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IBERIAN DAILY 14 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CELLNEX, EUSKALTEL, INDRA.

MARKETS YESTERDAY AND TODAY

European stock markets in consolidation mood
European stock markets settled in for another session of consolidation, posting slight losses. Within the Euro STOXX, Leisure, Retail and Telecom (following D. Telekom’s results) were among the only sectors that ended in the black vs. the big drops in Banks and Insurance. On the macro side, in Germany and in Spain, July’s harmonised CPI data was in line with the preliminary figure. In the US, weekly jobless claims came in once again below expectations (falling to levels below 1 M for the first time since the beginning of the pandemic). Separately, the pace of new infections continued to decrease. On the political front, doubts remain on a quick approval of a fiscal stimulus package. In Mexico, the Central Bank cut rates by -50bps to 4.5%, as expected. Early this morning in China, July’s retail sales and industrial output recovered less than expected/fell more than expected (in the case of retail sales).
What we expect for today
The European stock markets would open without a clear direction awaiting new macro references that provide visibility on the economic recovery. Currently, S&P futures are trading flat (the S&P 500 ended down -0.24% vs. its price at the closing bell in Europe). Volatility in the US remained stable (VIX 22.13%). Asian markets are trading virtually flat (Hong Kong -0.1%, Japan +0.1%).
Today we will learn in the Euro zone the 2Q’20 GDP (est. -15%), in the US, July’s retail sales (est. 0.8%), the 2Q’20 non-farm productivity (1.5%), July’s industrial output (est. 3%), July’s utilisation of installed capacity (est. 70.3%), June’s business inventories (est. -1.1%) and the University of Michigan’s consumer confidence index for August (est. 71.9).

COMPANY NEWS

CELLNEX. Successfully completes its rights issue. BUY.
The company announced yesterday that it has successfully completed its € 4 Bn right issue (18% of market cap). The demand for new titles and additional requests of shares was 46.38x. The company had a subscription commitment from 19% of its shareholders. The new shares (101.4 M) will begin trading on 19 August. Positive news, although expected, as it bolsters the company’s growth plan. We recall that the objective of the rights issue is to finance the company’s inorganic growth, with an expected pipeline of € 11 Bn.

EUSKALTEL, SELL.
According to market sources, the company would have commissioned Lazard to study possible M&A moves, among which is the sale of its cable network to finance the roll-out of its commercial offer on Virgin Telco. EKT has pointed out that it wishes to study the market to know all possible options, but that a decision has not been made yet. This news was already known, given that the possible sale of its cable network was considered last year after a statement made by the Zegona’s CEO, although later on, EKT’s CEO ruled out this possibility. In this regard, we believe that any alternatives that may allow the company to maximise its resources would be positive, given its financial position (NFD of € 1.46 Bn as of 1H’20; 4.07x EBITDA) and the investment needs of its national expansion plan. However, the sale of its network would mean an increase in OPEX (with a subsequent reduction in its cash generation capacity), meaning that we will have to wait to see which parts of the network are sold and for how much before analysing in detail the deal’s multiples.