OREANDA-NEWS. October 01, 2010. X5 announced that it has completed the acquisition of retail chain Ostrov for USD 38m, including debt. The chain operates 13 stores in Moscow and the Moscow region with a selling area of 12,300 sqm. X5 plans to convert half of the newly acquired stores into Perekrestok, and the remaining stores into Pyaterochka, reported the press-centre of OTKRITIE Financial Corporation.

View: In 1H10, Ostrov had a revenue of RUB1.5bn, which is around 0.8% that of X5. Ostrov's acquisition multiple (EV/Sales) should be around 0.46x, while X5's 2010E EV/Sales is 1.0x. Overall, we regard the news as neutral due to the deal's small size.

Valuation and action: The stock currently trades at a 2011E EV/EBITDA of 8.9x, which is at a 23% discount to EM peers.