Atacadão: A Great Brazilian Cash And Carry Worth Monitoring

seekingalpha02-16

Atacadão, a Brazilian cash and carry retailer owned by Carrefour S.A., operates throughout Brazil, offering a mix of food and non-food products, convenience stores, pharmacies, and gas stations.ATAAY ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2411637393?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-02-16 17:29","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2411637393","market":"us","top_or_hot":-1,"title":"Atacadão: A Great Brazilian Cash And Carry Worth Monitoring","media":"seekingalpha","content":"<div>\n<p>Atacadão, a Brazilian cash and carry retailer owned by Carrefour S.A., operates throughout Brazil, offering a mix of food and non-food products, convenience stores, pharmacies, and gas stations.ATAAY ...</p>\n\n<a href=\"https://seekingalpha.com/article/4670915-atacado-ataay-stock-great-brazilian-cash-and-carry-worth-monitoring\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Atacadão: A Great Brazilian Cash And Carry Worth Monitoring</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAtacadão: A Great Brazilian Cash And Carry Worth Monitoring\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-02-16 17:29 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4670915-atacado-ataay-stock-great-brazilian-cash-and-carry-worth-monitoring><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Atacadão, a Brazilian cash and carry retailer owned by Carrefour S.A., operates throughout Brazil, offering a mix of food and non-food products, convenience stores, pharmacies, and gas stations.ATAAY ...</p>\n\n<a href=\"https://seekingalpha.com/article/4670915-atacado-ataay-stock-great-brazilian-cash-and-carry-worth-monitoring\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"ATAAY","symbol_name":"Atacadao SA","start_time":0,"source_url":"https://seekingalpha.com/article/4670915-atacado-ataay-stock-great-brazilian-cash-and-carry-worth-monitoring","article_id":"2411637393","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2411637393","pubTimestamp":1708075767,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Atacado, a Brazilian cash and carry retailer owned by Carrefour S.A., operates throughout Brazil, offering a mix of food and non-food products, convenience stores, pharmacies, and gas stations.ATAAY f","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ATAAY":"Atacadao SA","CBD":"Companhia Brasileira de Distribu","BK4113":"食品零售","CRRFY":"Carrefour S.A.","BK4155":"大卖场与超市","BJ":"BJ批发俱乐部","ASAI":"Sendas Distribuidora SA"},"translate_title":"Atacad ã o：一个伟大的巴西现金和自带价值监测","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ASAI":1,"ATAAY":1,"BJ":1,"CBD":1,"CRRFY":1},"content_text":"Atacadão, a Brazilian cash and carry retailer owned by Carrefour S.A., operates throughout Brazil, offering a mix of food and non-food products, convenience stores, pharmacies, and gas stations.ATAAY faces challenges such as declining food inflation, high indebtedness, and intensified competition.Despite the conversion of BIG Group stores and synergy gains, high costs and delays in store maturation have pressured Atacadão's margins, impacting its profitability.Looking ahead to 2024, Atacadão anticipates increased profitability driven by factors like Brazil's food inflation recovery, lower interest rates, store maturation, and CapEx reduction.The Company's valuation, while stretched compared to historical averages, is aligned with domestic peers and poised for profit growth, suggesting a potential convergence in profitability by 2024.Tarcisio Schnaider/iStock Editorial via Getty Images Atacadão S.A. (OTCPK:ATAAY) is a Brazilian cash & carry retailer operating throughout Brazil, with Carrefour S.A. (OTCPK:CRRFY), based in France, as its controlling shareholder. The group also operates convenience stores, pharmacies, and gas stations and offers credit lines. In 2014, Brepa Comércio e Participação Ltda, which controlled Grupo Carrefour Brasil and Atacadão, merged into Atacadão S.A. The latter became a mixed holding company responsible for operational activities. Atacadão operates in Brazil's hypermarket format under the Carrefour banner and runs convenience stores under the Express banner. It serves end consumers, retailers, and suppliers in the food service sector under the Atacadão banner. The company is traded on pink sheet OTC markets through American Depositary Shares (\"ADS\"), where each ADS represents the right to receive four (4) shares of Atacadão S.A. common stock. Therefore, investors must know the risks of lower liquidity and limited information. On the Brazilian stock exchange, Atacadão S.A. trades under the ticker CRFB3. Investment Thesis As one of the leading food retailers in Brazil, Atacadão benefits from the sector's essential nature, enabling it to perform well even during periods of recession or low economic growth. Data from 2023's ABRAS (Supermarket Association in Brazil) showed that Atacadão S.A. held the top revenue generation in Brazil until 2022, with a turnover of R$108 billion. The second and third positions are occupied respectively by Assaí Atacadista (ASAI) (R$59.7 billion) and Grupo Mateus (R$24.6 billion). However, Atacadão's shares have experienced a decline of 19% over the