Cnova - true value to Casino?

All,
Please find a simplified historic model on Cnova here.

Several clients and others in the market have talked about the potential upside to Casino structure and share price of the recent share price rally of Cnova. We have always been cautious on extrapolating the share price movement of what is only 1% free float, to calculate the overall value of Cnova to Casino and GPA.

Prior to the Casino results tomorrow, we have examined the recent doubling of share price in Cnova.

Firstly, there are changes in the net financial debt at Cnova. Historically, Cnova has borrowed funds from Casino and has limited external debt. The majority of this has been short term debt. However, during H2 2020, Cnova has entered into long term borrowings (likely with external sources) and in turn, have ended up funding Casino c. €140m of cash as at December 2020. Cdiscount is within the perimeter for the Casino France for covenant purposes so under consolidation this cash lent to Casino does not improve leverage multiples.

Away from the balance sheet, there has been some speculation that the re-organisation of the LATAM assets could lead to the GPA stake (34%) being sold in the market. This would have limited impact on Casino’s cash numbers. IF GPA sold their stake but used proceeds (€870m) for internal purposes, this will have no impact on Casino France cashflow (albeit will create a larger free-float giving more comfort to the true value of Cnova). If proceeds are used for special dividend, c.€360m would flow to Casino. Therefore, unless the market expects Casino France to sell down its stake in Cnova, any sale, partial or in full, by GPA, this would have limited cashflow impact on Casino.

Happy to discuss.

Tomás
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