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IBERIAN DAILY 13 NOVEMBER + 3Q’24 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, AENA, CAF, GREENING, NEINOR HOMES, REAL ESTATE SECTOR, SACYR.

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’24 results to be released over the coming days in Spain.

Germany to hold elections in February
The contagion from Asia, along with the increased geopolitical risk, dragged down European stock markets. In the STOXX 600, only Technology ended in green numbers, followed by Food, whereas Basic Materials and Consumer Goods ended with the biggest losses. On the macro side, in Germany the inflation data confirmed the preliminary figure, rising to 2.0% in October, whereas November’s ZEW index fell unexpectedly, returning to a low since May’20. Separately, we learned that the election for German Chancellor will be held on 23 Feb’25. In France, legislators rejected the modifications to the 2025 budget, and thus the Govt. will be able to send the original to the Senate. In the UK, the unemployment rate rose more than expected in September, but with salary pressures increasing. In the US, October’s SME confidence index (NFIB) beat expectations. In Brazil, September’s retail sales grew less than expected. In US business results, Home Depot was in line, Tyson Foods beat expectations and The Mosaic released disappointing earnings.
What we expect for today
Stock markets would open with losses of between -0.5% and -1.0%, with worse performance in cyclical sectors and bond proxies in view of the rising interest rates. Currently, S&P futures are down -0.27% (the S&P 500 ended up +0.10% vs. the European closing bell). Asian markets are mixed (China’s CSI 300 +0.39%, Japan’s Nikkei -1.68%).
Today in the euro zone we will learn September’s industrial output and October’s general and core inflation. In US business results, Tencent, Cisco Systems and Kepco, among others, will release their earnings.



COMPANY NEWS

ACS, OVERWEIGHT
3Q’24 Results came in below consensus expectations on the operating level (EBITDA € 522 M vs. € 546 M BS(e) and € 627 M consensus; +6.3% vs. 3Q’23), with a weaker performance of cash (NFD € 2.4 Bn vs. € 2.1 Bn BS(e)) Most of the results were already known following the earnings release of Hochtief (77.4% ACS; >80% EBITDA) and Abertis (~46% ACS), although the EBITDA contribution from the rest of divisions was slightly higher (+3% vs. BS(e)).
We do not foresee a relevant impact from these results as the share price has already climbed +5% YtD (-7% vs IBEX) and thus we maintain our OVERWEIGHT recommendation. We will raise our T.P. in view of the gradual expansion of the turner model (US) and the de-risking of its businesses, which should lead to higher valuations/multiples, in our view, in line with its US peers (Aecom or Jacobs; >13x EV/EBITDA vs. 5.3x for ACS).

AENA. An essential company offering an appealing yield. OVERWEIGHT.
Despite the good YtD share price performance (+26% in absolute terms; +8% vs. Ibex 35 and vs. -7%/-10% for its peers ADP and Fraport), the recent weakness seen after the 9M’24 Results (-4% in absolute terms; -1% vs. Ibex 35) has increased its upside, driven by the strength of passenger traffic, where we do not see any signs of a change in trend. In the light of this robust performance (+9.4% through October’24) and its good prospects, we have raised our estimates (now foreseeing a +7% CAGR’23/26 BS(e) in revenues and +8% in EBITDA vs. +5% previously, respectively), and with the roll-over’25 we upgrade our T.P. by +9% up to € 222.00/sh. (+12.5% upside), maintaining our OVERWEIGHT recommendation.

GREENING. Betting on diversification. We raise our T.P. range to € 6.93-9.86/sh.
GGR has beaten the sector in 2024, meeting its guidance in COD&UC and thanks to the diversification and internationalisation strategy (North America and rest of Europe). Currently GGR has a portfolio of 9 GW (268 MW in COD&UC and 783 MW backlog). Our estimates assume two scenarios (cautious and base-case, which means assuming 61% of the Strategic Plan) depending on COD&UC’26e capacity and equity generated with asset rotation. Thus we place our valuation range at € 6.93-9.86/sh. (an improvement of +15%/+9%, respectively, to the T.P., with upside of +8%/+54%).

REAL ESTATE SECTOR - REITS
Following the PSOE-Sumar agreement, which threatens to eliminate the special tax regime for REITs (if it is approved in the end, which is unclear), Merlin announced at yesterday’s closing bell that it is analysing different scenarios to calculate the impact this measure would have on cashflow. The company expects this impact to be “limited by the joint effect of several tax regulations”. At the same time it has indicated that it does not exclude any legal measures within its power to safeguard the interests of its shareholders, clients and employees.
Positive news, as we understand it should help limit the calculation of the negative impact on cashflow in the worst-case scenario. As we said in our comment yesterday, we must not assume that an increase in the tax rate has a proportionally negative impact on cashflow, as in tax terms, the tax base is calculated using the Spanish PGC and not IFRS, which results in it being significantly lower than IFRS benefit. Additionally, we understand that both Merlin and Colonial have tax credits that would also help lessen the impact from an increased corporation tax rate. Yesterday Merlin shed -7% and Colonial -5%.
In our coverage universe (LAR, Merlin, Colonial), the company with the least risk from tax issues is Colonial, thanks to its exposure to France (which accounts for >65% of GAV).