last twelve months on the Brazilian stock exchange (Ibovespa). This decline has been primarily influenced by a falling and slow recovery of food inflation in Brazil, which is currently at 1.82%. TradingView In June 2022, the company began to convert BIG Group stores in Brazil to the Carrefour and Atacadão brands. By the second quarter of 2023, the company had converted 129 stores, including 76 for Atacadão, 48 for Carrefour Hypermarket, and 5 for the Sam's Club chain. This plan was executed faster than anticipated, initially slated for completion in early 2024. Synergy gains of R$530 million were captured in the first half of 2023, with the integration expected to generate up to R$2 billion in annual results by 2025, according to the company's projections. Despite progress in in-store conversions and synergy gains, the high costs of adapting the stores and delays in maturing new points of sale have increased pressure on the company's margins. Additionally, Atacadão faces competition from Assaí, which is also pursuing a robust store expansion plan. The deflation of the food channel without a recovery in volumes in the B2B segment has further strained revenue generation. These factors have increased expenses and intensified competition, impacting Atacadão's operating margin and profitability. Data by YCharts After the acquisition of the BIG Group, a few months later, in April of last year, Atacadão announced a downward adjustment of R$1 billion due to liabilities discovered after the negotiation. Of this amount, R$350 million has already been paid, with an additional R$550 million scheduled for payment by May 2024 and R$100 million to be paid and adjusted based on predetermined targets. Regarding business divisions, a significant portion of Atacadão's entire group revenue comes from cash and carry operations, mainly under the Atacadão brand, which accounted for 70% of gross revenue in the third quarter of 2023. The Retail operation contributed 25% to the group's revenue, while the remainder came from Sam's Club and Banco Carrefour. Despite an annual growth of 10% in the number of Cash & Carry stores, gross sales have remained flat, considering the stores converted by the BIG Group. As indicated by the company, this performance was marked by continued food deflation, especially in commodities, impacting both sales (due to lower prices) and volumes. This has been observed in B2B clients destocking, notably in the earlier part of the quarter, and buying in more fragmented patterns, resulting in lower average tickets and a higher number of tickets. Grupo Carrefour Brasil's IR Regarding the retail segment performance, converted stores have performed in line with the legacy Carrefour hypermarkets during the last quarter. Atacadão expects to accelerate growth in converted stores by adjusting inventories, promoting brand awareness, and implementing loyalty initiatives, especially in new cities/regions where Carrefour hypermarkets do not have a strong presence. Additionally, Atacadão continues implementing its digital strategy, expanding e-commerce and the marketplace. In the third quarter of 2023, GMV reached R$2.53 billion, up 50% year-over-year, with notable growth in food sales. The company is also focused on improving Banco Carrefour's performance, with the credit portfolio expanding to R$22.5 billion by the end of the third quarter of 2023. Despite these efforts, Atacadão faces challenges related to its high indebtedness and increased competition in the sector. Currently, Atacadão has a leverage of 2.27x, which, while significant, has been decreasing its net debt annually by $1.4 billion, thereby maintaining a relatively stable net debt/EBITDA ratio. A substantial portion of this indebtedness stems from the acquisition of Grupo BIG. Grupo Carrefour Brasil's IR In summary, the primary threats to a bullish stance on the thesis are as follows: While Atacadão aims to deliver results and gain market share, the company's figures continue to be impacted by deflation in the food channel, store maturation, high indebtedness, and intensified competition. Therefore, as Atacadão's recent performance remains blurry due to these factors, and it has not yet fully captured the synergies and integration with Grupo BIG in the face of a food deflation scenario, a neutral long-term view is adopted for the company. Current Economic Landscape and Outlook for 2024 While Brazil experienced a steep rise in food inflation between October and December 2023, the overall picture indicates deflation, with an annual decrease of 0.52%. A persistent trend in the inflation of dry products, such as rice and beans, which have seen significant increases in recent months, could serve as a short-term positive trigger for cash-and-carry companies, given that commodities are a substantial portion of this segment's sales mix. Even a temporary decrease in food consumption at home is unlikely to result in lasting changes in consumer purchasing patterns or companies' business practices. Companies serving end consumers (B2C) or other businesses (B2B) are not expected to see significant shifts in customer demand or buying behavior. However, Atacadão still faces the challenge of increasing its operating cash flow in 2024, which could be the main turning