Report
Research Department
EUR 100.00 For Business Accounts Only

IBERIAN DAILY 05 FEBRUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, IBERDROLA, OHL, PROSEGUR, SACYR, SIEMENS GAMESA

MARKETS YESTERDAY AND TODAY

Indices try to recover ground
It was a positive session, with rises in all sectors in the Euro STOXX, led by Basic Resources and Technology. Bond proxies, such as Real Estate and Utilities were the worst performers. On the macroeconomic level, in Spain, registered unemployment rose by 90,248 people, the worst data since Jan’14, which leaves the total unemployment data at 3.25 M. In the US, in Iowa’s democratic primary elections in the absence of the total result, the winner was P. Buttigieg, followed by B. Sanders, E. Warren and J. Biden far behind. In China, the services and manufacturing PMI dropped more than expected in January. In US results, Phillips and Ford released disappointing figures, Gartner, Walt Disney and Ralph Lauren came in far above expectations.
What we expect for today
Stock markets would open with slight drops. Currently, S&P futures are -0.21% lower (the S&P 500 closed +1.41% higher vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 16.05%). The Asian markets that are open are climbing (Japan +1.02% and Hong Kong +0.11%).
Today in the euro zone we will learn January’s final services PMI and December’s retail sales, in the US January’s ADP employment survey, December’s trade balance and January’s non-manufacturing ISM. In US business results, Merck, General Motors and Fox News, among others, will release their earnings. Today the Greek Treasury will issue 3M T-bills.


COMPANY NEWS

IBERDROLA/SIEMENS GAMESA. We reiterate our SELL recommendation for SIEMENS GAMESA despite SIEMENS’s acquisition of the stake held by IBEDROLA.
SIEMENS (59% SGRE) and IBE (8.1% SGRE) have agreed the (i) acquisition (by SIE) of IBE’s stake in SGRE at € 20.00/sh. (+27% vs. yesterday’s close; ~ € 1.1 Bn, (ii) the resolution of the current shareholders agreement, (iii) cancelling (by IBE) the processes initiated against SGRE and (iv) signing a collaboration agreement (including SGRE). Additionally, SIEMENS announced it does not plan to launch a mandatory takeover bid for the rest of SGRE’s capital and as result of the breach of the shareholders agreement it expects to obtain € 100 M of savings in SGRE that would account for up to € 900 M at present value. After the 1Q’20 Results, we place our T.P. ex SGRE savings at € 12.42/sh., and thus even assuming 100% of these savings, our T.P. would not exceed € 14.00/sh. (vs. € 15.78/sh. of yesterday’s close). Thus, and as the probabilities of a takeover bid are limited (the CNMV could still request it), we reiterate our SELL recommendation for SGRE, setting our T.P. at € 13.07/sh. (-17% potential) only assuming 50% of the additional value generation where we do not have further information. In IBE, the higher valuation vs. BS(e) has an impact of +0.4% on T.P.

OHL, SELL.
Yesterday the company announced that after completing its due diligence on OHL, the Mexican company Caabsa has reiterated its interest in moving forward with a merger, making a € 50 M cash contribution (16% of OHL’s market cap) as well as Caabsa’s construction assets to the new merged company. It has also reiterated that the finalisation of the deal is subject to Caabsa’s stake in OHL reaching 31-35% and that the CNMV exempt it from having to make a TOB on 100% of OHL. OHL has confirmed that it will carry out its own due diligence and a valuation of Caabsa’s Construction business.
Although Caabsa is not a listed group and therefore therefore there is no financial information available, its construction business would generate € 30 M of recurring EBITDA (with double-digit margins vs. 4% in OHL), which would mean ~27% of the total EBITDA in the merged company in recurrence (in addition to the € 50 M cash contribution), meaning that in principle the exchange ratio seems reasonable to us, as we await to know debt levels. On the negative side we highlight that in principle Villar Mir would not sell part of its stake (as was initially expected), but rather that it would lower its stake to 21-23% (vs. the previous 30.6%) and would not raise cash to face its own debt, of which € 120 M would be owed to OHL (for Pacadar). In any event, on the qualitative level we welcome the integration, as it would allow OHL to broaden and complement its business, speeding up international growth (Caabsa has a strong footprint in Mexico and LatAm) by allowing new guarantee lines to be granted.
Underlyings
Actividades de Construccion y Servicios SA

ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.

Iberdrola SA

Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.

Obrascon Huarte Lain SA

Obrascon Huarte Lain is an international concession and construction groups based in Spain. Co. maintains significant operations in 30 countries across all five continents. Co. is engaged in hospital and railway construction, transport infrastructure concessions, oil and gas, energy, solids handling and fire protection systems and international contracts. Co.'s operations are organized along four divisions: OHL Concesiones, OHL Construccion, OHL Industrial y OHL Desarrollos. Co. is also engaged in real state project developments of mixed use managed by the international hotel chains.

Sacyr S.A.

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.

SIEMENS GAMESA (SGRE SM)

Provider
Sabadell
Sabadell

Analysts
Research Department

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