EUR 100.00 For Business Accounts Only

IBERIAN DAILY 18 FEBRUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: MEDIASET ESPAÑA, NEINOR HOMES, ROLLING STOCK SECTOR, TALGO, VISCOFAN.

MARKETS YESTERDAY AND TODAY

Stock markets at cruising speed
Slight gains in European indices that continue to welcome the monetary stimulus from China and possible new rounds of fiscal cuts. In this regard, the Chinese Finance Minister suggested specific tax cuts while D. Trump is preparing another tax cut focused on the middle class. In the Euro STOXX, Automobiles and Utilities were the best performers vs. Technology and Media that saw the biggest drops. On the macroeconomic level, in Spain, the Cabinet of Ministers will approve the Google (although the collection will be postponed until December due to the US pressure) and Tobin taxes aimed at meeting 2020 deficit target (1.8%) although the collection estimates (€ 850 M and € 1.2 Bn) are apparently overly optimistic. In China, the National Committee of the Popular Party of China would postpone the Political Consultative Conference to the 3rd of March.
What we expect for today
European stock markets would open with drops of -0.5%, dragged down by Apple’s guidance cut for the 1Q’20 due to the impact from the coronavirus. Currently, S&P futures are down -0.27% (the S&P 500 was closed for a holiday). The Asian markets that are open are falling (Japan -1.45% and Hong Kong -1.33%).
Today in Germany we will learn February’s ZEW index, in the UK January’s ILO unemployment rate, and in the US the NAHB confidence index for the real estate sector and the Empire index (both for February). In US Results, Walmart, Agilent and Devon Energy, among others, will release their earnings. As for auctions, France will issue € 4 Bn in 3, 6 & 12M T-bills, Spain € 2 Bn in 3 & 9M T-bills and Germany € 5 Bn in bonds due 2022.


COMPANY NEWS

TALGO, BUY
According to the press, the Spanish consortium in charge of building and operating the Mecca high speed train (of which TLGO is a partner, manufacturing and maintaining the trains) would have threatened SRO (the Saudi rail operator) with terminating the contract (it would have sent a first warning) if the latter does not pay the accumulated bills totaling €~200 M. However, for the time being the Spanish consortium will continue to provide service as it has to date. Note that in 2016 the consortium had to take the same measure, which at the time meant beginning to receive payments one month later. Negative news of little impact, as we understand that, as occurred in the past, the SRO will end up resuming the accumulated payments. In the case of TLGO, we estimate that the company would still have a pending reception of the payment for the manufacturing (we estimate less than € 75 M / 9% of market cap; some € 100 M were still to be paid as of YE2018) and €~700 M in the backlog from maintenance works (~20% of the backlog as of the end of 3Q’19). However, although currently we see this as unlikely, in the case the contract is terminated, we understand the consortium would have the right to compensation, although we cannot quantify the amount at present.