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IBERIAN DAILY 21 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACCIONA ENERGÍA, AEDAS, IBERDROLA, NEINOR HOMES.

Real estate recovery
Europe saw new drops amid concerns that the reactivation of the US real estate sector offers the Fed new arguments to continue raising rates. In the Euro STOXX, defensive sectors ended with gains, led by Utilities and Pharmaceuticals. However, cyclical sectors linked to raw materials, such as Basic Resources and Energy, ended with drops of around -2%, dragged down by the lack of more aggressive stimuli from China. On the macro side, in Germany, May’s production prices slowed down more than expected. From the ECB, B. Vujcic warned about the persistence of the core component of inflation and the difficulty to assess a soft economic landing. On another note, the chair of the Supervisory Board, A. Enria, warned about the mounting shadow risks of the banking sectors over the coming months due to the accumulated tightening. In the US, May’s real estate sector showed signs of recovery, with construction permits and housing starts climbing above expectations. In China, the Govt. announced it will extend until 2027 the tax benefit plan (US$ 72.3 Bn) in order to spur the electric vehicle purchases. In Japan, the monetary meeting minutes show doubts on the possibility of being far behind in changing monetary policy.
What we expect for today
European stock markets would open with slight gains. Currently, S&P futures are unchanged (the S&P 500 ended up +0.26% vs. the European closing bell). Volatility in the US dropped (VIX 13.88). Asian stock markets are mixed (China’s CSI 300 -0.80%, Japan’s Nikkei +0.74%).
Today in the UK we will learn May’s inflation and in the US June’s mortgage requests. J. Powell will speak before the Congress. In Brazil, BCB meeting. As for auctions, Germany will issue € 2.5 Bn in bonds due 2050 and 2052.


COMPANY NEWS

AEDAS, BUY
According to the press, the main shareholder in AEDAS (Castlelake, 71.5%) could be considering, among other options, selling the developer to a series of investment funds that would include, as a prior step, a delisting tender offer. According to the same sources, Castlelake, which has been a shareholder in the developer for seven years, has exceeded the timeframe commitment it had forecast (between 5-7 years) and does not agree with the market’s low valuation of the company.
We would not be surprised by a possible move of this kind, as (i) AEDAS’s valuation, like the rest of the developers in our coverage universe, is excessively low, and (ii) it makes sense that Castlelake is looking for an exit after 7 years in the shareholding structure.
As for the valuation, after falling -26% over the past year, we think the share price is very cheap, trading at a -53% discount to the latest NAV, at 7x P/E’23e and with an estimated dividend yield above 14%. At our T.P. (which yields +38% upside) the stock would trade at 9x P/E’23 and have a -35% discount to NAV.

NEINOR HOMES, BUY
The company has announced the sale of Sky Homes, a development of 213 rental homes located in Málaga. The sale price stands at € 66 M (similar to Dec’22 appraisal, which would mean around 7% of EV). According to the company, with this deal (along with the sale of 2 other BTR projects in 2023) it has settled 20% of the BtR portfolio, which is key to carry out the aggressive dividend payment plan announced in March’23.
Positive news. Although the deal is small, we believe it underscores the existence of hidden value in the rental portfolio, which can be sold at a similar price to the appraisal, and the fact that the dividend payment plan is feasible.
We believe that the stock is highly inexpensive, trading at 12x P/E’23, at a discount of -47% to the latest NAV (ex DPS) and with an estimated 12-month dividend yield ~>10%, which are highly appealing ratios, in our view.