Even more cautious on Brazil, dividend cut now assumed
Forecast cuts. Recent economic developments lead us to revisit Edenred’s
performance in the late 1990’s (then part of Accor), a period which saw a similar rise
in unemployment. As a result we once again cut our forecasts: 16E/17E/18E EPS
falls -0.5%-3.3%/-6.5% (the recent rally in the Real offsets some impact in FY16).
We see knock on implications for the balance sheet and think that a dividend cut is
the logical next step. We now assume a 35% dividend payout ratio, well below
guidance of c90%. We cut our DCF derived target to €13 (From €14.0) and reiterate
our Sell recommendation.