EUR 100.00 For Business Accounts Only

IBERIAN DAILY 18 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACERINOX, AEDAS, ELECTRICITY SECTOR, FERROVIAL, IBERDROLA, SIEMENS GAMESA

MARKETS YESTERDAY AND TODAY

Consolidating 2019 highs
Profit taking on European markets after the strong gains from the previous 5 sessions. Most of the sectors in the Euro Stoxx fell, led by Personal Household Goods (following the profit warning by Unilever) and Chemicals, compared to the rises in Utilities and Energy (given the rising price of Brent crude). On the macro side, in the UK October’s unemployment rate fell to a 45-year low. In the US, November’s industrial output rose more than expected, as did housing starts and building permits. In politics, Trump once again called for new interest rate cuts from the Fed, criticising the strength of the dollar. R. Kaplan expects growth to stabilise next year (~2%), questioned the effectiveness of negative rates in Europe and does not expect a short-term reaction in inflation. In Japan, exports fell less than expected in November, whereas imports fell more than expected, showing the weakness on the domestic front.
What we expect for today
European markets would open with slight drops. Currently, S&P futures are trading unchanged (the S&P 500 closed unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 12.29%). Asian markets are falling (Japan -0.55% and Hong Kong -0.20%).
Today we will learn in Germany December’s IFO, in the Euro zone November’s final inflation data, in the UK the inflation data for November.

COMPANY NEWS

AEDAS, BUY
The company has released its activity data through the 30th of November, showing that 172 units have been delivered on the month, bringing the accumulated figure for the year to 564 units (vs. the target of 1,055). Of the units pending delivery this year, 15% still lacks the first occupancy permit (FOP, the data was 35% in October). All the units have a final construction certificate (which they already had at the end of October).
The company has also announced that it has sold 73% of the deliveries forecast for 2020 (rising +5pp on the month) and 29% of those for 2021.
With this data, and given that with the new mortgage law it takes more than 3 weeks from when the FOP is obtained to the delivery date, we think it is reasonable that the company will end the year with 875-925 units delivered, below the target of 1,055. Although this is negative, we think the impact on the valuation is quite low, because this was expected and as the cashflows are delayed a few weeks, and thus there is no relevant impact on the financial level (the biggest impact could come from the heightened perception of execution risk in view of a target not being met that looked achievable one year ago). In any event, with the stock trading at a -40% discount to NAV as of June’19, we think the market is already pricing in a scenario of the target not being met as well as a significant drop in prices, and thus we would see any negative reaction to the data as a buying opportunity.
On the positive side, we believe that the pre-sales data are reasonably positive, as the 2020 figures increased by +5pp in a month and would close the year above levels of 75%, with the 2021 data ending at levels of 30%. The presales portfolio would total some € 1 Bn (2,884 units).