IBERIAN DAILY 30 DECEMBER (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: SACYR, TÉCNICAS REUNIDAS.MARKETS YESTERDAY AND TODAY
Christmas catch up in European stock markets
European bourses caught up the heavy gains of all risk assets from the opening bell on the 26th of December, which eased after the US opening. Volume was very low, as usual in these dates. In the Euro STOXX, Real Estate and Retail led gains while Basic Resources and Banks saw the biggest drops. On the macroeconomic level, in Spain, November’s retail sales grew above expectations.
What we expect for today
European stock markets would open with slight drops, penalised by the appreciation of the euro to US$ 1.12. Currently, S&P futures are up +0.15% (the S&P 500 closed +0.13% higher vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 13.4%). Asian markets are rising (Japan -0.36% following the sharp rise on 26/12 and Hong Kong +1.06%).
Today in Spain we will learn the 3Q’19 GDP and December’s final inflation and in the US November’s trade balance and pending home sales, as well as December’s Dallas Fed manufacturing index.
COMPANY NEWS
TÉCNICAS REUNIDAS, BUY
According to the press, TRE would have been awarded 55% of a € 3.3 Bn contract (~ € 1.8 Bn) to build a refinery in Algeria for Sonatrach. TRE would lead the consortium where Samsung is also taking part.
Very positive news if confirmed given its relevance: this contract would account for 16% of the order backlog as of 9M’19 (€ 10.9 Bn) and it would allow the company to end the year with a backlog of around € 11.7 Bn (2.7 years of sales). Similarly, the order intake in 2019 would total around € 6.5 Bn vs. our recurring estimate of € 4 Bn (€ ±250 M mean ±4,4% on T.P.). Taking into account the weak share price performance in 2019 (-13% vs. IBEX), we expect a positive market reaction. Note that we raises our recommendation to BUY on 14/11 assuming that TRE will improve its margins on 2020. TRE expects to reach a 4% EBITDA margin at the end of 2019, which will not be seen in results until 2020. We forecast 3.1% in 2020 and 3.8% in recurrent terms vs. 3.5%/3.9% consensus (every ±25bps in the margin has an impact of ±4.6% on our T.P.).
Sacyr is the parent company of a group engaged in the acquisition, development and construction of urban properties for their subsequent rental or resale. Co. primarily leases and sells office buildings and complexes, housing units, and shopping centers. Co. is also engaged in the operation of urban car parking facilities. Co. offers services related to the real estate industry such as technical assistance in energy savings, inventory management, architectural design, telecommunications management, property maintenance, as well as gardening and landscaping. Co. also provides consulting services in the real estate fund management sector.
Tecnicas Reunidas is a general contractor company based in Spain. Co. engages in the engineering, design, and construction of industrial facilities for refining and petrochemical, oil and gas, power, and infrastructure and industries sectors worldwide. Co. constructs nuclear plants, conventional thermal plants, and renewable energy and cogeneration facilities for power sector; refineries and facilities for petrochemicals; water treatment, desalination, waste management, air, land, and marine transport facilities; and liquefaction, and storage facilities, as well as oil and gas fields and pipelines. Co. also provides engineering, management and operating services for industrial plants.
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