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SACYR: WE CHANGE OUR RECOMMENDATION TO SELL AFTER A NEGATIVE ARBITRAL AWARD (ANÁLISIS BANCO SABADELL)

Very negative arbitral award on the Panama case. We cut our T.P. and change our recommendation to SELL.
The long-expected arbitral award on the basalt issue has been negative and the worst among the expected scenarios. Not only does the court not rule in favour of the company in most claims, but GUPC (SCYR 41.6%) will also have to return the money it received as a result of previous rulings. Thus, SCYR will have to pay some € 86 M (7% market cap and 1% EV; it had €>300 M in available loan facilities as of June’20). Following this setback, we no longer think that GUPC may receive significant amounts for the claims pending, as this arbitral award would lead the way for the rest. Assuming in our estimates € 0 from future claims and the return of the amounts previously received would have an impact of € 0.59/sh. on our T.P. (-23% vs. previous T.P.). Our revised T.P. is € 2.03/sh. (0% upside). We change our recommendation to SELL. With this change of recommendation, we remove SACYR from our Small & Medium portfolio after the stock has outperformed the IBEX by +22% (-6% in absolute terms) since we included it in October 2018.