Sonae: Limited upside after strong run
Post the Q4 trading statement, we raise EBITDA and earnings estimates for ‘18e-‘20e by an avg of 3% and 5%, respectively. The main driver has been Worten, where we lift the LT EBITDA mg from 3.5% to 4.0% to reflect our stronger conviction on the ongoing turnaround in Spain after several quarters in a row of impressive LfL growth linked to a quite successful omnichannel strategy and shift into smaller stores and tier 2 cities. We also raise MC’s sales and EBITDA by 1%/2% to allow for the sound LfL exit rate from 2017. On the valuation front, the combination of higher EBITDA forecasts for Worten and MC with the 1-yr roll over to 2018 of our SOTP-set valuation has led to an increase in our FV from Eur1.18 to Eur1.33. However, the shares’ 32% jump since mid-November (vs. +8% for the PSI20) has left us with upside potential of just 3% and thus we downgrade our rating from BUY to Neutral.Sonae SGPS is a holding company. Through its subsidiaries, Co. operates in four segments: Sonae MC, which is Co.'s food retail unit that had 478 stores as of Dec 31 2014; Sonae SR, which is Co.'s specialized retail unit, with a presence in the electronics, sports and fashion market and had 522 stores at Dec 31 2014; Sonae RP, which is Co.'s retail real estate unit which manages retail real estate properties of Co.; and investment management, which includes a company that operates in the retail DIY products, building and garden (Maxmat), a travel agency (Geostar), insurance brokers (MDS) as well as Wedo Technologies, Saphety, Mainroad , Bizdirect and Publico.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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