Polish Food Retail: The good, the expensive, and the ugly (duckling) (Dino stays SELL, Eurocash upgraded to BUY, Jeronimo Martins stays HOLD)
We maintain our expectations of the relative performance of Jeronimo Martins (JMT) (HOLD, price target (PT) EUR 21.8) over Dino (SELL, PT PLN 303), while upgrading Eurocash to a BUY (PT PLN 15.8). Within the past year, both JMT and Dino have performed broadly in line with the broader market, showing more resilience to another spike in COVID-19 woes over the past few weeks. At the same time, Eurocash’s share price has continued its meltdown, losing almost 50ppts in relation to the bull market. Going forward, we see a balanced risk/reward for JMT (9x 2022E EBITDA, regulatory issues) and a risk of de-rating for the high growth/high multiples (a three-year EBITDA CAGR of 28% vs. 21x 2022E EBITDA) story of Dino. At the same time, we believe that the strategic options review pending at Eurocash may allow the ugly duckling to grab some traction. At a 2022E EV/EBITDA of 4.7x, we see the downside as limited, the wholesale core healthy and e-commerce subsidiary Frisco offering growth prospects, if re-capitalised.Dino Polska is engaged in the business of retail sale in non-specialized stores with food, beverages and tobacco. In addition, Co. conducts processing of meats and the resulting products are dedicated, in the form of culinary meat, to external recipients within Co.'s retail chain. As of December 31, 2016, Co. operated a network of 628 Dino stores.
Eurocash, through its subsidiaries, is engaged in the distribution of food products, household chemicals, alcohol, and tobacco products (fast moving consumer goods). Through a range of distribution formats, Co. and its subsidiaries focus its business activities on the wholesale distribution to customers across the wholesale market segments, in particular, to stores throughout Poland such as retail stores, convenience stores at petrol stations, restaurants, hotels and cafeterias. Co. and its subsidiaries operate a range of distribution formats focused on supplying independent stores in Poland, which primarily include: Cash and Carry, Franchise Systems, and Distribution.
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.
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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