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(2.2x increase), average selling price +8.3% YoY. Increasing cash flows should allow the company to cut debt and improve liquidity over the course of the next few years. The success of Morton's assets' integration, and its effect on profitability, will be one of the decisive factors for PIK's credit rating (confirmed at B with negative outlook in December).
9.2.5 Retail corporate news
X5 Retail Group published 1Q17 trading update that confirms it as the clear market leader . X5 Retail Group’s revenue growth rate of 26.4% y/y was in line with the latest comments from management, and highlighted the strongest sector performance. March positively surprised with 27.9% y/y consolidated and 32.6% y/y Pyaterochka top-line advances. Magnit its main competitor is expected to grow by only 5% in 1Q17, so X5 Retail Group could become 9% larger in terms of revenues and, thus, the clear market leader. After publishing 2016 financial results and beating Magnit in terms of food sales, X5 became the top pick of the sector by a broad analyst consensus .
Detsky Mir reported its 1Q17 operating results on April 10 . Revenue increased 27% y/y to RUB20.8bn, driven by the growing maturity of stores opened in 2016 and 2015, and LfL sales growth. 1Q17 LfL sales rose 11.2% y/y, driven by 13.2% y/y traffic growth, albeit it was partially offset by a 1.9% y/y decline in the average check. However, revenue growth slowed relative to 1Q16 (when sales climbed 34% y/y). During 1Q17, the company opened two Detsky Mir branded stores, while it closed two Detsky Mir and four ELC stores for relocation. The company reiterated its 2016 guidance of opening at least 70 new stores. The market reacted negatively to the announcement (the stock dropped 5.6% yesterday vs. a 2.5% loss for the MICEX Index). We think the downward correction following the recent rally (the stock gained some 20% after a trough on 20 March) is likely to continue in absence of other catalysts.
Russian supermarket chain Lenta reported weak 1Q17 trading results.
Total sales growth decelerated to 17.2% y/y and RUB77.9bn, compared to a 20.9% increase for 4Q16. LfL sales declined 1.7% y/y driven by a 2% decrease in traffic, and a 0.3% increase in LFL ticket. The company opened four new hypermarkets, and four new supermarkets in 1Q17, and reiterated its guidance to open about 30 hypermarkets and 50 new supermarkets in 2017. Lenta moved part of its capex in 2017 to 1H18, and as a result 2017 capex will decrease to RUB30-35bn from RUB40bn.
9.2.6 TMT corporate news
Russian retail bank Tinkoff announced its intention to launch a virtual mobile operator in the network of Tele2. “We understand that you’re tired of the ‘big three’ monopoly, their terrible service, horse tariffs, and tricks,” the bank’s main owner Oleg Tinkov wrote on Facebook, referring to Vimpelcom, MTS, and MegaFon mobile operators. Vedomosti reports that the launch is planned for the end of 2017 or beginning of 2018.
Russian billionaire and ex-presidential candidate Mikhail Prokhorov is preparing to sell the RBC media holding and business news portal to ESN group of Grigory Berezkin, Vedomosti daily reported on April 12, citing three sources close to the deal. The deal could be closed by May 1, they said. Prokhorov is reportedly being forced to sell RBC, the reporting of which has
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