IBERIAN DAILY 28 APRIL (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: BBVA, IBERPAPEL, INSURANCE SECTOR, SANTANDER.MARKETS YESTERDAY AND TODAY
After the market drops, it is now time for gains
Stock markets posted gains at the beginning of the week with all eyes on the upcoming results releases and the Fed and ECB meetings to be held on Wednesday and Thursday, respectively. Within the Euro STOXX, all sectors closed in the black, led by Autos, Banks and Travel & Leisure, with Energy and Media being the worst relative performers. On the macro side, the ECB has announced that it has purchased € 97 Bn worth of assets during the first four weeks of its purchase programme against the pandemic. In the United Kingdom, B. Johnson met with the press after being in intensive care due to Covid-19. In the US, the Fed announced an extension of up to US$ 500 Bn with a 3Y maturity to its municipal lending facility (MLF) for states with at least 500,000 population and cities with 250,000 inhabitants. In Japan, March’s unemployment rate climbed in line with expectations to 2.5% from 2.4% in February. In US business results, CNX Resources came in much better than expected, Lexicon Pharmaceuticals better and Northwest Bencshares, Middlefield Banc and Koppers worse.
What we expect for today
Stock markets would open with slight gains that should ease throughout the session, once again dragged down by the drop in crude oil prices, but backed by expectations of a more ambitious stimulus package by the ECB. Currently, S&P futures are down -0.58% (the S&P 500 was up +0.56% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 33.29%). Asian markets are mixed (Japan -0.3% and Hong Kong +0.57%).
Today in Spain we will learn the 1Q’20 unemployment rate, in France April’s consumer confidence and in the US April’s consumer confidence and April’s Richmond Fed manufacturing index. Debt auctions: Netherlands (€ 1.5 Bn in bonds due 2047 and € 4 Bn in 3M, 6M and 12M t-bills) and Italy (€ 7 Bn in 6M t-bills). In US business results, Caterpillar, Merck & Co, Harley-Davidson and Pfizer, among others, will release their earnings.
COMPANY NEWS
IBERPAPEL. 1Q’20 results slightly worse than expected but with enough upside to change our recommendation to BUY.
The company released yesterday poor 1Q’20 results, as expected, with a slight drop in EBITDA (-3% vs. BS(e)), but in line in Net Profit. However, there is still upside. With the revision of estimates we expect to conduct on our scenario of V-shaped recovery (-45% in EPS’20e and -15% on average over the 2021-22 period), our T.P. would fall to levels of € 26.00/sh. (-17% cut), whereas in our scenario of U-shaped recovery (-54% in Net Profit’20e and -22% on average over the 2021-22 period), our T.P. would stand at levels of around € 24.00/sh. (-25% cut). Therefore, bearing in mind that there would be upside in both scenarios, we change our recommendation to BUY. The stock has fallen by -46% since August’18 highs (-20% vs. Ibex).
SANTANDER. Releases better results than expected, with €~1.9 Bn of Net Profit. Covid-19 provision of €-1.6 Bn. BUY.
The company has released better 1Q’20 results than expected in all main activity lines. Performance in almost all regions was better than the consensus estimates (except for the United Kingdom and, to a lesser extent, Poland). Performance in the US, Mexico and Brazil stood out. Very positive performance in organic CoR (100bps), which remained at 4Q’19 levels. Thus, the company met its target of € 1.9 Bn of recurring Net Profit. Provisions for COVID-19 totalled €~1.6 Bn (+20% vs. BS(e), that is €~1.25 Bn in 1Q’20). We will have to wait for the company’s messages in the conference call to assess whether this can be extrapolated. If so, this would mean a CoR’20 of >150bps. The fully phased-in CET1 ratio stood at 11.58%, somewhat below our estimate of around 11.65% due to a greater impact from M&A moves. We place our T.P. Under Revision. We will cut our Net Profit/EPS’20-21 estimates by -40%, reducing our T.P. proportionally to levels of € 3.00/sh., which would still yield an upside potential of ~50%.
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.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
Iberpapel Gestion is engaged in the manufacture, wholesale distribution, sale and export of pulp and printing and writing paper. In addition, Co. maintains forestry activities, including the cultivation of timberlands.
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.
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