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IBERIAN DAILY 26 OCTOBER + 3Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, CELLNEX, ELECTRICITY SECTOR, ENAGÁS, IAG, PRISA, RESIDENTIAL PROPERTY DEVELOPERS, ROVI.

MARKETS YESTERDAY AND TODAY

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 3Q’21 results to be released over the coming days in Spain.

Moderate gains
The last week of the month got off to a good start on the stock markets despite Germany’s disappointing IFO data, which confirmed the slowdown in investor confidence. With value being the winner in Europe (and growth in the US), within the Euro STOXX, the best-performing sectors were Autos and Basic Resources, whereas Media and Consumer Goods were the worst relative performers. In Mexico, the IGAE Economic Activity index contracted unexpectedly in August. On the macro side, in Spain, the AIReF lowered its GDP growth forecast for the 2021 and 2022 to 5.5% and 6.3%, respectively (6.4% and 6.6% previously), and the BDE warns that it will do the same with its 2021 forecast (currently, it expects 6.3% and 5.9%, respectively) to levels 1pp below the Govt’s estimates. In China, another developer, Modern Land, defaulted. In Turkey, the Govt. reverses its decision to declare 10 ambassadors persona non grata. In US business results, Otis came in better than expected, Kimberly-Clark worse, and Facebook released disappointing sales data and guidance.
What we expect for today
The European stock markets would post slight gains, with a better relative performance of growth stocks. Currently, S&P futures are up +0.2% (the S&P 500 ended up +0.26% vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 15.24). Asian markets are trading with mixed results (China’s CSI 300 -0.2% and Japan’s Nikkei +2%).
Today we will learn in the US the Richmond manufacturing index and October’s consumer confidence, the new home sales data and September’s building permits. In debt auctions: Netherlands (€ 2.5 Bn in bonds due 2031), Italy (€ 3 Bn in bonds due 2024 and I/L bonds due 2051) and Germany (€ 3 Bn in bonds due 2028). In US business results, Google (Alphabet), Twitter, Visa, Microsoft and Eli Lilly, among others, will release their earnings.

COMPANY NEWS

3Q’21 Results highlights and rest of previews
Of the stocks releasing their earnings next week on the positive side we highlight Rovi (03/11), where we believe that the quarter will be marked by the greater momentum of the filling and packaging business of Moderna’s vaccine, which would fuel sales growth and the gross margin up to 59.7% (+290bps vs. 3Q’20; +690bps in sequential terms). Thus, the company would beat the consensus estimates and this could result in an upgrade to its 2021 guidance.

ENAGAS. 3Q’21 Results in line with expectations. The company reiterated its 2021 guidance. BUY.
The 3Q’21 Results were in line with our expectations and those of the consensus in Net Profit (€ 94 M vs. € 96 BS(e) and consensus), and thus ENAG is on track to meet or even to beat (at the expense of the 4Q) its Net Profit guidance’21 of € 380 M (vs. € 390 M consensus and € 402 BS(e)). After these results without surprises, we expect a limited impact on the share price. On another note, we carry out the rollover’22, setting our T.P. at € 21.98/sh. (-6% vs. previous T.P. and +13% upside), keeping our estimates unchanged. ENAG’s share price has climbed +14.1% YTD (+1.6% vs. IBEX and vs. +2% REE), and we reiterate our BUY recommendation based on the dividend yield (8.7% 2021).

PRISA. Vivendi (9.93%) asks the Govt. for permission to increase its stake to 29.9%. SELL.
Vivendi (holds a 9.93% stake in PRS) has submitted a request to the Govt. to increase its stake in PRS up to 29.9% of the share capital. Additionally, the company has stated that it is not in negotiations or talks with any shareholder in PRS over the acquisition of such shares. This is very positive news that would undoubtedly have a positive market impact (over 400 trading days, without taking into account the limit of 20% of the daily trading volume) due to Vivendi’s confidence in the company and the stock’s strong underperformance (-39% in absolute terms in 2021 and -60% since 2020). On the financial level, for Vivendi 20% of PRS (€~80 M) would not pose a problem following the sale of UMG. We maintain a cautious stance on the stock due to its high debt levels (NFD/EBITDA >7x in 2Q’21) and the ongoing business restructuring process.

IAG, BUY
As of the 8th of November, the US will allow entry to all international tourists, provided that they are fully vaccinated with any of the vaccines authorised by the FDA or the WHO (a mix of doses will also be accepted), including AstraZeneca’s, which was one of the main doubts since the reopening was announced. Still, travellers will be required to present a negative Covid test within 72 hours upon arrival.
US citizens, immigrants, children under 18, persons allergic to any of the ingredients used in the vaccine and those coming from countries in which at least 10% of the population has been vaccinated will be exempt from the obligation to be vaccinated, but will have to present a negative Covid test with a maximum of 72 hours before arrival.
Very positive news, as the US is going to accept AstraZeneca (this being the most widely used vaccine in the world, distributed in 184 countries), which was one of the main doubts following the announcement of the reopening in late September. As we have already mentioned on other occasions, the US market represents 17% of IAG’s sales on a normalised year and 30% of its capacity. This geographic segment is particularly relevant due to British Airways dominant position in the North Atlantic, which has higher unit revenues (due to the higher weight of the business segment), and therefore, higher returns, backed by business travel.