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IBERIAN DAILY 27 JANUARY + 4Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, ENAGÁS, GRIFOLS, IBERDROLA, LAR ESPAÑA, MERLIN PROPERTIES, SIEMENS GAMESA.

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’21 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

The Fed puts an end to the market rally
Stock markets saw heavy gains on both sides of the Atlantic ahead of the Fed meeting amid increasing expectations of an agreement to avoid a military conflict in Ukraine. Rises in Europe exceeded +2% with a slight outperformance of value vs. growth, whereas in the US the latter outperformed the former thanks to Technology. Thus, within the Euro STOXX, all sectors with the exception of Household ended with gains, with Energy and Banks being the best relative performers. In the US, the Fed meeting confirmed that the first rate rise will take place in March and that the balance reduction might begin a few months later. Separately, in its speech, J. Powell did not rule out a more aggressive interest rate hike to contain inflation. On another note, December’s new home sales rallied above expectations. In US business results, Tesla and Intel came in as expected and AT&T and Boeing came in below.
What we expect for today
The European stock markets would open with drops of around -2.0%, with a better relative performance of value stocks, although the significant and sustained flattening of the 2/10Y slope hints at a better performance of growth in the medium term. Currently, S&P futures are down -1.4% (the S&P 500 ended -1.67% lower vs. the European closing bell). Volatility in the US rose (VIX 31.96). Asian markets are falling (China’s CSI 300 -1.7% and Japan’s Nikkei -3.11%).
Today in Spain we will learn the 4Q’21 unemployment rate, in the US the 4Q’21 GDP, weekly jobless claims, durable goods orders and December’s pending home sales. In debt auctions: Italy (€ 6 Bn in 6M T-bills). In US business results: Apple, Visa, Mastercard and McDonalds, among others will release their earnings.

COMPANY NEWS

4Q’21 Results highlights and rest of previews
Of the stocks releasing their earnings over the next few days on the negative side we highlight Unicaja (03 Feb), where we foresee an unfavourable performance in the 4Q’21 due to the greater weakness than stated by the company in NII and restructuring expenses. This would not question its RoTE in the medium-term and we would see the poor market reaction to results as an entry opportunity.

LAR ESPAÑA, BUY
Yesterday Pimco announced the sale to Castellana Properties of its 21.7% stake in LRE, and thus the latter is now the main shareholder in the Spanish REIT. According to the press, the deal has come at a -48% discount to NAV (if this is over NAV as of Sep’21 it would be equivalent to € 5.30/sh., with a +3.7% premium to yesterday’s closing price). Castellana Properties is controlled (with an 88% stake) by the South African fund Vukile. In the press, Castellana Properties would have stated that its entry is friendly, and that it does not intend to carry out a TOB. According to the Chairman, Laurence Rapp, “this is a financial investment, and Castellana Properties will not request any spots on Lar España Real Estate’s Board of Directors”, adding that “as a capital vehicle focused on retail and not as an investment fund, we think this deal is positive for Castellana Properties and provides visibility for Lar España Real Estate’s shareholders”. Castellana Properties is a REIT specialising in retail.
This is not the first time that Vukile has shown interest in LRE. According to the press, in Sep’19 the fund sounded out the main shareholders with the aim of launching a TOB on the REIT.
Although we could see a slightly positive share price reaction, given that Pimco is selling its stake with a very slight premium and does not have to liquidate it at a discount, we believe that this is bad news for LRE’s shareholders, as in our view it distances the possibility of a TOB made 100% in cash and increases the likelihood of Castellana Properties, as main shareholder, trying to promote a merger of the two REITs via asset swaps at NAV parity.