Page 98 - RusRPTOct19

9.2.4 Construction & Real estate corporate news
One of Russia's largest real estate developers Etalon reported 60% year- on-year revenues growth to RUB39.6bn ($0.6bn) under IFRS for 1Q19. The 1Q19 made the first IFRS effort after the consolidation of 51% in Leader Invest (aka Lider) peer acquired by Etalon, on which the developer booked RUB1bn profit. Overall the company posted RUB0.95bn net profit if the reporting quarter as compared to RUB1.2bn loss for 1Q18.
9.2.5 Retail corporate news
Russia's second-largest retailer Magnit will transform its wholesale stores into "cash and carry" format stores, Vedomosti daily reported on September 18. The company has 21 wholesale format stores out of a total of 18,000 outlets, most of which are former hyper- or supermarket facilities. The new format is a typical crossover between wholesale and retail, with minimum investment in store design and packaging, and encouraging bulk purchasing of single items. The stores will also serve SMEs and smaller retailers with wholesale supplies of over 1,000 grocery items. Currently 40% of Magnit's wholesale store turnover caters to small retailers.
Russian toy store Detsky Mir released 1Q19 IFRS results on April 30 that positively surprised on the EBITDA line, but disappointed on net income. The company had previously reported 16% y/y sales growth, with 6.6% y/y increase in LFL and 12.1% y/y expansion of selling space. Nevertheless, the results were robust despite the slowdown.
X5 Retail Group shares have enjoyed the sector’s best performance YTD, climbing 46% vs. a 31% for the RTS. In addition to robust 1H19 revenue growth of 15% at a 7.7% EBITDA margin, the stock has benefited from improving sentiment toward ruble-based stories and offering exclusive exposure to a niche. Our unchanged forecasts anticipate a 2H19 top-line increase of 14% at a 7.3% EBITDA margin, with greater focus on scale over profitability. However, for FY20, we see sales adding only 10-12% y/y, which we believe would weigh on perception of the company as a rapidly growth story and cool investor heels. Last month, X5 Retail Group shares gained 13%, and now offer only a 10% ETR to our 12-mo Target Price of $38. We thus lower them from Buy to Hold. We see limited room for operational surprises in the near term, and believe rerating would require fuel in the form of further improving sentiment toward the retail space. We view a 2020F EV/EBITDA multiple of 6.0x as fair.
Russia's largest retailer X5 Group announced a reshuffle of its format mix for the next two years, with the transformation of the hypermarket (Karusel) format in favour of supermarkets (Perekrestok) and proximity stores (Pyaterochka). As reported by bne IntelliNews, Russia is following the global trend of the downfall of the hypermarket format in favour of smaller retail outlets and delivery options, which X5 has also been actively developing. X5 increased sales by 14% year on year in 2Q19, decelerating slightly from 15.3% seen in 1Q19. The sales showed 15.6% y/y growth for Pyaterochka, 18.1% y/y for Perekrestok, while Karusel hypermarket format saw a 3.6% decline. Overall X5 plans to transform 34 Karusel stores (8 leased, 26 owned) into large Perekrestok supermarkets by early 2021, while closing another 20 leased Karusels by 2022. 37
98 RUSSIA Country Report October 2019 ww.intellinews.com