Page 79 - RUSRptAug18

previous quarter . For January-June overall the top line was up 14% y/y versus consensus expectations of 17% y/y for 2018. The results in the second quarter continued the trend of falling short of expectations, VTB Capital said on July 16, noting that the retailer offers different explanations for the undershoots each time. In the reporting quarter Detsky Mir attributed the underperformance to the pressure coming from temporary store closures following greater oversight from state officials of all shopping centres after the major accident in the Kemerovo shopping mall in March. VTB Capital believes that the third quarter "is likely to show a q/q sales acceleration, absent one-off factors."
Russian supermarket chain Lenta has released an unimpressive the second quarter of 2018 trading update , with revenue growth of 16.6% y/y vs. near 20% y/y in the first quarter of 2018 . This takes the first half of 2018 growth to 18.2% y/y. The key reason for the slowdown was lower LFL ticket growth, which, apart from weaker inflation this quarter, was affected by one-off factors, such as the FIFA World Cup and post-Kemerovo tragedy health and safety checks of retail centres. the second quarter of 2018 selling space expansion ran according to the annual guidance of 20 hypermarket and 50 supermarket openings. Despite the fact that one-off factors will dissipate, we do not expect any rebound in sales growth in the second half of 2018 ; the more cautious tone on store openings is the reason for cutting our openings expectations. Profitability for the first half of 2018 dipped 70bp y/y. Thus, we reduce our 2018-22 total selling space forecast 9% and EPS 15%. We now see 12% 2018-22F sales CAGR. We expect Lenta to turn FCF positive next year and forecast the FCF yield to grow to 5% by 2022. Our new 12-month TP is thus 30% lower than before, $6.00, implying a 15% ETR. We thus revise our recommendation to Hold from Buy.
Russian supermarket chain O’Key has released its the second quarter of 2018 trading results . They show a 10.6% y/y correction in revenue, primarily reflecting the disposal of its supermarkets. Adjusted for that, revenues fell 2.5% y/y vs. the 0.7% y/y the previous quarter. The company is not expanding its hypermarket base, while its discounters are yet to accelerate their pace in the second half of 2018 . During the quarter, O’Key suffered from the slowdown in CPI, less favourable y/y weather conditions and operational limitations associated with the FIFA World Cup. We see the the first quarter of 2018 trading figures as having created downside risks to our model. The stock has lost 12% YTD to trade at a 2018F EV/EBITDA of 6.4x, on our numbers, which we view as demanding. The company has scheduled a conference call for today at 18.30 Moscow time. Our unchanged 12-month Target Price of $2.15 implies an ETR of 1%: Hold reiterated.
Russian supermarket chain Magnit released its the second quarter of 2018 financial results in July . The top line was up 6.5% y/y in the second quarter of 2018 , to R306.7bn, with a 5.2% y/y decline in LFL sales. These results marked a further deterioration from the 8.0% revenue growth and 3.7% decline in LFL sales in the first quarter of 2018. The comparison base became more difficult in the second quarter of 2018 , which we estimate shaved off 0.6 pp from top-line growth. The rest came from lower inflation (as evidenced by the 3.2% drop in the LFL ticket) and a slowing ramp-up of newly opened and renovated stores (LFL traffic fell 2.1%). The company posted its slowest revenue growth of the quarter in May, when revenues were up just 3.9% y/y, but growth picked up to 7.6% in June. The retailer added 220 convenience stores in the second quarter of 2018 on a net basis, which was significantly
79 RUSSIA Country Report August 2018 www.intellinews.com