Turkey - Main Takeaways from BIMAS Call
This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.BIMAS - Main Takeaways from BIMAS Call
BIMAS management arranged a conference call on Friday in order to discuss 1Q20 results as well as the outlook for retail sector. BIMAS posted YoY stronger results in 1Q20 which also came in above both our estimate and the consensus. Note that its share price is up by 22% y-t-d, outperforming BIST-100 by ~35%, mainly due to the excess demand from consumers led by partial curfews and change in consumer behaviours because of the Covid-19 pandemic. We maintain our positive view on retail sector as well as BIMAS.
Here are the main takeaways from the call:
• To remind, BIMAS posted TL430mn net profit in 1Q20, higher than consensus expectation of TL376mn net income and our estimate of TL360mn. Revenues grew by 40% YoY to TL12,598mn higher than the consensus expectation of TL11,753mn and our estimate of TL11,573mn. EBITDA (TL 985mn) is also higher than consensus expectation of TL899mn and our estimate of TL862mn. BIMAS’ EBITDA margin of 7.8% was above consensus estimate of 7.6% and our expectation of 7.4%.
• Strong revenue growth derived by the new store openings, strong LFL growth and excess demand in the last two weeks of March following COVID 19 pandemic, which is expected to be prevail during 2Q20 as well.
• The reason behind the higher than expected EBITDA margin is mainly attributable to slight YoY improvement (+0.2pp) in gross margin as a result of favourable product mix coupled by the decline in OpEx/Net Sales ratio due to economies of scale.
• Management stated that non-food product group had a positive impact on gross profitability. Note that the Company sold several electronic equipments such as shavers, televisions, bakery etc. in its stores. Despite it is a common operation, consumer demand increased these type of products because of the change in customer behaviour stemming from Covid-19 pandemic. Management also stated that all type of these product groups had been sold-out in 1Q20.
• Positive impact of Covid-19 pandemic on company financials had started in the last two weeks of March. In April and May, increase in customer demand is more visible. Therefore, management expects its strong growth momentum to maintain in its 2Q20 results as well.
• Egypt and Morocco operations have not been effected as much positive as Turkey operations as the curfews had longer durations than Turkey’. On the other hand, the daily life erosion abided by pandemic was higher than Turkey in these countries.
• In 1Q20, while LfL basket size grew by 24% YoY and we see slight, 0.5%, improvement in LfL daily average customer traffic despite of the service hours limitation because of Covid-19 pandemic. As a result, LfL daily average sales per store increased by 25% YoY. Management expects to see slight negativity on customer traffic in 2Q20 due to the service hour limitations. However strong basket size trend is continuing.
• File, which is in the ramp-up period yet, also showed a strong operational growth and printed net profit in 1Q20. Note that File reached to break-even in terms of EBITDA in 2019. Online channel initiations of File may start at the end of the year. Management had not shared a specific guideline for its online channel initiatives. BIM’s potential online channel is not on the table as of today.
• Following its 1Q20 results, BIMAS has not shared its updated its 2020E guidance. However, the management stated that there is not an update in their CapEx and new store openings plan after its 1Q20 results. Recall that BIMAS guided +23% revenue growth, 7.5% EBITDA margin and TL 1bn of CapEx, indicating around 850 new store openings for FY20.
Bim Birlesik Magazalar is engaged in operating retail stores through its retail shops throughout Turkey, which sell an assortment of approx. 600 items, including a number of private labels. Co.'s object is to offer consumers basic food items and consumer goods at discount prices with quality. Co.'s private labels provides its consumers with quality tasting sausage, salami and similar meat products while at the same time being suitable to the consumers family budget. Products include meat products, breakfast and dairy products, beverages, legumes and bakery, snacks and sweets, fruits and vegetables, frozen foods, and non-food items - cleaning supplies.
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