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Piraeus Securities increases target price for Jumbo

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Jumbo’s share price appreciated from €2.38 in late May 2012 to €6.95 on 8 Jan, in tandem with the slide in bond yields, Piraeus Securities explains in a report published today.

Jumbo said that it will tip its toes into Romania with at least 2 new outlets during fiscal year 2013/2014. In the past, the company had guided for a total of 59 stores in Greece and Cyprus (54 at the moment; 56 by June 2013; 60 by June 2014 on our forecasts), and 8 in Bulgaria at the first stage of expansion (already there).

Piraeus Securities believes the rollout in Romania will be faster (it took 5 years to reach 8 stores in Bulgaria) but look for a similar number of stores in the medium term.

It also updates the numbers accordingly, also adjusting for the new tax regime in Greece (corporate tax rate rises to 26% from 20%) and allowing for bigger margin pressure.

According to the report, Piraeus Securities increases the target to €6.60 per share from €4.30 previously after significantly lowering our cost of capital assumptions.

And retains a Neutral rating given the challenges in the Greek retail environment, the downside risks on margins (guidance is for gross margin to drop by up to 4 percentage points), and the limited upside potential.

Next key catalyst according to the report is the release of 2Q/1H 2012/2013 results during the month.

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