Page 108 - RUSRptSept18

an improvement, but this was mainly due to seasonality,” VTBC said. X5’s leverage had increased to almost 2.2x as of 30 June 2018, from 1.7x at YE17, which we think was due to new financing attracted so as to distribute dividends. The effect from a higher level of debt translated into a higher interest expense. Net operating cash flow and capex were broadly flat q/q. “X5 trades at 2018F EV/EBITDA of 6.0x and 12.0x P/E, which we view as attractive levels relative to peers given that we see 2018-20F CAGRs of 14% for sales and 9% for EPS. We also think that the company offers better visibility and predictability relative to its peer group,” said VTBC.
Russia's leading retailer X5 Group opened its first "dark store" in Moscow , the company said on August 21. Dark stores are a large retail outlet facility or distribution centre that caters exclusively for online shopping and is open only to retailer's workers. While X5 continues its rapid expansion in the northwest regions of Russia , reports previously suggested that store openings in Moscow and St Petersburg could be capped by the Federal Antimonopoly Service (FAS) watchdog. Coupled with the decline of the hypermarket format in general, X5 opening the dark store for its Perekrestok format could be aimed to boost online sales. The store could help to increase Perekrestok online sales 3.5-fold, X5 claims in the press-release. Previously the dark store facility costs were estimated at RUB70mn-90mn by Kommersant d aily. Similar stores are run by foreign retailers, such as Sainsbury's and Tesco. In June X5 also launched a pilot project to test the “Vyruchai-Kassa” self-service checkout machines with voice assistance in Russian, English and Chinese at two of its Pyaterochka format stores in Moscow. Another 10 stores are to be equipped with the service by the end of 2018, the company said. X5 is in intense rivalry with retailer Magnit, but in 2Q18 it came out ahead with a strong set of IFRS results . The company's Ebitda of RUB29bn beat the consensus expectations by 4% and the Ebitda margin of 7.5% was up 150bp q/q, primarily due to the seasonally lower share of selling, general and administrative (SG&A) expenses helped by the 20bp q/q gross margin expansion, VTB Capital (VTBC) said in a note on August 15. “The bottom line was weaker than market expectations due to the higher depreciation expense and income tax rate. We think that the latter is less important and that the stock is already more attractive after its 14% drop in the last ten days. The company’s sales growth is in line with our FY18F forecast of around 19% y/y and management’s guidance of a 7+% Ebitda margin,” VTBC said.
Russian electronics retailer M.Video reported 42% year-on-year growth in revenues in January-June 2018 to RUB118bn ($1.75bn), with the 40% y/y increase in online sales to RUB15.5bn. the company's Ebitda almost doubled y/y to RUB9bn, with the margin jumping 210pp to record-high 7.6%. Net income came in at RUB4.7bn, up 88% y/y, with a net margin of 4%. M.Video has recently merged with Eldorado electronics retailer, the companies controlled by Russian Safmar Group of billionaire Mikhail Gutseriev combined in a mega-merger creating an unrivalled national retail champion as big as any company in the rest of Europe . Last month Safmar also said it will acquire MediaMarktSaturn electronics retailer owned by the German Ceconomy . Inclusion of two months of Eldorado's results into M.Video financials boosted the revenues. "Stripping that out, revenue growth was just 16.5%, or 13.8% on an like-for-like basis," Sberbank CIB commented on August 28. Still, the adjusted revenue growth was ahead of the 14.8% growth in the consumer electronics market. M.Video's Ebitda not accounted for Eldorado could be even higher, tripling y/y, as Eldorado had been loss-making on the Ebitda level in 1H17. The management also reported RUB2.3bn in synergies from the merger in and target synergy gain of RUB4bn for the full year 2018. The management reiterated its full-year guidance of RUB340bn in revenues and RUB19bn in Ebitda, while presenting "a clear strategy for how the two brands will be developed, with Eldorado positioned as an easy and convenient place for bargain-shopping, whereas M.Video targets the premium market with "A-level" brands and a full spectrum of services," Sberbank notes. "The results were clearly positive and reconfirmed the company's superior fundamentals,
108 RUSSIA Country Report September 2018 www.intellinews.com