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IBERIAN DAILY 13 NOVEMBER + 3Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ARCELOR MITTAL, CELLNEX, ENCE, SANTANDER, TALGO.

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 3Q’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

The vaccine effect on the markets eases
After 3 very positive days on the markets thanks to the good news surrounding the COvid-19 vaccine, yesterday European stock markets ended with losses, where core countries were the worst relative performers. The IBEX was the best-performing European index, falling only -0.7%. Thus, in the Euro STOXX all the sectors except Telecoms and Travel & Leisure fell, with Banks and Consumer Goods posting the biggest losses. On the macro side, in the euro zone September’s industrial output was disappointing, falling more than expected, and in the UK the 3Q’20 GDP recovered less than expected to -9.6% YoY. In the US both general and core inflation for October fell more than expected. In US business results, TransDigm, Walt Disney and Cisco beat expectations.
What we expect for today
European indices would open with losses of -0.5%, which could ease throughout the session, but with better relative performance from growth in view of the falling interest rates and the increased tension between the US and China after Trump’s Govt. banned investments in 31 Chinese companies due to their military ties. Currently, S&P futures are up +0.1% (the S&P 500 closed down -0.6% vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 23.35%). Asian markets are falling (Hong Kong -0.5%, Japan -0.6%).
Today, in the euro zone we will learn the second reading of the 3Q’20 GDP, in Spain October’s final inflation and in the US October’s production prices and November’s U. of Michigan consumer sentiment.


COMPANY NEWS

CELLNEX. Acquisition of Hutchison’s towers. BUY.
The deal means €~10 Bn EV (38% of CLNX’s market cap), €~8.6 Bn of which will be paid in cash and €~1.4 Bn in newly-issued shares (~5% of capital for Hutchison). Initially, the acquisition will include ~24,600 towers (33.4% of CLNX’s current total) in Italy, United Kingdom, Sweden, Austria and Denmark. In year one the contribution will be € 640 M in EBITDA post IFRS16 (44.1% of CLNX’s EBITDA at oresent), whereas at cruising speed (2030), the contribution will amount to € 970 M in EBITDA. The EV/EBITDA ratio is 11.75x vs. CLNX’s current trading levels of ~21x. NFD would rise to €~13 Bn (~3x current NFD; up to 6x NFD/EBITDA), using up all the company’s capacity for new purchases. The reading of the agreement is positive, as the asset is a perfect strategic fit.

TALGO. 9M’20 results above expectations in sales and very much in line in adjusted EBITDA. BUY.
At yesterday’s closing bell, the company released its 3Q’20 results, which continued to show an impact from Covid-19 (especially in Maintenance activity). Sales came in above expectations (+6% vs. BS(e) and +8% vs. consensus), whereas EBITDA was very much in line with the consensus’ estimate and slightly above ours (€ 7.9 M vs. € 6.4 M BS(e) and € 7.6 M consensus). There were no new developments in order intake, and we recall that TLGO does not report balance sheet data in 3Q. Although this set of results might lead to estimate downgrades (of as much as -35% in EBITDA’20e), bearing in mind that this was already expected and that the results came in slightly above expectations, we would expect a neutral share price reaction, especially after the stock has underperformed the IBEX by -20% since February’s pre Covid-19 highs.

ENCE. Sells 49% of its Renewables division excl. Thermosolar assets totalling 50 MW. BUY.
The company will sell these assets to Ancala Partners for EV in which 100% is valued at € 886 M (€ 613 M for operating assets / € 2.3 M/MW + € 273 M in contingencies for the pipeline as projects are developed). The initial payment for the operating assets (excl. pipeline) is € 225 M for 49% and represents 37% of the company’s NFD’20e and 41% of market cap. The deal is pending approval at the AGM (14 Dec; 41% of the share capital has pledged to vote in favour). This is very positive news, as we valued the entire operation at € 455 M EV vs. € 613 M for this deal (not including the pipeline). Assuming these valuation levels, the impact on our T.P. would be +17% (+46% with the pipeline). Even if we assume this sale price for 49% and our valuation for the remaining 51%, the impact on the T.P. would be +8% (+23% with the pipeline).