IBERIAN DAILY 10 AUGUST + 2Q’22 RESULTS PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: FERROVIAL, REDEIA, TALGO.At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 2Q’22 results to be released over the coming days in Spain.
Markets remain in wait-and-see mode
The rise in energy prices (Russia cut off oil supply to Central Europe through the Druzhba oil pipeline) and profit taking in the Nasdaq Technology index after Micron Technology (the US largest microchip manufacturer) cut its sales guidance dragged down European indices. Thus, in the Euro STOXX, the best-performing sectors were Energy and Automobiles, whereas Pharma and Telecoms were the worst performers. On the macro side, in Mexico, July’s inflation rose in line with expectations (8.2%) whereas in Brazil it moderated in line with the consensus expectations (10.1%). In the US, J. Bullard (hawkish, with voting rights) stated that the Fed is ready to keep interest rates high for longer if inflation continues to increase above expectations, with an expected range of between 3.75%-4.00% for the end of the year. In China, July’s inflation climbed less than expected, standing at 2.7%. In US business results, Ralph Laurent, Welltower and Wynn Resorts came in better, whereas Sysco was in line.
What we expect for today
European stock markets would see a bearish opening again, awaiting July’s US inflation, where the consensus foresees moderation. Currently, S&P futures are almost flat, -0.01% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US rose (VIX 21.77). Asian markets are sliding (China’s CSI 300 -1.10% and Japan’s Nikkei -0.64%).
Today in Germany we will learn July’s inflation, in the US also July’s inflation, June’s final wholesale inventories, July’s production prices and weekly jobless claims, and in Mexico BoM meeting. In US business results, Fox and Walt, among others, will release their earnings.
COMPANY NEWS
FERROVIAL, BUY.
According to the press, FER would be analysing with external consultants the sale of its 25% stake in Heathrow airport after the interest shown by the private equity fund Ardian that apparently already made a similar proposal last year.
Ardian would submit a bid with Saudi Arabia sovereign fund. Neither FER nor Ardian have confirmed rumours.
The press outlines market valuations for FER’s stake of between € 600 M and € 3.5 Bn, depending on the long-term passenger revenue estimates. Based on our estimates, we assume a € 23.98 Bn EV for Heathrow, meaning an equity value for FER’s stake of € 1.07 Bn (5% of our T.P.).
The share price welcomed the rumour yesterday, climbing +3.7% given the difficulties Heathrow is facing since the onset of the pandemic due to the high weight of business traffic and the tough Covid restrictions. In our view, the risk of a rights issue continues to be low although the uncertainties surrounding tariffs for the H7 period remain present and we do not expect a final decision in the 2H’22.
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.
Red Electrica is engaged in the transmission of electrical energy, the operation of the system and the management of the transmission network in the Spanish electricity system. In addition, through its subsidiaries, Co. is engaged in the acquisition, holding and management of foreign securities, co-ordination of international exchanges, provision of telecommunications services for third parties, provision of consultancy, engineering and construction services outside the Spanish electricity system, securing of funds, carrying out of financial transactions and provision of financial services.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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