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UPDATE 1-Rambler Media CFO steps down
http://www.reuters.com/article/rbssMediaDiversified/idUSBNG40346620090508
Fri May 8, 2009 2:23am EDT
* CFO Nikita Serguienko to step down, effective May 21.
* Says reviewing candidates to replace the CFO
May 8 (Reuters) - Russian Internet company Rambler Media Ltd (RMG.L: Quote, Profile, Research, Stock Buzz) said Chief Financial Officer Nikita Serguienko would step down "due to private matters", effective May 21.
The company said it was reviewing candidates to replace Serguienko, who would pursue other interests.
Rambler Media is the UK-registered owner of Russia's search engine www.rambler.ru and on-line newspaper www.lenta.ru.
Shares of the company closed at 5.8 pence on Thursday on the London Stock Exchange. (Reporting by Purwa Naveen Raman in Bangalore; Editing by Himani Sarkar)
New valuation benchmark by Carrefour?
http://www.businessneweurope.eu/dispatch_text8550
Rencap, Russia
Friday, May 8, 2009
According to Kommersant, Carrefour is expected to make a second bid for Seventh Continent (SCON) on 15 May. If this occurs, we believe it could be an important valuation benchmark for listed Russian food retailers. We view the probability of this deal going through in the near term as 70/30. If it does not, SCON shares, which have gained 59% over the past month, should sell off.
__ Initially, SCON was given a low valuation by Carrefour of 6.2x 2008 and 7.4x 2009 EV/EBITDA, on our estimates. We forecast SCON's 2008 and 2009 EBITDA at $159mn and $134mn. Kommersant reported on 9 Apr that Carrefour had offered $1.25bn for 100% stakes in SCON and M-Kapital (the latter owns 65 stores with 175,000 m2 of selling space in Moscow, including SCON supermarkets) and their combined $610mn debt ($450mn for SCON and $160mn for M-Kapital's).
Assuming M-Kapital's EV is $263mn (based on a per m2 EV assumption of $1,500), SCON's EV was valued at $987mn and its equity at $537mn ($7.2 per share).
__ Why is Carrefour bidding for SCON? The financial crisis has turned the Russian retail sector into a buyer's market and asset sellers no longer expect very high valuations. At peak valuation, listed food retailers traded at 14-17x current year EV/EBITDA. SCON is not a high-quality retailer based on its operating efficiency. Its supermarkets have demonstrated very disappointing LfL rouble revenue growth in Moscow, but it has well-located real estate in the capital as well as 10 hypermarkets in the Central region. We think that Carrefour is after a sizeable selling space footprint in Russia (SCON operated 181,500 m2 of selling space at the end of 1Q09, of which 29% represents hypermarkets).
__ Maximum valuation? EM food retailers are trading at a 2009 EV/EBITDA of 10.7x, while Magnit and X5 are trading at 8.3-8.6x currently, on our estimates. We think the maximum Carrefour may offer for SCON is 9.5-10x 2009 EBITDA. It would put 100% of SCON's EV at $1.27-1.34bn and the new offer at $1.53-1.6bn EV for 100% stakes in both companies. A 75% equity stake in SCON could be bought for $613-665mn, if Carrefour agrees to a stake that is less than 100%.
We think that listed Russian food retailers could benefit on a relative valuation basis if Carrefour makes an offer for SCON above the original $1.25bn bid, which we understand was for 100% stakes in two companies - SCON itself (a listed retailer which owns about 50% of its stores) and M-Kapital (a real estate company, 95-99% controlled by Alexander Zanadvorov who owns a 74.8% stake in SCON; this stake, along with a near 99% stake in M-Kapital, was pledged to Deutsche Bank for a $560mn loan received by Zanadvorov in Nov 2007 and due in Nov 2009).
Having said that, we would point out that the food retail sector has outperformed the MSREN index by 40% over the past 12 months. Based on total market capitalisation, the food retail sector has 3% downside to our target prices. Therefore, we are quite cautious about further upside potential in food retail names, which will be purely speculative based on the Carrefour-SCON deal valuation. Instead, we view M.video as an attractively valued buying opportunity. (M.video trades at 2009- 2010E EV/EBITDA of 3.3x and 2.2x, while international consumer electronics retailers are valued at 6.6x and 6.4x, respectively.) We understand that the original bid was not only for SCON, but also for M-Kapital which owns 175,000 m2 of commercial real estate in Moscow, including some SCON supermarkets. It also remains to be seen if Carrefour will bid for a 74.8% stake in SCON or will insist on buying 100% (which would then entail the acquisition of a 10% stake in SCON from Vladimir Gruzdev - one of SCON's co-founders who was bought out by his partner Zanadvorov with the use of a Deutsche Bank loan, as well as the free float from minorities), and if 100% in M-Kapital (or less) will be acquired along with the stake in SCON and included in the offer and valuation. At the current share price (which is up 59% over the past month), Zanadvorov's 74.8% stake is worth $561mn, which is exactly the size of the Deutsche Bank loan. The current high market valuation of SCON reduces the chances of the deal with Carrefour, in our opinion.
We assume that Carrefour may offer 9.5-10x 2009E EV/EBITDA for SCON's retail business in its second bid. In our opinion, it should make an attractive offer given SCON's poor credit prospects (YE08 debt/EBITDA is estimated at 2.8x; about 90% of the $450mn gross debt is short term) and credit problems its largest shareholder is facing. From the minority investors' standpoint, a $1.53-1.6bn valuation by Carrefour for 100% in both companies, including their debt (which will be 22-28% above the initial offer), may result in a further 10-20% growth in SCON share price to $10.9-11.8/share from the current $10.
We would be surprised if Carrefour offers a much higher multiple given SCON's weak operating and financial performance in 2008 and 1Q09. If the deal is done at 9.5-10x EV/EBITDA for 2009, it could trigger up to 15-20% share price growth in Magnit and X5 Retail Group shares, both of which have performed very strongly.
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