UYUM GIDA - Mixed picture: HOLD

Net income misses our estimate
Uyum Gida reported a TRY5.1m net loss in 3Q12 (BNPP estimate: -TRY4.1m) vs. a TRY2.7m net loss a year ago. 3Q12 revenue came in at TRY91m (+41% y-y), 7% below our expectation. Lower revenue was offset by better than expected gross margin at 25.4% (+20bps y-y). S/M expenses to revenue fell by 1.3pp q-q, which was better than expected.

Improvement in EBITDA margin is encouraging
41% y-y revenue growth in 3Q12 implies 0.6% revenue growth per sqm in nominal terms, implying deterioration over 2Q12 where nominal revenue growth per sqm was 2.6%. 3Q12 EBITDA came in at TRY0.8m (at 0.8% margin) while we expected a TRY1m EBITDA loss. Better gross margin and sales-marketing expenses (S/M) caused the discrepancy.

HOLD maintained
We maintain our estimates and HOLD rating with 8% upside potential on a 12-month horizon. 3Q12 results imply that revenue performance could be a potential downside risk to our estimates. On the flip-side, improvement in S/M expenses across the board is encouraging and implies an upside risk to our estimates

UYUM GIDA Report 08/08/2012

Carrying values to be unlocked

Target price raised by 30% after recent transactions, MARKET OUTPERFORMER rating maintained. With this note we highlight the hidden values to be unlocked – i.e. the real estates that are to be disposed of and the mid-term high growth potential of the business that offers 22% CAGR in revenues and 75% in EBITDA in the next five years –highest among all Turkish food retailers. Our target price implies 0.7x 2012E EV/Sales for the stock (in line with domestic peer average at 0.7x). We believe Uyum deserves a higher multiple vs. its current 2012E EV/EBITDA at 0.6x and Sok’s deal multiple at 0.5x, as Sok was generating EBITDA loss and slower growth, whereas Uyum started to enjoy operational leverage as of 1Q12 and the EBITDA margin outlook is improving.