IBERIAN DAILY 27 MAY (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, MELIÁ HOTELS, ROVI.Market corrections from highs
Stock exchanges saw profit taking last week, which was marked by the Fed’s comments in favour of keeping rates at high levels and despite NVIDIA’s good results. Thus, Industrials and Technology were among the few sectors that saw gains in the STOXX 600, whereas Utilities and Food were hit the hardest. On the macro side, in Germany the final 1Q’24 GDP confirmed the preliminary data, climbing 0.2% QoQ vs. -0.5% the previous quarter thanks to the increase in investments. In the UK, April’s retail sales slowed down much more than expected. From the ECB, J. Nagel (Bundesbank’s chairman) ruled out that the rise in wages jeopardises June’s rate cut, whereas P. Lane admitted rates could be lowered, but always maintaining a restrictive monetary policy. In the US, April’s durable goods orders rose more than expected, with solid performance in the core figure. Separately, May’s University of Michigan consumer confidence was raised unexpectedly, but with 1Y and 3Y inflation expectations falling. Lastly, the OPEC+ production meeting was postponed to 02/06 where an extension of cuts is expected (currently at 5.86 M b/d broken down into 2.2 M voluntary and 3.66 M from previous cuts).
What we expect for today
Stock markets would open with sight drops of -0.2%. Currently, S&P futures are down -0.03% (the S&P 500 ended unchanged vs. the European closing bell). Asian stock markets are climbing (China’s CSI 300 +0.29 %, Japan’s Nikkei +0.33 %).
Today in Germany we will learn May’s IFO and April’s import prices. In US business results, HP and Salesforce, among others, will release their earnings.
COMPANY NEWS
ROVI. Possible sale of its CDMO business for between € 3.1-3.7 Bn. SELL
According to the press, ROVI could obtain between € 3.1-3.7 Bn (~73% market cap and EV) for its third-party manufacturing business (CDMO). The valuation would be based on a 12x and 14x EV/EBITDA multiple for € 261 M of EBITDA expected to be generated by the division in 2024. The proceeds stemming from the divestiture could be earmarked to diversification towards new businesses. The process would have already started and Advent, Cinven, KKR, Pay or Permira would be interested in the deal. Positive news if confirmed. ROVI’s intention of selling its CDMO division was already known and the valuation multiples are in line with expectations. However, the valuation range outlined by the press article exceeds the amount rumoured (around € 3 Bn) due to the higher EBITDA expected for the division (€ 261 M in 2024). We stress that this EBITDA level for 2024 of the division exceeds our EBITDA expectation for the whole company (€ 249 M and € 245 M consensus), which could be explained by the impact from the “carve out” exercise of the division, and in our view by the contribution from new contracts not yet announced. Although we expect a positive market reaction, the share price has already priced in the good prospects of the CDMO business (+52% in 2024; +41% vs. IBEX). No independent valuation for this division is available as the company only reports sales. We value the whole company through the DCF method.
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.
Melia Hotels International is the parent company of a group engaged in the acquisition, management and operation of hotels. Co. operates its hotel network in Germany, Argentina, Brazil, Bulgaria, Cabo Verde, Chile, China, Costa Rica, Croatia, Cuba, Egypt, Spain, United States, France, Greece, Netherlands, Indonesia, Italy, Luxembourg, Malaysia, Mexico, Panama, Peru, Portugal, Puerto Rico, United Kingdom, Dominican Republic, Singapore, Switzerland, Tunisia, Uruguay, Venezuela and Vietnam under the followings brandnames: Paradisus Resorts®, Melia Hotels & Resorts®, TRYP Hoteles® and Sol Hotels & Resorts®.
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