Turkish Food Retail: Is the stocking-up over? (BIM, Migros stay BUY, SOK downgraded to HOLD)
We take profits after the rally, downgrading SOK (PT TRY 13.5) to HOLD, while maintaining our BUY ratings for BIM (PT TRY 80.7) and Migros (PT TRY 57.9). Since the outbreak of the pandemic, in early- March, Turkish food retailers have gained 60%, on average, supported by the flow of local money to both the food and stock markets. In 1Q20, the stocking-up effect fuelled average headline EBITDA growth of 47% for the sector. For 2Q20E, we expect the food retailers to remain relative winners, with continuing EBITDA expansion at a solid 20%. We also believe that the spike in local fund flows has contributed strongly to the rally in safe havens. In light of 2021E EV/EBITDAs of 10x for BIM and SOK, already c.30% above JMT, we find the latter well priced. Still, we believe that high quality and positive earnings momentum at BIM, and cheap valuation at 2021E EV/EBITDA of 6.4x for Migros, justify a constructive stance on both.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.
Migros Ticaret is a retailing group based in Turkey. Co. offers spacious stores in a wide range of formats and locations whose vast selection of stationery, glass and kitchenware, appliance, book, clothing, and other items along with groceries and other necessities. Co. maintains a store network of 1,004 national and international locations with a national presence in 70 provinces in Turkey's seven geographical regions. Store brand names include M, MM, MMM, 5M, MigroJet, Tansas, Macrocenter and Ramstores. Co. also provides customers alternatives such as internet, call centers, kiosks, catalogues, and mobile shopping networks.
Sok Marketler Ticaret AS. Sok Marketler Ticaret AS, located in Istanbul, Turkey, owns and operates grocery stores. It sells Amigo, Crown, Deren, Evin, Karmen, Lio, Peki, Piyale and Tempo brands. The Company was founded in 1995.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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