Ahold Delhaize

Ahold Delhaize

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150128 Dutch On-line Food Retail | despite all, too material to ignore 150128 Dutch On-line Food Retail | despite all, too material to ignore

No. pages 36
Description

In-depth report on the Dutch food-retail grocery market and industry featuring Ahold and Sligro

On-line grocery in the Netherlands will grow as at least specific customer segments (B2C and B2B) increasingly want it, despite their overall reluctance to pay fees. From supply side, not only supermarkets but also existing and emerging providers within and beyond the traditional at-home and out-of-home channels are expanding their on-line offering which further reinforces on-line's development. Although we do not believe on-line's penetration in food will grow to double digit shares witnessed in non-food, there is considerable upside from a still low base.

We believe penetration rates of 4-5% and 5-7% by 2020 mentioned by Ahold and EFMI respectively make sense, like Jumbo's most recent estimate of 3-5% penetration at company level by 2017. Assuming supermarket sales will grow by 1-2% annually total industry sales will reach an estimated EUR 36-38bn by 2020. A 4-5% sales share for on-line, "only mid single digits", suggests that on-line grocery will reach a very broad EUR 1.5-2bn range and imply CAGRs for on-line of 27-33%. Such market sizes and growth rates are both material and attractive.

Against the back-ground of an increasingly maturing supermarket industry, and our belief that on-line in itself does not enlarge the total, broadly defined pie of FMCG, this can only mean that on-line (grocery) is a phenomenon which food retailers have to on-board and can't miss. That participation can materialize in various ways including establishing PUPs in/near the store, remote PUPs and/or a delivery service. Despite all challenges to execute a successful on-line strategy, not participating is therefore not an option in our view.

On-line grocery does not only poses challenges but also creates opportunities. We believe that on-line initially is a way to defend one's market share with the potential to grow volume and share by better servicing existing and attracting new consumers and customer groups, amongst others by offering a broader portfolio and/or by penetrating new adjacent geographic areas. On-line can also enable retailers to more prominently market their private-label range and/or support their suppliers

Contents

Summary and Conclusions
1. Kicking off: Food-retail in overview
2. Dutch on-line grocery market meagre in international context
3. Supply side: On-line at Dutch retailers in European context
4. The Dutch consumer is hesitant, but not in denial
5. Steps and strategies of Dutch groceries so far
6. Bench-marking versus pure on-line player Ocado
7. Going forward: Becoming too material to ignore

150209 Ahold | Maturing bull, but still some upside left 150209 Ahold | Maturing bull, but still some upside left

No. pages 44
Description

In our recently published food retail sector update “Dutch on-line grocery: Too material to ignore” we addressed the Dutch on-line grocery market, an industry that is to a large extent developed and dominated by Ahold. In this company update (44 pages) we not only detail Ahold’s on-line operations and ambitions, but also its performance in its core US and Dutch grocery markets. Following a strong share price performance, we believe it merits to address Ahold’s challenges and opportunities to determine if further share price upside is left.

We conclude that despite all challenges in food retail and elevated multiples in the industry, Ahold’s profile still has its attractions. It enjoys structurally strong local market positions with margins ahead or at least in line with peers and it has taken steps to address industry and company challenges. These factors support continued attractive free cash flow generation which fuels dividends and buy-backs. Our SOTP and DCF estimates suggests there is still some upside left. Ahold’s dividend yield is still reasonably attractive at an estimated 3%. A potential EUR 500m buy-back represents 4% of current market capitalization. Potential TSR returns might be less than in the past as Ahold’s share price trend is showing signs of a maturing bull, Ahold’s risk reward profile is still favorable, we argue.

Contents

Summary and Conclusions

1. Erosion of strong US positions needs to be tackled
1.1 Ahold’s attractive US profile won’t change overnight
1.2. But, un-mistakenly some erosion has taken
1.3. As a result, steps have been taken
1.4. Concluding; it was about time to act

2. Dutch AH still dominant, but has to re-invent itself
2.1 AH still leading in a retail industry that has changed
2.2 Ahold lost momentum in the Netherlands
2.3 Initiatives taken to restore growth
2.4 Concluding; AH has to regain momentum

3. Dutch on-line grocery to grow strongly from low base
3.1 Initiatives accelerate in Dutch on-line grocery
3.2 Conditions and characteristics of on-line offering
3.3 Concluding; on-line grocery becoming too material to ignore

4. Ahold’s profile in Dutch food & non-food online is unique
4.1 Bol.com and delivery largest on-line sales contributors
4.2 On-line grocery to grow strongly, but less foreseen earlier
4.3 Benchmarking versus Ocado
4.4 Concluding; margin upside in on-line

5. Maturing bull, but still some upside left
5.1 What to expect, another buy back?
5.2 Valuation multiples versus historic ones and versus peers
5.3 SOTP supported by higher multiples US peers
5.4 More moderate upside based on DCF
5.5 Concluding, dividend and buy back(s) are still attractions

6. Appendix
6.1 P&L FY14-20E
6.2 Balance sheet and leverage FY14E-20E
6.3 Cash flow and free cash flow FY14-20E
6.4 Discounted cash flow

150709 Ahold | After the dust has settled, a bit 150709 Ahold | After the dust has settled, a bit

 

 



    
        
            
            
        
        
            
            
        
        
            
            
        
    

No. pages
            
13
Description
            

                

Although we are cautious wheter the all targeted synergies can be retained, we see upside potential for the future combination and hence for both companies. We believe upside is largest for Delhaize at current share prices, also as it trades at a discount to the implied bid price.


