EUR 100.00 For Business Accounts Only

IBERIAN DAILY 26 NOVEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, ALMIRALL, NEINOR, RENEWABLE SECTOR, TOURISM SECTOR.

MARKETS YESTERDAY AND TODAY

A Thanksgiving break, the South African Covid variant will be key today
There was a weak rally in Europe during the US holiday, which ended the bearish streak that had been ongoing since the beginning of the week. In the Euro STOXX, Food and Utilities were the best relative performers, with Autos and Telecoms posting the biggest losses. On the macro side, in Germany the final 3Q’21 GDP confirmed the preliminary 2.5% YoY figure. In Mexico, the 3Q’21 GDP contracted more than expected to -0.4% QoQ. In Japan, November’s Tokyo inflation climbed less than expected whereas the core data was even more negative. Lastly, the WHO warned about the Covid B.1.1.529 variant seen in Africa that will be classified as relevant variant at today’s emergency meeting in view of its high contagion level and ability to avoid vaccines. Against this backdrop, the UK has added 6 African countries (where the variant is predominant) to its red list that will force travellers to spend a quarantine whereas Hong Kong already admits cases of this variant.
What we expect for today
The European stock markets would open with drops of as much as -2.0%, where cyclical sectors such as Travel & Leisure (with an impact on companies such as IAG, Aena, Amadeus, Meliá, NH), Oil and Banks will be penalised by the new Covid-19 variant, and the drop in the Brent price and interest rates. Currently, S&P futures are down -1.1% (the S&P 500 was closed yesterday for the holiday and today will close at 13:00). Asian markets are falling (China’s CSI 300 -0.8% and Japan’s Nikkei -2.5%).
Today in the euro zone we will learn October’s M3 and in Mexico October’s trade balance. In debt auctions: Italy (€ 5 Bn in 6M t-bills).

COMPANY NEWS
PROPERTY DEVELOPERS SECTOR. The fund Värde has rejected HOME’s acquisition bid.
The fund Värde, controlling 76% of Vía Celere, has rejected HOME’s acquisition bid, deeming it low (no details have been given, and thus we cannot assess it), and it will now open the bidding process to other interested companies (mentioning Aedas and Habitat). Note that Vía Celere’s assets are valued at € 1.599 Bn vs. AEDAS’ € 1.907 Bn and HOME’s € 2.185 Bn.
Although we believe that the combination of Vía Célere and HOME would be good news, we welcome its example of financial discipline and we understand that the market would not welcome if the deal is carried out at an excessive price, and thus, we think the news is not negative for HOME (the share price has slid -2% since the announcement of negotiations). As for AEDAS, the deal is also positive (although we believe that worse than with HOME), also with financial discipline, and thus, in principle, initiating the acquisition negotiations we would not be a bad option, in our view. In this regard, we believe that Värde’s bargaining power is relatively low, as there are not many buyers interested in Vía Célere (only the two or three groups mentioned above) at a time of the cycle when many private equity funds that invested in the Spanish sector some years ago (among them might be Castlelake, AEDAS’s reference shareholder) are now in exit mode.

TOURISM SECTOR
Among the common travel recommendations that the EU is readying we would highlight: the Covid-19 certificate would have a 9-month validity and will be renewed automatically if a third dose of the vaccine is administered. Moreover, the EU will demand a PCR test for travellers with vaccines that have not been approved by the EMA but have been approved by the WHO. Lastly, the EU advocates granting travel authorisation based on the situation of each traveller, regardless of their country of origin, and thus, it proposes to eliminate, as of 1 March, the list of countries considered safe and from which it is possible to travel to the EU. Separately, yesterday we learned about a new variant in South Africa and other African countries, which has a large number of mutations and could impact the behaviour of the virus. The UK has already taken action and cancelled flights to six African countries. Lastly, the EMA has approved the use of Pfizer’s Covid-19 vaccine on children aged between 5 and 11, although each State will decide when and how the vaccine will be administered. As for the EU’s proposals (and the new vaccine for children) positive news but of limited impact. The fact that vaccines have a validity date should not be a surprise, as the news that immunity is not eternal has been long discussed. In any event, these are just recommendations. Every country will decide whether to apply them. If these recommendations are ignored this would not be a surprised either. This was already the case in the summer when the EU recommended not allowing the entry of British citizens and Spain allowed their entry through the Balearic and Canary islands. Meanwhile, apparently all the measures are aimed at bolstering vaccinations with restrictions for non-vaccinated citizens or those not taking the third dose. As for the new variant, very negative news that will result in clear corrections in the sector today, with IAG’s long-haul flights already cancelled (precisely when the improvement was expected). This represents an additional uncertainty in the short-term that could invalidate the sector’s drivers in the short-term.