Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Investors should ignore the news around restructuring....it's nice but basically irrelevant</li>
<li>The long-term valuation proposition is driven by the core convenience store businesses in the US and Japan</li>
<li>Unlike Walmart, we think 7&amp;I should have a good quarter in the US and beat analyst expectations for Q1</li>
</ul>


Investors should ignore the news around restructuring....it's nice but basically irrelevant
The long-term valuation proposition is driven by the core convenience store businesses in the US and Japan
Unlike Walmart, we think 7&amp;I should have a good quarter in the US and beat analyst expectations for Q1


Seven & I (3382) | So What if Walmart Missed

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Auchan, together with private equity, explores a possible €23.5/share offer for <a href="https://www.smartkarma.com/entities/carrefour-sa" target="_blank" data-smartkarma-citation="entities:21409:1" rel="noopener">Carrefour SA (CA FP)</a> (pro forma €105 billion revenues and 500,000 employees), after last October's attempt failed. Synergies should be sizeable. </li>
<li>On a simple LBO model, at year 5, the cumulative IRR would be 15.0%, and leverage would be 3.8x. Anti-trust and political hurdles are to be expected.</li>
<li>The creation of a French champion, should likely be favoured by French politicians. Recommendation is long CA FP, underpinned by a 22e 9.6% FCF yield, with potential offer upside.</li>
</ul>


Auchan, together with private equity, explores a possible €23.5/share offer for Carrefour SA (CA FP) (pro forma €105 billion revenues and 500,000 employees), after last October's attempt failed. Synergies should be sizeable. 
On a simple LBO model, at year 5, the cumulative IRR would be 15.0%, and leverage would be 3.8x. Anti-trust and political hurdles are to be expected.
The creation of a French champion, should likely be favoured by French politicians. Recommendation is long CA FP, underpinned by a 22e 9.6% FCF yield, with potential offer upside.


Auchan/Carrefour: Ongoing Merger Plans, LBO

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

PTT Oil & Retail Business  / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/ptt-oil-and-retail" target="_blank" data-smartkarma-citation="entities:28939:1" rel="noopener">PTT Oil and Retail (OR TB)</a>/PTTOR is the flagship company for the oil and retail business of <a href="https://www.smartkarma.com/entities/ptt-pcl" target="_blank" data-smartkarma-citation="entities:197:1" rel="noopener">PTT PCL (PTT TB)</a> in Thailand and in the Southeast Asia region such as Cambodia, Laos, Myanmar and Philippines. PTTOR is the largest player in Thailand’s fuel retail market. PTTOR priced its IPO at THB18.00 per share, at the upper end of its IPO price range of THB16.00-18.00 per share. The shares are set to start trading on Thursday, 11 February. </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/ptt-oil-and-retail-pttor-ipo-initiation-octane-ratings" target="_blank" data-smartkarma-citation="insights:46230" rel="noopener">PTT Oil and Retail (PTTOR) IPO Initiation: Octane Ratings</a>, we stated that PTTOR remains a market-leading business and well-placed to ride the recovery in oil prices, easing of lockdown restrictions and consumer confidence.</p>
<div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ptt-oil-and-retail-pttor-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:47147" rel="noopener">PTT Oil and Retail (PTTOR) IPO: Valuation Insights</a>, we opined that a reasonable P/E valuation and solid cornerstone support makes PTTOR tempting at the proposed pricing range. Our base-case DCF derived price target of THB22.20 per share. Our valuation analysis shows that the IPO price remains attractive.</p></div>
</div>

PTT Oil and Retail (OR TB)/PTTOR is the flagship company for the oil and retail business of PTT PCL (PTT TB) in Thailand and in the Southeast Asia region such as Cambodia, Laos, Myanmar and Philippines. PTTOR is the largest player in Thailand’s fuel retail market. PTTOR priced its IPO at THB18.00 per share, at the upper end of its IPO price range of THB16.00-18.00 per share. The shares are set to start trading on Thursday, 11 February. 
In PTT Oil and Retail (PTTOR) IPO Initiation: Octane Ratings, we stated that PTTOR remains a market-leading business and well-placed to ride the recovery in oil prices, easing of lockdown restrictions and consumer confidence.
In PTT Oil and Retail (PTTOR) IPO: Valuation Insights, we opined that a reasonable P/E valuation and solid cornerstone support makes PTTOR tempting at the proposed pricing range. Our base-case DCF derived price target of THB22.20 per share. Our valuation analysis shows that the IPO price remains attractive.


