EUR 100.00 For Business Accounts Only

IBERIAN DAILY 11 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKINTER, ELECTRICITY SECTOR, NATURGY, SACYR.

Consolidation
Following the strong gains at the start of the year, the European stock markets ended yesterday’s session with slight losses, with the IBEX the best performer. Within the Euro STOXX, Financial Services was the best relative performer vs. the drops in Retail and Real Estate. On the macro side, in the Euro zone, gas stockpiles are higher than they were before the Ukraine war broke out thanks to the mild winter. Separately, the World Bank cut its growth estimates for 2023 in the US to 0.5% (-1.9pp vs. previous) and in the euro zone to 0% (-1.9pp) due to the inflation crisis, the rising interest rates, falling investments and the war in Ukraine. With all this in mind, global growth would fall to 1.7%. The new figures are slightly above the market consensus. In the US, Fed Chairman J. Powell stated that restoring price stability may call for unpopular measures in the short-term and defended the Central Bank’s independence, without giving new hints on the next rate hike. Separately, M. Bowman suggested that there is still work to be done and that more tightening is necessary. In Brazil, inflation fell less than expected in December to 5.8%. In Japan, November’s leading indicators fell in line with expectations.
What we expect for today
Optimism on the reopening of China and increased raw materials prices point to a bullish opening in Europe driven by cyclical sectors. Currently, S&P futures are up +0.1% (the S&P 500 ended +0.65% higher vs. the European closing bell). Volatility in the US dropped (VIX 20.08). Asian markets are rising (China’s CSI 300 +0.1% and Japan’s Nikkei +1.05%).
Today we will learn in Spain and Mexico November’s industrial output, and in Brazil November’s retail sales. In debt auctions: Germany (€ 5 Bn in bonds 2023).


COMPANY NEWS

SACYR, BUY.
According to the press, SCYR would be mulling the sale of 49% of its toll road concessions in Colombia, including an external partner in a business valued according to the press at some € 500 M (28% of market cap; ~6.6% of NFD). Note that SCYR has 4 toll road concessions in Colombia without including the recent awardings of the Buga-Buenaventura toll road and the Canal del Dique project, which has not yet been closed financially.
Positive news of limited impact. Our valuation of the toll road concessions in Colombia is € 401 M BS(e)), meaning that if the sale for € 500 M is confirmed, the transaction would have a +4.6% impact on our T.P.
Separately, the cash obtained from the sale (together with the cash it would generate from the sale of 49% of Services, a division we value at € 486 M, and which is in the process of being sold with a deadline of the end of 2023), should allow SCYR to accelerate the reduction of its recourse net debt (€ 689 M) to zero by the end of 2023.
On the strategic level, we welcome the deal, as it will allow SCYR to take a step forward towards its objective of geographically balancing its concessional portfolio, where the target would be to have 33% of the business located in LatAm (vs. ~45% currently BS(e)), another 33% in Europe and the remaining 33% in English-speaking countries. Moreover, the reduction of its exposure to Colombia makes sense, in our opinion, due to the country’s current high specific weight (~20% BS(e) of the group’s total concession backlog) and the recent increase in political and economic uncertainty stemming from changes in Govt.