IBERIAN DAILY 03 JUNE (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA ENERGÍA, ACERINOX, ALMIRALL, CAIXABANK, IAG, REPSOL.OPEP+ fuels markets
Volatility continued and after the bearish opening in the US (hit by Microsoft’s guidance cut due to the dollar’s strength) markets turned around after OPEC+ announced an increase in output of +648,000 b/d between July and September (vs. 432,000 in the original plan), above consensus expectations, but including Russia. It was a positive session in Europe, with the exception of the Ibex, which was the only main index ending with slight drops. Thus, almost all sectors in the Euro STOXX ended in positive territory, led by Consumer Goods vs. the worse relative performance of Travel&Leisure and Real Estate. On the macro side, in the US May’s ADP employment survey rose less than expected whereas weekly jobless claims dropped unexpectedly. Meanwhile, the Fed’s L. Brainard warned that it could be necessary to implement another +50bps rate hike in September if inflation does not fall as expected. Separately, Biden’s Govt. would be considering a tax on oil companies’ profits in order to return it as a subsidy to consumers hit hardest by the price increases.
What we expect for today
European markets would open with gains of +0.5%, awaiting the US job data. Currently, S&P futures are up +0.1% (the S&P 500 ended +0.7% higher vs. the European closing bell). Volatility in the US fell (VIX 24.72). Asian markets are climbing (China’s CSI 300 closed and Japan’s Nikkei +1.2%).
Today in the US we will learn May’s unemployment data.
COMPANY NEWS
ACERINOX, BUY
According to Bloomberg, ACX and Aperam would be studying a possible merger agreement, although no specific details have been given.
Note that ACX’s main shareholder is Alba (17.8% of capital), and Aperam’s is the Mittal family (40.9%), and thus it would be key that these shareholders approve the move.
Positive news if confirmed, as the resulting group would become one of the main global players, being a clear leader in the US and Europe (>75% EBITDA), as well as in the special alloy business (currently ACX and Aperam are the two main producers of these products globally).
Separately, a merger would lead to more stability on the P&L level (due to the desynchronisation of the economic cycles in the different regions; ACX is especially strong in the US and Aperam in Europe and Brazil), and we think synergies could arise in Europe if the regulator were not to impose significant antitrust measures.
On the financial level, both companies have similar market caps (€~3 Bn), NFD (€~600 M) and EBITDA’22e (€~1.2 Bn), although ACX is slightly larger, and in both cases 2022 is expected to be a positive year on the net level, and thus currently we do not see any urgency for either company, and thus the key for the deal to end up moving forward would be the valuation assigned to each company (they are trading at levels of 3.0/3.4x EV/EBITDA’22).
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.
Almirall is engaged in the acquisition, manufacture, storage, sale and mediation in the sale of pharmaceutical specialties and products and all manner of raw materials used to prepare pharmaceutical specialties and products. Also, Co. acquires, manufactures, storages, sales and mediates in the sale of cosmetics, chemical, biotechnological and diagnostic products for human, veterinary, agrochemical and food-industry use, as well as all manner of utensils, complements and accessories for the chemical, pharmaceutical and clinical industries. In addition, Co. is engaged in the acquisition, sale, lease, subdivision and development of land lots, land and properties of all kinds.
Caixabank is an investment company based in Spain. Co. is involved in investment portfolio management activities across two areas: Services and Financial Business and Insurance. In the services area, Co. provides investment solutions for companies involved in the infrastructure, energy, services and entertainment sectors. In the financial business and insurance area, Co. is engaged in the investments for international banks, insurance and specialist financial services. Co. focuses most of its banking investments in India, China, the U.S., and Central and Eastern Europe with a particular interest in retail banking. Co. is also involved in the disinvestments activities.
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.
Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.
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