaged in the operation of stores located in Spain, France, Portugal, Turkey, Argentina, Brazil and China.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
NH Hotel is engaged in the operation and management of hotels throughout Spain, the Benelux countries, Germany, and South America.
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.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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