EUR 100.00 For Business Accounts Only

IBERIAN DAILY 12 MAY + 1Q’23 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACCIONA ENERGÍA, AENA, FERROVIAL, MELIÁ HOTELES, MERLIN PROPERTIES TALGO.

At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 1Q’23 results to be released over the coming days in Spain.

Far from monetary policy easing
The possibility of further rate hikes in developed countries dragged on the European stock markets, which were also impacted by news on US regional banks (deposit outflows in PacWest, which fell by more than -20% yesterday). Thus, within the Euro STOXX, Consumer Goods and Food were the best relative performers, whereas Basic Resources and Energy saw the biggest losses. On the macro side, the BoE raised rates by +25bps to 4.5% as expected. Moreover, Governor A. Bailey left the door open to further rate hikes as long as inflation is not brought under control and in view of the lower recession risks and the increased 2023 growth forecasts (+0.25% now vs. -0.50% previously). In the US, weekly jobless claims increased more than expected, whereas production prices rose somewhat less than expected in April. From the Fed, N. Kashkari highlighted that inflation remains far above the Fed’s target, ruling out a change in policy in the short term. On the geopolitical front, J. Yellen warned that failure to repay US debt obligations would lead to a global recession and the meeting scheduled for today to negotiate the debt ceiling was put off until next week.
What we expect for today
European stock markets would see slight gains of +0.25%, with the technology sector benefiting from renewed doubts about US regional banks. Currently, S&P futures are up +0.23% (the S&P 500 ended flat vs. the European closing bell). Volatility in the US dropped (VIX 16.93). Asian stock markets are mixed (China’s CSI 300 -0.63%, Japan’s Nikkei +0.83%).
Today we will learn in the United Kingdom the industrial output data and the first reading of the 1Q’23 GDP, in Spain April’s final inflation, in Mexico March’s industrial output, in Brazil April’s inflation, and in the US the University of Michigan Confidence index for May.


COMPANY NEWS

MELIA HOTELES. 1Q’23 Results in line with expectations. We cut our T.P. by -8% to € 7.10/sh. BUY.
1Q’23 Results practically in line with expectations in sales (+45.9% vs. +47.4% BS(e) and +44.4% consensus) and in EBITDA (+243.2% vs. +261.2% BS(e) and +258.1% consensus). The trend continues unchanged, underpinned by higher RevPAR vs. 1Q’19 (+13%) although with a -7% drop in available rooms. Positive outlook with bookings on the books +31% vs. 2019 levels. We update our estimates, revising sales by +6% vs. previous levels and EBITDA by -3.5% on account of lower margins. The main impact on valuation would stem from a lower margin hypothesis (-50bps vs. previous level), which leads us to cut our T.P. to € 7.10/sh. (-8% vs. previous T.P., +25% upside), reiterating our BUY recommendation.

MERLIN PROPERTIES. BUY.
The results showed robust growth in LfL rents (+8% vs. +6% BS(e)) thanks to the update of contract rents with the CPI and the rise in occupancy levels in the office segment (+183bps to 92.2%). By type of asset: offices grew +7% in LfL rents, shopping centres by +11% and logistics by +4%. FFO (cashflow) only decreased by -5.6% (-18% BS(e)), even though there is no FFO contribution from Tree this year (it was sold in 2Q’22). The improvement vs. BS(e) is mainly due to lower financial costs. The LTV ratio came in at 32.5% (-18bps vs. Dec’22). There are no asset appraisals this quarter.
While the numbers are solid, we believe that the stock’s performance will continue to be linked to macro data (GDP, inflation and rates, etc.).
FERROVIAL. BUY.
1Q’23 Results in line with expectations on the operating level (EBITDA € 189 M vs. € 196 M consensus), with the positive performance of Highways (EBITDA € 158 M vs. € 150 expected; +45% vs. 1Q’22) both in terms of traffic and tariffs (+>8.5% in the main Managed Lanes). Results in line with expectations in Construction (EBITDA € 43 M vs. € 44 M consensus) and weaker in Airports (€ -10 M vs. € 1 M expected) due to the negative seasonality in Dalaman (130.00/MWh expected). However, it added that there could still be price rises in the remainder of the year (highly volatile gas) and does not rule out the possibility of conducting a corporate deal with positive EBITDA contribution (without further details). According to our model, if we were to assume the prices suggested by forward prices for Spain (vs. € 125.00/MWh BS(e)), the resulting EBITDA would stand at around € 1.4 Bn. The rest of the guidance remains unchanged: (i) CAPEX between € 1.8-1.9 Bn (~1.88 BS(e)) and (ii) ≤ 2x NFD/EBITDA (vs. 2x BS(e) and1.9x consensus).
On the positive side, we stress the messages on the favourable outlook for the sector, in general, stressing the positive message on supply chain and PV prices. We also welcome the confidence in meeting the capacity installation target in 2023. On the contrary, and even though it should be at least partially expected, the comments on the EBITDA target’23 mean admitting that this target is complicated without some type of corporate deal which, at least in our case, we were not assuming. However, the impact on valuation should not be relevant, as longer-term futures have not seen significant variations. With this in mind, following the -19% correction vs. IBEX YtD, we assume that the disappointment of the guidance should be widely priced in, and thus we would not expect a relevant market reaction, in any case, with a negative slant.

TALGO, BUY.
The company released at yesterday’s closing bell 1Q’23 results in line with expectations showing improved activity and margins, on track to meet the guidance’23, which was reiterated. Sales increased by +7% vs. 1Q’22 as expected (+8% vs. last quarter) to € 127 M, whereas adjusted EBITDA came in at € 15.4 M, in line with expectations, with the margin coming in at 12.2% (+20bps vs. BS(e) and +30bps vs. the consensus; +160bps vs. 1Q’22 and +20bps vs. 4Q’22), in line with the ~12% guidance for the full year. The only contract awarded on the quarter was the contract extension in Denmark for € 184 M (already known), bringing the backlog to € 3.09 Bn (€ 3.03 Bn in 2021). This contract and the one in Egypt signed in 2022 (€ 280 M) are still pending definitive signing.
We would expect a slightly positive share price reaction, as the results met expectations and the guidance’23 was maintained, and especially considering the -15% drop vs. IBEX YTD. There will be a conference call at 12:00 (CET), where we will pay close attention to any comments on possible extensions with Deutsche Bahn and Saudi Arabia, as well as a possible contract with Letrain.