EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKINTER, CAF, CHANGES IBEX, COLONIAL, FCC.


MARKETS YESTERDAY AND TODAY

Stock markets end in a stalemate
The gains over much of the day ground to a halt after the poor opening in the US, where the fiscal stimulus package once again seems distant after the Senate majority leader, Mitch McConnell, stated that Republicans have doubts regarding the reconstruction project and will reject Mnuchin’s proposal of US$ 916 Bn. Despite all this, in the Euro STOXX, value once again led the way, with Media and Autos posting the biggest gains vs. Construction and Retail, which were the worst performers. On the macro side, in Germany October’s trade balance saw the trade deficit shrink, but less than expected. As for Brexit, Boris Johnson reiterated that the EU’s terms for Brexit are unacceptable, whereas Angela Merkel responded that they will safeguard European companies from any unfair competition from the UK. Despite the differences, both parties will continue negotiating with the eyes set on next Sunday. As for the European budget, Hungary and Poland were more favorable to unblock funds and an agreement is expected at the European Council meeting to be held today. In the US, October’s final wholesale inventories data rose unexpectedly. In Brazil, the Central Bank kept rates unchanged at 2% although it warned that the rise in inflation will prevent the continuation of these levels for a long period of time.
What we expect for today
Stock markets would see a flat opening awaiting the ECB meeting, with the market placing its bet on a more flexible monetary policy. Currently, S&P futures are flat (the S&P 500 closed -0.7% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 22.27). Asian markets are sliding (CSI 300 -0.25%, Japan -0.2%).
Today in the euro zone the ECB and the European Council will hold their meetings. In the US we will learn general and core inflation for November and weekly jobless claims. In debt auctions: Spain (€ 2.25 Bn in bonds due 2030 and I/L due 2027), Italy (€ 5.75 Bn in bonds due 2024 and 2027) and Ireland (€ 750 M in 6M t-bills).


COMPANY NEWS

IBEX 35 Technical Advisory Committee. No changes at its ordinary meeting.
As expected, no changes were made to the current index components. Three changes were made, however, in the stocks weightings: Aena’s was raised to 80% (from 60% previously), while Cellnex’ was lowered to 80% (from 100% previously) and Siemens Gamesa’s to 40% (from 60% previously). The changes will be effective on 21 December (the adjustment to the index will take place on 18 Dec at the closing bell).

COLONIAL, BUY.
The company yesterday held its CMD where it reviewed its recent past and outlined its current situation and the strategic positioning of the portfolio for the future:
Situation of the office market. The fundamentals of the office market are relatively favourable given the current situation, especially in Paris but also in the prime areas of Madrid and Barcelona, as the occupancy rate is very high and there is no significant supply in sight. This means that availability is low. The consulting firms (Cushman made the presentation) expect stable rents or even higher in Paris and a drop of around -5% in Madrid and Barcelona in 2020 (and growth again starting in 2021). As for yields, they foresee slight reductions in Paris and stability in Madrid and Barcelona.
Annual guidance. The company forecasts € 338 M of gross rents’20 (vs. € 348 M BS(e)) while the annual EPS guidance stands at € 0.26/sh. (vs. € 0.28 BS(e), in line with the consensus). The reason behind the cut vs. our expectation lies in the timing of asset sales and also in a possible additional impact from the second outbreak of the pandemic. The group expects 2021 to be a transition year before being able to grow stronger starting in 2022.
Capital allocation. No news in this regard, the company put up for sale assets worth € 300 M (around 2% of GAV).
The portfolio going forward. The company believes that its portfolio has a positive outlook going forward, as it is made up of prime assets that are located in the centre of the cities where the company operates and meet strict sustainability criteria, and the densification trend we have seen in the past three decades is reverting. At present, the company does not think that its tenants are taking decisions linked to teleworking that may have a significant impact on the demand for rental space. It also warns that there is little visibility, and thus, predictions are difficult to make.
The CMD brought no big surprises. Although the gross rents and EPS guidances for the year stand below our expectations, this would be due mainly to the effect of the scope of consolidation following asset sales and to specific factors from 2020, and thus, we play it down. If we look at NAV, the 2 cents less in EPS represent