IBERIAN DAILY 19 DECEMBER (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA, BANKINTER, BBVA, EBRO FOODS, ENAGÃS, IBERDROLA, PRISA, PROSEGUR CASH, SIEMENS GAMESA.MARKETS YESTERDAY AND TODAY
Markets consolidate gains awaiting news
Stock markets fell gradually as the session progressed, with little volume traded on the European stock exchanges despite New York’s bullish opening (which in the end closed with no changes). Within the Euro STOXX, we highlight the better performance of defensive sectors, led by Retail and Food and Banks, whereas Construction, Autos and Industrials saw the biggest drops. On the macro side, in Germany, December’s IFO data came in above expectations, suggesting modest recovery in growth and capital goods orders. In the Euro zone and the United Kingdom, general inflation remained unchanged in November (vs. the slight drop expected in the UK), as did core inflation (in line). In the US, as expected, Congress passed the political trial of D. Trump for abuse of power and obstruction of justice in 2020, but the process is unlikely to go through the Senate, where it would have to be backed by a two-thirds majority. In Japan, the BoJ kept its monetary policy unchanged, whereas Kuroda maintained a message of expansive monetary policy due to the downward risks on growth.
What we expect for today
The markets would open flat with few drivers. Currently, S&P futures are falling slightly (the S&P 500 closed unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 12.28%). Asian markets are falling (Japan -0.29% and Hong Kong -0.48%).
Today the BoE and the Central Bank of Mexico will meet. Also we will learn in the UK, November’s retail sales, in the US the 3Q’19 current account balance, the Philadelphia Fed index for December and second-hand home sales for November.
COMPANY NEWS
BANKINTER – SELL. Spin off of LDA to pay extraordinary dividend
At yesterday’s closing bell BKT announced a payment in kind through the distribution of 82.6% of LÃnea Directa Aseguradora in a proportion of 1x1, a move that will be completed in Sept’20 with a listing. LDA is valued at € 1.434 Bn (in line with our estimate, € 1.60/sh.) and shareholders will receive € 1.184 Bn (19.3% of BKT’s market cap). The move will allow BKT to cash in on the real value of LDA (3x the investment the bank made and its BV), with a small impact on TE (-3% BS(e)), and it will be slightly positive in terms of capital (+5bps, currently 11.56%). Looking ahead, it will dilute sustainable RoTE by around -150bps BS(e) (to 115% in 2020 BS(e)) and will lower our T.P. for BKT to €~6.10/sh. (-17%). We expect a positive reaction, due both to the “unexpected gift†to shareholders and to the appeal of being able to monetise ~20% of the bank’s value in less than one year, or alternatively to have a stake in one of the best-managed and most profitable insurers on the Spanish market. BKT will make a presentation at 9:00 (CET).
ENAGÃS. Capital increase without rights of € 500 M (9.3% of market cap) in accelerated bookbuild
... to finance part the acquisition of Tallgrass (35% of €~1.4 Bn), which in our view will contribute to a neutral valuation if the success of future investments are not assumed (we recall that the company pays 15x P/E vs. current trading levels of 12x). That said, an issuance without a discount (-5% vs. our T.P.) would have a negative impact on our T.P. of -0.4%, and every -1% of additional discount would have an additional impact of -0.1%. The transaction is therefore negative for the current shareholders, as although it might cut the EPS by as much as -9% (impact of up to 65bps on the DVD yield to 6.9%), but it has a positive effect, as ENAG would maintain its rating (BBB+ according to S&P), as its NFD/EBITDA ratio would remain at levels of 3.8x vs. 4.2x without rights issue.
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.
Banco Bilbao Vizcaya Argentaria is an international financial group, engaged primarily on providing banking services and consumer finance to private individuals and businesses in Spain and Portugal; providing real estate activity in Spain; providing services to international companies and investment banking, capital markets and treasury management services to clients; and providing the banking, insurance and pension businesses in Mexico and the U.S., as well as in South America.
Bankinter is the parent company of a group engaged in banking activities. Services provided include: investment banking; capital market services; financial services insurance; international services such as foreign exchange transactions and travelers' checks; wholesale corporate banking; and retail and private banking services. Co. offers its products and services through the following channels of distribution: branch network; telephone banking, interactive (software) banking; agents; and Internet banking. As of Dec 31 2014, Co. had assets totalling Euro57,332,974,000 and deposits totalling Euro29,966,129,000.
Ebro Puleva is a food manufacturing group based in Spain. Co. is engaged in the manufacture and marketing, export and import of sugar, rice, dairy products, and products destined for agriculture development and human and animal consumption. Co.'s brand names include: Panzani®, Ronzoni®, American Beauty®, Skinner®, Lancia®, Catelli®, Healthy Harvest®, etc. in pastas and sauces, Mahatma®, Sucess®, Carolina®, Lustucru®, Taureau Aile®, Oryza®, Bosto®, Reis-Fit®, Riceland®, Danrice®, Risella®, Brillante®, Nomen®, La Cigala® and La Fallera® in the rice sector, Puleva®, Ram® and El Castillo® in the dairy sector, and Azucarera® and Sucran® in the sugar sector.
Enagas is a gas transportation company based in Spain. Co. is engaged in the technical distribution and storage of gas through pipelines as well as the provision of regasification services. Co. and subsidiaries are engaged in the ownership, administration, storage, pipeline transportation, distribution flow, and sale of natural gas. As a transport company, Co. also provides gas and manages the gas infrastructures.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
Prosegur Cash SA, formerly Prosegur Cit Holding SA, is a Spain-based company engaged in the provision of security services. The Company's activities are divided into three business areas: Logistics, Cash management and Outsourcing. The Logistics division focuses on the provision of local and international transport services of cash and other valuable goods. The Cash management division offers counting, processing, custody, preparation and delivery of notes and coins, as well as replenishment of automatic teller machines (ATMs). The Outsourcing division includes a number of support financial services, such as automation of retail operations through self-service cash automatization machines (MAEs), ATMs management, as well as branch forecasting, reconciliation, settlement and credit card support services. The Company operates through own branches and joint ventures in Europe, Central and South America, Africa, Asia and Australia. It operates through Contesta Teleservicios SAU.
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