Casino from Saint-Etienne, not Vegas!
For those who have never heard about Casino (OTC:CGUIF) (OTCPK:CGUSY), it has nothing to do with Las Vegas or gambling… it is a company with more than a century of history in retail, coming from a quiet, provincial city in France, Saint-Etienne. Known in the 70s for its winning soccer team and its fluorescent mining activity, Saint-Etienne is now more like a rust city, trying to escape bankruptcy as the town is stuck with toxic loans contracted before the subprime crisis.
Anyway the story of Casino is not there, even if the company is now one of the few reasons for the people of Saint-Etienne to be proud (despite the loss of influence of the founding family two decades ago, the new controlling shareholder, CEO for almost ten years, kept the headquarters of the company in the city).
Casino from Asia and Latin America... not Saint-Etienne
Casino is today doing ~60% of its sales and ~70% of its EBIT in 4 key emerging markets, Brazil, Vietnam, Colombia and Thailand (totaling 400 million people), where it has a leading position (n. 1 or 2). But this is quite well-known, and thanks to Fed tapering, emerging market exposure, at least in the short term, is not as sexy as it used to be (though I would still keep a positive bias on Brazil consumption, with the Soccer World Cup this summer and the Olympics in 2 years).
The real market mover: its multi-billion e-business IPO
The new big thing for Casino is its e-commerce business: €~3bn ($4.1bn) of online sales in France and Brazil. The group also recently announced the launch of e-commerce websites in Thailand, Colombia and Vietnam. In France, Cdiscount.com is the leading etailer, Amazon (NASDAQ:AMZN) is n. 2, despite the US giant entering France in 2000, only 2 years after the Charles brothers started Cdiscount.com (now 99.6% owned by Casino). In Brazil, with €1.5bn ($2bn) of sales, Nova.com (27.2% controlled by Casino) is way ahead of Amazon, who entered Brazil only a couple of years back… So, Casino is a very credible online player, not of the size of Amazon worldwide, but in some large national markets. Casino.com is far bigger than very fancy listed etailers, such as Asos.com (OTC:ASOMF), Ao.com, and Ocado (OTC:OCDGF). Icing on the cake: Casino.com has a real competitive advantage on pure etailers: the very dense network of Casino stores, where you can pick your orders... the superior click & collect model.
What if Casino IPOs its e-commerce business? Ao.com (Appliance Online), last week, got listed in London: ~£275m ($460m) of sales, market cap of £1.6bn ($2.7bn)… 6x sales! Is there a kind of tech bubble going on? Casino CEO, a former Rothschild senior banker and one of the best CEOs in France, has obviously been weighing the pros and the cons of an IPO of Casino.com… and there are more and more "pros".
A back-of-the-envelope calculation
A 2.5x sales for Casino.com would suggest a c. €5bn ($6.85bn) valuation (as Casino only controls c. 27% of nova.com). The emerging markets businesses are listed and the combined shares of Casino are worth c. €8.5bn ($11.6bn). There is c. €5.5bn ($7.5bn) net debt. This would imply a €8bn ($11bn) theoretical market cap vs. a current €9bn ($12.3bn). But do not forget, Casino is a French company, with ~€18bn ($25bn) of sales in France, with a very clever positioning on proximity and discount formats (the group is far less exposed to big hypermarkets than Carrefour (OTCPK:CRERF), for instance). Let's take a very conservative multiple of, let's say, 25% of sales, this would imply a €4.5bn ($6.25bn) of valuation, i.e. an upside of ~40%. I guess the Saint-Etienne mayor should better invest in Casino shares to reimburse the toxic loans!