            
Contents
            

                

                        
  • Summary and Conclusions

  •                     
  • Highlights of the deal

  •                     
  • Pro-forma valuation multiples not too demanding

  •                     
  • Positive performance since our company reports, most notably for Delhaize

  •                     
  • So far we have preferred Delhaize over Ahold, driven by valuation differentials

  •                     
  • Gross synergies of EUR 500m at best in line with estimates

  •                     
  • Although the targeted full retention rate is not underperforming expectations

  •                     
  • Is the 61/39% split fair?

  •                     
  • From a historical perspective no reason to complain for Delhaize’s shareholders

  •                     
  • Ultimately, it depends though on expected earnings and cash flows

  •                     
  • Delhaize’s current share price at discount to implied bid price

  •                     
  • Two approaches to determine both companies’ up/downside

  •                     
  • Method 1: Ahold upside 6-19% versus Delhaize 15-30%

  •                     
  • Method 2: Ahold upside 10-23% versus Delhaize upside 19-35%

  •                     
  • In conclusion: preference for Delhaize over Ahold maintained

  •                     

160127 Dutch On-line Food Retail | online grocery initiatives accelerating 160127 Dutch On-line Food Retail | online grocery initiatives accelerating

No. pages 40
Description

This new sector report features the prospects for food online in the Netherlands. Apart from Jumbo's step up, Ahold's continued market leadership, thé online story in our view was the launch of pure online player Picnic. We have seen more initiatives in recent years that ultimately failed to deliver and are no longer active. This explains our initial cautiousness. However, we do believe Picnic is at least well prepared and supported by a committed, determined and experienced team with seemingly sufficient resources.

In this update we have dug deeper into Ocado's financial and operational performance as it provides a useful framework to assess the chances of a pure online player, like aforementioned Picnic. It might have taken time and significant investments, but Ocado's normalized EBITDA margins are ahead of those of Ahold in online grocery and those of Sligro in Foodservice Delivery. Ocado guides that further efficiency improvements can support margins, at least confirmed by our estimates. Ultimately what matters are ROIC's. Ocado's current estimated ROIC's are high single digit. However, based on some broad assumptions, Ocado's ROIC would approach, meet and exceed Ahold's current ROIC, during FY19-20E.

We realize Ocado's operational and financial progress doesn't guarantee newcomers like Picnic will succeed as well. Also, even after more than a decade post its launch, Ocado's market share in online grocery might demonstrate its success, but its share in total grocery is still small. So, Ocado has not completely changed the grocery landscape (yet). Still, in favour of online's case, ultimately we believe it is possible to generate profit margins and ROIC's which are equal if not superior to a well established traditional grocer.

Regarding Ahold, it continues to lead the Dutch grocery market both offline and online, while its position in non-food via Bol.com strengthens further. When completed, the merger with Delhaize will provide further opportunities to expand Ahold's online expertise. The only critical remark is online profitability. Positively, Ahold's domestic EBITDA margins remain above industry average providing ammunition to simultaneously invest and return cash to shareholders.

Sligro's strengths and opportunities include its leading position in Dutch Foodservice, divisional EBITDA margins, its strong balance sheet, its attractive dividend yield and the announced entrance of the Belgium Foodservice market. Weaknesses and threats are Foodretail's sluggish performance and position and the aforementioned blurring of boundaries between Foodretail and Foodservice.

Contents

Summary and Conclusions
1. Dutch online grocery: Supply and demand in overview
2. Online offering per retailer in greater detail
3. Revisiting Ocado
4. Concluding, pure online a serious potential threat (to some)
5. Appendix

170220 Ahold Delhaize | a shopping basket full of triggers 170220 Ahold Delhaize | a shopping basket full of triggers

No. pages 28
Description

Despite continued challenging market conditions, AholdDelhaize’s profile enjoys favorable market positions while its bottom line will be supported by net savings of EUR 500m of which no less than 96% are still to be expected during FY17-19E. Mid –term FCF of FY1.6-1.9bn represent an attractive yield of 6-8%.

Contents
  •  Introduction
  • Ahold's and Delhaize's US positions post the disposals
  • Inflation or deflation: What's it gonna be?
  • How are Ahold and Delhaize positioned versus peers?
  • Looking beyond the US, Ahold Delhaize at a consolidated level
  • Appendix

170705 Ahold Delhaize | revisiting our investment case 170705 Ahold Delhaize | revisiting our investment case

No. pages 28
Description AholdDelhaize’s share price performance has disappointed triggered by a dismal industry news flow. Although we don’t deny industry wide challenges, we believe that current valuation multiples and yields are too attractive
to ignore and don’t reflect Ahold Delhazie’s attractive profile which enjoys favorable market positions and above average profit margins.
Contents

Executive summary
1 Kroger warning underlines tough US grocery climate....
2 ....however, we still expect inflation kicking in as of H2-17
3 Lidl entering and Aldi further expanding in US grocery
4 Amazon acquiring ‘troubled’ Whole Foods
5 current valuation simply too undemanding in our view
6 SOTP scenarios more realistic if share price softness continues
Appendix

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