EUR 100.00 For Business Accounts Only

IBERIAN DAILY 11 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, ALMIRALL, ARCELOR MITTAL, MEDIASET ESPAÑA, OHL, RED ELÉCTRICA, REPSOL, SIEMENS GAMESA.

MARKETS YESTERDAY AND TODAY

Stock markets get back on track
C. Lagarde’s speech that the ECB will do “whatever is necessary” underpinned the solid performance by European markets. Thus, the Euro Stoxx posted green numbers once again with Construction and Autos leading the way, compared to the only sectors with losses, Insurance and Retail. On the macro side, in Spain March’s industrial output fell more than expected (11.9% MoM). In the US, April’s non-farm job creation fell sharply, but less than expected (20.5 M vs. 22.0 expected), with the sharp rise in salary gains standing out (4.7% MoM vs. 0.4% expected). This did not offset the plunge in consumption or energy, and thus inflation will continue to trend towards 0 in the coming months. In US business results, Revlon, Sabre and Verastream released their earnings.
What we expect for today
Currently, S&P futures are up +0.30% (the S&P 500 ended up +0.26% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 27.98%). Asian markets are rising (Japan +1.42% and Hong Kong +1.76%).
Today there are no relevant macro indicators to be released. In US business results, Under Armour, BlueBird and Marriott International, among others, will release their earnings. In ratings, Moody’s will review that of Italy (Baa3, stable), where we do not expect any changes. Debt auctions: France (€ 5 Bn in 3M, 6M and 12M t-bills) and Germany (€ 4 Bn in 6M t-bills).

COMPANY NEWS

ALMIRALL. Better 1Q’20 results in all lines thanks to the pre-purchase effect. BUY.
The 1Q’20 results were far above expectations on the operating level (EBITDA +10% vs. -16% BS(e) and -11% consensus) due to much better sales figures (+8% vs. -6% BS(e) and -2% consensus), boosted by a pre-purchase effect and with NFD being maintained, as expected (€ 385 M; 1.2x NFD/EBITDA). The company has not changed its guidance (EBITDA between € 260-280 M vs. € 270 M BS(e)) and anticipates a strong negative impact from Covid-19 on 2Q’20, especially in the US, where it expects -45% (worse than expected). We will have to cut our estimates -12% on average in EBITDA’20-21 in our scenario of V-shaped recovery (in line with the impact expected by ALM in 2Q’20 in the US), and our T.P. would fall less than -5% to € 17/sh. (+36% upside). Even in a negative scenario of U-shaped recovery, the cut would be -20% on EBITDA and -9% on the T.P., which would still have +30% upside on the share price.

ACS, BUY
CIMIC (73% Hochtief (50.4% ACS) and 44% of ACS’s EBITDA) has just released its 1Q’20 results, which for the time being have not been hit very hard by Covid-19. Sales fell -3% vs. 1Q’19 (in local currency), whereas the EBITDA margin rose by +110bps vs. 1Q’19 to 15.8%. Net Profit fell -8.3% vs. 1Q’19 due to greater amortisations and a higher tax rate.
Operating cash flow before factoring (which has fallen slightly), leases and CAPEX (which has remained stable) decreased slightly to A$ -16.3 M vs. A$ 50.1 M in 1Q’19, which we understand is due to some deterioration of working capital (although this has not been broken down). Separately, there was a cash outflow of A$ 1.45 Bn (around € -900 M) from the payment of guarantees to BICC, which we expect throughout 2020 (no exact timing given), as in our estimates we do not consider capital gains to offset part of the cash outflow (as indicated by ACS at the time). Thus, NFD reached A$ 991 M vs. A$ -831 M as of YE2019.
In order intake, the new contracts awarded fell -40% (we understand this was due to the Covid-19 crisis), leaving the backlog at A$ 36.1 Bn (-2.1% vs. 1Q’19).
On the P&L level, the results are surprisingly positive, as sales fell slightly and the EBITDA margin even increased. In terms of cash generation, we see no significant negative impacts save for the payment linked to BICC guarantees, which we already expected to see throughout the year, although apparently it has come almost exclusively in 1Q’20. The Covid-19 crisis would have been felt in Order intake, which contracted by -40% vs. 1Q’19, although we already expected it to suffer this quarter, especially considering the company’s exposure to Asian markets (which were more severely affected by Covid-19 in 1Q’20).