IBERIAN DAILY 06 OCTOBER (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA, FCC, LIBERBANK, UNICAJA.MARKETS YESTERDAY AND TODAY
Market recovery
The improvement of D. Trump, the imminence of a minimum agreement on the new stimulus plan in the US and the unexpected rise in September’s non-manufacturing ISM to 57.8 fuelled global stock markets. Thus, the Euro STOXX climbed +0.9% with Telecommunications and Insurance leading gains while Utilities was the only sector ending with drops and Personal Consumption saw the lowest gains. In the euro zone, the services PMI was raised slightly (although it dropped to 42 in Spain), August’s retail sales climbed slightly more than expected and Sentix sentiment index deteriorated slightly more than expected in October. From the Fed, Evan hinted at new coordinated monetary stimuli with an expansive fiscal policy from the Congress to boost inflation to at least 2.5%
What we expect for today
European markets would open flat with a slight bullish slant and strong sector dispersion, with the US closing yesterday only 5% below record highs. Currently, S&P futures are trading flat (the S&P 500 was up +0.4% vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 27.96). Asian markets are rising (Japan +0.5%, Hong Kong +0.8%).
Today in Germany we will learn (August) factory orders and in the US (August) trade balance. Debt auctions: Spain (€ 4 Bn in 6M and 12 M t-bills), Germany (€ 750 M in bonds linked to inflation due 2030 and 2046).
COMPANY NEWS
UNICAJA/LIBERBANK – New round of merger talks, we see more upside in Liberbank.
UNI and LBK yesterday confirmed they have resumed their merger talks, which might be closed in 1Q’21 This is not a surprise, as it is one of the consolidation options with greater complementarity and potential value enhancement. Assuming conservative synergies of around 30% of LBK’s cost base (€~115 M), we estimate an accretive impact on UNI’s EPS’22 >20% and a dilution of CET1 (after integration adjustments) to around 13% (vs. 14.3% currently), and thus, a rights issue would not be necessary. Both stocks yesterday soared around +15%, although the share prices of both banks continue to assume a ratio of around 40% LBK/60% UNI, below the exchange ratio we deem most likely, 42% LBK/58% UNI, which would mean +5%/+9% upside in LBK. With this in mind, we continue to see an opportunity through LBK and reiterate our BUY recommendation for both stocks.
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.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Unicaja Banco SA is a Spain-based financial institution (the Bank) engaged in the banking sector. The Bank offers services to individual and business customers. Its products and services range includes current and savings accounts, debit and credit cards, consumer and commercial loans, real estate credit, securities brokerage, funds management, leasing, factoring, pension plans, life and non-life insurance, international trade financing, money transfer, as well as treasury, among others. The Bank operates a number of branches in Spain and Morocco. The Bank is controlled by Fundacion Bancaria Unicaja.
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