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DB: Fourlis Q3 In Line

Deutsche Bank says Fourlis’ 3Q10 net income was EUR4.7m, down 50% yoy or 7% lower than its estimates but it liked the IKEA-related gross margin of 43%, which was unchanged yoy despite the VAT hikes and the truck drivers’ strikes in September.

In a report dated November 23rd , it said it didn’t like the retailer’s net debt reaching EUR136m, up by an incremental EUR78m, with the wholesale business (to be discontinued soon) responsible for 55% of the delta and Intersport for 22%.

“We believe working capital should normalize in the next two quarters and expect net debt of EUR107-120m by year end,” it said.

“We believe the shares of Fourlis are fairly priced. With IKEA-related LfL at -10% in 2010E and -3% in 2011E, we model IKEA EBITDA margins at 12% this year and next. With this report we leave our net income estimates unchanged and reiterate Hold. In our sum-of-the-parts valuation IKEA is worth EUR295m, at 16x 2011E PE,” it adds.
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