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IBERIAN DAILY 26 FEBRUARY + 4Q'20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: COLONIAL, FERROVIAL, GRIFOLS, GRUPO CATALANA OCCIDENTE, LIBERBANK, MERLIN, OHL, TALGO, UNICAJA, VIDRALA, VISCOFAN.

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

MARKETS YESTERDAY AND TODAY

Pressure from yields begins to take its toll
US debt continued its particular rally one more session (hitting levels of ~1.5%), leading to profit taking at the end of the session, with value outperforming growth and the Spanish index being the best performer in the euro zone. Thus, in the Euro STOXX Insurance and Energy saw the highest gains vs. Chemicals and Food that were the worst relative performers. On the macroeconomic level, in the US, the second reading of the 4Q’20 GDP was disappointing, rising less than expected while weekly jobless claims improved to lows of almost 3 months and January’s durable goods orders were better than expected. From the Fed, J. Bullard mentioned that the rising rates is a result of business activity returning to normal, and it could overheat a bit without generating a rise in inflation, whereas P. Lane from the ECB stated that the organisation continues to monitor real yield performance and that the PEPP will be used flexibly depending on market conditions. In Mexico, the 4Q’20 GDP climbed more than expected. In Japan, January’s industrial output rose more than expected and retail sales fell less than expected. In US Results Nielsen, HP and American Electric came in better, Norwegian and Domino’s Pizza worse.
What we expect for today
The widening on debt markets (despite some stabilisation of yields in Asia) will continue to hurt stock markets. Currently, S&P futures are down -0.35% (the S&P 500 closed down -1.03% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 28.9). Asian markets are sliding (CSI 300 -1.8%, Japan -3.9%).
Today the Finance Ministers of the G20 will meet. In Spain we will learn February’s inflation and in the US personal income and outlays and wholesale inventories. In US business results, Public Service and Evergy, among others, will release their earnings.


COMPANY NEWS

ACS. FY2020 results above expectations in EBITDA and debt. BUY.
The company released at yesterday’s closing bell FY2020 results that were impacted, above all, by the adjustments made in the sale of Thiess and the Gorgon project. The results came in above our expectations in (underlying) operating EBITDA (+5% consensus if we apply the same adjustments) and in working capital levels (in line FY2019, adjusted for factoring, while we expect to see deterioration). Since the results were slightly above expectations in EBITDA and above in cash generation (in terms of working capital), we would expect a positive share price reaction (although the comparison vs. the consensus is not evident). The stock has underperformed the IBEX by -8% thus far this year.

CAF. FY2020 results slightly below expectations in EBITDA but above in debt. Reasonable guidance’21. BUY.
The company’s FY2020 results came in below expectations in EBITDA (-3% vs. BS(e) and -4% consensus) due to lower margins (7.3% vs. 8.0% BS(e) and consensus), yet far above expectations in NFD (€ 311 M vs. € 391 M BS(e) and € 452 M consensus; 1.5x NFD/EBITDA’21) thanks mainly to working capital performance. Guidance’21: (i) BtB of>1 (in line); (ii) increasing sales vs. FY2020 (+1% BS(e) +5% consensus); and (iii) Net Profit growth, with pre Covid-19 operating EBITDA margins (9.4% in FY2019 vs. 9.5% BS(e) and 8.9% consensus). We would expect a mildly positive share price reaction, especially considering that the stock has underperformed the IBEX by -12% thus far this year.

FERROVIAL. 4Q’20 results above expectations on the operating and cash levels. Higher dividend than expected. BUY.
The 4Q’20 results came in above expectations in EBITDA (€ 168 M vs. € 133 M consensus) thanks to Construction (€ 113 M EBITDA vs. € 45 M consensus), which offset the weaker performance of Toll Roads (€ 54 M vs. € 66 M), where the recovery of traffic continues to be slow. Cash exc. infra improved +17% to €~1.99 Bn (vs. € 1.75 Bn BS(e)), which allowed the company to hit an all-time high in liquidity levels (€ 7.92 Bn; 3.1x NFD). The company has announced a dividend payment of e 0.513/sh. (+43% vs. 2020; 2.4% yield), which stands above our estimates and those of the consensus (€ .37/sh. BS(e) and € 0.44/sh. consensus). We expect a positive share price reaction considering the stock’s recent performance (-5% thus far this year; -8% vs. IBEX and -12% vs. Eurostoxx Const.&Mat.).

MELIÁ HOTELS: Worse results than expected due to costs. No guidance’21 provided. SELL.
Worse FY2020 results in EBITDA (€-151.7 M vs. €-136.8 M BS(e) and €-145.8 M consensus) due to a worse performance in personnel costs. Below the EBIDA line, leasings also came in below expectations. The company expects the 1Q’21 trend to be in line with 4Q’20, whereas the expected recovery from 2Q’21 on (reservations have started to improve) appears to be focused on the Spanish resort segment (~20% EBITDA), as there continues to be little visibility into the rest of businesses. NFD increased more than expected to € 1.25 Bn (vs. € 1.21 Bn BS(e)). Meanwhile, MEL has increased by +32% in the last month (+27% vs. IBEX). Our estimates already assume strong recovery (+8% in EBITDA’23 vs. FY2019) and we see no upside. Additionally, the stock is trading only -12% below Jan’20 pre Covid-19 highs, and the amount of cash burnt in 2020 alone would justify a -38% underperformance.

