OREANDA-NEWS. February 26, 2010. Dixy has published a weak January 2010 trading update. The company did not open any stores during the month but closed four. This translates into a store base of 533 stores and selling space of 204,396sqm (up 7% YoY) as of 31 January 2010. We note that store openings are usually skewed towards the second half of the year and our unchanged forecast is for 97 Dixy stores to be opened in 2010, reported the press-centre of VTB Capital.

The company continues to show a weakening top-line trend: Dixy’s YoY net sales growth (in rouble terms) slowed from 12.3% YoY in 2009 to 10.6%YoY in January 2010 (for net sales of RUB 4,813mn). The improving net retail sales growth (from -9.7% in November to 0.3% in January 2010) makes the numbers look even weaker. However, we think that it is too early to make revisions (we forecast 23.6% top line growth in 2010).

On DCF, we see 19% upside potential to our 12-month Target Price. On multiples, the company is trading at 2010F EV/EBITDA of 6.8x, or discounts of 36% and 27% to X5 and Magnit, respectively, and 24% to EM peers. We think that the discounts to EM and Russian peers are justifiable and do not expect any fundamental triggers before April at the earliest, when we shall be checking to see whether the company is delivering on its promises for growth and profitability.