Jumbo AGM update Short memo (Beta Sec).

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Manos Chatzidakis	10:42 π.μ. (Πριν από 16 λεπτά)

As expected, Friday’s AGM approved a DPS of EUR0.18 for fiscal 2014 (01/07/13-30/06/14), implying a dividend yield of 2.02% from current price levels.

The stock trades ex-dividend on October 22; record date October 23. Dividend payment will commence on October 30, 2014.

Q1 2015 group top-line rose 10.92% y-o-y (vs over 10% increase announced on October 1) to EUR145.5m against EUR131.2m a year earlier, driven by L-F-L sales rebound Greece (thanks to a more benign economic backdrop), as well as double digit growth rates in Cyprus (higher penetration) and Bulgaria (stronger brand awareness).

For fiscal-2015e, we look for group sales, EBITDA and net earnings of EUR593m, EUR160m and EUR113m, rising 9%, 10% and 12% y-o-y, respectively.

Key growth drivers:

¡  Domestic 2015e-16e L-F-L sales uptrend, +3-4% y-o-y vs -1% in 2014a (on improved market conditions),

¡  vigorous network expansion; six new store rollouts through fiscal 2015 (2 in Greece, 1 in Cyprus & 3 in Romania), raising total to 72 PoS,

¡  resilient gross margin (52.6%).

Valuation & rating

¡  Overweight rating; TP at ΕUR11 (COE of 11% to account for elevated macro/political risk), implies 24% potential upside

¡  At 10.7x 2015e PE and 6.6x EV/EBITDA, Jumbo trades at deep discounts vs its global peers, while offering 2014a-17e EPS CAGR of 11%

¡  Net cash position of EUR159m (13% of market cap) at end-fiscal 2015e

Sensitivity of EPS to gross margin (vs USD) & potential tax cuts

¡  A potential +/-10% EUR vs USD move (to 1.39/1.14 vs our 1.25 base case) adds/cuts 0.68bps from our fiscal 2015e gross margin 52.60% base case...

¡  ...assuming EUR/USD at 1.09, this would trim 100bps off our 2015e gross margin call, lowering our EBITDA and EPS estimates by 5% and 6%

¡  If corporate tax-rate is reduced to 23% in 2015 and 20% in 2016 from 26% currently, this should raise our TP by EUR0.8 per share to EUR11.8

Why we like Jumbo

¡  In our view, Jumbo (2011a-14a EPS CAGR of 3%) appears well placed to weather the stormy conditions  capturing extra market (owing to customers’ trading-down behaviour via low-priced, EUR4.99 on average, product offering), thanks to its strong brand equity, continued product mix shift (increasing exposure to highly profitable home/seasonal products) and ongoing network expansion, both home and abroad

¡  Besides its earnings growth profile and strong international foot print, we like Jumbo also for its robust balance sheet, FCF generation ability and excellent track record

¡  Strong net cash position leaves plenty of room for extra dividends

¡  We see fiscal 2016e Romania top-line more than 3x up to EUR31m vs 2014a levels  (representing 5% of total), on new store openings, boosting Jumbo’s future growth outlook

Spiros Tsangalakis

Senior Equity analyst

Tel: +30 210-64.78.751

Mail: s.tsangalakis@beta.gr