IBERIAN DAILY 05 JULY (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ELECTRICITY SECTOR, ENCE, ENDESA, FERROVIAL, IBERDROLA, TALGO.Stock markets in wait-and-see mode
European stock markets ended in negative territory after investors assessed the rise in crude oil prices (Brent crude +2.1% after Saudi Arabia’s and Russia’s cut) vs. the tightening expectations of Central Banks. With this in mind, the Euro STOXX ended flat, with Real Estate and Basic Resources being the best-performing sectors, whereas Banks and Constructions posted the biggest drops. On the macro side, in Spain, June’s registered unemployment rate fell less than expected, with job seekers exceeding 21,000 people. Despite the slowdown in job creation (the lowest level since 2015), the Social Security affiliation rose to 20.6 M workers. In Brazil, industrial output climbed more than expected in May. In Japan, June’s final services PMI moderated more than expected. In China, June’s services Caixin PMI deteriorated prospects after falling sharply, which adds pressure on an announcement of a plan to back growth by the government. This data, along with lower consumption levels in holidays and the drop in car sales, suggest that the reactivation after the opening has cooled off.
What we expect for today
European stock markets would open with drops amid concerns about China’s slowdown and the commercial barriers. Currently, S&P futures are down -0.10% (the S&P 500 was closed for holiday). Asian stock markets are sliding (China’s CSI 300 -0.73%, Japan’s Nikkei -0.46%).
Today in the euro zone we will learn June’s final services PMI, in Spain May’s industrial output, in Mexico June’s consumer confidence, and in the US the Fed meeting minutes, May’s durable goods orders and May’s factory orders. The OPEC+ will hold its output meeting today. As for auctions, Germany will issue € 1 Bn in green bonds due 2033.
COMPANY NEWS
ENCE, BUY
According to the press, the Supreme Court has denied the appeals presented by the Pontevedra city hall and the State Attorney against the ruling that backed the extension of the Pontevedra factory (43% of production, 33% of pulp EBITDA and 25% of ENC’s consolidated EBITDA) until 2073. Positive news, although of little impact, given that we already considered the matter practically settled, and we understand the market also considered the appeals unlikely to succeed. In any event, we do not rule out the possibility the plaintiffs will appeal to the Constitutional Court, although again we think any appeal is highly unlikely to succeed.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Enel Generacion Chile is engaged in the electricity generation, transporting, producing and distributing in Chile. Co.'s purpose also includes investing in financial assets, developing projects, carrying out activities in the energy industry and in other fields in which electrical energy is essential and participating in public civil or hydraulic infrastructure concessions, in which it may participate directly or through subsidiaries or associate companies in Chile or abroad. As of Dec 31 2016, Co. owns and operates 111 generation units in Chile with an aggregate installed capacity of 6,351 MW.
Ferrovial is a transportation company based in Spain. Co. is engaged in operations in the transportation sector. Co. specializes in the design, construction, management, administration and maintenance of transport infrastructures. Co.'s services range also includes the maintenance of parking lots, and land-, sea- and air-based transport networks. Co. is also engaged in the promotion and operation of short-stay parking lots, parking regulation and management services and promotion and sale of residents' parking.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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