One of the consequences of the outbreak of the coronavirus is that new valuations are being generated in the securities that are listed in the equities of our country. Unfortunately, on the downside, although due to the low prices they currently have, there are some listed companies that present a upside potential very interesting. Another of the collateral effects of the current pandemic is that there is a cascade of titles that are announcing the suspension of their dividends, while others are ratifying it. It is a very changing landscape that is exceeding the levels of compression on the part of small and medium investors.
Such is the repercussion of this scenario that since PayPal They are sending all users a notification in which they show that “we are in an unprecedented historical moment, where the COVID-19 pandemic is having a strong impact on the health of our loved ones, and is affecting companies on which we depend, the good state of the world economy, as well as our daily lives. ”This is a company that is listed on the US stock market, being an online payment system that supports money transfers between users and serves as an electronic alternative to traditional payment methods like checks and money orders.
Because it may be that after the resolution of this serious health incident, the equity markets will not even return to what they were. To the extent that some companies may stop trading from now on. While the rest will do so with a much lower stock market valuation than until a few months ago. From this point of view, everything indicates that it will be a very changing market in which it will be necessary to operate with particular speed since the money is at stake. There is no doubt that there will be a before and an after, as in relation to the political and social order. Nothing will return will be the same from these days or weeks.
Has a soil formed?
One of the aspects that most interest small and medium investors is whether the Ibex 35 has formed a floor or if, on the contrary, we are still going to see lower levels in the coming weeks. The key level is constituted in the 6.000 points and that is the base where the rebound of the last week has started. If it were demolished, it could go up to very close to 5.000 points, which would be the level set in 2002. In this sense, one of the keys to which a large part of financial analysts allude is that the key may reside in that there is progress in the fight against the coronavirus in terms of the number of people affected and fatalities.
While on the other hand, what happens in the next two or three weeks will be decisive to show what the trend of the equity markets will be apart from that moment. Because it cannot be ruled out that the current rebound It is a movement to clear the strong oversold maintained by the values. But not as a performance that signifies a change in trend that can encourage opening positions. Only in short-term operations is there the occasional guarantee of success as long as it occurs with a large adjustment in the purchase and sale prices. Due to the great volatility that financial markets present these days. With levels above 10% in many cases.
On the other hand, not all the values will have the same behavior since the differences between one or the other can reach levels of 4% or 5%. Where their selection is going to be a determining factor for the profitability of the operation, at least in the short term. In this sense, it cannot be forgotten that despite everything there have been values with positive balances in these difficult days. As in the specific cases of Grifols or Viscofan which have been minimally reinforced since the beginning of March. And that at the moment they are acting as safe havens against a good part of the monetary flows of the large investment funds.
Operations are guaranteed
Faced with the Covid-19 crisis and with the exceptional measures that are being applied throughout Europe, the Stock Exchanges have mobilized to successfully implement their business continuity plans to guarantee the continuity of the markets. Since the beginning of the Covid 19 crisis, the Stock Exchanges are fully operational and they have implemented their business continuity plans, in accordance with the relevant provisions. The markets remain open to all and perform well in these extreme market conditions. These plans ensure that everything works satisfactorily, including in the context of 'work from home' protocols, and have been implemented in close cooperation with the supervisory authorities.
In equity markets, on the other hand, as highly regulated entities, operational resilience is not just a choice, but a commitment and a requirement. Exchanges are continuously monitored with regular surveillance to ensure we remain robust and reliable in a wide spectrum of scenarios, including a pandemic.
Review of some values
Bankinter's analysis department is reviewing the status of some securities listed on the equity markets. The face is represented by the electricity company Endesa that mantures its commitment to shareholder remuneration assumed in its strategic plan of a total dividend corresponding to fiscal year 2019 of 1,475 euros per share. This represents the delivery of more than 1.500 million euros of dividend to its shareholders. Enel, owner of 70% of the company's share capital, will receive almost 1.100 million euros. In this way, Endesa will submit to its general meeting of shareholders, scheduled for next May 5, the payment of the complementary dividend that will be paid in the month of July, and that, with the 0,7 euros paid last January on account, it will raise the total remuneration for 2019 to 1,475 euros per share, which represents an increase of 3% over the dividend charged to the results of 2018.
From Bankinter they show that Endesa has three key factors that place it in a good situation to be able to maintain the dividend despite the coronavirus crisis. First, 63% of its EBITDA comes from regulated electricity distribution activities, which is established based on a return on an asset base and which is independent of the evolution of economic activity. The liberalized electricity generation and commercialization business will be affected by the crisis, but not as much as other industries.
Lastly, Endesa has a very healthy financial situation with a Net Debt / EBITDA ratio below 1,7x. Last November, Endesa updated its strategic plan for the 2019-2022 period, in which it plans to distribute some 5.970 million euros in dividends among its shareholders in those four years. The dividend expected to be distributed against the results of 2020 is 1,60 euros per share, payable in 2021. Consequently, they choose to purchase their securities with a target price that is set at 27,30 euros per share.
The cross is AENA
Bankinter's analysis department and with regard to this listed company is less optimistic. By estimating that the number of Aena passengers accumulates a drop of -45,5% so far in March, although it has accelerated to -97% in recent days. Therefore, its traffic forecasts for 2020 are no longer valid (+1,9%). To cushion the impact, Aena has reorganized the activity of its airports with the aim of temporarily reducing costs by approximately 43 million euros per month. In addition, it has temporarily paralyzed its investment program (52 million euros per month). Aena has a liquidity of 1.350 million euros, with the possibility of increasing it by 900 million euros with Euro Commercial Paper (ECP) programs and signing new facilities and loans. The dividend decision is postponed until the meeting is held, with no date at this time.
The opinion of the entity in charge of carrying out the analysis is that “although it is still early to estimate the final impact of the virus, if we assume that the 3-month income is totally lost and that the activity normalizes afterwards, the impact of the Coronavirus AENA's EPS 2020, and foreseeably also in its dividend, would be close to -65% and net debt would increase +10% to about 7.300 million euros. However, the impact on valuation would be only -4%. We maintain the recommendation of neutral ”. With a target price of 171,90 euros for each share. Due to the great volatility that financial markets present these days. With levels higher than 10% on many of the occasions and which hinders a good part of the operations on the stock market.