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IBERIAN DAILY 10 NOVEMBER + 3Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, GRIFOLS, OHL.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 3Q’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

Stock markets sparked by news of vaccine
Stock markets welcomed Pfizer’s news regarding the high effectiveness of its vaccine (which puts the company on track to be able to request emergency use from the FDA) and showed the market was is not that invested in value (which easily beat growth on both sides of the Atlantic) or in sectors that would benefit from it. In the Euro STOXX, the sectors rising the most were Banks and Energy (both more than +10%), whereas Household Goods (the only sector in the red) and Pharma brought up the rear. On the macro side, in China inflation fell more than expected in October, whereas production prices repeated the -2.1% YoY drop. In Japan, the Prime Minister is readying a new fiscal package. In US business results, McDonald’s beat expectations and Simon Property came in below.
What we expect for today
European markets would see profit taking with drops of around -1.0%, while in the US the approval of a stimulus package before 2021 will be challenging and an investigation into accusations of election fraud have been authorised. Currently, S&P futures are down -0.5% (the S&P 500 was -1.5% down vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 25.75%). Asian markets are rising (Hong Kong +0.4%, Japan +0.3%).
Today, in the UK we will learn September’s employment data, in Germany November’s ZEW and in the US the NFIB SME confidence index for October. In US business results, Advance Auto Parts and Rockwell Automation, among others, will release their earnings. In debt auctions: Spain (€6M & 12M T-bills), Belgium (3M and 12M t-bills) and ESM (12M t-bills).


COMPANY NEWS

OHL. Details on the debt restructuring process. SELL
According to the press, OHL would have reached an agreement with its bondholders (€ 593 M, ~81% debt) that would include a € 100 M relief (around 17% of the total; ~51% market cap) in exchange for extending the debt maturity for at least 5 years (vs. 2 and 3 years previously) at a higher interest rate and swapping part of the debt (between 10% and 30%) for OHL shares. The article outlines that the swap would be carried out at a price slightly above current levels. On another note, in order to offset the debt relief, OHL will propose a € 55 M rights issue (~28% market cap) with subscription rights that the Amodio family (16% OHL) would have pledged to guarantee. If this agreement is confirmed, the fund Sand Grove would become the main shareholder in the company with 20%, awaiting the possible exercise of the call option of the Amodio family of 9% (on GVM shares) that would mean a 25% stake. With this in mind, we welcome this agreement, as it should guarantee the company’s financial viability. In the absence of the details of the agreement, if we were to assume a rights issue at current levels and a conversion of around 20% of debt into shares (some € 100 M, 51% market cap), along with a € 100 M relief, our T.P. would stand at € 0.81/sh. (+36% vs. previous T.P.; +19% upside). Given that all of our calculations are based on mere assumption (with no confirmation), we maintain our recommendation.