European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.
The Spanish Government enhances anti-takeover rules:
<ul>
<li>Temporarily until June 30, 2021, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.
</li>
<li>In the case of investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely, until a new legislative change is introduced.</li>
<li>This protects the Ibex 35 companies from takeover raids by European rivals.</li>
</ul>
This rule could make it possible to avoid hypothetical bids of <a href="https://www.smartkarma.com/entities/total-sa" target="_blank" data-smartkarma-citation="entities:812:1" rel="noopener">Total Sa (FP FP)</a> or <a href="https://www.smartkarma.com/entities/eni-spa" target="_blank" data-smartkarma-citation="entities:21185:1" rel="noopener">Eni SpA (ENI IM)</a> for <a href="https://www.smartkarma.com/entities/repsol-sa" target="_blank" data-smartkarma-citation="entities:21292:1" rel="noopener">Repsol SA (REP SM)</a> or <a href="https://www.smartkarma.com/entities/deutsche-telekom-ag" target="_blank" data-smartkarma-citation="entities:21611:1" rel="noopener">Deutsche Telekom Ag (DTE GR)</a> for <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> , which have been the subject of rumours in the market.
<ul>
<li>Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.</li>
</ul>
Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: <a href="https://www.smartkarma.com/insights/acs-unlocking-value-via-disposals" target="_blank" data-smartkarma-citation="insights:44311" rel="noopener">ACS: Unlocking Value Via Disposals</a>).

The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.
The Spanish Government enhances anti-takeover rules:

Temporarily until June 30, 2021, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.

In the case of investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely, until a new legislative change is introduced.
This protects the Ibex 35 companies from takeover raids by European rivals.

This rule could make it possible to avoid hypothetical bids of Total Sa (FP FP) or Eni SpA (ENI IM) for Repsol SA (REP SM) or Deutsche Telekom Ag (DTE GR) for Telefonica SA (TEF SM) , which have been the subject of rumours in the market.

Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.

Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: ACS: Unlocking Value Via Disposals).

Enhanced Limits to Investments in Spanish Companies

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Communications, Health Care, Manufacturing, Materials, Technology, Transportation, and Utilities Sectors

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Communications, Health Care, Manufacturing, Materials, Technology, Transportation, and Utilities Sectors

Bottoms-Up View on Developed Markets: Actionable Stocks, Part 2

Commodities and related stocks are on the rise. Crude oil, industrial metals, and lumber prices are all breaking out to new highs and related energy and materials stocks are reaping the benefits. We expect their outperformance to continue. In this week's report we highlight commodities and actionable associated stocks.

Commodities and related stocks are on the rise. Crude oil, industrial metals, and lumber prices are all breaking out to new highs and related energy and materials stocks are reaping the benefits. We expect their outperformance to continue. In this week's report we highlight commodities and actionable associated stocks.

Opportunities in Global Energy & Materials Stocks

Pullback opportunities are currently in limited supply. While most markets are advancing to 12+ month highs, including the U.S., Japan, and EM, Europe is still trading at its 200-day MA, as a result of its recent four-month decline. This presents an attractive entry point, especially for small-cap investors.  In this report we highlight opportunities in: steel companies, trucks/construction/farm machinery, auto parts manufacturers and energy companies.

Pullback opportunities are currently in limited supply. While most markets are advancing to 12+ month highs, including the U.S., Japan, and EM, Europe is still trading at its 200-day MA, as a result of its recent four-month decline. This presents an attractive entry point, especially for small-cap investors.  In this report we highlight opportunities in: steel companies, trucks/construction/farm machinery, auto parts manufacturers and energy companies.

Pullback Opportunities in European Small Caps

Spain

Ence Energia y Celulosa SA produces eucalyptus cellulose and renewable energy with forestry waste. The Company has two plants in Navia and Pontevedra (Spain), with a total pulp net capacity of 930,000 tons/year and an installed power capacity of 223MW. Ence also manages forests in Spain.

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Ence Energia Y Celulosa Sa (ENC SM)

Enhanced Limits to Investments in Spanish Companies

Any attempt to acquire over 10% of a Spanish listed company by any foreign investor must be approved by the Cabinet. This could prevent bids of...

Jesus Rodriguez Aguilar

Bottoms-Up View on Developed Markets: Actionable Stocks, Part 2

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index. In today’s report...

Vermilion Research

Opportunities in Global Energy & Materials Stocks

Commodities and related stocks are on the rise. Crude oil, industrial metals, and lumber prices are all breaking out to new highs and related...

Vermilion Research

Pullback Opportunities in European Small Caps

Pullback opportunities are currently in limited supply. While most markets are advancing to 12+ month highs, including the U.S., Japan, and EM,...

Vermilion Research

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