OREANDA-NEWS. November 09, 2009. The Russian government approved final amendments to the draft of the retail law on Thursday, which will now be submitted to the State Duma for a second reading on 9 November, Kommersant wired. The law will retain clauses regarding a 25% market domination limit, and on three payment periods that range from 10-45 business days (depending on the product type), reported the press-centre of OTKRITIE Financial Corporation.

View: We view this news as neutral for the moment, but if the current version of law is passed, it will have a greater negative impact on X5 and Magnit than on Dixy due to their larger scale of business. It should be noted that the 25% market domination rule will be introduced only on 1 July 2010, which will provide Russia’s Anti-monopoly Service (FAS) time to calculate retailer market share more precisely. The retailers will also have time to define their vulnerable regions and take action.

Valuation: X5 currently trades at par with EM peers on a 2009E EV/EBITDA, Dixy - at a 25% discount. Magnit offers a 5% premium to EM peers.

Action: We would advise exercising caution when investing in retailer stocks.