Steinhoff - Pepco Pop
All,
Please refer to our slightly updated model and a new Pepco analysis here.
Post IPO we expect the shares to trade richer than the offering is targeting - in line with practice, but also from an arithmetic rationale.
Valuation:
Pepco had received a E4.5bn bid early 2020 from a consortium of three PE firms, but the company held out for E5bn - just as the pandemic struck. The IPO target range today implies a similar value, even though the company has grown. Admittedly, Pepco now holds some E300m excess payables from the pandemic and there is great uncertainty around Eastern European macro trajectories and off-line retail in general. But at the price point, Pepco deals in there is little online competition (delivery too expensive) and recent post-lockdown revenues have been impressive. Valuations post QE 3000 (or wherever we are now) have all moved up a multiple and this growth is hard to find outside tech and in a sector benefiting from the return to social (non-media) life. So we see an eventual valuation of E5.5bn to 6bn+ as entirely achievable when the company’s stores will be 100% operating again for a year - i.e. the next 12 months.
We remain long Steinhoff with 10% of NAV, split evenly across the Luxfinco 1 A1s - to benefit from the Grand Settlement) and the A2s (21s/22s and 23s) to benefit from a rampant Pepco.
Happy to discuss,
Wolfgang
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E: wfelix@sarria.co.uk
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