Cnova - planning world domination

All,

Please refer to our unchanged analysis here.

Cnova have released a 157-page presentation this morning in line with their analyst call in order to raise an additional €300m of capital from a primary IPO. But where does that leave Casino?

Conclusion:

Cnova will not be paying any dividends to Casino in the near future. With the level of CAPEX over the coming years, any free cash will be used to reinvest in the business. Therefore, as previously stated, Casino will only crystallize any value for their 65% direct stake in Cnova by selling down part of their stake. This potential capital transaction, which is primarily to raise €300m in primary issuance, has the possibility of Casino, and more likely GPA to sell down some of their stake.

The bullish presentation includes EBITDA growing from €133m in FY20 to €160m in FY21 and low to mid30% CAGR 2021-25 growth rate, driven by c. €100m CAPEX in FY21 and €150-170m p.a. up to 2025.

The capital injection is aimed to allow Cnova to capture a larger share of the potential opportunity upside from increased digital marketing, white-label, cyber, financial services, and bolt-on acquisitions.

The presentation is still ongoing, and in the coming days and weeks, we will expect equity research reports on Cnova. But without Casino selling down part of their stake there will be limited impact on Casino and in turn Rallye's debt.

We retain a small position in the Rallye bonds and are looking for further weals to take exposure.

Happy to discuss.

Tomás

E: tmannion@sarria.co.uk
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