Six stocks for 2011
The Investment Center of Deutsche Bank reveals six stocks on the Spanish Stock Exchange that it considers to be of interest in terms of their potential for this year.
Abertis: The entrance of CVC in the concessionary capital is very good news. We believe that the nature of the venture capital firm will provide Abertis with the dynamism that it was lacking until now. The almost certain non-strategic asset divestitures (Brisa, Atlantia) could lead to extraordinary compensation for shareholders, so our outlook is very positive. The gradual but slow macro improvement in Spain will have a direct impact on the operational improvement of its business..
BBVA: It still has a very solid core. Firstly, its ROE is above the European average, secondly, its focus on commercial banking makes it one of the banks with more visible and recurring income in the Euro zone, and finally, its capital increase has placed it in a comfortable solvency position reinforcing its readiness to face future challenges. In the short term, it still may be pressured by tensions that affect the Spanish sovereign debt.
Iberdrola Renovables: Following the adoption of renewable energy regulations, fear about retroactive premium cuts have disappeared. Therefore, the discount at which it is being traded-nearly 10% of book value, is unjustified, after having been the second worst power company in 2010. Its exposure in the U.S., exceeding 40%, should be one of the great catalysts, especially after the extension of government subsidies.
Repsol YPF: The deposits discovered in the Gulf of Mexico, Venezuela, Peru, Argentina and Sierra Leone, together with confirmation of large deposits in Brazil, have boosted the valuation of the Spanish oil company. Repsol's image as a refining company forced to buy crude oil, has changed under Brufau´s management. We expect good news from Argentina in the coming months.
Indra: It was one of the stocks with the worst performance since the lows of March 2009. In these 22 months it has fallen by 10%, while the sector was revalued by 80%. Fears of margin erosion on contracts signed in 2009 and 2010 have proven unfounded, with the strength of its order book showing tremendous growth potential. Its exposure to the domestic market is shrinking, but we still hope that in 2011 the activity in Spain will grow back after two poor years. Deutsche Bank analysts expect a good year for the company and our new estimates show a 12-month target price of 18 Euro. .
Telefonica: Despite the disappointment of recent results in its Spanish division, we are confident of a sustained recovery in 2011. The flow of news from Latin America remains positive and O2 maintains its strength in its core European markets. It has a high dividend yield and trades at a discount compared to its competitors.