PTT Oil and Retail (PTTOR) IPO: Trading Debut

<div><p><a href="https://www.smartkarma.com/entities/ptt-oil-and-retail" target="_blank" data-smartkarma-citation="entities:28939:1" rel="noopener">PTT Oil and Retail (OR TB)</a>/PTTOR is the flagship company for the oil and retail business of <a href="https://www.smartkarma.com/entities/ptt-pcl" target="_blank" data-smartkarma-citation="entities:197:1" rel="noopener">PTT PCL (PTT TB)</a> in Thailand and in the Southeast Asia region such as Cambodia, Laos, Myanmar and Philippines. PTTOR is the largest player in Thailand’s fuel retail market.</p></div><div><p>PTTOR has launched its IPO at a price range of THB16.00-18.00 per share to raise as much as THB47.0 billion ($1.6 billion). Cornerstone investors will account for around two-thirds of the offer shares. Nine international cornerstones which include Fidelity, JP Morgan Asset Management and GIC will take up $270 million of the offer shares. Nineteen domestic cornerstone investors will take up $758 million of the offer shares. The books will open on 22 January and the first day of trading is set for 11 February. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ptt-oil-and-retail-pttor-ipo-initiation-octane-ratings" target="_blank" data-smartkarma-citation="insights:46230" rel="noopener">PTT Oil and Retail (PTTOR) IPO Initiation: Octane Ratings</a>, we stated that PTTOR remains a market-leading business and well-placed to ride the recovery in oil prices, easing of lockdown restrictions and consumer confidence. Overall, we think that a reasonable P/E valuation and solid cornerstone support makes PTTOR tempting at the proposed pricing range. </p></div></div></div>

PTT Oil and Retail (OR TB)/PTTOR is the flagship company for the oil and retail business of PTT PCL (PTT TB) in Thailand and in the Southeast Asia region such as Cambodia, Laos, Myanmar and Philippines. PTTOR is the largest player in Thailand’s fuel retail market.PTTOR has launched its IPO at a price range of THB16.00-18.00 per share to raise as much as THB47.0 billion ($1.6 billion). Cornerstone investors will account for around two-thirds of the offer shares. Nine international cornerstones which include Fidelity, JP Morgan Asset Management and GIC will take up $270 million of the offer shares. Nineteen domestic cornerstone investors will take up $758 million of the offer shares. The books will open on 22 January and the first day of trading is set for 11 February. In PTT Oil and Retail (PTTOR) IPO Initiation: Octane Ratings, we stated that PTTOR remains a market-leading business and well-placed to ride the recovery in oil prices, easing of lockdown restrictions and consumer confidence. Overall, we think that a reasonable P/E valuation and solid cornerstone support makes PTTOR tempting at the proposed pricing range. 

PTT Oil and Retail (PTTOR) IPO: Valuation Insights

<p><a href="https://www.smartkarma.com/entities/carrefour-sa" target="_blank" data-smartkarma-citation="entities:21409:1" rel="noopener">Carrefour SA (CA FP)</a> 's shares have fallen this Thursday, 14 January, after the French government yesterday showed its opposition to a possible merger with the Canadian company <a href="https://www.smartkarma.com/entities/alimentation-couche-tard-inc-544efbde-b153-4672-afd6-c4979a9734ee" target="_blank" data-smartkarma-citation="entities:25108:1" rel="noopener">Alimentation Couche-Tard (ATD/B CN)</a>.</p>
<ul class="">
<li>Shares of Carrefour chain began the session with a fall of over 6.8% in the first 10 minutes of trading and closed 2.5% lower at €17.10.</li>
<li>The French Government, inclined to veto purchases of local companies by foreign firms, said yesterday, through its finance minister, that "a priori" it opposes the takeover.</li>
</ul>
<p>Following a Bloomberg <a href="https://www.bloomberg.com/news/articles/2021-01-12/circle-k-owner-couche-tard-said-to-explore-purchase-of-carrefour" target="_blank" rel="noopener">report</a>, on 13 January Alimentation Couche-Tard confirmed that it had been discussing a friendly transaction to acquire Carrefour for €16.4 bn. Under the terms, the offer per share will be €20 per Carrefour share, expected to be mostly in cash. The terms of the transaction are under discussion and remain subject to due diligence.</p>
<p>The Canadian group of convenience stores seeks to acquire the French supermarket company to forge the third largest group worldwide by turnover, with €120 bn.</p>
<p>The unexpected move by Couche-Tard, which Carrefour described as “friendly” but “very preliminary”, comes at a time of price wars due to the rise of super discount chains; <span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">transformation of the business due to the strength of online commerce giants such as Amazon; and the pandemic driven difficulties, which have spurred the online channel to the detriment of physical stores.</span></p>
<ul class="">
<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">Couche-Tard and Carrefour would create a giant with very different formats and complementary at a geographical level, but with <em>little margin for synergies and cost savings</em>.</span></li>
<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">If approved, the transaction would be by far and large the largest in the relatively short history of Couche-Tard, with non-negligible execution risk.</span></li>
<li>The move by the Canadian company is opportunistic and lacks any obvious synergies and strategic merit, in my view. The interest of Couche-Tard is mainly because of the low valuation of Carrefour (€15.46 per share prior to the disclosure).</li>
</ul>
<p>If anything, the news highlight the <strong>lowly valuation Carrefour had</strong> before the disclosure, at c. 6.2x EV/Fwd EBITDA vs. median of comparables at c. 7.4x and Couche-Tard at at c. 8.5x (Capital IQ consensus) despite strong improvements in the business over the past two years.</p>
<p>I value Carrefour using a DCF based approach (FCF Capital IQ consensus estimates, 7.3% WACC and 1.5% terminal growth) with a <strong>PT of €17.8</strong> (vs. a €19 median of Capital IQ consensus).</p>
<ul>
<li>On this basis, I recommend <strong>LONG CA FP</strong>.</li>
<li>The approach highlights the sector's strong cash generation and relatively low valuation on fundamentals.</li>
</ul>

