Fourlis | COVID-19 scenarios
Stress-testing estimates for various COVID-19 scenarios – In this note, we build on our recent work on OPAP and Jumbo, extending our COVID-19 scenario modelling to Fourlis. The scenarios we examine model a €13m-€49m swing in 2020e EBITDA vs our current numbers (which assume full lockdown until April, with strong bounce-back in H2). We find that, after having secured extra liquidity of €50m, Fourlis has built enough war chest to handle a store closure period even beyond the end of 2020. We also argue that thanks to Fourlis’s investment in e-commerce in previous years, digital sales will help the group suffer minimal cash burn during the suspension period, thereby protecting its existing liquidity.The scenarios – We are modelling the following scenarios: 1) Suspension of shops throughout Q2, with c6.5% bounce-back in H2. 2) A full suspension throughout Q3, with re-acceleration in Q4 and full normalization in 2021, with 2021 sales just 4% lower than in 2019. 3) Similar to Scenario 2, but with the additional assumption that the prolonged period of shutdown and the resulting severe disruption in economic activity trigger a recession resulting in 2021e revenues shaping c11% below the levels of 2019, and 2021 EBITDA (pre IFRS16) returning to 2015 levels (c€32m).
Mitigating actions – Fixed costs stand at c€14.5m/month but mgt expect this to be reduced to c€7m by virtue of recent measures announced by the govt (salary subsidies, rent relief programs etc). In our modelling, we have assumed c70% of the cost saves targeted by mgt. On the cash flow front, mgt has already pointed to credit flexibility being agreed with major suppliers. Under a bear scenario of extended lockdown, we believe further support by InterIKEA would come into play, similar to the experience of the Greek crisis in 2012-14, thereby protecting working capital.
Valuation – Fourlis is trading at c6.5x 2020e adj. EV/EBITDAR, significant discount to the LT average. Assuming return to normality in 2021, the valuation falls to c5x. Our modelling exercise yields a 12m fair value range between €3.1 (closure until September & recession) and €4.9 (current estimates, lockdown ends in April), thereby pointing to a very compelling risk-reward profile for long-term investors.
Co. is engaged in the manufacture, import and distribution of electrical household appliances and the manufacture of FOURLIS kitchen hoods. In addition, through a subsidiary, Co. is engaged in the operation of a retail chain.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
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