EUR 100.00 For Business Accounts Only

IBERIAN DAILY 29 NOVEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, BANKING SECTOR, BANKINTER, MELIÁ HOTELES, MERLIN PROPERTIES.

China in the spotlight
Stocks markets on both sides of the Atlantic posted losses, with all eyes on the demonstrations in major Chinese cities against the Govt.’s Zero-Covid policy, although the market was also waiting for Europe’s inflation data and the US employment data. Thus, within the Euro STOXX, almost all sectors ended in the red, with Energy and Basic Resources leading the way, vs. the best relative performance of Food and Pharma. On the macro side, in the Euro zone, M3 growth decreased more than expected. From the ECB, Schnabel was in favour of a 75bps rate hike in December, whereas Lagarde warned the European Parliament that inflation could be higher than expected. In the US, from the Fed, Bullard hints at rates of between 5% and 7% to tame inflation, whereas Barkin and Williams back moderate increases but with a higher target and for longer. In Japan, October’s unemployment rate increased more than expected, whereas retail sales YoY slowed unexpectedly. In China, the Chinese regulator (CSRC) announced five measures to support capital funding for the real estate sector, in addition to the 16 aid measures already announced at the beginning of the months and the commitment of official banks to provide US$ 178 Bn of financing. Separately, the Chinese press (Xinhua) points to a conciliatory tone from the Govt. regarding the demonstrations, triggering speculation about a possible early easing of restrictions (such as removing the PCR requirement for low-risk persons).
What we expect for today
The European stock markets would recover, led by cyclical stocks such as Energy (awaiting the OPEC+ meeting this weekend, where production cuts could be increased) and Basic Resources, as well as by Luxury companies on news from China. Currently, S&P futures are up +0.35% (the S&P 500 ended -0.78% lower vs. the European closing bell). Volatility in the US rose (VIX 22.20). Asian markets are mixed (China’s CSI 300 +2.85% and Japan’s Nikkei -0.5%).
Today we will learn in the Euro zone November’s economic climate and consumer confidence, in Spain and Germany November’s inflation, and in Mexico November’s unemployment rate. In debt auctions: Italy (€ 6.5 Bn in bonds due 2027 and 2033, and CCT due 2030).


COMPANY NEWS

BANKINTER. We beat BKT’s Net Profit guidance’23 in 2022. We raise our T.P. to € 7.90/sh. BUY.
We beat the company’s Net Profit guidance’23 of € 550 M in 2022. Looking to the 2023-24 period, with the Euribor’23-24 at 2.5% (1% previously), this more than offsets the economic slowdown, the tax on the banking sector, the higher inflation costs and the slight rise in CoR (to 45bps). Thus, we roll over our model to 2023, setting our new T.P. at € 7.90/sh. (+11% vs. previously; +25% upside). The current share price factors in a CoR of 80bps (~70bps during Covid-19) or a CoE of 12% (vs. 9.5% BS(e)), which we believe is unreasonable. Trading at a 1.1x P/E’23 for a RoTE of 13%, the stock is one of our top picks.

MELIÁ HOTELES. Assets will back both NFD and the stock price. BUY.
The company will release in the coming weeks the new valuation of its owned assets, where we believe that, all things being equal (price increases are offset with higher discount rates) and considering the asset acquisitions/sales made since 2018, GAV BS(e) might stand €>4.2 Bn (€~11.00/sh. NAV). In short, the company’s liquidity position (60% on debt maturities over the next two years), cash generation (we expect an average FCF yield of 10% in 2023-24), debt profile (55% at fixed rates and an average cost of ~3%) and, particularly, new asset valuations (vs. € 1.27 Bn of NFD) should dispel doubts on debt levels somewhat and be a catalyst for the share price, especially considering the stock’s poor performance (-17% in 2022 and -16% vs. IBEX, with the drop being even more significant since May’22 highs: -38% vs. Ibex and -39% vs. sector).