According to British business bank Morgan Stanley, Benelux discounter Action is worth about 10 billion euro, a “conservative calculation”. Majority shareholder 3i’s share immediately skyrocketed.
Worth nearly twice as much
Early March, discount chain Action presented excellent financial results: its store network grew from 655 to 852 stores and its turnover reached record heights of 2.675 billion euro, up 34 % compared to the year before.
London’s financial center, The City, has also taken notice. Business bank Morgan Stanley put British private equity firm 3i on its “to buy” list and forecast a 831 pence share target. “We think 3i’s share in Action is already worth more than 250 pence per share”, Morgan Stanley’s analyst Geoff Ruddell said.
Up until this point, the bank valued Action at 5.5 billion euro, solely based on its gross operating profit. “We believe that estimation does not take into its long-term growth potential and the chain’s unusually high cashflow. That is why we feel a valuation based on its expected cash streams to be more relevant and even then, a conservative calculation reaches beyond 10 billion euro.”
Even better than B&M Stores
The bank also compared the chain with British furniture discounter B&M Stores, the region’s fastest-growing store chain. Both have more than 700 stores, sell similar products at prices that the internet cannot compete with and both easily surpass the 2 billion euro turnover mark.
However, even though B&M’s growth has been described as “attractive”, Action’s growth is labeled to be “absolutely exceptional” thanks to a higher sales density, superior cash conversion and a proven international expansion plan that could last for at least a decade.
Backed by those statements, it comes as no surprise that 3i’s share on the London Stock Exchange shot up 5.7 % to 740.5 pence.
