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IBERIAN DAILY 23 FEBRUARY + 4Q’22 RESULTS. HIGHLIGHTS AND PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: GLOBAL DOMINION, NH HOTELES, REIT SECTOR, TELEFÓNICA.

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 4Q’22 results to be released over the coming days in Spain.

The Ibex falls below the 9,200-point level
It was yet another session of losses for the European indices, which fell as the session progressed following the positive US opening, with the Ibex lagging behind. Thus, within the Euro STOXX, Media and Food were the best relative performers vs. the drops in Real Estate and Banks. On the macro side, in Germany, February’s IFO rose less than expected, confirming that concerns about recession continue, although it improved for the fifth consecutive month. In the US, there were no surprises in the Fed minutes, with most members in favour of moderating the pace of rate hikes and warning that the recent softening of financial conditions could make it difficult to bring inflation under control. In US business results, eBay was in line and Nvidia better than expected.
What we expect for today
European stock markets would open with gains of up to +0.5% that could be reeled in throughout the session. Currently, S&P futures are up +0.3% (the S&P 500 ended -0.24% lower vs. the European closing bell). Volatility in the US fell (VIX 22.29). Asian markets are falling (China’s CSI 300 -0.27% and Japan’s Nikkei closed).
Today we will learn in the Euro zone January’s final inflation, and in the US the second reading of the 4Q’22 GDP, weekly jobless claims and January’s Chicago Fed index. In US business results, Domino’s Pizza, Moderna and Booking, among others, will release their earnings. In debt auctions: Italy (€ 5 Bn in 3M and 9M T-bills).


COMPANY NEWS

REIT SECTOR: In price discovery mode. LRE, COL and MRL BUY. MRL is our top pick.
We update our target prices to reflect the deterioration of the investment market following the sharp rise in interest rates along with the economic downturn. The stock market could be assuming a -29% drop in GAV, which is greater than what we see as sufficiently pessimistic (-20% in 2022-24), whereas we believe they are well protected in the short term against rate hikes (in cashflows and refis), hence our positive view, although the situation will be uncertain in the short term. We cut our T.P. for LRE by -6% to € 6.38/sh. (+35% upside), MRL -17% to € 10.75/sh. (+20% upside) and raise that of COL by +7% to € 7.85/sh. (+20% upside).

4Q’22 Results highlights and rest of previews
Of the stocks releasing their earnings over the coming days, on the positive side we highlight Vidrala (28/02), where we expect a better 4Q than what was foreseeable only two months ago thanks to the combined effect from price increases to customers and the drop in energy prices.

G. DOMINION. 4Q’22 Results in line on the operating level. Stake in BAS increased. BUY
The 4Q’22 results were in line on the EBITDA level (€ 35 M vs. € 34 M BS(e) and € 33 M consensus), with higher sales than expected (+9% vs. +1% BS(e) and consensus) and slightly lower margins (11% vs. 12% expected). We highlight the organic growth, which rose to +17% in 4Q’22 (+10.5% accumulated vs. more than +5% from the guidance). DOM has raised its stake in BAS (renewables IPP; target of 2 GW in 2026) to 100% (vs. the previous 27%) after capitalising debt and buying back its stake from the minority stakeholder, and thus it now has € 163 M of NFD (~1.3x NFD/EBITDA vs. € 61 M of net cash previously), with no impact on the P&L statement. The company will present a strategic plan in 2023. We do not expect a significant impact (+9% YTD; -2% vs. IBEX).

NH HOTELES, BUY.
The 4Q’22 results were far above expectations in both EBITDA (+9.7% vs. +1.2% BS(e) and -11.9% consensus), sales (+45.3% vs. +34.8% BS(e) and +37.4% consensus) and margins (32.9% vs. 32.7% BS(e) and 27.9% consensus). All this is underpinned by prices (+15% LfL vs. 4Q’19), whereas occupancy remains -6pp below 4Q’19. No outlook was given for 2023. NFD’22 stands at € 308 M (€ -260 M vs. 2021), meaning 1.2x NFD/EBITDA (vs. 0.6x in 2019) without losing the strong cash position (€ 569 M vs. € 511 M in 2021).
Very positive results we expect to be well received, although the key will lie in the outlook to be given in the conference call for 2023, where we do not expect any negative surprises.