Lenta: When two dogs are fighting over a bone... (BUY - initiation of coverage)
In this report, we initiate coverage of Lenta, Russia’s third-largest food retailer, with a BUY rating and price targets (PTs) of USD 8.6/GDR / RUB 486/local share (lcl). We like the company for its attractive combination of: i) solid growth; ii) high-quality operations/ management; and iii) cheap valuation (a 2018E EV/EBITDA of 6.0x). In our view, Lenta’s growth prospects are underpinned by the recovering real income of Russian society, the relatively low penetration of modern formats, the high market fragmentation, its focus on the niches still neglected by the two market leaders, and the lack of competition from state-of-the-art discounters. On top of this, we believe that Lenta could play a crucial role in the consolidation of the Russian market, as both a buyer and a target. Overall, we believe that the company could be a potential beneficiary of the competitive battle of industry giants X5 and Magnit.
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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