EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 FEBRUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, BANKING SECTOR, CELLNEX, IBERPAPEL, NATURGY, VISCOFAN.

MARKETS YESTERDAY AND TODAY

After the gains, the markets take a break
Profit taking in Europe and the US following the new highs hit over the last few sessions. In the Euro Stoxx, the best-performing sectors were Banks and Insurance, compared to the worst performers Autos and Basic Materials, which fell around -2%. On the macro side, in Germany industrial output was worse than expected after falling -3.5% vs. -0.2% expected (showing the weakness of the manufacturing sector) and the trade deficit fell by -2.2% in 2019 compared to 2018. In Spain, December’s industrial output rose +0.8% (YoY), closing 2019 with a +0.6% increase. In the US, non-farm employment beat expectations, although average salary gains rose less than expected and the unemployment rate rose +0.1% more than expected to 3.6% vs. the previous 3.5%. The Fed warned that the coronavirus poses a new risk for the US economy’s growth due to the disruptions it could bring. In China, both inflation and production prices rose more than expected. Separately, China’s Central Bank (according to one of the vice-governors) will increase its measures to support the economy in order to cushion the blow from the coronavirus impact, although activity levels are expected to recover once the virus is under control. In US business results, AbbVie beat expectations slightly.
What we expect for today
The markets would trade with drops of up to -0.5%. Currently, S&P futures are down -0.25% (the S&P 500 closed -0.30% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 15.47%). The Asian markets that are open are falling (Japan -0.60% and Hong Kong -0.60%).
Today in the euro zone February’s SENTIX index and in Mexico November’s fixed investment. In US business results, Allergan, Davita and Steris, among others, will release their earnings. Debt auctions: Germany (€ 3 Bn in 6M t-bills), France (€ 4.6 Bn in 3M, 6M and 12M t-bills) and Finland (€ 1.5 Bn in 3M and 6M t-bills).


COMPANY NEWS

ACCIONA, SELL
At Friday’s closing bell the company announced that it has reached an agreement with the Move consortium (led by Odebrecht) and the Govt. of Sao Paulo (Brazil) to transfer the construction and concession contract of Line 6 of the city’s underground (more than 15km). The company states that the deal’s closing is subject to different suspensive conditions as well as negotiations with the Sao Paulo Govt. for certain conditions related to the economic-financial rebalancing of the concession. The company has not provided any additional information on the deal.
Separately, the press has released some information on the deal, such as that the amount of the investment would total €~2.6 Bn (23% of ANA’s current EV and 22% of the infrastructures backlog) and that the concession will last for 25 years. Likewise, it is suggested that the Govt. of Sao Paulo would fund 50% of the investment and that ANA will have 4 years to finish the works. Note that the concession project was awarded to the Odebrecht-led consortium in 2013 and that the works have been suspended since 2016 (with around ~15% finished) due to the financial difficulties of some of the consortium members.
This news is unsurprising, as it was already known that the company was in advanced talks for this deal and that, at least for now, no additional details on the economics of the deal have been given (except for the amount of the investment that has not been confirmed by the Company). In this regard, we welcome the importance of the construction project, which represents 22% of the infrastructures portfolio. However, there is still relevant information missing, such as the definitive terms of the deal and the structure of possible partners (nothing has been mentioned by the company or by the press), as we would not be surprised that it could include other possible investors in the project. This aspect is especially important in our view, as a project of this size could have a significant impact on the Company’s leverage (4.2x NFD/EBITDA over the past 12 months as of the end of 9M’19 vs. guidance’19 of