IBERIAN DAILY 14 MAY + 1Q’21 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, ROVI, TALGO.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 1Q’21 results to be released over the coming days in Spain.
MARKETS YESTERDAY AND TODAY
The US tows Europe
The European indices rose as the session progressed thanks to a positive US opening driven by the rally in the Technology sector and with all eyes on inflation. In any case, within the Euro STOXX, the recovery was led by defensive sectors such as Utilities and Household Goods, which were the best relative performers vs. cyclical sectors like Energy and Travel & Leisure, which saw the biggest losses. On the macro side, in Spain, the BoS recommended to the Govt. a comprehensive fiscal reform, reducing the pension deficit and matching the conditions of permanent and temporary employments. In the US, producer prices climbed above expectations in April (both the general and core components), whereas the weekly jobless claims fell more than expected. Meanwhile, Fed members Waller and Bullard warned that the Monetary Authority will not react to the transitory inflation bump. In US business results, Walt Disney beat expectations in EPS, but released disappointing subscriptions data.
What we expect for today
The European stock markets would open with gains of around +0.5% backed by the growth segment and with Basic Resources dragged down by falling industrial raw materials prices (-8.0% in iron ore). Currently, S&P futures are up +0.6% (the S&P 500 ended up +0.18% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 23.13). Asian markets are rising (China’s CSI +2% and Japan’s Nikkei +2.3%).
Today in the euro zone we will learn the ECB’s meeting minutes, in Spain April’s final inflation and in the US retail sales and industrial output for April.
COMPANY NEWS
ROVI. 1Q’21 results that beat consensus estimates. We raise our T.P. SELL.
The 1Q’21 results beat consensus estimates on the operating level (€ 34.8 M of EBITDA vs. € 29.9 M consensus) thanks to higher EBITDA margins (26.7% vs. 23.8% consensus). The company announced that it expects to reach the high end of the guidance’21 (revenues growing between +20% and +30% vs. +25% consensus). We raise our 2021-23 estimates by +24% in sales and +91% in EBITDA in order to reflect the agreements with Moderna, and we incorporate Letrozol ISM into the pipeline (phase I for breast cancer), with a joint impact of € +11.50/sh. on the T.P., which stands at € 47.50/sh. (-1.3% potential). Following the solid recent performance (+27% in 2021 and +15% vs. IBEX), our new T.P. has no upside, and we maintain our SELL recommendation.
ACS. Results in line with expectations, although with poor cash generation. BUY
The 1Q’21 results were in line with expectations, with drops on a comparable basis (ex Thiess, ex Cobra) of -10.6% in sales and -4.3% in EBITDA. The margin rose +30bps thanks to Hochtief (already known) and the Services division (+270bps), with lacklustre performance from Dragados. Cash generation was weak, hit by deteriorated working capital (seasonal effect) and a reduction to factoring. With the sale of Cobra NFD will go from € 3.69 Bn to € 1.3 Bn of pro forma net cash. That said, the results take a back seat, with the key lying in the fact all eyes are on a possible acquisition of the Italian motorways (ASPI), where no news was given in the presentation. We expect a neutral/slightly negative reaction, although the stock has underperformed the IBEX by -11% YtD, and thus we reiterate our BUY recommendation.
TALGO, BUY
The 1Q’21 results were in line in sales (-0.4% vs. BS(e) and +0.3% consensus) and above expectations in adjusted EBITDA (+11.7% vs. BS(e) and +5.5% vs. consensus) due to better margin performance, which reached 9.1% (vs. 8.1% BS(e) and 8.7% consensus) thanks to the operating efficiency plans. Net Profit came in at € 6.4 M (vs. € 2.6 M BS(e) and € 2.3 M consensus), driven by more controlled financial results. The company has maintained its guidance’21, highlighting sales’21-22 between 35-37% of the backlog (vs. 40% BS(e) and 35% consensus), average BtB’20-21 above 1.2x (vs. 1.0x BS(e)) and an EBITDA margin between 10-12% in 2021 (vs. 14% BS(e) and 11.4% consensus). We expect a positive slant in the reception of these results following the stock’s lacklustre recent performance (-1.4% since 4Q’20 results; -9% vs. IBEX).
We expect a positive slant in the reception of these results following the stock’s lacklustre recent performance (-1.4% since 4Q’20 results; -9% vs. IBEX). We expect the company to meet its targets as restrictions on movement begin to be lifted.
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.
Laboratorios Farmaceuticos Rovi is engaged in the sale of its own pharmaceutical products and the distribution of other products for which it holds licenses granted by other laboratories for specific periods, in accordance with the terms and conditions contained in the agreements entered into with said laboratories.
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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