Report
Research Department
EUR 100.00 For Business Accounts Only

IBERIAN DAILY 04 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACS, MASMÓVIL, MERLIN, OHL.

MARKETS YESTERDAY AND TODAY

Macroeconomic data underpin a rally following the losses from the last few days
European stock markets saw an increasing performance, fuelled by the good PMI data in the euro zone and the bullish US opening (following the good manufacturing ISM data and the fact that Trump apparently accepted Microsoft’s proposal to get hold of TikTok). In the Euro STOXX, Construction, Automobiles and Media led gains, while Real Estate and Food ended almost flat. On the macroeconomic level, in the euro zone, Germany and Spain, July’s manufacturing PMI rose more than expected, consolidating in expansive territory (up to 51.8, 51 and 53.5, respectively). In the UK, however, it fell slightly (vs. stability expected). In the US, July’s manufacturing ISM also climbed more than expected (up to 54.2), however, June’s construction expenses slowed down unexpectedly. On another note, D. Trump would be seeking a formula to extend the unemployment aid without the need of reaching an agreement with the democrats at the Congress. In Brazil, the manufacturing PMI also rose significantly, as well as in Mexico, although more moderately and remaining in contraction zone (40.4). In Japan, the monetary supply speeded up vs. June, Tokyo’s inflation came in above expectations. In US Results, Tyson Foods and Clorox came in better than expected, Eastman Chemical, Virgin Galactic and Hyatt worse than expected.
What we expect for today
European stock markets would open without significant variations following yesterday’s gains. Currently, S&P futures are up slightly (the S&P 500 ended flat vs. its price at the closing bell in Europe). Volatility in the US dropped slightly again (VIX 24.28%). Asian markets are climbing (Japan +1.7% and Hong Kong +0.8%).
Today in the US we will learn factory orders and June’s durable goods orders, in Spain July’s unemployment (+20k expected) and in Brazil June’s industrial output. In US business results, KKR, Gartner, Warner Music, Fidelity, Ralf Lauren, Western Union, Prudential, Wall Disney, Fox and Monster Beverages, among others, will release their earnings.

COMPANY NEWS
MERLIN PROPERTIES, BUY
According to the press, Canada’s Brookfield would be studying to take part in MRL’s capital and it would be mulling a takeover bid for the company (around € 3.3 Bn market cap) to take advantage of the market corrections. According to this source, the fund would have already contacted some shareholders to analyse their willingness to sell their stakes. Note that Santander holds >22% of the Company, Manuel Lao Hernández >6% and Black Rock almost 4% of capital.
Despite Brookfield’s signs of interest (already shown before the pandemic), we maintain caution on the possibility of closing this deal given the low visibility and the predictable difficulty to reach agreements with the current shareholders. In any event, and awaiting the details on the potential bid, we stress that following the recent corrections (-47% YTD, -25% vs. IBEX), we continue to see significant upside in the company as it is trading at a -55% discount to NAV June’20, and bearing in mind its debt as of June’20, we believe that the market is implicitly assuming that MRL’s assets are worth -35% less than the valuation appraisal, which we believe is excessive.

OHL, SELL
According to the press, the Amodio family (16% OHL) would be analysing a € 50 M injection (~28% market cap) in OHL through a rights issue if bondholders accept a 25% bond relief of € 593 M (~ € 150 M; ~18% debt) due 2022 and 2023. Note that OHL’s bondholders meeting will be held today and the press had rumoured the possibility of reaching an agreement so that the company’s creditors accept the capitalisation of some € 180 M of debt (~30% of bonds; ~100% OHL market cap).
Awaiting the signing of the agreement and the specification of the terms, we welcome the steps taken to ensure the company’s financial viability. In any event, we believe that even though a 25% relief would be clearly positive for OHL it will be complicated to reach (we do not rule out this possibility but we assume
Underlyings
Acciona SA

Acciona is the parent company of a construction group. Co. is engaged in general construction activities in the areas of civil engineering and buildings, including railways, marine and hydraulic works, motorways and airports, town planning, conduits, pavements, parking lots, and industrial and urban buildings. In addition, Co. is engaged in the provision of real estate services, the operation of parking lots, telecommunications, services, ecology and alternative means of energy. Co.'s operations are organized in six business divisions: Infrastructures, Real Estate, Energy, Water, Environmental & Urban Services and Logistic & Transport Services.

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.

Masmovil Ibercom SA

Masmovil Ibercom SA, formerly World Wide Web Ibercom SA, is a Spain-based company primarily engaged in the telecommunication sector. The Company focuses on the sale and distribution services for Internet, Data Center and Telecommunications. The Company's product and services portfolio comprises Internet access through Asymmetric Digital Subscriber Line (ADSL) and Symmetric Digital Subscriber Line (SDSL) technologies, Internet domains and Domains Management and Registration Service through IberDNS application, Web hosting, virtual servers, dedicated servers, telephony services and routers. The Company also offers collocation services through two Internet Data Centers located in Madrid and San Sebastian. It operates through subsidiaries, such as Embou Nuevas Tecnologias SL and Ebesis Sistemas SL, among others. The Company owns a number of brand names, such as Pepephone, Yoigo and Llamaya.

MERLIN Properties SOCIMI S.A.

Merlin Properties SOCIMI SA is a Spain-based company engaged in the operation of a real estate investment trust (REIT). The Company focuses on the acquisition, management and rental of commercial properties located in the Iberian Peninsula, primarily in Spain. The Company's activities are divided into the following segments: Office buildings, operating a portfolio of office space; High-street retail, engaged in leasing retail stores; Shopping centers, engaged in managing department stores; Logistics, operating logistics warehouses and distribution centers, and Others. The Company's other activities include property management services rendered to third parties.

Obrascon Huarte Lain SA

Obrascon Huarte Lain is an international concession and construction groups based in Spain. Co. maintains significant operations in 30 countries across all five continents. Co. is engaged in hospital and railway construction, transport infrastructure concessions, oil and gas, energy, solids handling and fire protection systems and international contracts. Co.'s operations are organized along four divisions: OHL Concesiones, OHL Construccion, OHL Industrial y OHL Desarrollos. Co. is also engaged in real state project developments of mixed use managed by the international hotel chains.

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