IBERIAN DAILY 21 JUNE (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, CAF, CHANGES IN SPANISH PORTFOLIOS, ENAGAS, FCC, MEDIASET ESPAÑA, METROVACESA.The market stabilises
The European stock markets rallied following the oversold conditions seen in Europe after last week’s drops. The worst performer was the French CAC after E. Macron lost his absolute majority in parliament, jeopardising his reformist agenda at the beginning of his second term. Raw material prices continued to fall as a result of the worsening global growth outlook. Thus, within the Euro STOXX, Travel&Leisure and Banks led gains, whereas Construction and Real Estate were the day’s worst performers. On the macro side, in Germany, production prices increased somewhat less than expected in May but remain very high (33.6%), which will continue to encourage inflation. On another note, C. Lagarde warned t hat the anti-fragmentation plan will be effective and proportionate. In the US, Biden would be analysing a temporary relief of the federal tax on gas. In China, Covid-19 cases extend to other regions with outbreaks in Shenzhen and Macau. On the geopolitical front, Russia is threatening Lithuania with retaliations for halting the transport of goods towards Russia.
What we expect for today
The European stock markets would open with gains of around +0.5%, with banks and oil companies benefitting from rate hikes and crude oil prices. Currently, S&P futures are up +1.5% (the S&P 500 was closed for the holiday). Asian markets are rising (China’s CSI 300 +0.25% and Japan’s Nikkei +2.5%).
Today we will learn in the US the Chicago Fed national index and second-hand home sales (both for May).
COMPANY NEWS
CHANGES IN SPANISH PORTFOLIOS
We remove Grupo San José (GSJ) from our Small&Mid Cap portfolio and include Melía Hotels (MEL). In GSJ (which has outperformed the IBEX by +7% since we included it last year) we maintain a positive stance, as we see lots of hidden value, considering that its stake in DCN and its net cash position (adjusted for 75% of the provisions as of Dec’21) alone are equal to its market cap. Nevertheless, we are looking for more exposure to stocks benefiting from the improvement in the tourism industry that we foresee this summer, and for this reason we include MEL, whose targets announced recently in it Strategic Update for 2024 are above our expectations and those of the consensus in EBITDA’22e (excluding capital gains +17%) and in the long term (MEL expects to reach 2019 levels in 2023 vs 2024 BS(e)). Following the stock’s drop from its recent high (-14%), we think its risk-reward ratio is more appealing.
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.
Enagas is a gas transportation company based in Spain. Co. is engaged in the technical distribution and storage of gas through pipelines as well as the provision of regasification services. Co. and subsidiaries are engaged in the ownership, administration, storage, pipeline transportation, distribution flow, and sale of natural gas. As a transport company, Co. also provides gas and manages the gas infrastructures.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Metrovacesa SA, formerly Metrovacesa Suelo y Promocion SA, is a Spain-based real estate developer. The Company specializes in construction and sale of sustainable housing, both single-family and multi-family residential properties. Its activities also include promotion, urbanization and parceling of real estate in general, as well as real estate management for own benefit or on behalf of third parties. Its asset portfolio includes more than 6 million square meters of building land across Spain, as well as already developed properties in cities, such as Malaga, Almeria, Cordoba, Barcelona and Madrid, among others.
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