EUR 100.00 For Business Accounts Only

IBERIAN DAILY 06 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: GRIFOLS, NEINOR HOMES, OHLA, TALGO.

Fear of a recession leads to profit taking
After an extremely bearish opening dragged down by the sharp drops in Japan, during the evening the stock markets reeled in their losses following the release of the services ISM in the US that helped calm the markets regarding the macroeconomic situation and cooling expectations of an extraordinary rate cut. On the macro side, in Spain June’s industrial output recovered more than expected. In the euro zone, August’s Sentix index fell much more than expected. In the US, July’s services ISM recovered more than expected, with recovery in the price, order and employment subindices. This morning in Japan, household spending for June contracted less than expected, while salary gains rose more than expected. In 2Q’24 US business results, Tyson Foods released figures well above expectations and Diamondback Energy was in line.
What we expect for today
Stock markets would open with gains of more than +1%. Currently, S&P futures are up +1.5% (the S&P 500 ended down -0.75% vs. the European closing bell). Volatility on the S&P500 (VIX), which last week was at 15, reached 35 yesterday, later falling back to 28. Japan, which started the panic on the market yesterday, is rising sharply today (Nikkei +8.75%) and China is falling slightly (CSI 300 -0.35%).
Today in Germany we will learn June’s industrial orders and in the euro zone June’s retail sales. In US business results, Caterpillar, Fidelity, Duke Energy, Baxter, Uber, Fox, Amgen and AirBnB, among others, will release their earnings.

COMPANY NEWS

NEINOR HOMES, OVERWEIGHT
According to the press, HOME could sign an agreement in the very near future with Bain Capital, owner of Habitat, to enter the company’s capital and take over its management. There is no mention of the percentage of the capital HOME would acquire or the outlay it would require, although at the beginning of the year Habitat would have been seeking out investors to close a coinvestment deal and obtain €~200 M (~20% of HOME’s market cap).
Habitat has land with the capacity to house more than 10,000 homes, similar to HOME’s capacity (12,000 homes without bearing in mind the coinvestment agreements signed recently, which add capacity for another 4,700 homes) and in 2023 generated some € 291 M of revenues and € 24 M of EBITDA (48% and 17% of HOME’s figures, respectively). Thus, this would be a transformational deal for HOME.
Separately, and also according to the press, the company has signed a new coinvestment agreement with Avenue Capital to develop ~700 homes in southern Spain, with an investment of € 35 M.
Without taking these two deals into consideration, HOME has already beaten its target of € 500 M of coinvestments, which is the figure it had set as a target for 2027 and where it expects to generate returns above 20% (this is the central pillar of its growth strategy, which we see as positive).

OHLA, OVERWEIGHT
According to the press, the entry of new investors into the company’s capital structure could come at € 0.25/sh. (-18% vs. yesterday’s closing price). Note that yesterday OHLA confirmed that it will propose a capital injection of up to € 150 M (~83% of market cap) in which José Elías and a pool of investors will contribute some € 50 M, Andrés Holzer € 25 M and the Amodio brothers € 26 M. The deal would be structured in two placements, the first one without preemptive rights of up to € 70 M and a second of up to € 80 M with preemptive rights. The execution would be subject to acceptance by lending banks and bond holders.
Negative news due to the dilutive impact. Only assuming the inflow of the € 101 M (~56% market cap) secured, at € 0.25/sh. our T.P. (€ 0.75/sh.) would stand at € 0.55/sh. post-increase (-27% vs. previous), which would leave +94% upside over TERP (€ 0.28/sh.). Under this scenario, and in the absence of knowing the subscription rate of minority stakes, José Elías would reach a ~20% stake, the Amodio brothers ~25% and Andrés Holzer ~10% BS(e).

TALGO, UNDERWEIGHT
In an interview, Skoda’s CEO stated he does not rule out a cash offer for TLGO if due diligence can be performed beforehand. Skoda has decoupled its project with TLGO from the Spanish Govt. and other Spanish investors with Criteria, and has confirmed that it will send a new letter to TLGO’s Board to propose negotiations.
The possibility of a new offer could underpin the share price, although for this to be successful Skoda should launch a counterbid, which it already ruled out a few weeks ago.
Note that in late April Magyar V. sent the Spanish market regulator its prospectus for the friendly and voluntary TOB on 100% of TLGO’s shares at € 5/sh. in cash (+16% vs. the previous day’s closing price) that was supported by Pegaso T. (main shareholder in TLGO with a 40% stake), as well as by TLGO’s Board of Directors. The CNMV would have a 3-month period to review the bid, although the period could be extended, and a waiting period would follow until all the authorisations are obtained (from the Spanish Govt. and from the regulators where TLGO is operating: Egypt, Saudi Arabia, Kosovo, Serbia, etc.).