Fernando Rodríguez | The outlook for economic growth in Spain continues to be good and domestic small and midcap stocks should reflect this. Above all, the cyclicals – particularly industrials – and consumer stocks. Barón de Ley, Miquel y Costas, Cie Automotive, CAF and Fluidra are some of the top stock picks.
SPANISH SMALL & MID CAPS
UBS | REE delivered an impressive annual total return of over 20% in the past 5 years. This was driven by EPS growth, supportive regulation and above all, falling sovereign bond yields. The trend however was halted this year as bond yields recovered and yield expansion impacted the stock – a risk which continues to keep us cautious on REE, and on regulated names in general.
Spanish midcap CAF has won a €51.3 million contract in Germany to supply 9 three-car light rail vehicles for the Schönbuchbahn and their maintenance over 19 years, with the option to request up to an additional 19 trains. The contract will strengthen CAF’s position and reputation in a key strategic market niche.
Spanish midcap Telepizza has announced a Master Franchise Agreement with Momenin Investment Group (MIG) to open around 200 stores in Iran over the next 10 years.
Spanish engineering company Talgo declared yesterday that it was the “virtual winner” of an order from Renfe (the state-owned passenger and freight rail transport operator) after presenting the best technical and economic bid.
The group representing the small creditors and bondholders affected by Abengoa’s situation has recommended they do not sign up for the Spanish company’s financial restructuring plan. In the opinion of the representatives of this organisation – La Plataforma de Perjudicados por Abengoa – the best solution is to go ahead with bankruptcy proceedings.
Earlier this week, OHL sold 4.425% of Abertis (43.83 million shares) at 13,65 euros/share via placement with institutional investors. With this operation OHL will reduce its debt and also free itself up from its previous strategic commitment to Abertis in Brazil, which prevented it from expanding in a country which will have privatisations in the coming quarters.
On Wednesday during its Investor Day in London, Prosegur announced a restructuring, aimed at changing its management model, as well as the possible IPO of its Cash in Transit (CIT) business. This is slated to take place in the first half of 2017.
We are updating our target price on Viscofan, with a HOLD recommendation. Viscofan will increase its net cash in 2016e (vs 0,4x DN/EBITDA 2014 and 0x DN/EBITDA 2015), given its strong capacity for cash generation. Viscofan is the only supplier in the world to make artificial casings for meat products in the four commercially available technologies (cellulose, collagen, fibrous and plastic).
FCC’s story this year has been marked by the mandatory takeover bid by Carlos Slim’s fund Inversora Carso. The bid was launched in March and completed on July 15. Grupo Carso now owns 61.11% of FCC and is the largest shareholder, while Esther Koplowitz is the second biggest with 20%. The company has just left the Ibex 35 blue chip index.