HEMA - Nothing gained, nothing lost

All, 

clease refer to our unchanged analysis here.
At E470m EV, the proposed transaction is certainly good news for HEMA, but would take place just below our base case.  We admittedly bought into the name late, but we had been optimistic that proceeds would cover the PIKs. On the current basis we stand to neither make, nor lose much money.

Operating Performance: The company has been performing extremely well over the summer, considering its position as non-food retailer. Smaller and medium sized stores outperformed the large city centre locations and the relatively small online business continued strong even as store revenues recovered.

Operating Costs:Dutch landlords are proving to be as difficult as expected, or at least some of them. Dutch law knows no CVA and HEMA are still negotiating payment terms and schedules on some of their larger leases.
Liquidity:Liquidity is significantly stronger than in our model, for lack of including the PPM proceeds at the time and on the stronger than expected EBITDA performance. Should the deal not materialise, HEMA should have enough cash to operate even after re-paying its significant deferrals, but may benefit from targeted growth capEx.

Overall we are a little disappointed by the valuation - even in the pandemic. The bidding consortium are getting a good bargain. We will be looking to find an exit between now and end of next month, but realistically we may not be able to sell.

Wolfgang

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E: wfelix@sarria.co.uk
T: +44 203 744 7003

www.sarria.co.uk

Wolfgang FelixHEMA