IBERIAN DAILY 28 FEBRUARY (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA, ATRESMEDIA, C. OCCIDENTE, COLONIAL, ENCE, FERROVIAL, IAG, INDRA, NATURGY, TALGO, TÉCNICAS REUNIDAS, VISCOFAN.MARKETS YESTERDAY AND TODAY
A new storm
Losses accelerated in stock markets in Europe yesterday, with America registering the biggest drop since May 2011. In the Euro STOXX, all sectors ended in the red, with Leisure and Food seeing the biggest drops and Utilities and Telecoms the lowest falls. On the macroeconomic level, in Spain, February’s preliminary inflation slowed down, as expected. In the euro zone, January’s M3 climbed as expected and the economic climate index rose above expectations. From the ECB, C. Lagarde outlined that the economic situation generated by the coronavirus does not call for one-off actions, for the time being. In the US, January’s durable goods orders (core) climbed more than expected. In Japan, both the industrial output and retail sales climbed unexpectedly, whereas the unemployment rate rose more than expected and Tokyo inflation slowed down more than expected. In US business results, NRG Energy and CenterPoint came in better than expected, and Nielsen Holdings and Flir Systems worse.
What we expect for today
Stock markets would open with -4.0% drops that would ease throughout the session. Currently, S&P futures are down -1.75% (the S&P 500 closed -3.3% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 39.16%). The Asian markets that are open are falling (Japan -3.67% and Hong Kong -2.81%).
Today in Germany we will learn the number of unemployed and February’s inflation, in the euro zone February’s inflation and in the US February’s personal outlays. In US Results, Edison International, Monster Beverage and Mylan NV, among others, will release their earnings.
COMPANY NEWS
ACCIONA. 4Q’19 results above expectations in LfL EBITDA. SELL
At the closing bell the company released FY2019 results that came in above expectations in LfL EBITDA and very much in line in NFD. On the accumulated level, LfL EBITDA beat our estimates by +2.7% (+4.6% consensus), due especially to the Water and Real Estate businesses. This means an increase of +12% vs. 2018 in LfL terms (according to ANA’s definition), exceeding the guidance (“high single digitâ€). NFD reached € 5.32 Bn, in line with our estimate (and slightly above the consensus), leaving NFD/EBITDA’19 at 3.9x (in line with the guidance). Despite outperforming the IBEX by +22% on the year, we expect a positive reaction since EBITDA was better that expected. There will be a conference call at 11:00 (CET).
FERROVIAL. 4Q’19 Results below expectations on the operating level bet but above in cash. BUY.
Despite higher sales figures, EBITDA came in below our estimates and those of the consensus (€ 88 M vs. € 110 M BS(e) and € 108 M consensus) due to lower returns on Toll roads (74% of our T.P.; margin of 64.2% vs. 68.3% consensus). Good performance in cash ex infra, which improved to € 1.63 Bn (vs. €~1.16 Bn BS(e) thanks to a remarkable performance in working capital (€+562 M in 4Q’19). We expect a slightly negative market reception considering the worse operating performance and the stock’s excellent performance in the last year (+40% vs. IBEX). We continue to see additional upside through the development of new greenfield projects, and thus, we maintain our BUY recommendation.
INDRA. Good results in cash and order intake. 2020 Guidance above the consensus. BUY.
On the positive side, we stress cash generation (€ 246 M in the 4Q’19) and order intake growth (+11%, exceeding € 4.5 Bn, 1.4x sales, the company’s record) in these results that came in below expectations in sales (given the double-digit decline in transport and traffic as a result of the complicated comparison vs. 4Q’18) and in line in the rest of headings. As for the 2020 targets the company expects mid-digit sales growth (vs. +2.2% BS(e) and +3.8% consensus), >+15% EBIT growth (above € 225 M, vs. € 254 M BS(e) and 246 M consensus) and > € 150 M of FCF (vs. € 173 M BS(e)) including WC. We highlight that the guidance does not include the impact from SIA, which would add around 2% to sales and around 2.7% to EBIT. We expect a positive impact.
TALGO. 4Q’19 results in line with our estimate, but below the consensus. BUY
At the closing bell the company released 4Q’19 results that were very much in line with our estimates, but slightly below the consensus in sales (-4.0%) and adjusted EBITDA (-6.5%). The margin was -50bps below expectations, although it met the guidance of an 18% margin for the year. Net cash reached € 59 M, in line with our estimate, but once again below the consensus, which expected € 80 M. The guidance announced for sales and margins in 2020 would be in line with our estimate and the consensus. We expect a neutral or slightly negative reaction as, despite the fact that the results were quite in line with our estimates, and despite the reasonable guidance given, the results are below the consensus in EBITDA margin and net cash. The stock has underperformed the IBEX by -5% on the year.
