EUR 100.00 For Business Accounts Only

IBERIAN DAILY 07 APRIL (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, CELLNEX, ENCE, NATURGY, REPSOL, TELECOMS SECTOR.

MARKETS YESTERDAY AND TODAY
Europe passes peak of infections
Good feelings on the European stock markets after the coronavirus curve began to flatten both in Spain and in Italy (Austria will be the first country to gradually loosen its coronavirus lockdown this week), and following the announcement of new fiscal stimuli. Today we highlight the Eurogroup’s meeting, which could enable for its members as much as 2% of their GDP through the ESM without hardly any conditions (the possibility of issuing coronabonds is still remote), in addition to € 200 Bn from the EIB and € 100 Bn from the EC fund. Within the Euro STOXX, all sectors posted gains, led by cyclical sectors such as Autos and Construction, vs. the worse relative performance of Energy and Utilities. On the macro side, in the Euro zone, the Sentix investment confidence index fell to -42.9 in April (more than expected; March’09 lows). In Germany, February’s factory orders contracted less than expected. In the United Kingdom, March’s consumer confidence deteriorated sharply. In the US, the Fed announced a loan scheme for businesses that do not implement any staff reduction plans. Japan has approved a fiscal package worth 1 Bn yens (aid measures in Japan already account for 20% of the GDP).
What we expect for today
A moderately bullish opening in Europe. Currently, S&P futures are practically unchanged (the S&P 500 ended +1.75% higher vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 45.24%). Asian markets are climbing (Japan +1.10% and Hong Kong +0.50%).
Today the Eurogroup will meet to discuss the financing of the stimulus measures. We will learn in Mexico March’s inflation, in Brazil February’s retail sales. Today, the German Treasury will issue 10Y and 25Y inflation-linked bonds, and the Austrian Treasury will issue 4Y and 10Y nominal bonds.

COMPANY NEWS

CELLNEX, BUY
In a press interview, CLNX’s CEO considers there is still a market to aim of 300,000 or 400,000 antennas Thus, Cellnex could manage in two or three years the double of its current number of towers. Mr. Martínez focuses this growth potential mainly on the eight countries where the company is already present (France, Spain, Italy, the UK, Switzerland, Ireland, Holland and Portugal), since from a rational point of view, the consolidation generates higher value in these countries. The CEO also outlined his wish of being present in Germany although there is no plan on the table for the moment and he considers the access to this market is highly complicated given the lack of opportunities.
As for the impact from Covid-19, he believes that Cellnex’s recurrent business should not be affected by Covid-19 although the press article has nuances (we do not know if they come from the CEO or from the journalist), with the expectation of an increase in EBITDA above +40% in 2020, significant, but below 55% previously expected. If confirmed, the impact on EBITDA’20 would be around -10%. As for the growth expected in the number of antennas, we do not see any impact, as this strategy was already known. We assume that its priority continues to be strengthening its footprint in those regions where it already has operations (to maximise efficiencies) although this does not mean it will not look at other regions in Europe.

ENCE. Messages from the virtual roadshow with the company. BUY.
From our virtual roadshow held yesterday with ENC, we highlight the following messages from the impact of the Covid-19 crisis: (i) both its pulp (75% sales’19) and renewable production businesses (23%) are deemed essential and stand at usual activity levels, (ii) the company keeps its production (~+15% vs. 2019) and cash cost (-6% vs. 2019) targets’20 unchanged; (iii) potential recovery of pulp prices from the 3Q’20, and (iv) for the time being, it does not see liquidity problems (~ € 230 M in cash and 70 in available credit lines vs. ~ € 50 M in maturities’20-21). Current levels are pricing in the shutdown of the Pontevedra plant (43% production) in the short-term and pulp prices in perpetuity -6% below the average levels seen in the past 10 years (adjusted for inflation).

TELECOMS SECTOR
The CNMC has limited portability to 50 changes per day (for each operator) in the fixed-phone segment, and established a maximum cap of 25% to the quota assigned to each operator in the mobile phone segment (the day prior to the declaration of the alert state, this quota was defined as 1,000-19,000 requests per day, depending on the operator). This quota will be successively increased by 15% each time, depending on the criteria established in the current specifications. Positive news for the largest players such as Telefónica (33% of sales Spain), which are the hardest-hit by portability, and negative news for the smallest ones, such as Euskaltel and Másmóvil, the growth of which depends, among other factors, on attracting clients from large operators by means of better prices. We can say that these new regulations bring limitations to levels close to the total, given that, according to the quota proposed (25% in the mobile segment), portability should fall between 70-80% vs. the scenario prior to the pandemic.