EUR 100.00 For Business Accounts Only

IBERIAN DAILY 06 APRIL (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ENAGÁS, ELECTRICITY SECTOR, INDRA, MÁSMOVIL, OHL, RED ELÉCTRICA.

MARKETS YESTERDAY AND TODAY
Uneasy calm
After the rally from previous sessions, slight profit-taking on most European stock markets, dragged down by the negative unemployment figures. However, stock markets begin the Easter holiday with increased optimism, driven the stabilisation of/reduction in the number of infections/deaths in the countries hardest-hit by the pandemic in Europe. Within the Euro STOXX, Financial Services and Pharma posted the biggest gains, whereas Energy and Insurance were the worst relative performers. On the macro side, from the ECB, O. Rehn was confident that an agreement over a joint fiscal plan will be reached in the Eurogroup’s meeting tomorrow. In the Euro zone, the final Services PMI was lowered. February’s retail sales rose more than expected, as they did not show the impact from the health crisis as yet. In Spain, both February’s industrial output and March’s Services PMI fell more than expected. In Mexico, March’s consumer confidence contracted more than expected. In Brazil, March’s Services PMI fell sharply from 50.9 to 37.6. In the US, March’s non-farm employment fell by 700,000, the unemployment rate rose from 3.5% to 4.4%, although wage returns grew 3.2%, doubling expectations, and March’s ISM non-manufacturing grew slightly more than expected. However, none of these figures are showing the impact from the current crisis as yet. In China, the PBoC cut rates by -40bps to 0.35% and the reserves requirements by 100bps.
What we expect for today
We expect a moderately bearish opening. Currently, S&P futures are up +3.4% (the S&P 500 ended unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 46.80%). Asian markets are climbing (Japan +2.71% and Hong Kong +1.11%).
Today we will learn in the Euro zone, the Sentix investment confidence index, in Germany the factory orders and in Spain the consumer confidence. In debt auctions, Germany (6M T-bills), France (3M T-bills) and the Netherlands (6M T-bills).


COMPANY NEWS

ENAGAS. We change our recommendation to BUY. Resilience and underperformance vs. sector. T.P. € 23.38/sh. (-25% upside).
Even though 84% of ENAG’s EBITDA stem from regulated activities with guaranteed return, we cut EPS’20 by -3.1% and -1.7% in recurring terms and our T.P. by -1.1% to € 23.38/sh. (+25% upside). We do not foresee a revision of DPS’20 (€ 1.68/sh.; +5% vs. 2019/9% yield/100% payout) despite its high debt level (3.8x NFD/EBITDA) for three reasons: liquidity position (72% NFD), low cost of debt (2.1%) and few maturities (3.3% NFD in 2020 and 3.5% in 2021). Despite its good performance (+7% vs. IBEX from Feb’20 highs), it has underperformed its best peer, Red Eléctrica, by -8%. At current levels, it is pricing in an EPS revision of much as -15%.

MÁSMOVIL, BUY
According to the press, the British risk capital group Cinven and the US fund KKR would have expressed a common interest in investing in MásMóvil. These indications of interest came before the COVID-19 outbreak, according to the source. Aside from these two firms, other private equity funds, such as Apollo or CVC, would have also expressed their interest. In any case, there would only have been a preliminary approach. Additionally, according to the same source, the outbreak of the COVID-19 disease and the declaration of the alert state in Spain have put any potential plans on ice because, among other reasons, bond holders would be entitled to the early maturity of their bonds, at a lower rate than the current market levels. Although we welcome the fact that these groups showed an interest in the past, we understand that the current conditions have considerably changed the scenario. Although the stock’s current trading levels are far more attractive following the recent drops, any operation of this kind will have to be backed by the current shareholding structure, currently with a 45% stake.