EUR 100.00 For Business Accounts Only

IBERIAN DAILY 29 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, AEDAS, AENA, CELLNEX, IBERPAPEL, SANTANDER, TÉCNICAS REUNIDAS, VOCENTO.

MARKETS YESTERDAY AND TODAY

Europe stabilise,but doubts on Covid-19 remain
European indices remained within a sideways range, highly influenced by the business results calendar. We highlight the rise in the IBEX 35 (+1%), which offset the drops on Monday. Within the Euro STOXX, the best performers were Travel & Leisure and Real Estate, whereas Basic Materials and Financial Services were the biggest losers. On the macro side, in Spain, the 2Q’20 unemployment rate rose less than expected, although the data is highly affected by the extension of furlough plans. In the US, in politics, the € 1 Tn fiscal stimulus package put forward by the Republicans seems to be far from meeting the Democrats’ expectations. In macro data, July’s consumer confidence was worse than expected due to the deterioration of the expectations component and June’s housing prices fell more than expected. From the ECB, Stournaras considers that the end of the PEPP will depend on the level of compliance with the inflation target. Separately, the number of new coronavirus infections increased once again in China (101). Meanwhile, A. Faucci, Trump’s expert virologist, is confident that there could be an effective and safe vaccine by December. In Europe, Sanofi and GlaxoSmithline will provide the UK with 60 million doses. In China, the minister of Foreign Affairs warned that the country would react rationally and firmly to US acts, asking other countries not to accept bullying from the US. In US business results, 3M and McDonald’s released worse earnings than expected, whereas Dr. Horton and Pfizer, Visa and Ebay beat expectations.
What we expect for today
Stock markets would open with losses amid doubts about a second wave of Covid-19 and awaiting the Fed’s decision. Currently, S&P futures are down -0.21% (the S&P 500 was down -0.52% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 25.44%). Asian markets are mixed (Japan -1.12% and Hong Kong +0.12%).
Today in the US the Fed will have its interest rates meeting for July and we will learn wholesale inventories and pending home sales for June. In US business results, General Electric, Garmin, Boeing, Qualcomm and Paypal, among others, will release their earnings. In debt auctions: Italy (€ 7 Bn in 6M t-bills), Greece (€ 625 M in 6M t-bills) and Germany (€ 3.5 Bn in bonds due 2035).

COMPANY NEWS

IBERPAPEL. 2Q’20 Results in line but with appealing upside. We change our recommendation to BUY.
Following the poor 2Q’20 Results, as expected (sales -4% below our estimate but +2% in EBITDA), we do not see risks of estimates in 2020 (-45% in EBITDA vs. -25% consensus) or going forward (-6% CAGR’19-22e vs. +0% consensus), and thus, as the upside potentials of the share price in our central-case scenario of V-shaped (T.P. € 26.10/sh.; +46% upside) and U-shaped recovery (+37% upside) exceed +35%, we change our recommendation to BUY. The share price has underperformed the IBEX by -1% since February’s highs (prior to Covid-19) and is trading at a -15% discount in P/E’21e vs. sector. Since our change to SELL (04/06), the share price has slid -18% (-14% vs. IBEX). We welcome its solvency: € 66 M of net cash (€ 165 M in cash) vs. € 55 M of maturities in 2020/21.

VOCENTO, BUY
The results were hit hard by Covid-19, in line in sales and beating expectations in EBITDA thanks to greater cost efficiencies (mainly in written press). 2Q’20 sales fell -24.6% (vs. -24.2% BS(e)) with circulation revenues -11.3%, advertising revenues -22.6% and other sales -8.3%. 2Q’20 EBITDA came in at € 5.6 M (vs. € 1.2 M BS(e)) thanks to the efficiency measures put in place (2Q’20 OPEX -20.9%, mainly in written press: commissions, furlough plans, suppliers, etc.) that have allowed the company to absorb part of the drop in sales. We also highlight the ordinary cash generation of € 6.6 M in 1H’20 (€ 2.1 M in 2Q’20), leaving NFD at € 67.5 M (vs. € 52.8 M in 2019), hit very hard by IFRS 16 due to the rents in the new offices, which had a € 15.5 M impact (excluding this effect, NFD in 1H’20 would have remained flat vs. 2019). The NFD/EBITDA ratio stands at 1.7x, whereas the company has cash and credit lines totaling € 68.5 M (vs. € 43.5 M of short-term debt).
We expect a positive impact due to the greater cost control and the positive cash generation in a quarter hit hard by Covid-19, especially bearing in mind the stock’s poor performance since Feb’20 highs (-40% in absolute terms and -12% vs. IBEX).

SANTANDER. Better 2Q’20 results in trading revenues and costs, CoR in line, € -12 Bn one-off. Dividend announced. BUY
The 2Q’20 results are very complicated, slightly better than expected in PPP (thanks to trading revenues and solid cost performance). CoR for 2Q’20 stands at the guidance’20 level of ~150bps (which is maintained). An impairment of around € -12 Bn was accounted (no impact on CET) in goodwill and DTAs (US, UK, Poland). The company has announced its intention of paying a DPS’19 of € 0.10/sh. and keeping reserves for the dividend’20 (~20% payout in 2Q’20). Phase-in capital at 11.60% (vs. 11.58% in 1Q’20) thanks to securitisations that, pro forma with the new CRR (SME factoring, among other things), reaches 11.84%. Fully-loaded CET would stand at 11.46% (11.33% in 1Q’20). We expect a poor reception due to the deterioration of the businesses and the scant progress in capital (ex-securitisations). Conference call at 10:00 (CET).

AEDAS HOMES. 1Q’20 Results in line with expectations. We raise our T.P. by +16% and reiterate BUY.
The results are marked by the impossibility of operating under normal conditions due to Covid-19. Deliveries reached 62 units, equivalent to € 23 M with a gross margin of 25%. Both the delivery and margin figures are not representative of our expectations for FY2020 (note that this is the first quarter after the calendar modification) that should show an increasing performance. Pre-sales came in at 127 units, where 106 were formalised in June. Cancellations were as usual on the quarter, according to the company, which we view as positive. 81% of the deliveries expected for 2020 have been already pre-sold. With these results we raise our T.P. by +16% up to € 21.20/sh. We reiterate our BUY recommendation.

AENA. 1H’20 Results came in above expectations good cost containment in the 2Q. BUY
1H’20 Results came in above expectations thanks to higher accounting entries of MGR, which explains the difference in estimates. AENA did not unveil a specific traffic guidance for 2020 although it assumes the estimates given by several bodies that mean a drop in passengers of between 57% and 67% in 2020 (vs. -54% BS(e) and -59% IATA) and it sees feasible that traffic will not return to 2019 level until 2024/27 (vs. 2025/2026 BS(e)). Results of limited impact, we welcome the cost containment in the 2Q and the fact that it is negotiating on all the operating fronts and its liquidity (renegotiation of concessions in Luton, Brazil, Murcia and request of waivers for debt covenants), which would allow the company to keep its stability in demanding scenarios.