September 25, 2024 11:29 GMT
Kesko (KESBV; unrated) final asides
CONSUMER STAPLES
exp. €300m Green 5.3Y Guidance MS+135-40 vs. FV +122
- Books ~€500m are VERY weak, pricing is not bad (-20 in from IPT and it's giving the normal single line grocer discount).
- We don't have a firm view but skewed to see some value at guidance. It will come in as the sector leader on margins (10% on EBITDA).
- Firstly the net 2.5x ceiling translates to net 4.2x including the €2b in store leases and gross 4.5x after removing the small cash on hand. That leaves a sizeable €2.2b in debt headroom. There doesn't seem to be recent history of testing ceiling - more seems to be there for a guideline to M&A appetite; largest was €1.5b in 2016, recent smaller. Re refi supply maturities next 2 years total ~€330m/yr.
- Grocery stores are franchised out (46% of group revenue is wholesale to retailers) but with large control including on store sites and designs, purchasing channels, logistics, brands and digital services (i.e. ex day-2-day seems to have full oversight).
- Finish grocery market share at 2nd place/34.3% (Nielsen) and mgmt estimates it is the leader in online grocery.
- Dividend pay-outs are aggressive with target 60-100% of net income - but to be expected given headline growth.
- We don't see any ownership risk - publicly traded €7.5b market cap equities.
Keep reading...Show less
216 words