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Jerónimo Martins: Q4 results unveil a few disappointments

JM’s Q4 EBITDA rose 8% YoY to Eur253m, missing our forecast and BBG consensus by 2.7% and 1.5%, respectively. Biedronka’s margin was flat YoY at 7.5% and in line with our forecast. However, there were small misses in Portugal, Colombia and especially at the corporate centre. Moreover, depreciation rose 20% YoY, which coupled with a high tax rate and bigger minorities led earnings to be flat YoY at Eur102m and miss our forecast and consensus by 19%. Capex reached Eur724m in ‘17 and should stay in the Eur700-750m range in ‘18e, well above consensus (Eur616m). Last but not least in the negatives camp, JM guided for Ara and Hebe losses only slightly below the Eur85m posted in ‘17. On a more positive note, JM will pay another special dividend that effectively doubles the pay-out to 100% of net income (Eur0.613 DPS). We cut EBITDA/earnings for ‘18e-‘20e by an avg of 2%/5%, mostly on the back of higher losses at Ara and the corporate centre, as well as higher depreciation across the board. Our new EPS is 2%/5% below consensus in ‘18e/‘19e. Likewise, our FV drops from Eur17.0 to Eur16.5 but we retain our Neutral rating. The shares are likely to open lower today as they have outperformed the SXRP Index by 8% YTD and there was limited room for setbacks. Having said that, even on our lower estimates JM still offers an attractive combination of high and visible EPS growth (9% CAGR 17-20e) and a sector leading DY (4.7% avg for 18e-20e), which should provide support to the shares.