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IBERIAN DAILY 22 OCTOBER + 3Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, ATRESMEDIA, GRIFOLS, HOTEL SECTOR, IBERDROLA, MEDIASET ESPAÑA, RESULTS HIGHLIGHTS, TÉCNICAS REUNIDAS.

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’20 results to be released over the next seven days in Spain.

MARKETS YESTERDAY AND TODAY

Markets marching to the beat of the fiscal agreement
The session ended worse than it began, with the lack of an agreement between Democrats and Republicans on the fiscal stimulus package continuing to weigh on markets on both sides of the Atlantic, where most European indices closed with losses of more than -1.5%. Thus, in the Euro STOXX, all the sectors except Media (boosted by Vivendi’s solid results) closed in the red, with Travel & Leisure and Real Estate leading the drops. In Spain there were no surprises in the vote of no confidence against the Govt., which is not expected to move forward. In the US, the Fed’s Beige Book showed the economy is growing at modest growth rates, with the performance of the residential sector standing out. In US business results, Abbott Laboratories, Tesla, Nasdaq and Baker Hughes beat expectations, with Verizon in line.
What we expect for today
Stock markets would open with gains of around -0.5%, with political uncertainty increases in the US on the background, with J&J and Astra Zeneca resuming this week their phase III trials in US territory. Currently, S&P futures are down -0.5% (the S&P 500 was down -0.15% vs. its price at the closing bell in Europe dragged down by cyclical consumption and the energy sector). Volatility in the US fell (VIX 28.65). Asian markets are falling (Hong Kong -0.15%, Japan -0.62%).
Today in the US we will learn weekly jobless claims and second-hand home sales. In US business results, EE.UU. AT&T, Coca-Cola , Intel, Freeport-McMoran, American Airlines and Southwest Airlines, among others, will release their earnings.


COMPANY NEWS

MEDIASET ESPAÑA/ATRESMEDIA. We raise our Target Prices. We maintain our recommendation on TL5 and change that on A3M to BUY.
After the two stocks’ poor performance in 2020 (TL5 has fallen by -47.1% and A3M by -35.6% in absolute terms) and since 2019 (TL5 has dropped by -50.2% and A3M by 58.1% in absolute terms and -24% and -32% vs. IBEX, respectively), their current trading multiples are attractive and stand far below their historical average and their peers. We raise our valuations: (i) TL5 new T.P. € 4.70/sh. (+23.7% vs. previous, +60% upside), and (ii) A3M new T.P. € 3.00/sh. (+11.1% vs. previous and +37% upside). We are aware of the current scenario of volatility, with a sharply deteriorating advertising market, the uncertainties linked to Covid-19 and structural risks, but we believe that this scenario would already be priced in at the current trading levels. We highlight the two companies’ strong cash generation capacity (FCF yield’21 of >17% both).

ATRESMEDIA. Results far above expectations in both sales and EBITDA. BUY
The 3Q’20 sales have grown +1.7% (vs. +3.5% BS(e) and flat consensus) due to higher sales in the Audiovisual division (both TV advertising and Digital and content sales). 3Q’20 EBITDA reflects this improvement in sales and came in a € 30.3 M (+33.8% vs. 3Q’19, above our estimate and the consensus of +2.4%) with a margin of 14.8% (vs. 12.3% in 3Q’19). Following the stock’s poor performance (since 2019 it has plunged -58.1% in absolute terms and -32% vs. IBEX, andf in 2020 it has fallen -35.6% in absolute terms), we expect the impact from these results to be positive.

GRIFOLS. Investor Day 2020: No big surprises... BUY.
As expected, the company has confirmed a drop in plasma supply of less than -15% in 2020 and full recovery in 2021 (+30% vs. 2020) as well as an impact of € -100 M on EBITDA’20 from Covid-19 (6.5%; already known). The company expects limited growth in sales over the coming quarters (in line with our estimates and the consensus for 2H’20; +4% BS’20e and +6% consensus and +10.5% as of 1H’20) and pressure on margins due to the increased remuneration for donors, but it expects a quick recovery in 2021 due to the robust demand and the future maintenance of cost savings from 2020e (€~100 M in EBITDA). GRF keeps its debt guidance below 4x NFD/EBITDA (vs. 3.4x 2021 BS(e) and consensus) and confirms that the ASFA could announce its opinion on AMBAR (23% T.P.) in early 2021, and if this goes in the company’s favour it would be a driver. In short, few surprises, and thus we do not expect an impact on the share price.

Results highlights and 3Q’20 Results Previews.
Along with our daily report we include 3Q’20 results forecasts with all the previews for the coming days in Spain with our qualitative opinion and the expected impact on the market. On the stocks releasing their results over the next few days we expect a positive impact in: Applus, Caixabank, Grupo Catalana Occidente, Mapfre, Repsol and Santander. On the negative side we highlight: Ferrovial and Iberpapel.

TÉCNICAS REUNIDAS, BUY
At yesterday’s closing bell, the company clarified a series of press comments on standard risks mentioned in a recent debt issuance prospectus, reiterating that the outlook and the management’s view remain the same. Specifically, the company claims:
(i) No contract in the portfolio has been cancelled.
(ii) All contracts in the portfolio, including those awarded in the last 18 months are progressing well considering the restrictions imposed due to Covid-19.
(iii) The company continues to see a significant amount of future opportunities and a high pace of offers to submit. Moreover, new FEED awardings (Front End Engineering Design), forerunner of large future investments, have increased by more than € 70 M the company’s engineering services portfolio in the past six month.
(iv) The company has strengthened its financial structure and liquidity position, preserving a net cash position as of the end of the quarter.
In our view, this news should put an end to the stock’s sharp correction yesterday (-16% at the closing bell, due to the comments made in a MARF issuance). We do not rule out that the share price may rally following these clarifications.
We reiterate our view that, while it is true that the situation is complicated, at the current share price (levels even prior to yesterday’s press article), the stock would be pricing in an overly pessimistic scenario both in terms of contracts and margins. To reach valuations lower than € 9.00/sh., we should remove from our estimates more than half of its backlog (€ 10.1 Bn as of 1H’20), and not raising but lowering its current margin (2.6% EBITDA) by as much as 80bps. We maintain our T.P. Under Revision.