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IBERIAN DAILY 06 NOVEMBER + 3Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, EUSKALTEL, FERROVIAL, IBERDROLA, MELIÁ HOTELS, PRISA, ROVI.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 3Q’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

Biden is the virtual winner of the US election
European stock markets continued to rise after Joe Biden won Wisconsin and Michigan thanks to the mail-in vote. Meanwhile, Trump initiated a legal process to halt the vote counting due to irregularities. In the Euro STOXX, only Energy (dragged down by Brent) was left out of the gains, led by Technology (dragged down by the US due to lower risk of more regulation/taxes in the US) and Chemicals. In the UK, QE increased more than expected by £ 166.23 Bn. Separately, the EC expects the euro zone to contract by -7.8% in 2020 and -4.2% in 2021 (due to the contraction in 4Q’20 and lower growth in 1Q’20) and 3.0% in 2022. In the US, the Fed meeting brought nothing new, although Powell warned that it will be necessary to use an ultra-lax monetary policy, with the asset purchase programme being discussed. In US business results, Westrock, Discovery and General Motors beat expectations.
What we expect for today
Following the sharp gains, we can expect profit taking of between -0.5% and -1.0% awaiting Biden taking one more state to win the presidency. Currently, S&P futures are down -0.6% (the S&P 500 unchanged vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 27.58%). Asian markets are trading with mixed results (Hong Kong -0.4%, Japan +1%).
Today, in Germany and Spain we will learn September’s final industrial output and in the US October’s non-farm job creation. In US business results, Ventas, Viacom CBS and Marriott, among others, will release their earnings. In ratings, Moody’s will review Italy’s rating (Baa3, stable).


COMPANY NEWS

MELIA HOTELS: 3T’20 Results better than expected. We cut our estimates and T.P. BUY
Results came in above expectations thanks to a slightly less negative performance of revenues (-78% vs. -81% BS(e)). Thus, EBITDA totalled € -27.6 M (vs. € -35.7 M BS(e), € -36.5 M consensus and € 156.1 M in 9M'19). As for its outlook, the company stated it is confident that the worst of the crisis is over although with many challenges ahead in the 4Q’20 due to the measures adopted as a result of Covid-19 and no quantitative guidance was given (expected). Thus, we believe that these results do not mean a game change and we cut our estimates (-46% on EBITDA’20-23e on average) and T.P. (to € 3.50/sh.; -12.5%). The limited upside (+7%), the lack of operating visibility and the lack of an imminent driver lead us to maintain our SELL recommendation.

ROVI: Robust 3Q’20 Results, better than expected by the consensus. 2021 guidance below expectations. SELL
The 3Q’20 results came in above the consensus on the operating level (EBITDA € 27.3 M vs. € 20.4 M consensus and 27.4 M BS(e)), thanks to better performance of margins (24.6% vs. 25% BS(e) and 20.2% consensus) and better sales figures (+18% and +7.3% consensus), with Net debt remaining stable (+0.0x NFD/EBITDA). The company provided 2021 guidance of mid single-digit growth in operating revenues’21 (from 0% to 10% vs. +16% BS(e) and consensus). We raise our estimates for 2020-23 (+1.2% in sales and +13% in EBITDA) and, with the roll-over of our model, we obtain a new T.P. of € 29.50/sh, meaning a €+4.50 rise (+18% vs. previous). Following its recent good performance (+43% in 2020 and +70% vs. IBEX), our new T.P. yields no upside (-15%), and thus, we maintain our SELL recommendation.

IBERDROLA. Strategic Plan through 2025: a first approach to the 2030-35 period. BUY.
Yesterday, IBE reiterated its bet on strong investments (+35% vs. previous) because this is the right time to do it (as there are many interesting investment opportunities), the company knows how to do it and, above all, it has access to credit to carry it out. Although the company could have opted for smaller investment levels, raising the dividend instead (4.5% yield on average over the 2020-25 period), it has placed its bet on strong investment in the medium-term to pay a substantial dividend in the very long-term. The targets are very much in line: CAGR’19-25 of +6.8% (vs. +6.6% BS(e)) and +6.6% in Net Profit (+7.5% BS(e)). We revise our estimates very slightly (+2% in Net Profit on average over the 2020-25 period) and our T.P. remains almost the same (€ 11.89/sh. vs. € 11.83/sh. previous). We reiterate that the stock’s positive momentum remains unchanged.