EUR 100.00 For Business Accounts Only

IBERIAN DAILY 23 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, FLUIDRA, NATURGY, NEINOR HOMES.


MARKETS YESTERDAY AND TODAY

The Ibex misses the train as the US bond stabilises
The punishment inflicted on BBVA’s share price (which fell by more than -7% due to the drop of the Turkish lira) and the banking sector in general, as well as the decline of the tourism sector as a result of the mobility restrictions in Europe as the UK-EU battle over vaccines heats up, dragged on the Spanish index, which fell by more than -1.7%. Thus, both in Europe and in the US, growth beat value once again, and within the Euro STOXX, Technology and Autos were the best relative performers vs. the bigger drops in Basic Resources and Banks. On the macro side, in the US, the Chicago Fed Activity index fell unexpectedly in February. Separately, the Govt. would be planning an infrastructure stimulus package worth US$ 3 Tn. In the euro zone, the ECB announced that it raised its weekly debt purchases in the PEPP to € 21.1 Bn from the previous week’s € 14 Bn and weekly average of € 18 Bn. Germany will extend the lockdown until the 18th of April with a partial shutdown of non-essential commercial activity.
What we expect for today
European indices would open with a slightly bearish slant, with value recovering the top spot in view of some interest rate rises in the US. Currently, S&P futures are down -0.23% (the S&P 500 ended practically flat vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 18.88). Asian markets are sliding (CSI 300 -1.5%, Japan -0.6%).
Today Powell will speak before the Senate Commission, and in the US we will learn the new home sales data for February and the Richmond manufacturing index for March. In debt auctions, Netherlands (€ 2.5 Bn in bonds due 2033).



COMPANY NEWS

NEINOR HOMES, BUY
Quabit’s CEO and main shareholder, Felix Abánades, outlined in an interview the reasons behind the merger with HOME and why he considers it is the best option for QBT’s shareholders. The main messages were as follows:
(i) Best alternative for QBT. He believes that the integration with Neinor is an extraordinary option for Quabit as this helps set up the first company in the country and the incorporation in a vehicle that has already generated € 100 M of EBITDA annually with the aim of obtaining € 150 M recurrently and around € 50 M of annual dividends (~6% yield). He thinks that the merger includes an improving potential for shareholders of at least 40%-50% once integrated”.
(ii) Reasons explaining why the project on its own was not possible. Mr. Abánades considers that Covid-19 was the last straw of a business plan that was already with delays as a result of the inflation of construction costs, the lack of personnel and delays of several years in awarding licences. Additionally, he considers that the access to financing, more and more complicated, will make the situation of small home developers in Spain more difficult. In the case of QBT, it plans to develop around 400 homes in the 2H’21 that would have not been possible to initiate without the merger in the absence of an increase in pre-sales.
The interview is interesting although it does not add new information on the merger process. We believe that the merger with QBT could be value enhancing but it is not priced in based on HOME share price, as it has slid -4% since the announcement vs +0% IBEX, +15% MVC and +5% AEDAS. The deal still needs the approval of the AGM of both companies on the 31st of March, although the green light by QBT’s shareholders is not certain (there is a 4% gap in the exchange ratio at market prices), we believe it will be eventually approved (with acceptance commitments of 26% of capital and the proxy advisors recommending to vote in favour of the deal).
In terms of NAV/sh. the merger could have a positive impact of +8% according to our estimates pre-synergies (and a much larger impact after operational and fiscal synergies). QBT’s excessive debt level, with an LTV of 51% in a company that never fully overcame all its “legacy” problems, the recession stemming from Covid-19 and the agreement with lending banks are the reasons behind the attractive selling price for HOME.