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IBERIAN DAILY 24 FEBRUARY + 4Q’22 RESULTS. HIGHLIGHTS AND PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, AMADEUS, CELLNEX, ENDESA, FERROVIAL, GLOBAL DOMINION, IAG.

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 4Q’22 results to be released over the coming days in Spain.

Stock markets post gains once again
The European stock markets posted gains yesterday after the drops of the past few days, with the Ibex leading the way, recovering the 9,200-point level. Within the Euro STOXX, Real Estate and Banks were the best relative performers vs. the drops in Basic Resources and Household Goods. On the macro side, in the Euro zone, January’s final inflation confirmed the preliminary 8.6% YoY figure, but core inflation increased unexpectedly by a tenth to 5.3% YoY. In the US, the second reading of the 4Q’22 GDP was lowered by two tenths to 2.7% QoQ annualised due to the lower increase in private consumption, whereas the consumption deflator was raised sharply. In Japan, January’s inflation rose in line with expectations, reaching a 41-year high (4.3% YoY general and 3.2% core). The incoming BoJ governor warned that bonds would no longer be purchased if the 2.0% inflation target is reached in the medium term, although he was in favour of maintaining the ultra-low rate policy. In US business results, Moderna came in worse than expected, Domino’s Pizza better.
What we expect for today
The European stock markets would open with gains of up to +0.4% awaiting the publication of the US consumer spending and core consumer deflator. Currently, S&P futures are down -0.1% (the S&P 500 ended +1.24% higher vs. the European closing bell). Volatility in the US increased (VIX 21.14). Asian markets are mixed (China’s CSI 300 -1.16% and Japan’s Nikkei +1.20%).
Today we will learn in Germany the 4Q’22 GDP, in Mexico December’s IGAE economic activity index and the 4Q’20 GDP, and in the US the new home sales and personal outlays for January.


COMPANY NEWS

ENDESA. Solid FY2022 results, beating expectations. DPS’22 raised. BUY
The FY2022 results beat expectations, at the high end of the guidance range in EBITDA and above in Net Profit. LfL EBITDA’22 (excluding the effect from the € 238 M from the Endesa X Way deal) stands at € 5.33 Bn (+25% vs. +20% consensus, -5% BS(e)) due to the strong performance in Conventional Generation and others. Ordinary Net Profit reached € 2.40 Bn (+26% vs. 2021, vs. +17.8% consensus and -7% BS(e)). NFD’22 rose to € 10.9 Bn (vs. € 8.8 Bn in 2021 due to greater capex and working capital). The DPS’22 was improved to € 1.585/sh. (+10% vs. 2021; +5% vs. expected; 8.5% yield). We expect a warm reception. Conference call at 10:00 (CET).

AMADEUS. 4Q’22 results in line. Guidance’23 within expectations. BUY
The 4Q’22 results were in line with expectations in sales (-12.9% vs. -12.5% BS(e) and -12% consensus) and EBITDA (€ 398 M vs. € 399 M BS(e) and vs. € 390 M consensus). As for the guidance’23, the company has indicated revenue growth of 20.0-22.5% (vs. +20% BS(e) and +22% consensus). Regarding EBITDA, AMS expects the margin to rise from 2022’s 36.5%, which is included in our estimates (we expect 38.9% in 2023) and the consensus (39%). With these results being in line, and with a guidance meeting expectations, we do not expect a significant market impact after the +2% outperformance vs. the IBEX in 2023.

IAG. 4Q’22 results beating expectations in EBIT. BUY
The 4Q’22 results beat expectations in EBIT (€ 486 M vs. € 402 M BS(e) and € 457 M consensus), which would come from a better price mix and lower costs. Net debt fell to € 10.4 Bn vs. € 13 Bn BS(e). We believe the most relevant aspect is the guidance. The company expects EBIT between € 1.8 Bn and € 2.3 Bn (vs. € 2.26 Bn with occupancy levels of ~100% vs. 2019 BS(e) and € 2.03 Bn consensus), with losses of € 200 M in 1Q’23. On the debt side, IAG expects to keep it stable on the year vs. 2022 with € 4 Bn of capex (vs. € 2.5 Bn BS(e)) due to fleet renewal. We expect a positive reaction.

IAG, BUY.
Yesterday the company announced a new agreement between Iberia and Globalvia whereby the former will acquire the remaining 80% of Air Europa’s capital it does not hold for € 400 M (this means valuing 100% of the company at € 500 M; 5% of market cap and EV of €~2.7 Bn): (i) an initial payment of € 200 M when approval is received from competition (~18 months from now), of which 50% will be in IAG shares (2.5% market cap) and the other 50% in cash; and (ii) the second and third payments will be € 100 M each in cash on the second and third anniversary of the approval date. As in previous agreements, the company expects significant synergies (in line with previous deals) and that they will be obtained (if the deal is approved on time) between 2026 and 2028.
Once again, we are back to square one. The main difficulty of the transaction will continue to be obtaining the approval from the competition authorities, although this time it could be different considering that after Covid-19 both companies are smaller (assuming 2019 figures), meaning that only the approval by national authorities is needed. In addition, we believe that IAG will be willing to make all the necessary concessions to get it through. In any event, as we have discussed on previous occasions, the transaction is a strategic fit that would allow IAG to position itself as leader in the Europe-LatAm segment (increasing its share by 7% to 26% of the total; vs. 19% for the second-largest company in the segment, Air France, assuming 2019 figures) and providing greater pricing power not only in the Europe-LatAm segment (the sixth-largest operator disappears, according to 2019 figures), but also in the domestic segment. As for the price, it means 3x EV/sales’21 (a year heavily impacted by the Covid effect) vs. 2.4x IAG (which falls to 1x in 2023, as significant improvement is expected in the business), although if we assume synergies of 3-4% over joint sales (in line with other deals), the ratio would fall to 2.7x EV/sales vs. IAG’s EV/sales’21 ratio of 3.1x.