IBERIAN DAILY 26 SEPTEMBER (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: BBVA, MEDIASET ESPAÑA, MERLIN PROPERTIES, NEINOR HOMES, RED ELÉCTRICA.MARKETS YESTERDAY AND TODAY
Markets fall
Last week’s poor activity data and increasing political risks in the US and the UK led to sell-offs in the European stock markets, although they improved significantly by the closing bell thanks to the expectations of advances in the trade talks. Thus, within the Euro STOXX, Consumer Goods and Construction saw the biggest drops, whereas Basic Resources and Real Estate posted gains. On the macro side, in the US, August’s new home sales came in surprisingly solid, more than doubling expectations. From the Fed, C. Evans does not expect further changes to reference rates, whereas Bullard was in favour of another preventative rate cut and Kaplan maintained a neutral message aimed at reviewing the role of the Fed’s balance sheet. L. Brainard was in favour of cutting the deposit rate again. In Japan, in the end the Govt. reached a partial agreement with the US, as part of a larger, more complete one, which includes the US agricultural and technology sectors. Separately, the BoJ cut bond purchases in the 5-10Y range for the 4th time in the past 6 weeks.
What we expect for today
The markets would open lacking definition, although the news regarding trade negotiations between the US and China suggest more optimism. Currently, S&P futures are down -0.09% (the S&P 500 was down -0.33% vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 15.96%). The Asian markets that are open are rising (Hong Kong +0.11% and Japan +0.18%).
Today we will learn: in the Euro zone August’s ME and the ECB’s monthly report, in the US the final 2Q’19 GDP, August’s preliminary wholesale inventories, weekly jobless claims and August’s pending home sales, in Mexico the BDM meeting and the IGAE economic activity index for July. In debt auctions: Italy (€ 7.5 Bn in bonds due 2025, 2030 and CCT due 2025).
COMPANY NEWS
MERLIN PROPERTIES/BBVA, BOTH BUY
According to the press, MRL would be in talks with BBVA to take part in the development of New North Madrid (BBVA has 75% of the development rights) in exchange of a stake in MRL’s share capital. No valuations of the possible transaction have been made public.
For MRL, the impact is difficult to quantify, as it will depend on the price, in the operation takes off the ground in the end, although in our view the impact will not be highly relevant. We believe that MRL would only be interested in the offices part and maybe in the retail segment (the project also includes residential and other segments). According to the law, REITs have a restriction on the amount of its portfolio that may be invested in assets that do not generate rents (they cannot exceed 20%), meaning that, should the operation move forward, it would be done with an independent vehicle in which MRL would have a stake. Lastly, the New North Madrid project is long-term, and will still take many years (+10) to complete.
In the case of BBVA, and according to the latest annual accounts, its 75.54% stake in the real estate company Distrito Castellana Norte has a BV of €~98 M. The impact on the results and the bank’s capital (11.52% in 2Q’19 will depend on the selling price, which for the time being is an unknown.
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.
Gestevision Telecinco is a television network company based in Spain. Co. heads a group of dependent companies, which form the Telecinco Group. Through its subsidiaries, Co. is engaged in the management and commercial exploitation of a television network. Co.'s television network acquires, produces, and distributes audiovisual content. Co. also sells the network advertising airtime, carried out by its subsidiary. In addition, Co. is involved in the sale of other advertising products; production of news programs; the production and sale of audiovisual property rights; and teleshopping.
Merlin Properties SOCIMI SA is a Spain-based company engaged in the operation of a real estate investment trust (REIT). The Company focuses on the acquisition, management and rental of commercial properties located in the Iberian Peninsula, primarily in Spain. The Company's activities are divided into the following segments: Office buildings, operating a portfolio of office space; High-street retail, engaged in leasing retail stores; Shopping centers, engaged in managing department stores; Logistics, operating logistics warehouses and distribution centers, and Others. The Company's other activities include property management services rendered to third parties.
Neinor Homes SA, formerly Neinor Homes SLU, is a Spain-based company engaged in the real estate sector. The Company focuses on the design, construction and promotion of residential properties. It develops housing projects in various Spanish cities, such as Malaga, Madrid, Barcelona, Cordoba, Vizcaya, Alicante, Almeria and Gerona.
Red Electrica is engaged in the transmission of electrical energy, the operation of the system and the management of the transmission network in the Spanish electricity system. In addition, through its subsidiaries, Co. is engaged in the acquisition, holding and management of foreign securities, co-ordination of international exchanges, provision of telecommunications services for third parties, provision of consultancy, engineering and construction services outside the Spanish electricity system, securing of funds, carrying out of financial transactions and provision of financial services.
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