EUR 100.00 For Business Accounts Only

IBERIAN DAILY 08 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ANNUAL SPANISH MARKET UPDATE, BANKING SECTOR, FERROVIAL, IBERDROLA, INDITEX, NATURGY, PRISA.

MARKETS YESTERDAY AND TODAY

The US job market fuels cyclical stocks
The positive surprise in US job data fuelled gains. In general, data in developed countries suggest a sofgter deterioration than expected in the 2Q’20. In the Euro STOXX, all sectors saw gains, led by Banks and Energy while Media and Utilities ended with the lowest rises. On the macroeconomic level, in Spain, April’s industrial output slowed down more than expected, as well as industrial orders in Germany. In the US, May’s non-farm job data provided a surprise with job creation (+2,500 persons vs. an expected destruction of -7,500), mainly in construction and services (health, education and leisure). Meanwhile, the unemployment rate fell unexpectedly to 13.3% and strong growth remained in wage gains (6.7% YoY vs. 8.0% expected and 8.5% previously). Furthermore, D. Trump outlined he will request the Congress a new fiscal stimulus package. In China, May’s exports fell in May less than expected although imports slowed down double than expected, still underscoring some weakness in internal demand. In Japan, the final 1Q’20 GDP was raised thanks to the better performance of investments.
What we expect for today
Stock markets would open flat following the rally from last week. Currently, S&P futures are up +0.31% (the S&P 500 was practically flat vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 24.52%). Asian markets are rising (Japan +1.09% and Hong Kong +0.14%).
Today in the euro zone we will learn June’s SENTIX index. As for auctions, Holland will issue € 4 Bn in 6 & 12M T-bills, France € 9.5 Bn in 3, 6, 9 & 12M T-bills and Germany € 8 Bn in 3 & 9M T-bills.


COMPANY NEWS

ANNUAL SPANISH MARKET UPDATE
Shortly we will release our report on the Spanish market, in which we review our estimates and T.P. for all the stocks in our coverage universe and we highlight the top picks of our portfolios (model, 5-stock, high yield and Mid&Small cap). We change Bankia to BUY, and NH, Euskaltel and Iberpapel to SELL. We cut our T.P. for our companies in our coverage universe by -18% on average, with the most relevant changes being the following: Prisa (-59%), IAG (-56%), Bankinter (-55%), Liberbank (-53%), Unicaja (-49%), NH (-43%), Aedas (-42%), Bankia (-41%), Metrovacesa (-39%), Lar (-38%), Arcelor (-38%) and BBVA (-37%). Of all the stocks in our coverage universe (59 vs. 65 in our previous report), 72% have a BUY recommendation (vs. 55% previously) and 28% have a SELL recommendation (vs. 45% previously). Our Top Down valuation for the Ibex 35 for Dec’20 stands at 7,780 points (vs. 9,885 pre Covid-19), with an implicit P/E ratio for Dec’20 of 16.3x vs. 18.9x at which the 12M forward is currently trading and 13.5x on average expected for 2010-30. From a Bottom Up perspective, we value the IBEX 35 at 8,501 points over a 12-month period (+12.4% upside vs. 10,782 previously).

INDITEX. 1Q’20 Results Preview: Covid-19 affects the P&L statemented. SELL.
The company will release its 1Q’20 results on Wednesday, 10 June, before the opening bell. We expect very poor results, unsurprisingly, as stores in most of the countries in which the company operates were closed for part of the period We forecast a -39% decline in sales ( a -38% drop in LfL sales), € -249 M of EBIT and € -243 M of Net Profit. Attention will also be paid to how the following quarter has started. It is difficult to estimate but we believe that the first 6 weeks of Q2 (all of May and the first days of June) could show a comparable drop in sales of c. -50%. The share price has slid by -20% since February’s highs (+7% vs. Ibex, +5% vs. peers) and has soared by +28% from lows (+6% vs. Ibex, +6% sector). We believe it lacks sufficient upside at current levels.