EUR 100.00 For Business Accounts Only

IBERIAN DAILY 25 NOVEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, BANKING SECTOR, ENAGÁS, ENCE, GRIFOLS, HOTEL SECTOR, NATURGY, ROVI.


MARKETS YESTERDAY AND TODAY

Trump still spurring the markets
The beginning of the transfer of power in the White House could shorten the timeframe for the new stimulus package in the US, where optimism surrounding a vaccine also continued. Thus, and despite the mixed macro data in Germany, where the IFO index fell more than expected and the final 3Q’20 GDP was raised more than expected, European stock markets closed with gains of more than +1.2%. In the Euro STOXX, Energy and Banks once again led the gains, with Consumer Goods and Personal Household Goods showing the worst relative performance. From the ECB, Olli Rehn defended more stimulus measures aimed at expanding the balance sheet and Mersch suggests that the dividend prohibition in the banking sector would be lifted in 2021. Meanwhile, France demands technological groups, mainly in the US, to pay the digital tax, which could trigger retaliations in the luxury sector. In the US, both the Richmond manufacturing index and November’s consumer confidence fell more than expected.
What we expect for today
The stock markets would take a break today, opening flat and with slight profit taking following the latest gains, with the luxury sector in the spotlight in view of the possible retaliation in the US. Currently, S&P futures are up +0.1% (the S&P 500 closed practically flat vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 21.64). Asian markets are trading with mixed results (CSI 300 -0.8%, Japan +0.5%).
Today, in the US we will learn the second reading of the 3Q’20 GDP, the minutes from the Fed’s 5 November meeting, weekly jobless claims, personal outlays and new home starts. Debt auctions: Italy (€ 2.5 Bn in zero coupon bonds due 2022 and I/L due 2023).


COMPANY NEWS

HOTEL SECTOR: Pricing in an excessive recovery scenario. We maintain our cautious stance.
News on the Covid-19 vaccine has boosted MEL’s and NH’s share prices by approximately +70% in the past few weeks, pricing in overly optimistic scenarios that considering there is very little visibility into the next few quarters and many doubts on consumer behaviour. A worse 2020 than initially forecast has led us to cut our estimates for both companies by >-45% in EBITDA in 2020-23e, and even though we foresee EBITDA levels in 2023 similar to 2019, debt will rise significantly (from 2.1x and 0.6x NFD/EBITDA’19 in MEL and NH, respectively to ~3x in 2023 in both cases), and thus with higher operating and financial risk than that seen prior to Covid-19. Our T.P. for MEL of € 3.50/sh. yields -35% potential. In NHH we cut the T.P. to € 3.00/sh. (-17% vs. previous T.P.), which yields -21% potential. Even assuming asset sales and a scenario of strong recovery, we maintain our SELL recommendation for both.

AEDAS, BUY
The results are basically in line with expectations on the commercial level (396 presales in 1H’20 vs. 397 BS(e)) and below in the P&L statement, although with figures that due to seasonality are low, and should not be representative of what we should expect for the full year. Deliveries totaled 109 units, equivalent to € 35 M (vs. € 44 M BS(e)), to which we must add € 4 M of land sales with a joint gross margin of 24%. Both the deliveries figure and the margin are not representative of what is to be expected for the full year (note that this is Q2 after the calendar modification), which should improve as the year goes on.
95% and 56% of deliveries forecast for the years ending in March’21 and March’22 have already been presold. AEDAS reiterates its guidance of deliveries for the coming years.
NAV ended the 2Q with a -3% drop at € 33.70/sh., in line with the company’s suggestion made in October. The company confirms the payment of a € 1.00/sh. dividend (5.3% yield) to be paid after the end of the fiscal year (March’21).
We do not expect a relevant impact from these results that are reasonably good in presales and weak in P&L although not highly representative for the full year (ending in March’21).