Steinhoff - Progress is in the details
All,
Please refer to our unchanged analysis of Steinhoff here.
We have calculated and written much about the sequence of payouts from Africa vs Europe. However, it seems that both processes are running quite in parallel. Over the last weeks, we have seen the agreement in South Africa of the major hold-outs to the Grand Settlement and we are still waiting for the courts towards the end of January. Meanwhile, the company has been preparing and initiating the IPO process in the US and it is selling its minor Swiss asset Lipo. We take note of the mix of fronts on which Steinhoff has recently been making progress.
Will the pay-down be mixed?
- If the company could have its way, perhaps that would be the wisest thing to do. Any one-sided pay-out is sure to end in a major legal battle.
- The simultaneous realisation of assets in both “hemispheres” suggests that may be the outcome.
Mattress Firm Group Inc.:
- Steinhoff have proceeded to filing an S1 registration statement with the SEC for the IPO of Mattress Firm. The contents of it are largely the same as we have seen before, but the step is one in the right direction.
- Mattress Firm is an astonishing turnaround from 2018 when the wheels were coming off, following a rampant acquisition spree in the US.
- We are valuing Steinhoff’s 45% stake at €1.4bn.
Sale of Lipo:
- Seifert’s XXX Lutz of Austria are buying Lipo for an undisclosed sum. The company previously bought the Eastern European Kika Leiner stores from Rene Benko’s Signa Holding. The transaction is interesting because 1) it generates cash for Steinhoff (SEAG level) and 2) it’s a deal with Andreas Seifert, the very business man with whom Steinhoff have fought tooth and nail over Conforama.
- Lipo is a minor asset within Steinhoff. The company runs 23 large stores in Switzerland, where nevertheless makes it one of the largest chains in the home furnishing market.
- Revenue in the 8 months to September have been €144m, up 16% in constant currency, 5% of which were from the online channel, which now accounts for 10% of sales.
- In H121, Lipo accounted for €12m of EBITDA on sales of €98m, even though it achieved only €2m in EBIT. Lacking further information and because the growth over 2020 EBITDA mirrors its sales growth, we go with the EBITDA, double it for the year and ignore the higher depreciation/write-off in 2021.
- The asset seems stable and so a post-pandemic multiple of 7x seems to be the minimum. Adding Net Cash of €13m per the half-year brings us to €180m, not far off the €200m balance sheet total and approx. 1x sales.
Positioning:
- We remain long Steinhoff via both, the SFHG A1s and A2s. Both continue to do very well, but we note that the equity has tripled since we thought of buying it in the summer.
Please reach out to discuss.
Wolfgang
T: +44 203 744 7003