$CBD sold down pretty hard over the last week. Why? Late SEC filings still not filed, Exito spinoff not happening in Q2 (that train has now sailed), or Casino telling the market they’ll dump both stocks at the earliest possibility? Or something else?
The only thing I would challenge is Grupo Exito´s quality. I think Exito will struggle to sustain EBIT margin in 23, due to inflationary pressure, Q1 results already show fixed cost +26% vs YA. SSS are growing 11.8% but inflation is 13% in Colombia.
Plus historically has much lower ROIC than ASAI3-CRFB3 so I would also assign a lower multiple. I think it is worth between 5.500 and 7.000 B Col pesos, instead of 7.000 to 8.000.
But must repeat it´s very well written and am thankfull for the idea. I´m investing a little bit now because the stub is not worth 0, and some post spin off in case I find even greater margin of safety.
Will add a couple of things. First, FX is playing a relevant role here, which can add up as long as BRL and COP make some gains vs USD or else lose some value. Second, CBD will deliver Exito's shares at book value, according to one of its presentations, which is north of COP$5.400 in orden to avoid capital gains in Brazil. So its very likely that Exito shares will rise before the event.
Perhaps a dumb question: I am a U.S. retail investor. What would my American brokerage, e.g., Schwab or IB, do with the Grupo Exito shares that I receive. What could I do with them? Perhaps the problem is that I don't understand this statement: "EXITO shares will be completely fungible across NY, Colombia, and Brazil."
Do you have a view on the contingent liabilities surrounding GPA (the "stub") that might impact your US1-2 valuation of the "stub"? (https://www.morningstar.com/news/dow-jones/2023020910454/pao-de-acucar-shares-drop-53-after-unfavorable-brazil-court-ruling). Maybe a slight commentary on what are the open legal case will be good and the full extent of the contingent liabilities will help.
Thanks for the color!
Thanks. Can we chat. If so how can I reach. Worth your time. SS
I’m a new subscriber. What do you think of the 2 pieces now that they have been distributed. Which has more upside CBD or EXTO. Thanks!
I don't think I have come across them before... Will include a link to your post in my Monday free emerging market links post...
How do I DM you
$CBD sold down pretty hard over the last week. Why? Late SEC filings still not filed, Exito spinoff not happening in Q2 (that train has now sailed), or Casino telling the market they’ll dump both stocks at the earliest possibility? Or something else?
It´s a great write up!
The only thing I would challenge is Grupo Exito´s quality. I think Exito will struggle to sustain EBIT margin in 23, due to inflationary pressure, Q1 results already show fixed cost +26% vs YA. SSS are growing 11.8% but inflation is 13% in Colombia.
Plus historically has much lower ROIC than ASAI3-CRFB3 so I would also assign a lower multiple. I think it is worth between 5.500 and 7.000 B Col pesos, instead of 7.000 to 8.000.
But must repeat it´s very well written and am thankfull for the idea. I´m investing a little bit now because the stub is not worth 0, and some post spin off in case I find even greater margin of safety.
Will add a couple of things. First, FX is playing a relevant role here, which can add up as long as BRL and COP make some gains vs USD or else lose some value. Second, CBD will deliver Exito's shares at book value, according to one of its presentations, which is north of COP$5.400 in orden to avoid capital gains in Brazil. So its very likely that Exito shares will rise before the event.
Perhaps a dumb question: I am a U.S. retail investor. What would my American brokerage, e.g., Schwab or IB, do with the Grupo Exito shares that I receive. What could I do with them? Perhaps the problem is that I don't understand this statement: "EXITO shares will be completely fungible across NY, Colombia, and Brazil."