IBERIAN DAILY 09 MARCH (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, CAF, EUSKALTEL, TALGO.MARKETS YESTERDAY AND TODAY
Europe steps on the gas
Despite the fact that the US 10Y bond yield continued to rise, the positive opening on the US market spurred gains in Europe, which ended up rising +2.5%, led by the German DAX (+3.3%), and where value once again easily beat growth on both sides of the Atlantic. Thus, in the Euro STOXX, all the sectors except Household Goods closed in positive numbers, with Autos and Basic Materials showing the best relative performance. On the macro side, in the euro zone March’s Sentix investor confidence index rose unexpectedly, showing the best data over the past year. In Spain and Germany, January’s industrial output disappointed, falling more than expected.
What we expect for today
European stock markets would consolidate levels after the gains with value performing worse due to the falling debt yields. Currently, S&P futures are up +0.6% (the S&P 500 was down -0.95% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 25.47). Asian markets are trading with mixed results (CSI 300 -1.5%, Japan +1%).
Today there will be no significant macro references. In debt auctions, Spain (€ 2.5 Bn in 3M & 5M T-bills) and Netherlands (€ 2.5 Bn in bonds due 2027).
COMPANY NEWS
EUSKALTEL, SELL
According to Cinco Días, EKT would be finalising the sale of up to 49% of its network (the transaction could be closed in 2Q’21) and the investment fund Infravía is said to be the best-positioned company. Moreover, EKT expects to generate €~500 M and its subsidiary’s value to reach €~1 Bn. The investment required to improve the network would be €~400 M over the 2021-23 period (including the update of its cable network to fibre; tit does not specify whether the network would be extended).
This news adds nothing new, as the company already disclosed in its FY2020 results presentation that the process was at an “advanced stage of development”. We reiterate that any alternative that includes maximising the company’s resources would be positive, given the financial situation (NFD’20 € 1.45 Bn and 4.20x EBITDA) and its investment needs in order to tackle its national expansion plan, and additionally, the improvement and extension of the network (not included in our CAPEX figures). Furthermore, bearing in mind the high valuations of network assets, a sale could act as a driver, although it would be necessary to learn further details on the deal to assess the impact: investment to improve and extend the network, penetration and the number of homes the new network reaches and wholesale prices. With the figures mentioned in the article, if EKT were to receive € 500 M for 49% of the network (a valuation that initially seems high), and with €~400 M of investments, the impact on the valuation would be around +6.5%, in the absence of the wholesale price, the possible extension of the network (with new wholesale clients, which would give more upside) and including the € 20 M of synergies announced in the results.
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.
Euskaltel SA is a Spain-based company engaged in the provision of integrated telecommunication services. The Company's activities are divided into three segments: Residential, Business, as well as Wholesale and Other. The Residential segment provides fixed and mobile telecommunication services, broadband and wireless Internet, as well as digital television (TV) as a single service and in packages. The Business division primarily offers fixed and mobile telephony, as well as Internet access for enterprises. The Wholesale and Other area serves wholesale customers and is responsible for the delivery of communication services, such as infrastructure leasing, information technology (IT) outsourcing, as well as sell of installation material and electronics. The Company operates in the Basque Country, Spain.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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