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FERROVIAL: HEATHROW DECEMBER 2020 INVESTOR REPORT (ANÁLISIS BANCO SABADELL)

Heathrow (25% FER; 6% of our T.P.) has just released its December 2020 Investor Report, of which we highlight the following:
 Although the company already announced a guidance cut in its 3Q’20 results, it lowers again its guidance for EBITDA’20 (adjusted) to £ 254 M (vs. £ 290 M previous and £ 887 M BS(e)), while maintaining its traffic forecast of -72% (vs. -50% BS(e)). It also keeps its traffic forecast for 2021 unchanged at -54% vs. 2019 (vs. -36% BS(e)), and expects £ 493 M of EBITDA (vs. £ 1.22 Bn BS(e)).
 As of Nov 2020, the company’s liquidity position stood at £~4.6 Bn (including a bond issuance from Oct 2020 totalling £~1.4 Bn), which would allow it to operate normally until 2023 under its traffic forecast or for 12 months in a worst-case scenario of zero revenues.
 It raised the RAB expected for 2020 to £ 16.5 Bn (-0.6% vs. 2019; vs. £ 16.4 Bn previously). For 2021, it expects the RAB to increase to £ 19.4 Bn, assuming that the CAA will admit the company’s £~2.7 Bn adjustment proposal (based on the losses expected for the 2020-21 period due to Covid-19).
 Lastly, the company has submitted to the CAA its price control proposal for the next regulatory period (H7), starting in 2022, and which includes its air traffic forecast through 2026, when there the number of passengers would hit levels of 74.5 M, still below pre Covid-19 levels (80.9 M passengers in 2019).
MARKET IMPACT
Negative news of limited impact. Although the guidance cut is bad news, we believe it is not surprising, given the recent evolution of air traffic (-88% in Nov 2020 after a new hard lockdown in the United Kingdom), and we already mentioned on the occasion of its 3Q’20 results that we would cut our numbers (meaning that FER’s latest guidance is not surprising). In any case, we welcome the company’s liquidity position and its ability to access capital markets. We will revise our estimates to include this guidance, with an estimated impact of -1% on our T.P. for FER.
Separately, apart from whether the adjustment Heathrow has requested the CAA make on RAB and the new regulatory framework (H7) are accepted, we think over the next few months all eyes will be on the pace of recovery in passenger traffic, which we do not expect to reach normalised levels until 2023, and especially on cash/liquidity position performance. We estimate £~450 M/quarter, and if this were to be true it would avoid a potential equity injection by company shareholders, as has been the case to date (if it had to make a contribution, every £ 1 Bn of cash would mean £ 250 M for FER; ~1.4% market cap).