EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ENAGAS GRIFOLS, IAG, IBERDROLA, RED ELÉCTRICA REPSOL.


MARKETS YESTERDAY AND TODAY

The geopolitical risk premium falls
Stock markets reacted well to D. Trump’s speech on Iran, ruling out (for the time being) a military strike in Middle East. Thus, the Euro STOXX closed with slight gains (+0.5%), with Technology and Pharma being the best-performing sectors and Basic Resources and Chemicals seeing the biggest drops. On the macro side, in Germany, the industrial output climbed somewhat more than expected in November, yet remaining in negative territory in YoY terms. In the Euro zone, October’s unemployment rate remained stable at 7.5%. In the US, weekly jobless claims fell somewhat more than expected. From the Fed, R. Clarida underscored the need for inflation expectations to stabilise at 2.0%, which could bring forward new stimulus measures. In Brazil, the industrial output contracted more than expected in November. In Japan, personal outlays fell more than expected in November, affected by the rise in VAT.
What we expect for today
Stock markets would open with slight gains, awaiting US job data. Currently, S&P futures are up +0.18% (the S&P 500 closed practically unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 12.54%). Asian markets are rising (Japan +0.47% and Hong Kong +0.25%).
Today we will learn: in Spain, November’s industrial output; in Mexico, December’s consumer confidence; in the US, December’s non-farm employment creation, wage returns and November’s final wholesale inventories.

COMPANY NEWS

ENAGAS, SELL
The company communicated at the closing bell that Fitch had cut its rating one notch from A- to BBB+. Thus, the agency removes the “Rating watch negative” that was granted to ENAG in July’19, awaiting the final release of the 2021-2026 regulatory framework. Negative news that is rather due, in our view, to the uncertainty that may stem from an increased stake in Tallgrass than to the regulation itself. Notwithstanding, ENAG carried out a € 500 M capital increase in December to finance the acquisition of Tallgrass (35% of € ~1.4 Bn). We did not expect this rating cut, as the rights issue would keep its NFD/EBITDA ratio unchanged at 3.8x vs. 4.2x prior to the capital increase. According to our estimates, the acquisition of Tallgrqass has a neutral contribution to valuation if no successful delivery in future investments in the asset is assumed (note that it is paying 15x P/E vs. the current trading multiple of 12x).

IBERDROLA, BUY
According to the press, IBE would have set an internal target of saving € 3 Bn (5% of market cap and 8% of NFD) in working capital on the supplier side, eliminating the advantages that until now it had given to the smallest ones (we understand this means earlier payments). Positive news, as if the target is achieved it would allow IBE to lower its NFD by -8% with an impact of around +5% on the valuation. In any event, we do not expect the target to be met in the short term (we understand it is a long-term goal), and at present we believe it would be too early for the market to price it in.

RED ELÉCTRICA, SELL
The company yesterday carried out a 8.5Y debt issue worth € 700 M (15% NFD) at a 0.5% yield cost vs. the company’s average cost of 2.3%. Good news, as it lowers the cost of debt by 30bps BS(e) to 2%, which has a positive impact on EPS of +2% and on valuation of around +2%.