Casino - The Conjuror's Trick
All,
Please find our updated analysis on Casino here.
As investors in the audience continue clapping, the great magician shuffles the assets from one pocket to another and we are taking our eyes off events unfolding underneath his table. We are the sceptic in the room, proud to be conscious that it's all a trick. But are we missing something? The point of investing, surely, is not whether the assistant is really sown in half, but that the crowd is cheering - and cheer it does. We already hold a ticket for the after-show at Rallye's. So should we also buy a ticket to the Casino?
Transparency:
All along Casino has been about assets vs cash flows. In 2021 however, increasing transparency of its legal structure (not its earnings) has allowed investors to carve out more clearly a significant, but increasingly finite set of disposable assets that could serve to fund interest and soon dividends to Rallye.
France Retail:
According to our modelling Casino France still generates flat cash flow and France Retail on its own continues negative. The French core business’ dilemma has not improved for several years now and our patience is wearing a little.
Asset values:
The stock split in LatAm has done wonders for Casino’s asset valuations. None of it generates cash to Casino, but the above sense of urgency is countered with the reassurance that Casino France could be debt-free if those other assets were sold. The French Retail group would trade at 0.2x Sales, a very attractive multiple for a retailer - provided it makes any money…
Happy to discuss,
Tomás
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