Carrefour SA (CA FP) 's shares have fallen this Thursday, 14 January, after the French government yesterday showed its opposition to a possible merger with the Canadian company Alimentation Couche-Tard (ATD/B CN).

Shares of Carrefour chain began the session with a fall of over 6.8% in the first 10 minutes of trading and closed 2.5% lower at €17.10.
The French Government, inclined to veto purchases of local companies by foreign firms, said yesterday, through its finance minister, that "a priori" it opposes the takeover.

Following a Bloomberg report, on 13 January Alimentation Couche-Tard confirmed that it had been discussing a friendly transaction to acquire Carrefour for €16.4 bn. Under the terms, the offer per share will be €20 per Carrefour share, expected to be mostly in cash. The terms of the transaction are under discussion and remain subject to due diligence.
The Canadian group of convenience stores seeks to acquire the French supermarket company to forge the third largest group worldwide by turnover, with €120 bn.
The unexpected move by Couche-Tard, which Carrefour described as “friendly” but “very preliminary”, comes at a time of price wars due to the rise of super discount chains; transformation of the business due to the strength of online commerce giants such as Amazon; and the pandemic driven difficulties, which have spurred the online channel to the detriment of physical stores.

Couche-Tard and Carrefour would create a giant with very different formats and complementary at a geographical level, but with little margin for synergies and cost savings.
If approved, the transaction would be by far and large the largest in the relatively short history of Couche-Tard, with non-negligible execution risk.
The move by the Canadian company is opportunistic and lacks any obvious synergies and strategic merit, in my view. The interest of Couche-Tard is mainly because of the low valuation of Carrefour (€15.46 per share prior to the disclosure).

If anything, the news highlight the lowly valuation Carrefour had before the disclosure, at c. 6.2x EV/Fwd EBITDA vs. median of comparables at c. 7.4x and Couche-Tard at at c. 8.5x (Capital IQ consensus) despite strong improvements in the business over the past two years.
I value Carrefour using a DCF based approach (FCF Capital IQ consensus estimates, 7.3% WACC and 1.5% terminal growth) with a PT of €17.8 (vs. a €19 median of Capital IQ consensus).

On this basis, I recommend LONG CA FP.
The approach highlights the sector's strong cash generation and relatively low valuation on fundamentals.


Carrefour - Alimentation Couche-Tard Non-Binding Offer

Canada

Alimentation Couche-Tard Inc. owns and operates convenience store. The Company offers a wide range of merchandise, including coffee, snacks, beverages, grocery products, beer and wine, and lottery tickets, as well as fuel and other services. Alimentation Couche-Tard serves customers globally.

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Alimentation Couche-Tard (ATD/B CN)

Seven & I (3382) | So What if Walmart Missed

We expect the core Convenience business in the US and Japan to perform strongly. This is the key driver of valuations. We expect Q1 results to...

Mark Chadwick

Auchan/Carrefour: Ongoing Merger Plans, LBO

The possibility of a new French champion, which would avoid falling in the hands of private equity. The LBO maths add up and synergies could be...

Jesus Rodriguez Aguilar

PTT Oil and Retail (PTTOR) IPO: Trading Debut

PTTOR priced its IPO at THB18.00 per share and the shares are set to start trading on 11 February. Our valuation analysis shows that the IPO price...

Arun George

PTT Oil and Retail (PTTOR) IPO: Valuation Insights

PTTOR has launched its IPO to raise as much as THB47.0 billion ($1.6 billion). A reasonable P/E valuation and solid cornerstone support make PTTOR...

Arun George

Carrefour - Alimentation Couche-Tard Non-Binding Offer

The move by ATD is opportunistic and lacks any obvious synergies and strategic merit, in my view, and lies in the low valuation of Carrefour....

Jesus Rodriguez Aguilar

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