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IBERIAN DAILY 15 NOVEMBER + 3Q’21 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ALMIRALL, BBVA, FERROVIAL, SIEMENS GAMESA.

MARKETS YESTERDAY AND TODAY

At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 3Q’21 results to be released over the coming days in Spain.

Europe survives Fed fallout and rising inflation
European stock markets managed to end the week with slight gains except for the IBEX, weathering the US inflation hitting a high from the past few decades and the wave of new Covid-19 cases in Europe and China. Within the Euro STOXX, the best-performing sectors over the week were Household Goods and Media, whereas the worst ones were once again Travel & Leisure and Utilities. On the macro side, in the euro zone September’s industrial output fell slightly less than expected. In Spain, October’s final inflation was cut -0.1% to 5.4%, whereas the core figure rose to 1.2% (more than expected). Everything suggests inflation will reach around 5% for 1Q’22. In the US, U. of Michigan consumer confidence for November fell unexpectedly. In Japan, the slowdown of the 3Q’21 GDP was cut more than expected. In China, October’s retail sales and industrial output sped up unexpectedly whereas home prices saw the sharpest monthly drop since the beginning of 2015.
What we expect for today
European stock markets would open mixed with the good performance of technology and consumer groups linked to China vs. oil companies, dragged down by the drop in Brent crude. Currently, S&P futures are up +0.1% (the S&P 500 ended +0.1% higher vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 16.29). Asian markets are mixed (China’s CSI 300 -0.2% and Japan’s Nikkei +0.6%).
Today in the US we will learn November’s Empire manufacturing. In debt auctions: Germany (€ 6 Bn in 6M and 12M t-bills) and France (€ 5.4 Bn in 3M, 6M and 12M t-bills).

COMPANY NEWS

ALMIRALL. 3Q’21 Results below expectations on the operating level. ALM raised its lower guidance’21 range. BUY.
3Q’21 Results came in below expectations on the operating level (EBITDA € 45 M vs. € 54 M BS(e) and € 52 M consensus) due to lower sales (+2% vs. +5% BS(e) and +3% consensus) and to the weaker performance of margins (23.3% vs. 27.5%BS(e) and 27.1% consensus). Net Profit did not see relevant changes, evidencing the operating performance (€ 13 M vs. € 23 M expected). Good performance of NFD, which fell by -14% to € 214 M ex pension plans (0.9x NFD/EBITDA vs. € 243 M BS(e)). The company raised its 2021 core EBITDA guidance slightly to between € 200 M and € 215 M (vs. € 195/215 M previously and vs. € 207 M BS(e) and € 212 M consensus). We do not rule out the possibility of a negative market reaction, limited following its recent performance (-8% in 2 months; -12% vs. IBEX).

BBVA: Announces voluntary TOB on Garanti. SELL
The company will launch a TOB on the 50.15% it does not hold in its Turkish subsidiary, Garanti, at a price of 12.20 TRY/sh. (€ 1.06), with a 15% premium over the closing price on 12/11 (+34% above its 6-month average). This will mean a maximum outlay of 25.7 Bn TRY (€ 2.25 Bn), in line with our valuation and around -3% below the consensus T.P. for Garanti. BBVA will fund the deal with excess capital (€~5.2 Bn BS(e) to date; with this acquisition, of the €~8.4 Bn of excess capital from the sale of the US business, BBVA would already have used €~7 Bn on adjustments in Spain, a buyback and Garanti, with a positive impact of around +25% on EPS’22). The purchase, expected to be made in 1Q’22 after authorisations are received, will have a maximum impact of -46bps on CET1 (13.18% at present including buybacks) and +13.7% on EPS, according to BBVA (around +11% BS(e)), based on consensus estimates for both banks and an exchange rate of 12.91 TRY (12% depreciation over the current level). Beyond the financial impacts, the acquisition will increase the bank’s geographical risk, as Turkey will account for 22% of Net Profit’22 (Mexico 44% and rest of LatAm 12%), whereas we see no possibility of synergies/value in the deal. What we like least about the deal is that it increases the risk in emerging markets, and if the situation in Turkey worsens it could jeopardise the second part of the buyback (€ 2 Bn), and any other M&A move will have to be carried out through a capital increase. There will be a conference call at 9:30 (CET).