EUR 100.00 For Business Accounts Only

IBERIAN DAILY 30 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS HOMES, ATRESMEDIA, ELECTRICITY SECTOR, IAG, LIBERBANK, NATURGY, OHL, PROSEGUR, PROSEGUR CASH, UNICAJA.

MARKETS YESTERDAY AND TODAY

Stock markets post gains once again
The world's stock markets recovered, fuelled by the strong macro data releases and the technology sector's reaction in the US. Thus, the Euro STOXX rallied led by Basic Resources and Personal Household Goods, and only the Real Estate and Travel & Leisure sectors ended in the red. On the macro side, in Spain, June's preliminary inflation slowed unexpectedly, whereas May's retail sales increased notably less than expected due to a less significant base effect. In politics, AIReF expects public debt to reach 112.4% of GDP for 2024 and warned of the risks of linking pensions to CPI. In Germany, June's preliminary inflation slowed more than expected to 2.3% YoY from 2.5% previously. In the Euro zone, June's economic sentiment index increased above expectations, while in the US, the Conference board consumer confidence climbed to one-year highs. Meanwhile, also in the US, housing prices accelerated to 15.7% YoY in April. In Central Bank news, Lagarde called for a joint green economy in the EU, whereas C. Waller of the Fed left the door open to tapering coming earlier than expected due to the recovery in the US. Rate hikes would come afterward. Separately, at the beginning of the OPEC+ technical committee's meeting, general secretary M. Barkindo was cautious on the current situation of crude oil, despite admitting that OECD stockpiles are already below their 2015-19 average. Lastly, the decision was pushed back to the 1st of July, with the consensus expecting a moderate rise in production of 550,000 b/d. In China, mixed data in June's PMIs, with the manufacturing index falling less than expected and the services index contracting unexpectedly. In Japan, industrial output was worse than expected.
What we expect for today
The rally in oil and the solid performance in the US suggest a moderately stable opening with better performance from value. Currently, S&P futures are up +0.17% (the S&P 500 ended practically unchanged vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 16.02). Asian markets are rising (China's CSI +0.6% and Japan's Nikkei +0.1%).
Today we will learn in Germany June's unemployment data, in the Euro zone June's inflation, in the UK, the final 1Q'21 GDP, in the US, June's ADP employment survey and May's pending home sales, and in Brazil, April's unemployment rate. In debt auctions: Italy (€ 6 Bn in bonds due 2026, 2030 and 2031).

COMPANY NEWS

PROSEGUR/PROSEGUR CASH. Main messages from CMD'21. BUY/BUY
Yesterday PSG held a CMD in which, apart from giving a detailed guidance'23-30 on its different divisions, detailed its growth strategy by business and country, where technological innovation will play a key role. We welcome the messages conveyed, specifically the fact that the guidance given by PSG for 2023 would be above our estimate and the consensus (more in line in EBITA in the case of CASH), with sales of € 4.2-4.5 Bn (vs. € 3.97 Bn BS(e) and € 3.89 Bn consensus) and an EBITA margin of ~10% (vs. 9.2% BS(e) and 9.0% consensus). After performing in line with the IBEX in 2021, the upside potential in PSG and CASH is +16% and +14%, respectively. We reiterate our BUY recommendation in both companies, although we see more upside in PSG.

UNICAJA/LIBERBANK. CNMC approves merger with no important conditions. Both BUY
The CNMC made public yesterday afternoon the result of the analysis on the merger of both banks, concluding that it does not entail a threat for the domestic competition. There is only significant concentration in some postal codes in the region of Cáceres, where Unicaja pledges to maintain the same conditions of price, fees and services for the clients as in other areas in the region. The approval fro the Finance Ministry would be pending, which could be announced over the coming days.
Positive and expected news, as the share prices of both banks have seen a very negative performance in the last few weeks (-10%; 8% vs. Ibex) due to the press article released by El Confidencial on the ECB's inspection of Liberbank, which generated doubts on a possible merger breach, which we rule out. Thus, in the absence of the confirmation from both banks, we believe that the merger will be executed in July and that Unicaja will unveil the final impacts in its 2Q'21 earnings release (end of July, date to be confirmed). Our T.P. for UNI of € 1.21/sh. includes the estimated impacts from the merger and yields around +40% of upside.

AEDAS HOMES, BUY
The company has held a meeting with investors and analysts to unveil the data of its 2021-25 Strategic Plan. The message conveyed at the presentation was optimistic and even though the medium and long-term figures mean strong growth in revenues and dividends, the company remains confident in meeting its targets against the current market backdrop. Highlights:
(i) Revenues and EBITDA. The company expects to double its revenues over the next 4 years and to more than double EBITDA. Thus, it would reach around € 1.45 Bn of revenues and € 325 M of EBITDA vs. € 1.013 Bn and € 176 M BS(e) (consensus € 175 M in EBITDA). The group also outlined that the consensus is -20% below their EBITDA forecast for 2022/23.
(ii) Presales: The company continues to see strong demand levels, with presales exceeding 270 units/month (run rate of around 3,200 units/annually), considering that the dynamics of supply and demand are positive in the regions where it is present
(iii) Investments in land assets: The company expects very good opportunities over the next 12-18 months to buy land, as competition is low and prices have fallen, and it is ready to make the most of this situation. Its pipeline totals around € 200/300 M. The company has all the land assets it needs going forward for its business plan with the exception of 2024/25 (where it only has 50% although for the rest it already has additional 15% in pipeline). 47% of the land pipeline is located in the autonomous region of Madrid.
(iv) Material costs. The company believes the raw material cost inflation we are seeing should easily be offset by increases in home prices, as inflationary tension only affects ~25% of the selling price (labour costs are unaffected). AEDAS is convinced that it will be able to easily offset the rising costs with price hikes, and even by raising margins.
(v) Dividends. The company expects a minimum pay-out of 50%, and additionally it could pay extraordinary dividend that could potentially reach another € 9.40/sh. over the next 4 years (equivalent to 41% of the current market cap).
We see the presentation as positive for the stock (yesterday it rose +5%), and although we will obviously have to wait and see if the business plan is executed well, we think the company is in a good position to meet it to a high degree, as we foresee at least two years of strong economic growth and a situation of limited new home supply (in the regions in which the company operates). Furthermore, the presales data lend strong visibility to the company's guidance for the next 2 years, meaning our revenues and EBITDA estimates now seem overly conservative. We think the stock is inexpensive, trading at a -32% discount to NAV, but also with a dividend yield above 6% (and with the dividend growing over the next 3 years). We reiterate our BUY recommendation.