EUR 100.00 For Business Accounts Only

IBERIAN DAILY 17 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ALMIRALL, BANKING SECTOR, CELLNEX, MELIÁ, NH HOTELS, PROSEGUR/PROSEGUR CASH.


MARKETS YESTERDAY AND TODAY

The market awaits the Fed meeting
European stock markets yesterday ignored the suspension of AstraZeneca’s vaccine in several countries and let themselves carried away by the good prospects suggested by leading indicators such as Germany’s ZEW. Furthermore, the stabilisation of sovereign debt benefited some sectors, such as Technology. In the Euro STOXX the best-performing sectors were Automobiles (thanks to the industrial reconversion to electric vehicles) and Real Estate while Basic Resources and Energy ended with the biggest losses. On the macro side, in Germany, March’s ZEW climbed more than expected, in general suggesting a lower drop than -3.0% YoY expected by the market consensus in the 1Q’21. On another note, Italy and France resume the use of AstraZeneca’s vaccine following the message of the European regulator. In the US, February’s import prices climbed and hint at rises in inflation in the short-term. February’s industrial output and retail sales slowed down significantly (hit by the snowfall), with all indications suggesting a substantial recovery in March. In Japan, February’s exports slowed down more than expected in view of the lower demand from China and the US while imports recovered in line with expectations.
What we expect for today
Stock markets would not see relevant changes, awaiting the Fed’s meeting. Travel&Leisure has seen significant gains but today it could react to the newsflow on an imminent issue in the EU on the Covid-19 passport allowing citizens to travel within Europe if they are vaccinated or with a negative test without the need of quarantine. Currently, S&P futures are flat (the S&P 500 was down -0.22% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 19.79). Asian markets are mixed (CSI 300 +0.50%, Japan -0.05%).
Today in the US, the FED will hold its meeting and in Brazil, the Bank of Brazil will also meet. In debt auctions: Portugal (€ 1.25 Bn in 6M & 12M T-bills) and Germany (€ 1.5 Bn in bonds due 2050).


COMPANY NEWS

PROSEGUR/CASH, BOTH BUY
Prosegur acquires the AVOS business (value-added and outsourcing services for financial institutions and insurance entities) in Spain from CASH for € 67 M EV (~2% of PSG’s EV and ~3% of CASH’s based on our valuation). The scope of the deal means 85% of CASH’s operating results in this business and for the rest of the business held by CASH (Argentina and Paraguay), the companies agreed to analyse the possible sale by CASH to PSG. The scope of the transaction means around € 55 M of sales (~1.5% of PSG’s sales’20 and ~3.5% of CASH’s; the margins of the activity have not been specified). CASH outlines that the rationale behind the deal is that further growth in this business needs additional investments and the company estimates there are other business areas with greater priority (linked to the cash cycle) given the synergy level that can be generated within the company. The rationale for PSG would be to continue bolstering business growth in Spain and in other countries (with the exception of Argentina and Paraguay for the time being).
News of limited impact for both companies, as the amount of the deal is not significant for them and the acquisition multiple is 6.7x EV/EBITDA’20 (assuming the same margin as CASH in 2020), which would be very much in line with the trading multiples of both groups (6.9x CASH and 7.3x PSG), and thus the impact on valuation would not be relevant. Additionally, as PSG holds 74% of CASH, the net impact from the deal would not mean more than 1% of its market cap. However, in the case of CASH, even though the company frees resources to grow in more interesting segments in terms of profitability and synergies, it would lose a relevant part of the so-called “new products” (19% of sales in this segment, in turn 19% of total sales’20), which would be, in our view, one of the drivers to alleviate/compensate the negative impact that may stem from lower cash use (especially in Europe).