EUR 100.00 For Business Accounts Only

IBERIAN DAILY 06 MAY + 1Q’24 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: FERROVIAL, ROVI.


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 1Q’24 results to be released over the coming days in Spain.

European peripheral stock markets fall
Mixed stock market performance on both sides of the Atlantic, with solid performance in North America, but weaker in the euro zone, which was dragged down by peripheral nations, where the IBEX/MiB closed with losses of around -1.0%. In the STOXX 600, the bond proxy sectors like Real Estate (+4.0%) and Utilities led the weekly gains, while Autos and Retail ended with losses of around -3.0%. On the macro side, in the US non-farm job creation was lower than expected, with a slight but unexpected rise in the unemployment rate and a drop in salary gains. Furthermore, the services ISM was disappointing, falling below 50, but with a sharp rise in the price index. In China, April’s services PMI fell less than expected. In US business results, Berkshire Hathaway, CBRE and Cboe beat expectations.
What we expect for today
Stock markets would open with gains of more than +0.3%. Currently, S&P futures are up +0.06% (the S&P 500 ended up +0.15% vs. the European closing bell). Asian stock markets are rising (China’s CSI 300 +1.5%, Japan’s Nikkei closed).
Today in the euro zone we will learn April’s final services PMI and May’s Sentix index. In US business results, Lowe’s, Tyson Foods and Realty Income, among others, will release their earnings.


COMPANY NEWS

ROVI, SELL
According to the press, ROVI will initiate in May the sale of a presumably majority stake in its third-party manufacturing business, in which several funds such as KKR, Pai Partners, Permira, Advent International or TA Associates could be interested. According to the same source, the business could be valued at between € 2 Bn and € 3 Bn assuming € ~200 M of EBITDA.
Positive news of limited impact. ROVI’s intention of incorporating a partner in its CDMO division was already known, in any case, we believe that the sale of a minority stake would make much more sense, as it would allow the company to generate value and cash to carry out investments and to keep the control of this business while maintaining the necessary capacity for its own activity. On the valuation level, the midpoint of the range given in the article (€~2.5 Bn) would mean a multiple of ~12.5x EV/EBITDA, which is in line with rumours. However, in our numbers the CDMO division would generate € 200 M of EBITDA no earlier than 2027 (with the incorporation of the contract announced in April’24), and thus we think the company would need to announce new contracts for 2025-27. Although we expect a positive reaction, we think the stock is already pricing in the solid outlook for the CDMO business (+37% in 2024; +30% vs. IBEX).