IBERIAN DAILY 07 JULY (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: AENA, IBERDROLA, OHL, TELEFÓNICA.MARKETS YESTERDAY AND TODAY
Macro data and the delta variant cool expectations once again
Most Eurozone indices saw drops of around -1% following the US opening bell with the strong correction of value in general, where "stay at home" companies stood out once more. Thus, almost all sectors in the Euro STOXX ended with losses, with Household and Real Estate showing the best relative performance vs. the drops of Banks and Automobiles. On the macroeconomic level, Brussels raised its GDP forecast for Spain in 2021 from 5.9% expected in May to 6.2% (vs. 4.8% expected in the EU), although it cut its 2022 estimate to 6.3% from 6.8% previously. Its 2021 forecast for CPI stands at 2.1%. In Germany July's expectations ZEW dropped more than expected despite a strong current conditions component. Although the indicator remains at low levels, it hints at more normalised growth in 3Q'21, in line with the consensus estimate of 3.9% YoY. In the US, June's non-manufacturing ISM fell more than expected and despite the moderation of the prices subindex (79.5 vs. 80.6 previously) it continue to show significant inflation pressure towards the middle of the year. In International politics, the White House would be in talks with several OPEC members to unlock the situation, as well as pressing the EU to postpone the tax on technology companies. In this regard, looking to the G20 summit, J. Yellen might propose a tax rate higher than 15%. In China, legislation for foreign companies wishing to issue shares in the country will be toughened.
What we expect for today
European stock markets would open stable with the increasing number of cases reducing the appetite for risk assets. Currently, S&P futures are down -0.1% (the S&P 500 ended +0.39% higher). Volatility rose in the US (16.44). Asian markets are trading with mixed results (China's CSI +0.9% and Japan's Nikkei -1.3%).
Today we will learn in Germany May's industrial output, and in the US, the Fed minutes. In debt auctions: Greece (€ 625 M in 3M T-bills) and Germany (€ 5 Bn in bonds due 2026).
COMPANY NEWS
AENA, SELL
According to the press, Court of First Instance No 5 of Mallorca would have ruled in favour of one of AENA's tenants (Zea Retail), declaring that rents from the period following the end of the Emergency state (in force from 15 March to 20 June 2020) should be set according to traffic criteria, which would mean an additional cut vs. AENA's proposal (a 50% cut to rents until September and, subsequently, paying 100% of the rents), given that traffic in 2021 stands -82% below 2019's levels. Note that this proposed cut has been rejected by AENA's large operators (which belong mainly to large business groups that account for 90% of AENA's commercial rents) given that, among other things, they believe that paying 100% of the tariffs once again after Sep'21 could be excessive.
Negative news that will continue to generate noise around the company and that does not appear to be subsiding in the short term given that most of the measures announced by the judges (and this ruling) go against AENA's interests. With all this in mind, although we think it is difficult for tenants to be able to achieve a 100% reduction on the legal level, we do think that in view of the restrictions and/or limitations (and the subsequent drop in air traffic), it is possible that a -50% cut to the tariff would not be enough for many of the shop operators in the airport, driving them to bankruptcy if air traffic levels remain at current levels. We believe this could force AENA to negotiate with its tenants a revision that would be regarded as a one-off, and in any event and we do not expect it to mean > € 200 M in 2021 (
Aena SME SA, formerly Aena SA, is a Spain-based company primarily engaged in the airports operation. Its activities are divided into four segments: Airports, which comprises Aeronautical subdivision, responsible for the management of airports, jetways, security, handling, cargo and fuel services, among others, as well as Commercial subdivision, including duty-free and specialty stores, restaurant services, car rental, as well as banking services and advertising; Services outside the terminal, which manages real estate assets, such as parking lots, warehouses and lands; International, which comprises operations of Company's subsidiary, Aena Desarrollo Internacional SA, that invests in other airport owners principally in Mexico, Colombia and the United Kingdom; and Others, encompassing corporate activities. It manages tourism, hub and regional airports, as well as heliports and general aviation areas. Furthermore, its destination range comprises Europe, the Americas, Asia and Africa.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
Obrascon Huarte Lain is an international concession and construction groups based in Spain. Co. maintains significant operations in 30 countries across all five continents. Co. is engaged in hospital and railway construction, transport infrastructure concessions, oil and gas, energy, solids handling and fire protection systems and international contracts. Co.'s operations are organized along four divisions: OHL Concesiones, OHL Construccion, OHL Industrial y OHL Desarrollos. Co. is also engaged in real state project developments of mixed use managed by the international hotel chains.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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