Hands Thai’d: the Big C-ell off begins
Casino: increasingly pressured, break-up valuation increasingly relevant…
Casino's leverage is elevated, profits pressured, its IG credit-rating ‘on watch’. With c.20% equityto-
EV the situation is precarious. Yet, Casino owns strategic assets. The more profits and the
equity are pressured, the closer to crystallising a break-up we shift. With EUR56/s of ‘break-up’
SOTP and EUR46/s for ‘shrinking back to France’, value signals are emerging.
Shifting from U/P to Neutral…but plenty of risk remains. EUR39 TP (from EUR48)
There remains plenty of risk - the ‘mark-to-market SOTP’ is EUR22, CDS >500bp and EM assets
aren’t in-vogue. Yet, the more the capital markets pressure Casino, the more likely assets are sold.
Capturing readily saleable disposals - the Asian assets - we derive a EUR39 TP and upgrade our
rating to Neutral. TP and EPS cuts relate to removing French property gains and swap liabilities.
Big C disposal – just the beginning?
Selling Big C, your best asset, rarely makes sense long-term but in raising cEUR3bn it would
reduce Casino’s leverage c.1 turn. A 16% eps dilution and increased profit volatility are negatives
but leverage is what most impairs Casino’s equity. However, with leverage still 3x debt/EBITDA,
and earnings visibility very low, the announced disposal plans may not fix the balance-sheet.
Time to consider global retreat?
Casino could ‘tough it out’, but the Brazilian economy faces near and mid-term challenges.
Unwinding complex holding structures and finding buyers for electronics businesses may be
problematic. However leading grocery market positions in Brazil and Colombia have strategic value
– a LATAM exit can’t be ruled out, with Walmart the obvious buyer. Based on our attributed breakup
values, this would significantly deleverage Casino.
Rallye – reiterate U/P, EUR9 TP (from EUR20)
With more flexible funding Rallye could wear a Casino dividend cut and hang-on in expectation of
LATAM rebound. However, even in a Casino break-up, Rallye’s debt looks elevated, reiterate U/P.