IBERIAN DAILY 18 OCTOBER (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACERINOX, AMADEUS, CAF, CELLNEX.MARKETS YESTERDAY AND TODAY
A new Brexit deal
The European stock markets celebrated temporarily B. Johnson’s preliminary agreement with the EU. However, Northern Island’s Democratic Unionist Party (whose support is needed) refused to back the deal, meaning that its passing through parliament seems complicated. Within the Euro STOXX, Real Estate and Telecoms led gains, vs. Food and Technology, which saw the biggest drops. On the macro side, in the Euro zone, B. Johnson’s deal keeps, in practical terms, Northern Island within the customs union, with a border and tariff arrangements in the Irish Sea. In the US, the industrial output contracted more than expected in September and the order-to-inventory ratio hints at further drops. Separately, housing starts fell more than expected, although building permits contracted less than expected, which shows a Real Estate sector unable to get off the ground. In Japan, general and core inflation slowed in September in line with expectations. In China, GDP growth slowed more than expected in the 3Q’19 to 6.0% YoY vs. 6.2% due to lower investment levels, whereas the industrial output (and retail sales) recovered more than expected in September (as expected). In US business results, Morgan Stanley came in above expectations, Philip Morris and Honeywell Int in line and Union Pacific below.
What we expect for today
European stock markets would open with drops close to -0.5%, with the ES50 struggling to break through resistance levels.
Currently, S&P futures are down -0.10% (the S&P 500 was up +0.09% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 13.79%). Asian markets are trading with mixed results (Japan +0.27% and Hong Kong -0.19%).
Today there are no relevant indicators. In US business results, Coca-Cola, NVR and American Express, among others, will release their earnings.
COMPANY NEWS
CELLNEX. After the acquisition of Arqiva and with the ongoing rights issue, the story continues. New T.P. € 45/sh. BUY.
After Arqiva’s integration (expected to be closed in 2H’20) and with the capital increase under way, the impact on our fundamental valuation is +7%, with the leverage ratio falling to ~4.9x (from the current ~5.8x). Thus, CLNX would continue to have the flexibility to carry out several mid-sized M&A moves. A new theoretical exercise on future acquisitions would bring our valuation to € 45.00/sh. (post money). We reiterate our positive view on the stock due the visibility and robustness of the business, the management’s ability to deliver, a scenario of historically low rates, and the company’s better positioning as an independent operator in Europe, as well as the fact that it continues to be an appealing target for larger operators (American Tower?), even more so if it continues to increase its footprint.
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).
Cellnex Telecom SA is a Spain-based company engaged in the wireless telecommunications (telecom) business. Its activities are divided into three segments: Broadcasting infrastructure, Telecom site rental, as well as Network services and other. The Broadcasting infrastructure division comprises distribution and transmission of television (TV) and frequency modulation (FM) radio signals, operation and maintenance (O&M) of radio broadcasting network, as well as over-the-top (OTT) radio services, among others. The Telecom site rental division provides access to wireless infrastructure, primarily through infrastructure hosting and telecom equipment co-location, mainly for mobile network operators and other wireless and broadband telecom network operators. The Network services and other division offers connectivity services for a variety of telecom operators and radio communication, among others. The Company also develops 5th generation mobile networks (5G) through Alticom BV.
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