Jerónimo Martins: Solid numbers and reassuring outlook
JMT’s Q4 EBITDA dropped 1% YoY and missed our estimates and BBG consensus by 4% on the back of soaring HQ costs. Adjusting for the latter, which we see as a one-off, EBITDA rose 4% YoY and was 1% ahead of our forecast on small beats from Pingo Doce, Hebe and Ara, while Biedronka and Recheio performed in line. Perhaps even more importantly, in the outlook section JMT said that it expects to be able to preserve its profitability in 2019e, which we see as quite reassuring for Biedronka, and it guided for lower than we expected EBITDA losses for Ara. The board will propose a Eur0.325 DPS, in line with our forecast, but a minor setback for those hoping for another special dividend. We have raised EBITDA/earnings for ‘19e-‘21e by an avg of 1%/2% mostly on lower Ara losses but our new numbers remain broadly in line with consensus. In this note we have rolled over our valuation to 2019, which has impacted our FV positively by Eur1.2. The higher estimates added a further Eur0.3 and thus our FV rose from Eur15.2 to Eur16.7, offering 26% potential upside. The shares rebounded 28% YTD, beating the SXRP by 12%, but we still see JMT’s 14.5x P/E 19e and 7.6x EV/EBITDA 19e ex-Ara/Hebe as quite attractive for what is essentially the undisputed #1 grocer in Poland. We reiterate our Silver Bullet BUY rating.Jeronimo Martins S.G.P.S. is a holding company. Through its subsidiaries, Co. is engaged as a food distribution company with operations in Poland and Portugal. Co. operates in four segments: Portugal Retail, which comprises the business unit of JMR - Gestao de Empresas de Retalho, SGPS, S.A. (Pingo Doce supermarkets); Portugal Cash & Carry, which includes the wholesale business unit Recheio; Poland Retail, which includes the business unit with the brand Biedronka; and Others, which includes marketing services and representations, restaurants in Portugal, health and beauty retail in Poland, and its retail business in Colombia.
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