Eurocash: Frozen 3.0 (upgraded to HOLD)
We close our negative call on Eurocash, upgrading the name to HOLD from Sell, with our 12M price target (PT) trimmed to PLN 17.1 (from PLN 18.5). While we see its cheap valuation, at our 2020E EV/EBITDA of 6.6x, as limiting further downside risk, we see the stock as a value trap for now, for the following reasons. First, we believe that the successful restructuring of the core wholesale assets has been priced in by the market already. Second, we see all the upside potential as hidden in the continuously underperforming retail segment. We expect the publication of a new retail strategy later this year, and its visible impact on the financials no earlier than in 2H21E. Finally, e-commerce remains too small (0.9% of total sales in 2021E) to move the needle in the short term, in our view.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.
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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