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FERROVIAL: 407 ETR 1Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

ETR407 motorway (43.23% FER; 53% of our T.P.) has just released its 1Q’20 results, which show drops in sales and EBITDA of -7% and -9%, respectively, in local currency. Traffic slid by -13.4%, whereas tariffs (average revenues per trip) grew +7.6%. Net Profit, however, managed to increase by +5.6% thanks to a sharp reduction in financial items (-48%). Separately, the company has decided not to distribute the quarterly dividend, confirming that it will revise this decision in the second quarter.
Negative news although expected and in line with the data disclosed by FER in late March, which hinted at a drop in traffic of more than -70% from the second half of March onwards. Based on our base-case scenario of V-shaped recovery (two quarters of sharp recession followed by moderate recovery in the third quarter, strong recovery in the fourth and very strong next year), we will cut our EBITDA estimates by -25% for 2020, although we expect recovery in 2021, and the impact on our T.P. would be only -2%. As regards the cancellation of the dividend, although this would only affect one quarter, we would like to highlight the importance of this decision, as the ETR407’s dividends (€~150 M in 2020 BS(e); -50% vs. 2019) represent ~45% of the dividends that FER receives from its infrastructure assets and in our view this reduces the likelihood of FER paying dividends to shareholders (€ 530 M; 3.2% yield), especially considering that the chance of FER not receiving the dividends from other assets like Heathrow (€~100 M; ~0.6% of the market cap) is very high.