Page 120 - RusRPTFeb19

statement on January 21, Vedomosti reported. Kesayev and Katsiyev will own 51% in the merged business, while Studennikov takes 49%. “Monetary instruments allowing to make valuation of the assets equal will be used during the parity merger,” the statement said, as cited by the Russian daily. The three retail have combined over 13,000 stores and the merged company will become the third largest in Russia as a result, according to the statement.
Metro lifts the restrictions on distributing its purchasing cards until 26 December 2018. Metro’s business model in Russia was aimed at corporate shoppers and required the issuance of a dedicated card. Although the card was widely distributed among ordinary clients, this still meant certain limitations on traffic and headwinds to turnover when customer budgets tightened and operating conditions at hypermarkets worsened. Metro, which saw flattish revenues and double-digit negative LFL in 2016-17, was the sixth largest retailer last year. Lifting the restrictions on card issuance is an attempt to promote a wider assortment to regular clients and support traffic. We consider this initiative as placing incremental pressure on the hypermarket format and creating additional uncertainty (depending on its roll out) for performance during the detrimental pre New Year season.
Russian supermarket chain X5 Retail Group opened 746 stores last quarter (versus 795 in the fourth quarter of 2017) taking the total store count to 14,431. It added 2,310 stores last year, versus 2,934 in 2017. Space growth slowed from 28% in 2017 to 18% in 2018.
Russian supermarket chain X5 Retail Group has acquired the leasing rights for four supermarkets that used to operate under Dixy's Victoria brand in the Moscow Region, according to Vedomosti. The paper cites its sources on Dixy's plan to dispose of its Moscow region supermarkets in order to lower overall leverage (2.0x net debt / EBITDA as of 30 September 2018). The supermarkets are operated under the Victoria brand, which the company bought in 2011 for RUB25.6bn ($382mn). The chain runs 129 stores in three areas, including 50 in the Moscow Region. Amid the deceleration in Dixy’s operations, the format has remained profitable of late, offsetting the downbeat performance of the convenience format, Vedomosti reported. “X5 considers the supermarket format as strategically appealing, and anticipates a CAGR of 4.1% in 2017-21. We note that there is no truly federal competitor and the medium-term roll-out prospects are favourable. In late 2017, the company acquired 32 supermarkets from O'Key for RUB 6.7bn and we saw the deal valuations as demanding. The aforementioned four supermarkets likely represent immaterial capex at this point in time, and we anticipate further comments on other Victoria supermarkets,” VTB Capital (VTBC) said in a note. In 2019F, VTBC forecast X5’s revenues to grow 14% y/y and maintain an EBITDA margin close to 7%. Analyst are also expecting a 12-month dividend yield of 4%. The stock is up 8% since the beginning of the year and now trades at 2019F Ev/EBITDA of 5.7x.
Russian supermarket chain Lenta’s disappearing revenue growth in 4Q18. The battle is on for survival in the intense competition in Russia’s supermarket sector. The market is dominated by market leaders Magnit and X5 Retail Group, and following Dixy merger last week, that leaves the number three Lenta playing catch up. Although operations currently take a back seat as far as Lenta’s investment case is concerned, the unimpressive 4Q18 surprised with its significant deceleration in revenue growth (6.6% y/y vs. 12.5% y/y in the previous quarter). Core retail added 11.3% y/y while wholesale halved y/y, reflecting operational risks and supplier reluctance to
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