Belarus retail giant Eurotorg mulls $300mn IPO in London

Belarus retail giant Eurotorg mulls $300mn IPO in London
Belarus' largest supermarket chain hopes to raise $300mn in the country's first ever IPO soon
By bne IntelliNews October 8, 2018

Eurotorg, the largest food retailer in Belarus is planning to list around $300mn of its shares in London in the coming weeks, according to Reuters.

The move could be the first international listing by a Belarusian business. The offering of global depositary receipts could be launched as soon as next week, according to an unnamed source.

Reuters' sources declined to comment on the company’s valuation, but based on average valuation multiples of its peers, Eurotorg (aka Euroopt) could be worth close to $1.5bn including debt, according to bne IntelliNews sources close to the deal.

Its main comparables include Dino Polska in Poland and BIM in Turkey, which respectively have enterprise values of 22.8 and 15.8 times core earnings, Refinitiv Eikon data shows.

Eurotorg, the largest food retailer in Belarus with around a 20% market share, increased net profit by 16.6% year-on-year to BYN68.7mn ($34.5mn) in January-June, with the net profit margin ticking up slightly to 3.2%, the company said in a statement on September 11.

Eurotorg, which was facing a very high possibility of default on its debt obligations to local banks, placed $350mn five-year Eurobonds in October 2017. Fitch Ratings has assigned Eurotorg a Long-Term Issuer Default Rating (IDR) of 'B-(EXP)' with a stable outlook. At the same time, Fitch has assigned an expected rating of 'B-(EXP)'/'RR4' to Eurotorg's proposed notes.

Successful measures to reduce debt, combined with solid Ebitda growth, helped to improve the net debt/Ebitda ratio to 3.0x as of June 30, compared to 3.2x at the end of 2017. The Ebitda/interest expenses LTM coverage ratio stood at 2.9x as of late June, compared to 2.7x as of late December 2017, the company said in the statement.

The retail sector in Belarus is developing rapidly on the back of  the fastest GDP growth rates in Eastern Europe that is creating a middle class. GDP grew by 4.4% year-on-year in January-July, following a 4.5% y/y growth in the first half of the year, which compares to 1.8% in Russia and 3.6% in Ukraine. The Belarusian economy is recovering well on the back of the ongoing recovery in neighbouring Russia, which still dominates the republic’s economic fortunes.

The emergent middle class has a surprising balanced income distribution. President Alexansder Lukashenko has been pushing to increase the average salary to BYN1000 ($461) per month from around BYN800 now, but incomes have been rising steadily and Belarus’s current average income is on a par with Russia’s and ahead of that in Ukraine.

“We outperform our Russian peers in terms of net sales growth and also in terms of sales space growth, where we were growing at a compound growth rate of 37% over six years with Lenta in second place again at a rate of 32%,” CEO Andrei Zubkou exclusively told bne IntelliNews in the company’s first every interview with the international press