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IBERIAN DAILY 18 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: GLOBAL DOMINION, REPSOL.

Doubts keep the Ibex stuck at 9,200 points
Despite the increased likelihood of Democrats and Republicans reaching an agreement over the debt ceiling before the 1st of June, uncertainty remains and the European stock markets lacked definition for another day, while the US stock markets rallied on the back of regional banks (rising deposits in Western Alliance). Thus, the best-performing sectors within the Euro STOXX were Retail and Industrials, vs. the bigger drops in Financial Services and Food. On the macro side, in the Euro zone, April’s inflation confirmed the preliminary 7% YoY figure, with core inflation standing at 5.6% YoY (it has remained above 5% since November’22). Car sales increased by +17.2% YoY in April, rising for the ninth consecutive month. In the US, home starts rose in line with expectations, whereas building permits increased less than expected. On another note, both Biden and the Republican congressional leader were confident that they will reach an agreement to increase the debt ceiling in the coming weeks. In Japan, exports and imports increased less than expected, which suggests that the strong consumption data will not be repeated in 2Q’23.
What we expect for today
European stock markets would rise +0.5% with banks performing well. Currently, S&P futures are down -0.08% (the S&P 500 ended +0.64% higher vs. the European closing bell). Volatility in the US dropped (VIX 16.87). Asian stock markets are rising (China’s CSI 300 +0.34%, Japan’s Nikkei +1.67%).
Today we will learn in the Euro zone the ECB minutes, and in the US April’s second-hand home sales and the Philadelphia Fed index for May. In Mexico, the Central Bank will hold its meeting. In debt auctions: Spain (€ 6.5 Bn in bonds due 2025, 2027, 2028 and 2043).


COMPANY NEWS

GLOBAL DOMINION. Strategic Plan’23-26: No big surprises. BUY
The 2023-26 SP sets a target of € 150 M of EBITDA’23 (vs. € 132 M consensus), driven by the consolidation of the renewable IPP subsidiary. In the medium term the company expects sales to grow more than +5% CAGR’23-26 (vs. +5.3% BS(e)) and more than +7% in EBITDA (vs. +6.3% BS(e)). The plan foresees “zero” NFD in 2026 and reiterates the payout level of 1/3 of Net Profit. In renewables, the company will maintain minority interests in its concessions without ruling out some sales in order to generate cash and create value. We will revise our estimates in order to adapt them to the guidance, with an insignificant impact expected on the T.P. We still see upside potential, although we think the company will need to deliver on its new focus in order to erase the discount.