EUR 100.00 For Business Accounts Only

IBERIAN DAILY 24 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, AMADEUS, IAG, MAPFRE, MEDIASET, MERLIN, SANTANDER.

MARKETS YESTERDAY AND TODAY

Doubts despite the stimulus measures
It was yet another session of losses on the stock markets due to the lack of agreement in the US Congress on D. Trump’s stimulus plan worth € 2 Tn and the increase in the number of coronavirus cases in the country. On the positive side, Italy is beginning to see the results of the containment measures and has registered a reduction in the number of daily deaths from the coronavirus for the second day in a row. Within the Euro STOXX, Basic Resources and Real Estate were the worst-performing sectors vs. Energy, which was the only sector that posted gains. On the macro side, we stress the Fed’s announcement of an open-ended QE programme, whereby the institution will purchase corporate bonds ETFs on the secondary IG US$ with a duration of up to 5/4 years (Secondary Market Corporate Credit Facility) and will provide the primary market with funding through bonds or loans (Primary Market Corporate Credit Facility). Also, it will purchase the necessary amount of Treasury bonds and MBS to back a good market performance, ensuring the flow of credit to businesses, consumers and workers via establishing financing programmes. In the US, the Philadelphia Fed activity index rose unexpectedly. In Europe, today the Euro Group will meet to discuss a joint package of support measures that would be funded through the ESM and would suspend deficit thresholds. The IIF estimates that the Euro zone’s GDP might contract by as much as -4.7% this year. In Germany, the government forecasts that the GDP might decrease by -5% this year (the IFO institute points to -7%-20%), and approved a stimulus package worth € 750 Bn yesterday, added to guarantees totalling € 200 Bn, which will mean issuing € 156 Bn of debt. In the United Kingdom, Boris Johnson has decreed the lockdown of the entire population for three weeks. In Spain, there will be a cabinet meeting today where the ministers will discuss a delay in tax payments and other support measures for the self-employed. In Japan, March’s leading indicators confirmed the preliminary figure.
What we expect for today
We expect the stock markets to see a bullish opening, with investors welcoming the latest stimulus package approved by the Fed to break the vicious cycle of sales/search of liquidity the markets are currently in. Currently, S&P futures are up +4.65% (the S&P 500 was down -2.00% vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 61.59%). The Asian markets are rising (Japan +7.13% and Hong Kong +4.00%).
Today in the Euro zone we will learn March’s preliminary manufacturing and services PMIs, and in the US, February’s new home sales and the Richmond Fed index for March. In debt auctions, today Germany will issue up to € 2 Bn of 2Y bonds.


COMPANY NEWS

AMADEUS. Ready to resist. We change our recommendation to BUY.
The COVID-19 crisis will have a severe impact on AMS’ business in 2020, but its leading market position will the company to recover quickly. The measures announced yesterday (€ 1 Bn increase in financing, cancellation of the dividend and € 300 M of cost savings) improve the company’s room for manoeuvre, with € 2.66 Bn of cash (including the € 1 Bn to be closed) covering >11 months of operating cash outflows. The stock is currently pricing in normalised EBIT with no recovery after 2020 (where we see drops of >20% in air traffic volumes). In our base-case scenario we will cut average EBITDA’20-25 by around -14%, with an impact of -16% on our T.P., which would fall to € 59.00/sh. (+47% upside).

MAPFRE – At a “whatever it takes” level. We change our recommendation to BUY.
MAP will have to continue restructuring its business, but the sharp drop on the month has left the stock trading at levels from June’12 (fears of default risk in Spain), at ~6x P/E’20-21 (-30% below its historical average). The stock should be unaffected by COVID-19 thanks to the retail profile of its business (pandemics not covered) and its highly conservative investment portfolio. Moreover, the economic shutdown will reduce the frequency of claims, boosting Net Profit. Solvency has been hit (~200% in Dec’19; stressed ratio ~175% BS(e)), but the dividend is not under pressure (yield >10%). The biggest risk lies in the virus spreading to LatAm, due to the risk on the fixed-income portfolio if there were to be defaults. We will cut our Net Profit’20-21 estimates by around -10% and the T.P. to levels of € 2.20/sh. (-15% vs. previous, +57% upside).

SANTANDER, BUY.
SAN last night released a communiqué outlining it has decided to consolidate a single final dividend that will be subject to the approval of the AGM to be held in 2021 (April), and thus, the interim dividend (DPS € 0.20/sh. BSS(e), +0% vs. 2018 and 10% payment yield) will not be paid in November’20 but in May’21. The bank has explained that this decision is based on the support of the current global agreement to fight the coronavirus and have all the necessary resources to back companies and retail customers that need it. Furthermore, SAN has explained it will not carry out any temporary redundancy or downsizing plans due to the current situation and both the chairwoman and the CEO will give up 50% of their remuneration. Negative news, as the cancellation of the DPS is in full contrast with the message recently announced by the company (18/03) when it outlined no significant impacts from Covid in 1Q’20 and limited in principle to 2020 against a base-case scenario (V-shaped recovery), as it calculated it could only deduct -5% from operating Net Profit’20. With this measure, SAN would be protecting its CET1 capital and the cancellation of this payment has an impact of +50bps, in our view, leaving the proforma CET at around 12.5% (vs. 11.65% in 2019 and vs. 12% previously announced by the company). We believe that SAN’s move allows the company to gain flexibility if the crisis extends over time.