IBERIAN DAILY 17 JULY (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA, ACS, BANKING SECTOR, FERROVIAL, MÃSMÓVIL, NH HOTELES, OHL, TELEFÓNICA.MARKETS YESTERDAY AND TODAY
Awaiting the recovery fund
Most European indices saw slight drops after the ECB kept its monetary policy unchanged, as expected, urging governments to take the lead in the business expansion through fiscal stimulus measures. The president, C. Lagarde, requested a rapid and ambitious agreement at the EU summit to be held today to discuss the recovery fund. Thus, the reference rates remain unanimously at 0% and the deposit facility at -0.5%. In the Euro STOXX, Real Estate and Travel&Leisure saw the biggest drops vs. Telecoms and Utilities that were the best performers. On the macroeconomic level, in France, June’s final inflation was raised to 0.2% YoY. In the US, June’s retail sales, July’s Philadelphia Fed, July’s NAHB index and weekly jobless claims grew above expectations, while May’s inventories fell in line with expectations. From the Fed, J. Williams outlined that the monetary policy is aimed at obtaining a strong and robust economy, adding the prevalence of inflationist pressures. In US Results, Morgan Stanley, Johnson&Johnson, Bank of America and Abbott Laboratories beat expectations, with Netflix coming in worse than expected (with subscriber growth prospects also disappointing).
What we expect for today
Awaiting the European Council meeting, the European stock markets would open flat. Currently, S&P futures are up +0.26% (the S&P 500 was up +0.26% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 28.00%). Asian markets are trading with mixed results (Japan -0.5% and Hong Kong +0.6%).
Today in the European Union, the European Council will meet to discuss the European recovery fund. Also, in the Euro zone we will learn June’s final core inflation figure and in the US housing starts, building permits and U. of Michigan consumer sentiment. In US business results, BlackRock and State Street, among others, will release their earnings.
COMPANY NEWS
FERROVIAL, BUY
ETR 407 motorway (43.23% of FER; 57% of our T.P.) released yesterday its 1H’20 results, showing drops in sales and EBITDA of -67% and -73%, respectively, in local currency on the quarter. Traffic levels plummeted by -70% (-45% in cumulative terms), whereas tariffs (average revenue per user) dropped by -1.3%. Separately, the motorway announced its decision not to pay out the quarterly dividend, and confirmed that it will study the possibility of resuming it over the next few months.
Poor 2Q’20 results, although expected and in line with the data disclosed by FER in May’20, which showed a drop of more than -75% in traffic in April. In our view, the attention will be focused on the recovery rate of traffic in the 2H’20, which we expect to accelerate, with the drop in traffic totalling -25% as of the end of the year, returning to pre-Covid-19 levels in 2021. In any event, we highlight that a slower recovery than expected (in 2022) would have a limited impact on our valuation (-1.5% in our T.P. for FER), given the concession’s long duration (78 years remaining) and the current scenario of ultra low interest rates. As for the cancellation of the quarterly dividend, this measure was totally expected. we estimate a -75% cut to the dividend’20 BS(e), which could lead to the cancellation of FER’s interim dividend’20 (€ 0.43/sh.; 1.8% yield), as ETR 407’s dividends account for ~45% of the dividends that FER receives from its infrastructure assets and Heathrow has already announced that it will not pay out dividends this year. In any event, we highlight that FER might pay out the dividend without compromising its balance sheet considering its comfortable liquidity position (€~6.8 Bn; 2.2x NFD).
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.
ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.
Ferrovial is a transportation company based in Spain. Co. is engaged in operations in the transportation sector. Co. specializes in the design, construction, management, administration and maintenance of transport infrastructures. Co.'s services range also includes the maintenance of parking lots, and land-, sea- and air-based transport networks. Co. is also engaged in the promotion and operation of short-stay parking lots, parking regulation and management services and promotion and sale of residents' parking.
Masmovil Ibercom SA, formerly World Wide Web Ibercom SA, is a Spain-based company primarily engaged in the telecommunication sector. The Company focuses on the sale and distribution services for Internet, Data Center and Telecommunications. The Company's product and services portfolio comprises Internet access through Asymmetric Digital Subscriber Line (ADSL) and Symmetric Digital Subscriber Line (SDSL) technologies, Internet domains and Domains Management and Registration Service through IberDNS application, Web hosting, virtual servers, dedicated servers, telephony services and routers. The Company also offers collocation services through two Internet Data Centers located in Madrid and San Sebastian. It operates through subsidiaries, such as Embou Nuevas Tecnologias SL and Ebesis Sistemas SL, among others. The Company owns a number of brand names, such as Pepephone, Yoigo and Llamaya.
NH Hotel is engaged in the operation and management of hotels throughout Spain, the Benelux countries, Germany, and South America.
Obrascon Huarte Lain is an international concession and construction groups based in Spain. Co. maintains significant operations in 30 countries across all five continents. Co. is engaged in hospital and railway construction, transport infrastructure concessions, oil and gas, energy, solids handling and fire protection systems and international contracts. Co.'s operations are organized along four divisions: OHL Concesiones, OHL Construccion, OHL Industrial y OHL Desarrollos. Co. is also engaged in real state project developments of mixed use managed by the international hotel chains.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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