Polish Food Retail: we still see some upside (JMT upgraded to BUY, EUR stays BUY, DNP stays SELL)
We maintain our expectations for the relative outperformance of Jeronimo Martins (JMT) (BUY, price target (PT) EUR 23.7) over Dino Polska (SELL, PT PLN 367), while maintaining a BUY rating for off-benchmark Eurocash (PT PLN 20.7). Within the past 12 months, the Polish food distributors have enjoyed safe haven and inflation shelter status, outperforming the broader market by 27%, on average. Going forward, we expect Dino’s valuation premium over JMT on EV/EBITDA, which exceeds 100% currently, to narrow, driven by converging growth prospects. For JMT, we underline the hidden value in Ara and its c.EUR 900m net cash pile, which is sufficient to open >1k stores in new markets. Finally, we expect Eurocash’s continued restructuring to allow it to extract more value for its shareholders, including tax optimisation opening the doors for future dividend streams. The disposal of the underperforming assets would be an added boost, but we do not see this as being in the cards in the current macro environment.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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