FT reports potential CEE disposal – our thoughts

Research evidence excerpt

FT reports potential CEE disposal – our thoughts

39 2,496 2,853 3,209 521p (2.4%) (1.8%) (1.1%) (0.5%) 0.1% 0.7% 1.4% 2.0%

Source: Morgan Stanley Research estimates

Sector read-across:

• Out of the listed grocers we cover, Ahold Delhaize has operations in Czechia

under its Albert banner (#2 market position per company reporting, with

~13.7% share per Euromonitor) and has a generally positive structural

outlook on CEE, with desire to expand its presence in the market through

store openings, plus recent M&A. Rationale for Ahold Delhaize's recent

acquisition of Profi Rom in Romania was to scale up presence (as AD

typically aims to be #1 in each of its markets) and extract meaningful

synergies, with the business expected to be a contributor towards a 4%

European EBIT margin.

• Elsewhere, Jeronimo Martins has an active expansion plan in Slovakia,

originally targeting to open ~50 stores by end of 2026. The format is similar

to Biedronka in Poland (avg store size is ~876sqm) and based on our prior

DC / store analysis, we believe the existing infrastructure has scope to serve

up to ~200 stores over time. This compares to Tesco having 182 stores in

Slovakia, with avg box size of 1626 sqm, and ~16% share per Euromonitor.

Given our negative outlook on market structure in Poland, we think

international diversification for JMT could be welcome for incremental

capital deployment. See our prior analysis on Slovakia expansion here

• For a broader list of operators across Slovakia, Hungary and Czech Republic,

see market share overview exhibit below.

Exploring a hypothetical CEE sale - Valuation considerations:

1) Multiples basis: Recent transaction multiples have been in the 5-7x EV/EBITDA

range: (1) Ahold Delhaize paid EV/EBITDA of 7x on a post-synergy basis for Profi