MERLIN PROPERTIES, BUY
The 4Q’20 results are very much in line with our forecasts in P&L (slightly better in NAV) and above the consensus estimates, although the guidance’21 is below what we expected.
The most noteworthy aspect is that, as in previous quarters in 2020, we have seen falling rental revenues due to asset sales, and additionally an even bigger drop in cashflow due to the incentives the company has given several tenants after they were forced to close for Covid-19 reasons (already announced previously).
Thus, gross rental revenues fell -4% and EBITDA -14%. Adjusted for the effect from asset sales, LfL revenues rose +0.4% (+1.4% as of 9M’20). Growth in LfL rents by segment was as follows: offices +2%, shopping centres -1% and logistics +2%. The tenancy ratio as of Dec’20 was 94.2% (+10bps vs. Sep’20 and -57bps vs. Dec’19). As for renewals (release spreads), the numbers for the year show a slowdown vs. 9M’20, but they are still positive: offices +3%, shopping centres +4% and logistics +6%. The company exceeded its FFO/share guidance with -16% growth to € 0.56 (vs. guidance of € 0.53). As for the asset appraisal, the LfL GAV fell -0.6% (+0.5% including capex), which is better than we expected (-3%). By segments, and in LfL terms, offices rose +1% and logistics +8%, whereas net leases remained flat and retail fell -9%. The improvement in offices beat our expectations (with yields compressing -46bps), whereas the rest was in line. NAV closed the year at € 15.68/sh. (vs. € 15.10/sh. BS(e)), and thus it is practically flat (+0.5%) vs. 2019, which in our view is a sign of the portfolio’s resilience in a very challenging year. As for 2021, the company gives an FFO guidance of € 0.56 (+0% vs. 2020), better than we expected (€ 0.60), although partly due to an effect from asset sales that was not included in our estimates. The incentives the company is giving tenants in 2021 for Covid-19 reasons is also having an effect. In any event, this is the part of the results we have liked the least. LTV closed the year at 39.9% (vs. 39.5% in Dec’20).In the AGM the company will propose a DPS of € 0.25/sh. against 2020 results (-29% vs. 2019, vs. € 0.27/sh. BS(e)), meaning a yield of 2.8%. We think the market is worried more by the future medium- and long-term outlook than by the resilience shown in the very short term, in companies with valid lease contracts, and thus there is strong revenues momentum in the short term. Thus, the stock is trading at a -43% discount to NAV as of Dec’20. Bearing in mind the company’s debt, we estimate the market is assuming that MRL’s assets are worth -27% less than the appraisal. This discount is excessive in our view, and we reiterate our BUY recommendation.

TALGO, BUY
The company released at yesterday’s closing bell FY2020 Results still hit by Covid-19 although above expectations in sales (+5% vs. BS(e) and consensus) and EBITDA (+6% vs. BS(e) and consensus), and slightly better in debt (€ 48 M vs. 60 BS(e) and consensus). It unveiled its 2021 guidance, stressing that (i) 2021-22 sales would account for between 35-37% of the backlog (vs. 40% BS€ and 35% consensus), (ii) the average 2020/21 BtB will be >1.2 (vs. 1.0 BS(e)) and (iii) the EBITDA margin would range between 10% and 12% (vs. 14% BS(e) and 12% consensus). We expect a moderately positive market reaction as these results came in above expectations and the guidance seems reasonable. The share price has climbed +2% vs. IBEX YtD.

VIDRALA. 4Q’20 Results above expectations. BUY.
The company has released 4Q’20 above expectations: Sales: € 238.6 M (-4.1% vs. -6.6% BS(e)); EBITDA: € 76.2 M . (+11.6% vs. -5.4% BS(e)) with a significant improvement in margins in the 4Q’20 (+477bps) based on a recovery of sales volumes and efficiency improvements. Furthermore, the company expects to maintain the margin reached in 2020 in 2021 (28.3 vs. 28.0% BS(e)). NFD fell more than expected: € 233 (vs. € 275 M BS(e)). We expect a positive market reaction.

VISCOFÁN, SELL
EBITDA on the quarter grew much more than expected (+19.3% vs. +3.6% BS(e) and -1.3% consensus) due to higher sales (+7.3% vs. +2.1% BS(e) and +3.6% consensus; +11.3% LfL) and very good margin performance (+150bps vs. 4Q’19 to 27.2% vs. 26.2% BS(e) and 25% consensus). Growth in Net Profit also exceeded expectations (+5.3% vs. -19% BS(e) and -8.8% consensus), whereas NFD ex-IFRS 16 rose by € 23 M to € 38.2 M as a result of the increase in capex in 2H’20 and the dividend payment. In any event, debt is practically at zero (~0.2x NFD/EBITDA; 0.1x in 3Q’20), in line with our estimates. For this year the company has given a guidance’21 that is far above the consensus on all lines: Sales between € 940-949 M (vs. € 934 M BS(e) and € 932 M consensus), EBITDA between € 241-246 M (vs. € 231 M BS(e) and € 234 M consensus) and Net Profit between € 127-130 M (vs. € 120 M BS(e) and € 124 M consensus), with capex reaching € 70 M (vs. € 60 M BS(e) and € 62 M consensus) and an average exchange rate of 1.20 USD/EUR. VIS has announced a final dividend’20 of € 0.29/sh. (-70%; 0.5% yield), in line with our estimates (€ 0.28/sh. BS(e)). The 4Q’20 results were robust and better than expected, with a guidance’21 above consensus estimates, and we expect a positive reception, especially bearing in mind the lacklustre recent performance (-2% YTD; -5% vs. IBEX). SELL. T.P. € 58.50/sh. (upside +4.46%).