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IBERIAN DAILY 11 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CHANGES IBEX, FLUIDRA, MAPFRE.

MARKETS YESTERDAY AND TODAY

The IBEX climbs despite the political turmoil
It was a new session of gains at both sides of the Atlantic following the stabilisation of sovereign yields for the second consecutive day, and with value outperforming growth and erasing yesterday’s rally. Thus, in the Euro STOXX, almost all sectors ended in positive territory, with Telecommunications and Chemicals being the best relative performers vs. Basic Resources and Technology that saw the biggest drops. On the macroeconomic level, in Spain, the president of Madrid autonomous region called early elections following the motions of censure presented in the regions of Murcia and Castilla y Leon. Separately, today the EU is expected to approve Janssen’s single-shot vaccine (easier logistics), although the company has already warned that it might not fulfil its commitments. In the (In the US, February’s inflation climbed to 1.7% YoY, as expected, while core inflation was disappointing after moderating by one tenth to 1.3%. Separately, the US Congress passed the US$ 1.9 Tn fiscal stimulus package that would increase fiscal deficit by US$ 1.13 Tn according to the CBO.
What we expect for today
Stock markets would open with slight gains and better performance from growth, imitating the movement in Asia and the pace set by US futures. Currently, S&P futures are up +0.45% (the S&P 500 was practically unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 22.56). Asian markets are rising (CSI 300 +1.75%, Japan +0.60%).
Today in the euro zone we stress the ECB meeting and in the US will learn weekly jobless claims. In debt auctions, Ireland (€ 1 Bn in bonds due 2031) and Italy (€ 8 Bn in bonds due 2024, 2028 and 2051).


COMPANY NEWS

CHANGES IBEX. Technical Advisory Committee will meet today in its first follow-up meeting of the year, and we do not expect any changes.
The IBEX 35 Technical Advisory Committee will meet at today’s closing bell in its follow-up meeting (held in early March and September). Note that in these meetings, apart from weighting changes, there are normally no changes made to the composition (changes that are normally made in the June and December meetings). Analyzing accumulated volume or free float on this occasion we do not expect any changes.

FLUIDRA, SELL
At yesterday’s closing bell the company announced the acquisition of the US firm CMP for US$ 245 M / € 206 M, meaning 4% of FDR’s EV and 35% NFD. CMP is the leader is designing, manufacturing, marketing and selling pool and spa products and has sales of more than US$ 109 M / € 91.5 M, meaning 6% of FDR’s sales’20. FDR has not specified the price, but simply states that it is paying (post-synergies) a low double-digit multiple.
Based on the contribution from this new purchase, FDR has raised its guidance for growth in sales’21 by +6pp from the previous 6-9% to 12-15%. As regards the margin, it is kept at 22.5-23.0%. As a result, FDR expects a +5% accretive impact on EPS’20. This accretion would be due to cost synergies totalling more than US$ 7.5 M / € 6.3 M (2% of FDR’s EBITDA).
News with a positive slant, but of little impact. We deduce that FDR would have paid ~16x EV/EBITDA pre-synergies vs. the 14x at which it is trading and ~12x post-synergies. According to FDR’s estimates, +5% accretion could have an impact of around +3% on the valuation, but this would assume synergy generation. Our opinion is that this news could receive a moderately warm reception. After beating the IBEX by more than 30% over the past 6 months, we think the guidance given with the results 10 days ago and revised today (+6% rise in sales) is already priced in. If we assume this in our estimates our T.P. would rise to € 16.80-17.80/sh. FDR is a stock that has benefited from the “stay at home” momentum, and in our opinion it will gradually lose this advantage as restrictions begin to be lifted with mass vaccination.