M&A will be fundamental to the Steinhoff investment case, by adding retailers to its vertically integrated model, value is created through margin expansion and gains in market share, Exane says in note.
- Steinhoff remains a top pick in the sector, outperform reiterated, PT raised to EU6.80 with further 50% “blue sky upside”
- Says despite pulling out of Argos and Darty deals, acquisition targets remain plentiful, their pursuit of retail consolidation is not over
- Co. has balance sheet, cash generation to support an M&A growth agenda over a number of years
- Steinhoff has EU9b of incremental cash for M&A over the next 5 years
- Has >EU3b available now, set to generate a further EU1.4b of cash in each of next five years
- Deploying this capital could result in up to 7% of incremental shareholder value per year
- Credit Suisse initiates Steinhoff with outperform rating, PT EU6; says company’s unpredictable M&A activity over the last 15 years has produced low returns when measured in rand
- Sees significant valuation upside from future M&A if historical returns are preserved