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IBERIAN DAILY 29 OCTOBER + 3Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ENCE, FERROVIAL, FLUIDRA, MEDIASET ESPAÑA, NEINOR, NH HOTELES, LOGISTA, RED ELÉCTRICA, RESULTS HIGHLIGHTS, SANTANDER, TELEFÓNICA.

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

Losses aggravate and support levels are near…
The lack of a fiscal package in the US before the election and new strict lockdowns in Germany (that will close leisure premises mainly until Dec’20) and France (that confirmed after the closing bell the shutdown of leisure premises, the restriction of mobility and the closure of its its borders to non-members until Dec’20 )dragged down the European indices, which closed down by around -3.5%. The Dax was once again the worst performer (-4%), while the Ibex and the Euro STOXX 50 nearing support levels of 6,400 and 3,000, respectively. Within the Euro STOXX, all sectors closed in the red, with Telecoms and Basic Resources being the best relative performers vs. Chemicals and Autos, which saw the biggest drops. In Spain, the decline in retail sales slowed in September to -2.1% (vs. -4.6% previous). In Brazil, the Central Bank kept the Selic interest rate at 2.0% and suggest rates will remain low for a long time . In Japan, the BoJ’s meeting ended with the cut to 2020 growth to -5.5% vs. -4.7% previously. In US business results, General Electric came in better, Mastercard disappointed.
What we expect for today
European indices would open with gains of as much as +1.0% with the good performance of value and financials. Currently, S&P futures are up by +1.2% (the S&P 500 closed down -0.6% vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 40.28). Asian markets are falling (Hong Kong -0.3%, Japan -0.4%).
Today, in the Euro zone, the ECB will hold its meeting. Also we will learn, October’s economic climate index, in Spain and Germany, October’s inflation data, in Germany October’s unemployment rate, in the US, the first reading of the 3Q GDP, weekly jobless claims and pending home sales data. In US business results, Comcast, Moody’s, Kellog, Twitter, Facebook, Alphabet (Google), and Apple, among others, will release their earnings. In debt auctions: Italy (€ 7.5 Bn in bonds due 2026 and 2031, and CCT due 2023).


COMPANY NEWS


FLUIDRA: We raised our T.P. by +66% to € 14.87/sh. (-1% upside). SELL.
Following the good 3Q’20 results released yesterday, we raised EBITDA in the short and medium-term by +18% on average. In 2020 our expectations are +10% above the consensus estimate (€ 273 M) and above the company’s previous guidance’20 that was withdrawn in April 2020 (€ 265-285 M). We also raised our T.P. by +66% to € 14.87/sh. (-1% upside). 40% of this revision is explained by better sales/EBITDA, and the rest would stem from a revision of the growth rate in perpetuity from +1.5% to +3%, which is in tune with our 2022 sales growth estimate. The stock has momentum, as it represents a growth option at the height of the pandemic, and we do not see downward risk but in terms of valuation, we believe it is trading at our T.P.

3Q’20 Results highlights and rest of previews
Along with our daily report we include 3Q’20 results forecasts with all the previews for the coming days in Spain with our qualitative opinion and the expected impact on the market. For the stocks releasing their results over the next few days, on the positive side we highlight Rovi, where we expect +30% growth in EBITDA thanks to the rally in the third-party manufacturing business that could lead to a guidance upgrade. On the negative side we highlight Acciona, where we expect poor 9M’20 figures (-27% EBITDA), which would necessitate an overly ambitious 4Q’20 to meet targets, and Meliá, where we expect poor results, highlighting the fact that the consensus has very high estimates for 2020.

MEDIASET ESPAÑA. Results came in better than expected in EBITDA. BUY.
The 3Q’20 EBITDA grew +23.3% (vs. +8% BS(e) and +0.2% consensus) up to € 50.5 M with a 29.4% margin (vs. 23% in 3Q'19) thanks to greater cost control (OPEX 3Q’20 -11.9%). Following the poor share price performance in 2020 (-53% in absolute terms and -20.5% vs. IBEX), we expect a positive reaction to results that beat expectations in cost cutting and allow the group to increase margins by +640 bps vs. 3Q’19 even against an adverse advertising backdrop. Furthermore, the advertising market performance in October (suggesting flat for TL5) could encourage optimism.

TELEFÓNICA. Worse results due to the impairment in Argentina, in line excluding this impact. Good in cash. BUY.
The 3Q’20 sales dropped -12.1% (-4.3% organic) with Spain falling -4.3% (vs. -4.4% BS(e)), Germany growing +0.4% (vs. +0.1% BS(e)), the UK falling -10% (vs. -7.3% BS(e)) and Brazil -31.4% (vs. -32.4% BS(e) (and -2.3% in local currency) and Hispam -13.6% (vs. -20% BS(e)). Good performance of FCF with € 1.58 Bn generation in the 3Q’20 (+13.2% vs. 3Q’20), coming in at € 2.8 Bn in 9M’20 (+12% above expectations). NFD totalled € 36.68 Bn (-1.5% vs. 2Q’20). In this regard, the company announced the cancellation of 1.5% shares. Given the poor share price performance in 2020 (-50% in absolute terms and -28% vs. IBEX and -28% vs. sector), the market reaction should be positive, as the dynamics in the main markets are in line with expectations. Furthermote, the share could price in the fiber investment agreement in Germany.

NEINOR, BUY
The company has released 3Q’20 results above our expectations on the P&L statement level, although below in net pre-sales. Revenues grew by +20% this quarter on a standalone basis (vs. +13% BS(e)), with EBITDA coming in at € 19 M (vs. € 15 M BS(e)) thanks to 263 being delivered (vs. 246 units BS(e)). The developer margin stood at 26% (in line), whereas in Servicing, it came in at 59% (vs. 57% BS(e)). In cumulative terms, the 9M’20 figures are lower than last year’s, as deliveries tend to concentrate towards 4Q in 2020. In this regard, the company already has the CFO (work completion certificate) for 100% of its deliveries and the LPO for 80%.
As for pre-sales, HOME has released good gross numbers, with 400 units in 3Q standalone, but due to cancellations, this figure is reduced to 305 net (vs. 340 BS(e)). The reason would partially be the cancellation of reservations linked to land, in which the company has decided to carry out BtR. The percentage of units delivered in 2020/2021/2022 is 90%/56%/34%, which provides reasonable visibility into revenues in the medium term.
The company maintains its guidance for deliveries (1,700 units vs. 1,350 units BS(e)) and EBITDA (€>100 M vs. € 85 M BS(e)) for 2020. HOME plans to purchase land over the coming months to take advantage from the current attractive prices. In this regard, the company is negotiating the exclusive acquisition of land equivalent to 2,000 housing units (vs. land portfolio of 10,300 units as of Sep’20).
Adjusted NFD came in at € 349 M on the quarter (vs. € 325 M as of June’20). The LTV ratio stood at 20%.
We believe that these numbers are more than satisfying considering the current market situation and following this set of results we will raise our estimates for the full year, as they now seem too conservative. The stock is trading at pre-Covid-19 levels, having risen by +51% since March’s lows. BUY. € 12.28/sh. (+16.29% upside).