point for a more optimistic outlook. Some key drivers that could contribute to increased profitability include: Brazil's food inflation recovery: the food inflation landscape in Brazil may offer operational leverage for the cash-and-carry vertical, despite expectations for a less intense impact compared to previous years. In January, it surged to 1.82%, up from 1.02% in December, signaling an upward trend since October of last year, attributed to continued cuts in the interest rate (Selic). Trading Economics Interest rates slowdown: Falling interest rates in Brazil (Selic), coupled with a leverage of 2.2x, the declining cost of capital should benefit Atacadão's profits throughout 2024 and provide room for Banco Carrefour to reverse provisions made over recent quarters. The Brazilian Central Bank forecasts that the Selic rate will end 2024 at 9%, down from the current 11.25%. EBITDA growth: The maturation of converted stores from 2022/2023 is expected to bolster Atacadão's profitability growth in 2024. According to the company's guidance for this year, it includes opening 10-12 Atacadão stores and 7-9 Sam's Club stores, all conversions from other formats (Hypermarket). Upon maturity, the company estimates a positive impact of R$10 million to R$15 million on annual EBITDA per store. Additionally, with the closure or sale of unprofitable stores, the company anticipates a positive impact of R$150 million to R$200 million on annual EBITDA, along with potential cash inflow via real estate monetization to offset demobilization expenses. The cumulative effects could result in an estimated potential impact on operating profit of between R$180 million and R$220 million in 2024. The consensus estimate from Koyfin, which utilizes the S&P Global Intelligence database, predicts Atacadão will report an adjusted net income of R$1.65 billion in 2024, reflecting a growth of 9.2% compared to 2023. The estimate for EBITDA is R$7.355 billion, representing a considerable annual growth of 25%, with an EBITDA margin of 6.23%. Koyfin - data by S&P Global Intelligence CapEx reduction: Furthermore, with less capital-intensive operations, Atacadão has announced an expected 40% annual reduction in Capex for 2024. Additionally, inventories will be normalized by two days year-over-year after extensive capital investment in Grupo BIG store conversions. These measures are expected to bolster the company's operating cash flow generation throughout the year. Grupo Carrefour Brasil's IR Valuation In Line With Domestic Peers Atacadão trades at a stretched valuation of 32x P/E ratio, nearly 30% above its historical average, as indicated by its ticker CRFB3, traded on the Brazilian stock exchange, B3. Compared with its main domestic peers, Sendas Distribuidora (Assaí Atacadista) and Cia. Brasileira de Distribuição (Grupo Pão de Açúcar) (CBD), we can see that Atacadão trades at multiples reasonably aligned with these peers. Atacadão trades at an EV/EBITDA forward multiple of 7.2x, 35% below the sector average, indicating an attractive multiple. Assaí trades at a multiple of 7.75x, and Pão de Açúcar at 6.6x. Adding an international peer, BJ's Wholesale Club Holdings, Inc (BJ) trades at 11.1x EV/EBITDA, highlighting the valuation discrepancy between Brazilian and similar-sized U.S. wholesalers. Seeking Alpha Considering the outlook for 2024 and the anticipated evolution of the microeconomic and macroeconomic scenarios, Atacadão and its domestic peers are poised to enter a cycle of profit growth. Assuming the company achieves a growth rate of 9% per year, we could see Atacadão trading at a forward P/E ratio of 15x, which is also in line with its primary domestic peer, Assaí. This would represent a level approximately 40% below its historical average. The Bottom Line The thesis on Atacadão is cyclical, as it has been impacted by food deflation in Brazil, affecting the company's performance since the middle of last year. However, the company shares optimistic expectations for the future, with targets for store expansion and EBITDA margins, as well as solid EBITDA gains from hypermarket conversions and closures. This suggests that profitability could reach a convergence point by 2024, potentially benefiting Atacadão's shares, which trade at lower multiples than international peers and are well aligned with its main domestic peers. Despite recent quarters showing Atacadão striving to deliver results and gain market share, the company's figures continue to be affected by deflation in the food channel, which, although on a reversal trend, is not expected to be as significant as it was in 2022. However, the high cost of debt related to the acquisition of the BIG Group is putting significant pressure on the company's results, and the high debt level is a concern. Additionally, the increase in competition over the last year, especially in the cash & carry and retail segments, reinforces the difficulties faced by the company. I prefer to see more convincing results throughout 2024 before taking a more optimistic stance on Atacadão's thesis. In the meantime, I maintain a neutral stance on the company's ADS.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.4","shortVersion":"4.26.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2411637393"}