EUR 100.00 For Business Accounts Only

IBERIAN DAILY 06 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKIA, CAF, IAG, OHL, TELEFÓNICA.

MARKETS YESTERDAY AND TODAY

Ups and downs... but today there will be a strong rally
The main European indices fell more than -1% following the strong rally from the previous day. In the Euro STOXX, all the sectors closed in the red with Consumer Goods and Autos leading the drops, compared to Technology and Real Estate, which were the best performers. On the macro side, in the euro zone the final services PMI was raised to 48.3 from the preliminary 47.3. In Spain June’s services PMI rose more than expected to positive territory, whereas in Germany it was raised to 47.3 from the previous 45.8. In France, President E. Macron chose J. Castex (head of withdrawal from lockdown) as PM following the resignation of E. Philippe. The EU authorised the use of Remdesivir in Covid-19 patients, making it the first authorised coronavirus treatment in the EU. From the ECB, O. Rehn warned that in the medium term deflation is more likely than inflation.
What we expect for today
Despite the new coronavirus cases, the macro improvement seen and the fiscal and monetary support should lead to a positive session (led by cyclicals), especially after the bullish comments made in a Chinese national newspaper. Currently, S&P futures are up +1.20% (the S&P 500 was closed for the holiday). Volatility in the US will start at 28.25% (VIX). Asian markets are climbing (Japan +1.95% and Hong Kong +3.35%).
Today in the euro zone we will learn July’s SENTIX investor confidence index and May’s retail sales, in Germany May’s factory orders, in Spain May’s industrial output and in the US June’s services ISM and final services PMI. Separately, the Dutch treasury will issue up to € 4 Bn today in 3M and 12M t-bills, and € 1.5 Bn in 20Y bonds. In Germany and France there will also be t-bill issuances, in Germany 6 M (€ 4 Bn) and in France 3M, 6M and 12M (€ 8 Bn).


COMPANY NEWS

CAF. 1H’20 results preview. BUY
On 04/05 CAF announced that it would delay the release of its 1Q’20 results until the 1H’20 results release (29/07). In this regard, and despite the low visibility implied, for 1H’20 we expect a -6% drop in Revenues (vs. -1.6% in 2020) and -67% in EBITDA (vs. -16%) due to the manufacturing halts and the slowdown in maintenance. These estimates pose a risk of our estimates being cut (as well as those of the consensus) for 2020 (around -15% in EBITDA), as the EBITDA margin falls to 3.2% and the company would have to present EBITDA margins above 12% in 2H’20 (vs. 9.3% pre-Covid BS(e)) in order to reach our 2020 estimate of 8%. Awaiting confirmation of a possible revision, the impact on the valuation would be small (around -3%), still leaving +23% upside, and thus we maintain our BUY recommendation.