EUR 100.00 For Business Accounts Only

IBERIAN DAILY 23 SEPTEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACERINOX, DIA, IAG, MEDIASET ESPAÑA, MELIÁ, PRISA, SANTANDER.

MARKETS YESTERDAY AND TODAY


All eyes on the US and China
The markets ended the week with gains, pending the conclusions from the US-China meeting. In the Euro Stoxx, the best-performing sectors were Energy (underpinned by the rise in crude prices) and Telecoms vs. the worse performance in Basic Materials and Industrials. In the UK, B. Johnson stated that he does not expect to reach a “legally operative” agreement on the Irish border in the meeting with EU leaders (EC on 17/18 October). On the macro side, Friday had very few catalysts, except in the euro zone where consumer confidence (September’s preliminary figure) improved more than expected. In Spain, S&P upgraded the rating of the sovereign bond yield to A stable from A- positive despite the political blockade, highlighting the country’s balanced growth and fiscal improvement, which is allowing for a reduction to the debt/GDP ratio. Separately, DBRS maintained the country’s rating at A, while upgrading the outlook from stable to positive. As regards the US-China trade talks, Trump insisted once again on a wide and definitive agreement, although a partial deal had been rumoured, whereas the two countries admit that the negotiations will continue at the top-level meeting to be held on 10 October.
What we expect for today
The stock markets would see some profit-taking.
Currently, S&P futures are sliding -0.10% (the S&P 500 closed -0.71% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 15.32%). The Asian markets that are open are falling (Hong Kong -0.74%).
Today is a holiday in Japan. In France, Germany and the euro zone we will learn the preliminary PMIs for September, in the euro zone M. Draghi will appear before the European Parliament, in the US preliminary services and manufacturing PMIs and in Mexico September’s retail sales. In debt auctions: Germany (€ 2 Bn in 3M t-bills), Belgium (bonds due 2026, 2029 and 2038) and France (€ 4.4 Bn in 1M, 3M, 6M and 12M t-bills).


COMPANY NEWS

PRISA, SELL
The company has announced the sale of Media Capital to Confina for € 225 M (EV), which means an Equity value of € 180 M (which is below its current market cap of € 210 M, after it has risen by +31.3% since it was known that the company was in talks over the sale of the asset). The transaction will generate a book loss of € 76.4 M in the consolidated accounts (~70% of Net Profit’20e). The execution of the operation is subject to approval from the Portuguese competition and regulatory authorities, the approval of a rights issue in Confina, obtaining a waiver from some of PRS’ financial creditors and the approval of the transaction at the AGM. The sale is expected to be closed in the 1H’20.
Note that PRS held a 94.69% stake in Media Capital, which was ~16% of its EBITDA.
This sale, expected to some extent as the two companies had been in talks for a month, will allow PRS to cut its NFD by -21%, bringing the NFD/EBITDA ratio to 3.9x (vs. 5.6x in 1H’19). As for the valuation of the asset, it means an EV/EBITDA ratio of 7.3x, according to the company (assuming the EBITDA generated in the past 2 months) and of 6.1x BS(e) (based on our estimates for the full year, vs. a range of 6-6.3x in peers). Moreover, the valuation of Confina is -42% lower than Altice’s offer (€ 440 M EV, € 321 M equity), which was abandoned in mid 2018 due to the objections raised by competition authorities. The transaction would have a negative impact of around -10% on our T.P.
We believe that the sale is positive for the company, as it accelerates leverage by selling an asset whose valuation (below our estimates) shows the negative momentum of results (1H’19 EBITDA -30.9% in comparable terms) resulting from stronger competition and after the asset was put up on sale in 2017. We maintain a cautious stance on the stock, as the upside is not attractive enough to offset the company’s high leverage levels (with a NFD/EBITDA ratio still at levels of 3.9x after the sale) and little cash generation capacity (€-88.4 M in the 1H’19).