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IBERIAN DAILY 24 FEBRUARY + 4Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, BBVA, ENCE, ENDESA, PROSEGUR CASH.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 4Q’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

The Ibex pulls Europe
European stock markets saw moderate drops in view of a new rise in the debt curve, with value outperforming growth again. The positive performance of the Ibex stood out once more after rising more than +1.7% vs. the rest of indices. Thus, in the Euro STOXX Retail and Banks were the best relative performers vs. the drops of Technology and Telecommunications. On the macroeconomic level, in Europe, January’s final inflation confirmed the preliminary data (0.9% general and 1.4% core), and in the UK December’s ILO unemployment rate rose to 5.1%, as expected. As for Covid-19, AstraZeneca will deliver less than half of the vaccines pledged with the EU in the 2Q’21 (40 M doses vs. 90 M agreed). In the US, February’s consumer confidence climbed above expectations. In the speech before the Senate, J. Powell ruled out again that inflation will entail a threat, reiterating that the Fed will keep rates close to zero and the purchase programmes (that enabled the last-minute recovery of US stock market). On another note, J. Biden’s stimulus plan will be voted next Friday, which will be apparently successful without the republican support. Lastly, Biden’s medical advisor stated he expected to announce shortly an easing restriction protocol for the vaccinated population. In China, the Hang Seng saw significant corrections after the announcement of higher taxes in stock market transactions. In US Results, Home Depot, Cabot Oil and CBRE Group came in better than expected.
What we expect for today
We expect yet another bearish opening due to the rise in debt curves, which will lead to a better relative performance by financial and energy stocks. Currently, S&P futures are down -0.4% (the S&P 500 closed up +0.9% vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 23.11). Asian markets are sliding (CSI 300 -3.1%, Japan -1.6%).
Today we will learn in Germany the final 4Q’20 GDP data, in the US January’s new home sales data and in Brazil January’s current account balance. In US business results, Lowe’s, Nvidia and Booking, among others, will release their earnings. In debt auctions: Italy (€ 6.5 Bn in 6M T-bills), Greece (€ 625 M in 3M T-bills) and Germany (€ 4 Bn in bonds due 2031).


COMPANY NEWS
AENA, SELL
The FY2020 results came in somewhat above expectations thanks to a higher accounting allocation of MAGs and cost reductions, which have led to a smaller drop in EBITDA vs. 2019 than expected (-74.2% vs. -76.4% BS(e)). The company has not provided a traffic guidance for 2021, claiming that in the current scenario of mobility restrictions in most European countries it is not possible to foresee when traffic levels will recover. Beyond the operating level, the company has stated that only 52.9% of current tenants with MAGs (accounting for 13.2% of MAGs affected) would have accepted the -50% cut to rents through Sept’21.
With all this in mind, the results will have a small impact, where we welcome the cost containment as well as the fact that the company has managed to extend the main debt covenants, which will afford it stability, even in such a demanding situation as the present. On the negative side, we think the tenants’ low acceptance of the proposal to lower rents could continue to generate noise in the stock. Thus, we continue to recommend caution on the stock.

BBVA, BUY
According to the press, BBVA would be preparing a downsizing plan in Spain could affect 3,000 employees (around 10% of the workforce including the branch network and corporate centre). The negotiations with the unions would have not started yet although it is expected to be carried out in the 1H’21. Positive news although expected. Note that BBVA already outlined in its 4Q’20 earnings release its intention of adjusting costs in Spain in the 1H’21 and providing further inflation throughout the 1H’21. According to our estimates, a ~10% personnel cut in Spain would mean around € 178 M of gross cost savings (~6% of the cost base in Spain and ~1.6% of the group’s cost savings) and around € 125 M of annual net savings (20% of the Net Profit’21 BS(e) in Spain and ~4% of the group’s Net Profit). We understand, however, that the adjustment plan will include other items apart from personnel adjustments, and we assume4 that it could reach ~10% of the cost base in Spain, which would mean an improvement of around +7% on group Net Profit, which for the time being we have not included in our estimates, awaiting specific details. On the restructuriing cost side, and assuming 2.5x savings, this would mean a cost of around € 300 M, which can easily be absorbed bearing in mind the excess capital generated with the upcoming sale of the US subsidiary.

ENCE. Good 4Q’20 results in EBITDA and Debt. BUY.
The company released at yesterday’s closing bell better 4Q’20 results than expected in EBITDA (€ 24.1 M vs. € 17.4 M BS(e) and € 17.7 M consensus) and NFD (€ 178 M vs. € 189 M BS(e)) thanks to a lower sales discount, improved cash costs, a less negative impact from other costs and provisions and better working capital performance. By divisions, pulp saw € 6.8 M of EBITDA (vs. 0.6 BS(e); Energy’s results were in line (with +69% EBITDA growth). We expect a slightly positive share price reaction despite the fact that the stock has risen by +20% thus far this year (+18% vs. IBEX), mainly driven by rising pulp prices (+15% vs. YE2020). We believe that the market is waiting for the court ruling on the extension for the Pontevedra plant. There will be a conference call at 16:00 (CET), where we expect the company to share its view on supply and demand levels, as well as pulp prices over the coming quarters, as at current levels the upside is more limited (+6% vs. our T.P.)

ENDESA. Results slightly above expectations, with substantial dividend. We expect a positive share price reaction. BUY.
The FY2020 results came in as expected in adjusted EBITDA and slightly above expectations in adjusted Net Profit. In addition to the positive and negative one-offs accounted on the year, the company set aside a provision for an impairment in extrapeninsular assets worth € 338 M for a regulation update one year ago that has no impact on DPS’20 that will be € 2.014/sh. 100% payout on adjusted Net Profit, meaning +36% vs. +30% BS(e) and consensus; 9.35% yield). Although the results came in as expected, we forecast a positive share price reaction driven by an attractive dividend and the stock’s poor performance vs. its integrated peers (-10% ELE vs. +4.2% Ibex vs. -8.2% IBE, +7.4% NTGY). BUY. T.P. € 28.04/sh. (+30% upside).