T. REUNIDAS. Margin guidance being met. We raise our T.P. by +10%. BUY.
We raise our T.P. to 28.68/sh. (+40% upside), which we break down as follows: (i) -+12% from the company’s better cash position’19; (ii) +3% from extrapolating the improvement seen in working capital to the medium-term and higher order intake levels in 2020; and (iii) -5% from a fiscal provision accounted in the 4Q’19 which will involve cash outflows in the short-term. The stock’s poor performance since the company reiterated its guidance of margin improvement as of the end of 2019 (-5.4% vs. IBEX) leaves TRE trading without any credibility, that is, a margin EBIT in perpetuity in line with that reported in 4Q’19 (2%) vs. levels above the guidance of 3%, in line with our estimate. +-250bps in the recurring margin means +-4.7% on our T.P. and €+-250 M of contracts annually, +-3.6%.
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.
Acerinox is the parent company of a group engaged in the manufacture and sale of flat and long stainless steel products, and stainless steel wires. Co.'s major products include slabs, billets, black coils, plates, hot-rolled coils, hot-rolled sheets, flat bars, hot-rolled re-bars, hot-rolled black bars, engraved sheets, cold-rolled coils, cold-rolled sheets and circles. Co. also provides long stainless steel products, such as wire rods, angles, hot rolled flat bars, hot rolled re-bars, reinforced bars in coils, cold rolled re-bars, hot rolled black bars, cold drawn bars, and smooth turned bars. In addition, Co. offers wires, welding wire bars, and bars for electrodes.
Amadeus is a transaction processor for the global travel and tourism industry. Co. provides transaction processing power and technology solutions to both travel providers (including full service carriers and low-cost airlines, hotels, rail operators, cruise and ferry operators, car rental companies and tour operators) and travel agencies (both online and offline). Co. acts both as a worldwide network connecting travel providers and travel agencies through a processing platform for the distribution of travel products and services (through the Distribution business), and as a provider of a portfolio of IT solutions which automate certain business processes (through the IT solutions business).
Atresmedia Corporacion De Medios De Comunicacion is a television and radio broadcasting company based in Spain. Co. is engaged in the indirect management of television and radio services, which include the broadcasting, creation, production and distribution of television and radio programming, and the sale of advertising time. Group companies mainly carry on business activities relating to the production, copying and broadcasting of sounds and images, and TV and Internet home shopping. Co. provides National and World Digital Television Services. Co. is the parent company of Grupo Antena 3.
CIE Automotive is the parent company of an industrial group formed by several companies that are engaged in the design, manufacture and sale of automobile component and sub-units on the world market. In addition, Co. is also engaged in the bio-fuels business which is in the initial stages of development and is made up of various companies devoted to the production and distribution of bio-fuels.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Fauji Cement is engaged in the manufacturing and marketing of cement.
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.
Fluidra is engaged in the manufacture and commercialization of accessories and specific products for swimming pools, irrigation, and water treatment and purification systems.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Grupo Catalana Occidente is an insurance group based in Spain. Co. is engaged in insurance and reinsurance activities, including commercial, life, disability, and automobile insurance. Co. is also engaged in the sale of annuities and pension funds. Co.'s operations are organized along two businesses: Traditional business (insurance) and Credit Insurance business. Co.'s main markets are located in Spain, Germany, United Kingdom, France and the Netherlands. Co. maintains a presence in more than 40 countries.
Indra Sistemas is engaged in the design, development, manufacture, assembly, repair, and installation of computer software and applications. Through its subsidiaries, Co. is engaged in consulting, graphic design and multimedia, web design and marketing, internet development and electronic trade, systems integration and hosting geared business to business and business to consumer, as well as in internet financing and electronic marketing. Co. serves defense and security, transport and traffic, energy and industry, telecom and media, finance and insurance, and public administration and healthcare markets. Co. operates primarily in Europe, the United States, Canada, and Latin America.
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
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.
Sacyr is the parent company of a group engaged in the acquisition, development and construction of urban properties for their subsequent rental or resale. Co. primarily leases and sells office buildings and complexes, housing units, and shopping centers. Co. is also engaged in the operation of urban car parking facilities. Co. offers services related to the real estate industry such as technical assistance in energy savings, inventory management, architectural design, telecommunications management, property maintenance, as well as gardening and landscaping. Co. also provides consulting services in the real estate fund management sector.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
Tecnicas Reunidas is a general contractor company based in Spain. Co. engages in the engineering, design, and construction of industrial facilities for refining and petrochemical, oil and gas, power, and infrastructure and industries sectors worldwide. Co. constructs nuclear plants, conventional thermal plants, and renewable energy and cogeneration facilities for power sector; refineries and facilities for petrochemicals; water treatment, desalination, waste management, air, land, and marine transport facilities; and liquefaction, and storage facilities, as well as oil and gas fields and pipelines. Co. also provides engineering, management and operating services for industrial plants.
Viscofan is the parent company of the Viscofan Group. Co. is divided into two major operational subgroups. The companies comprising the Naturin GmbH subgroup are engaged in the manufacture and distribution of artificial casings (small and big diameter collagen and plastics) for the meat industry. Through its wholly-owned subsidiary IAN, S.A., Co. also manufactures and distributes canned vegetables (asparagus, olives and tomato).
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