EUR 100.00 For Business Accounts Only

IBERIAN DAILY 02 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, ENCE, FERROVIAL, IAG, MERLIN PROPERTIES, NEINOR HOMES, OHLA, REPSOL.

MARKETS YESTERDAY AND TODAY

Strong rallies on the markets
The WHO’s more optimistic forecasts on vaccine efficacy spurred a rally on all European markets. In the Euro STOXX, the best-performing sectors were cyclical ones like Basic Materials and Autos, whereas Real Estate ended with losses and Household Goods practically flat. On the macro side, in the euro zone November’s final manufacturing PMI was cut due to the worse data in peripheral nations, among them Spain. The new OECD forecasts showed new Covid-19 variants as a threat to global recovery and lower growth in Spain of 4.5% in 2021 (-1.3pp), 5.5% in 2022 (-1.1pp) and 3.8% in 2023. We also highlight the estimate that inflation would rise to 3.2% in 2023. In the US, November’s manufacturing ISM rose slightly less than expected, while the prices paid heading fell slightly. On the whole the data points to GDP growth in line with the 4.9% QoQ expected by the market. Of the rest of the data we highlight November’s ADP private employment survey, which rose slightly more than expected, and October’s construction spending, which also rose less than expected. Lastly, the Beige Book, covering from October until the beginning of November hinted at moderated growth due to distortions in the supply chain and some tightness in the labour market. Despite the impact from the delta variant business expectations remain positive. In comments made before Congress, Jerome Powell once again stated that monetary policy will be adapted to inflation risks. In Turkey, president R. Erdogan dismissed Finances Minister L. Elvan for opposing interest rates cuts, which again added pressure on the lira.
What we expect for today
We expect the European stock markets to consolidate at the current support levels of 4,100/8,400 points (Euro STOXX 50 and Ibex 35, respectively). Currently, S&P futures are up +0.7% (the S&P 500 ended -2.64% lower vs. its level at the European closing bell after a first Omicron variant case was confirmed in the US). Volatility in the US rose (VIX 31.12). Asian markets are trading with mixed results (China’s CSI 300 +0.25% and Japan’s Nikkei -0.65%).
Today in the euro zone we will learn October’s unemployment rate, in Spain October’s unemployment, in the US weekly jobless claims and in Brazil the 3Q’21 GDP. OPEC+ will meet. In debt auctions: Spain (bonds due 2025, 2031 and I/L due 2033) and France (€ 4 Bn in bonds due 2030, 2041 and 2045).

COMPANY NEWS

OHLA. Madrid offers € 162 M for the Navalcarnero train. BUY.
According to the press, the Community of Madrid would have recognised € 162.4 M of debt with OHLA for the construction of the Móstoles-Navalcarnero commuter train (Cemonasa) before the works were halted in 2010. The amount would include € 123.4 M from the investments made and another € 39.1 M of interests. Apart from this, the Madrid High Court of Justice will meet on 15 December’21 to decide on OHLA’s claim in this project, which according to the article would reach € 289 M (€~350 M previously). Positive news if confirmed, as we do not have any cash inflows from this project included in our valuation, and the impact on the T.P. would be +33% to €~1.05/sh. In any event, note that the Community of Madrid already recognised the € 123 M from the investments in August’18, and furthermore the total amount offered is below the € 289 M claimed by OHLA (and even the €~200 M at which it has the asset recorded on its balance sheet).

MERLIN PROPERTIES, BUY
According to the press, MRL might launch the sale of its BBVA branches portfolio in 2022 for an amount of €~2 Bn.
This is not really new as in the latest results presentations the company suggested that it would sell this portfolio, which is not core to the company, if a good offer came along. In this regard, in the current inflation scenario (4% in the Euro zone), it would be very positive for the valuation of an asset that is indexed to Euro zone inflation (with a multiplier of 1.5x). If the price is good, we would also welcome the transaction.
The value of the branches, according to the appraisal in June’21, was €~1.86 Bn, equivalent to ~14% of the appraised value of MRL’s portfolio (GAV). The valuation is expected to be improved in Dec’21 in order to incorporate the aforementioned rise in inflation (although the data also includes some supermarkets, and some branches have been sold since June).
According to the company, the main use for the funds obtained would be to reduce debt, pay the dividend (which in any case is obligatory according to the REIT regimen) and recycle capital towards the data centre and logistics business.