IBERIAN DAILY 27 JULY + 2Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ENCE, CAF/TALGO, FERROVIAL, FCC, METROVACESA, PROPERTY DEVELOPERS SECTOR.At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 2Q’20 results to be released over the coming days in Spain.
MARKETS YESTERDAY AND TODAY
Macro loses strength
European stock markets closed better than they opened following the disappointing German IFO (which led to better performance by peripheral indices) and the negative opening in the US, with value outperforming growth. Thus, in the euro zone almost all sectors closed in the red except Banks, Basic Materials and Energy, vs. the biggest drops in Pharma. On the macro side, in Germany the IFO for July was disappointing, falling unexpectedly mainly because of the deterioration in the expectations component, hit by the Covid-19 contagion and concerns in the supply chain. In the UK, the decrease in the number of Covid cases (24,950 new cases vs. 39,950 last week) could suggest that the peak of the 5th wave is over and the country could be studying easing some tourism restrictions. However, the US maintains the restrictions to the UK, EU and China, and the Centre for the Control and Prevention of Diseases recommends not travelling to Spain. As for macro data, June’s new home sales and July’s Dallas Fed manufacturing activity index contracted unexpectedly. Talks in Tianjin between China and the US would be on a standstill given the differences between both countries. China demands the withdrawal of all sanctions and tariffs imposed and that the US remains outside Hong Kong, Taiwan and Xinjiang. In US business results, Otis beat expectations, Tesla, Coca-Cola and First Bank beat expectations..
What we expect for today
European stock markets would open flat, still hit by the selloff of technology companies in China and with the luxury segment being the focus of investments after LVMH beat expectations. The tourism sector suffers a setback as the US rejects the opening of travel to Europe, at least in the short-term. Currently, S&P futures are down -0.15% (the S&P 500 ended practically unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 17.58). Asian markets are trading with mixed results (China’s CSI -0.7% and Japan’s Nikkei +0.5%).
Today in Germany we will learn July’s IFO and in the US June’s new home sales. In debt auctions: Italy (€ 3.75 Bn in bonds due 2024). In US business results, Google, Visa, Microsoft, Starbucks, Apple and Invesco, among others, will release their earnings.
COMPANY NEWS
PROPERTY DEVELOPERS. Well positioned to capitalise on the cycle. BUY.
We are releasing today a report with a BUY recommendation on all three of the residential property developers in our coverage universe because we believe that the new housing segment is entering a bull cycle driven by favourable demand & supply dynamics, and market valuations are appealing, with dividend yields >5% (and with a growing dividend). In this report, we raise our T.P. for AEDAS by +23%. (+17% upside), our T.P. for MVC by +13% (+51% upside) and that for HOME by +14% (+20% upside). In all three cases, the increases are due to an improving outlook for sales and deliveries. We have a positive stance on all three, although we believe that Aedas and Neinor have better prospects in the short-term, whereas Metrovacesa has a weaker momentum in the short-term and a more deep-value profile.
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.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Metrovacesa SA, formerly Metrovacesa Suelo y Promocion SA, is a Spain-based real estate developer. The Company specializes in construction and sale of sustainable housing, both single-family and multi-family residential properties. Its activities also include promotion, urbanization and parceling of real estate in general, as well as real estate management for own benefit or on behalf of third parties. Its asset portfolio includes more than 6 million square meters of building land across Spain, as well as already developed properties in cities, such as Malaga, Almeria, Cordoba, Barcelona and Madrid, among others.
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