EUR 100.00 For Business Accounts Only

IBERIAN DAILY 26 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: INSURANCE SECTOR, TELECOM SECTOR, TOURISM SECTOR, UTILITIES SECTOR.

MARKETS YESTERDAY AND TODAY

Euro STOXX 50 closing in on 3,000
It was a session of gains on most European stock markets. In the IBEX, Spanish tourism stocks skyrocketed on the words of PM Pedro Sánchez, who announced the reopening of the country to international tourism starting in July. In the Euro STOXX, all the sectors closed in positive numbers, with Construction and Industrials rising the most, vs. Basic Materials and Retail, the worst relative performers. On the macro side, in Germany May’s IFO beat expectations, whereas the final 1Q’20 GDP confirmed the preliminary -2.3% YoY. Additionally, the Govt. announced a US$ 9.8 Bn bailout package for Lufthansa. The Netherlands, Austria, Sweden Estonia and Denmark made their proposal for a Recovery Fund, whereby aid would come in the form of loans and would be subject to conditions. The UK will begin to normalise economic activity starting on 1 June with stores opening on 16/06. In Japan, the President of the BoJ warned that there is leeway to raise monetary stimuli and suggested ETF purchases be increased, the programme to make loans more accessible be broadened or even that interest rates be lowered. Lastly, the WHO has called LatAm the new epicentre of the pandemic.
What we expect for today
Gains will continue today, reaching more than +1.0%. Currently, S&P futures are up +1.94% (the S&P 500 was closed for the holiday). Volatility in the US will start from 28.16% (VIX). Asian markets are rising (Japan +2.67% and Hong Kong +2.14%).
Today in the US we will learn April’s new home sales and May’s consumer confidence and in Mexico the 1Q’20 GDP. In debt auctions: Italy (€ 5 Bn in I/L bonds due 2030 and CTZ due 2022), Netherlands (€ 5 Bn in bonds due 2027) and Germany (€ 5 Bn in bonds due 2022).

COMPANY NEWS

UTILITIES SECTOR REPORT. ELE (we change our rec. to BUY), IBE and ENAG, our top picks.
Following a widespread market correction, the sector’s multiples continue to be demanding with respect to the market in general (13-15x P/E). However, in absolute terms, the stocks have fallen by as much as -25%, meaning that, even being selective, we continue to find long-term bets on the sector. In ELE, despite its good relative performance (+11% vs. IBEX since highs/-23% in absolute terms), we change our recommendation to BUY, setting a T.P. of € 26.07/sh. (+27% upside/+6% increase). In IBE, we change our T.P. very slightly (T.P. € 10.70/sh.; +17% upside), but we believe that the stock’s underperformance in the last few weeks (-10%/-15% vs. peers) is unjustified and thus, we reiterate our bet. Lastly, in ENAG, our T.P. remains the same. Although the upside potential is slightly reduced (T.P. € 23.38/sh./+12% upside), its dividend yield remains highly attractive (>8% yield), we prefer it to REE, where there is little visibility on Hispasat. Although the catalysts are the same for all of the companies within the sector (immunity to Covid-19, liquidity levels and dividend), we are selective and exclude NTGY from our top picks (T.P. € 17.82/sh.; +12% upside/-26% in T.P.), from which we would demand a higher upside potential in view of the results risk, as well as REE (T.P. € 17.79/sh. +13% upside/-4% in T.P.), which we find less appealing than ENAG, and ANA (T.P. € 90.30/sh.; +6% upside/-7% in T.P.), which would be penalised by merchant renewable assets in Spain. Risks: (i) Tax increases: +/-100 p. in the tax rate has an average impact of +-1.5% in EPS and +-1.1% in T.P.; and (ii) Increased risk premium: +/- 10bps in the 10Y bond yield means +/- 1.8% on the sectors’ stock prices on average.