IBERIAN DAILY 17 NOVEMBER (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: BBVA, IAG, INDRA, ROVI, TELEFÓNICA.MARKETS YESTERDAY AND TODAY
The IBEX continues to close the gap with Europe
It was another session of gains in European equity markets, underpinned by the promising results of Moderna’s vaccine trials, with an efficacy near 95%. In the case of the IBEX 35 (+2.6%), this was added to the rise in domestic banks after BBVA announced the sale of its US subsidiary amid merger rumours. Over the past month, the IBEX 35 has risen +16.6% vs. +6.8% in Europe and +1.9% in Germany. All this has coincided with the rotation within the Euro STOXX in favour of value. Thus, Banks and Energy (Brent rallying once again thanks to the normalisation of business activity) were again among the best-performing sectors, with Household Goods and Media falling the most. On the macro side, from the ECB Luis de Guindos cited the need for banks to be profitable and was skeptical of the creation of a Europe-wide bad bank. In Germany, the Govt. will extend the duration of its subsidy for electric vehicles until 2025. In the US, November’s Empire index fell unexpectedly. In US business results, Tyson Foods beat expectations.
What we expect for today
The stock markets would see profit-taking, with drops of around -0.5% on the ground that Hungary and Poland are blocking the EU long-term budget, which includes the Recovery Fund. Currently, S&P futures are down -0.5% (the S&P 500 closed +0.16% higher vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 22.45). Asian markets are climbing (Hong Kong +0.1%, Japan +0.4%).
Today, in US we will learn retail sales, industrial output and NAHB real estate confidence index (all for October), as well as November’s business inventories. In US business results, Walmart and Home Depot will release their earnings, among others. Debt auctions: Spain (€ 1.5 Bn in 3M and 9M t-bills) and Germany (€ 5 Bn in bonds due 2022).
COMPANY NEWS
BBVA. We raise our T.P. to € 4.30/sh. We reiterate our BUY recommendation.
We welcome the sale of BBVA US thanks to both the price obtained (€ 9.7 Bn; ~2x peer ratios) and the options available given the capital freed up (around € 8.4 Bn). In this regard, looking at the size/valuation of the deals that could be made in mature markets, we estimate that BBVA could finance a medium-sized acquisition and pay out up to €~0.63/sh. to shareholders (~15% yield). We set our T.P. at € 4.30/sh., +56% vs. previous T.P., where 15% stem from the revision of estimates (~+10% on average in 2021-2022e), +7% from the improvement to the capital estimates’22 (~12.4% CET1 vs. 11.8% previously). The remaining +34% stem from the positive impact from the price agreed in the sale of the US subsidiary (70% above our valuation). Despite the rise yesterday (+17%), our T.P. yields around +15% upside and we se additional potential for a rise given the options to earmark the funds raised.
ROVI. Moderna announces that its Covid-19 vaccine is 94.5% effective. SELL.
Moderna announced yesterday that its Covid-19 vaccine candidate is 94.5% effective according to provisional data. With this news, we include in our T.P. the impact on ROVI, assuming a base-case scenario of ~550 M vaccines sold annually outside of the US and Japan (vs. a range of between 500 M and 1 Bn doses that Moderna plans to commercialise globally in 2021) and a unit revenue of €~0.75/vaccine for ROVI (>3.5% of the vaccine’s full price), which means a €+6.50/sh. increase to our T.P. (+22% vs. previous) to € 36.00/sh., still not yielding upside. Since the announcement of the agreement with Moderna on the 9th ofJuly’20, ROVI’s market cap has increased by >€ 750 M (+53%), factoring in annual sales of Moderna’s vaccine outside the US of around 600 M units /annually and unit revenues for ROVI > € 1.00/vaccine, which is overly optimistic, in our view.
Banco Bilbao Vizcaya Argentaria is an international financial group, engaged primarily on providing banking services and consumer finance to private individuals and businesses in Spain and Portugal; providing real estate activity in Spain; providing services to international companies and investment banking, capital markets and treasury management services to clients; and providing the banking, insurance and pension businesses in Mexico and the U.S., as well as in South America.
Indra Sistemas is engaged in the design, development, manufacture, assembly, repair, and installation of computer software and applications. Through its subsidiaries, Co. is engaged in consulting, graphic design and multimedia, web design and marketing, internet development and electronic trade, systems integration and hosting geared business to business and business to consumer, as well as in internet financing and electronic marketing. Co. serves defense and security, transport and traffic, energy and industry, telecom and media, finance and insurance, and public administration and healthcare markets. Co. operates primarily in Europe, the United States, Canada, and Latin America.
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
Laboratorios Farmaceuticos Rovi is engaged in the sale of its own pharmaceutical products and the distribution of other products for which it holds licenses granted by other laboratories for specific periods, in accordance with the terms and conditions contained in the agreements entered into with said laboratories.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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