JUMBO (BELA) Comprehensive AnalysisThe JUMBO stock recorded a significant drop of 1.90% yesterday, closing at 24.72 euros, which is the lowest level in the last six months . The dividend cut has affected the stock price, but forecasts from major analysts indicate significant upside potential.
Last Closing Price: 24.72 euros
52-Week High/Low: 32.60 euros / 24.72 euros
Economic Analysis
Jumbo maintains a high dividend policy for 2024 despite market challenges. The company distributes 3% of its shares, with Apostolos Vakakis reducing his stake to 16.3%. The high dividend yield, combined with the expansion of the store network, enhances the attractiveness of the stock.
Expected Dividend Yield: 9.1%
2024 Revenue Growth Estimate: 4%-8%
Expected 2024 Earnings: Stable or slightly increased
Lowering Revenue and Profit Targets – Warning of Possible Revision
Jumbo informed investors that group sales increased by approximately 8% in the first half of the year, with a +9% increase recorded in June compared to the same month last year. Nevertheless, the company sets the bar for revenue and profit growth for the year at the lower end of the initial estimate of 8%-10%.
Jumbo warns that if current conditions worsen, which is reasonably expected, the sales growth rate could be limited to +4% with profitability hovering at 2023 levels.
Factors Affecting the Estimate
Commenting on the business environment, the company mentions that the situation in the Middle East, with the "closure" of the Suez Canal, although initially temporary, will continue to affect the global supply chain likely even after the elections in America. The current global trade situation resembles the pandemic crisis, with transportation costs skyrocketing and delivery times doubling.
Jumbo refuses to pass the burden of supply chain disruptions onto consumer prices. The company's strategy remains clear: it does not intend to offer overpriced products, as it estimates that the situation will reverse by the end of 2024 or 2025.
Jumbo's Strategy
Jumbo chooses products that meet the needs and capabilities of consumers. Faced with the dilemma of a product that includes the cost of disruptions and another with manageable costs, the company chooses the latter. This strategy is expected to lead to an increase in Jumbo's market share in the markets it operates, despite the expected reduction in inventory by the end of the year.
First Half 2024 Performance
Group sales increased by approximately +8% in the first half of 2024. In June 2024, sales recorded an increase of +9% compared to the same month last year.
Detailed sales performance by country:
Greece: Net sales increase of +6% in June 2024 and +7% for the first half.
Cyprus: Sales increase of +6% in June 2024 and +4% for the first half.
Bulgaria: Sales increase of +19% in June 2024 and +11% for the first half.
Romania: Sales increase of +17% in June 2024 and +14% for the first half.
Store Network Expansion
As of June 30, 2024, the JUMBO Group had 86 stores: 53 in Greece, 5 in Cyprus, 10 in Bulgaria, and 18 in Romania, with online stores in Greece, Cyprus, and Romania. By the end of 2024, two new superstores are expected to open in Nicosia and Bucharest. The opening of the new superstore in Timisoara is postponed to the first quarter of 2025.
Through partnerships, the group has a presence with 36 stores in 7 countries: Albania, Kosovo, Serbia, North Macedonia, Bosnia, Montenegro, and Israel. A second store in Israel is expected to start operating in August 2024.
It is reminded that on July 16, 2024, the dividend from the 2023 earnings, amounting to 1 Euro per share (gross), will be paid.
Citi and Pantelakis Securities See Over 20% Upside Potential for the Stock
Citi and Pantelakis Securities predict more than 20% upside potential for Jumbo stock, despite the recent downgrade of the guidance from the company's management for the 2024 results.
Citi Estimates
Citi maintains the target price at €32.5, with an estimated upside of 23.9% from current levels. Combined with the dividend yield expected to reach 9.1%, the total return is estimated to reach 33%. The investment bank issues a buy recommendation for the stock.
The target price of €32.5 derives from the average valuation based on the EV/EBITDA multiple, estimating that Jumbo will trade at 9 times the EV/EBITDA ratio for 2025 with a slight premium compared to the 5-year average, and from the discounted cash flow method. The target price implies approximately 14 times the P/E ratio for 2024, according to Citi.
Pantelakis Securities Estimates
Pantelakis Securities sets the target price at €36, with an estimated upside of 37%. They give an overweight recommendation and highlight that Jumbo is attractively priced at 10.1 times the P/E ratio for 2025 and 6.8 times the EV/EBITDA ratio.
Pantelakis Securities calculates that the market at current levels discounts a long-term drop in the EBITDA margin to 17.8% from 36.8% in 2023, which is not justified. Furthermore, they mention that the strong cash flow performance in 2025 at 8% and the generous and sustainable dividend payments (6.9%) further enhance Jumbo's valuation attractiveness.
Conclusion
Despite the downgrade of the guidance from Jumbo's management for the 2024 results, both Citi and Pantelakis Securities see significant upside potential for the company's stock. Their forecasts are based on stable valuations and estimates for strong cash flows and sustainable dividend yields, making Jumbo stock an attractive choice for investors.
Detailed Report
Jumbo, one of the leading retailers in Greece, operates in the sale of toys, baby products, gift items, household goods, stationery, seasonal and decorative items, books, and related products in Greece, Cyprus, Bulgaria, and Romania. This analysis focuses on the financial data and technical indicators of Jumbo S.A.'s stock, providing a comprehensive overview for investors and analysts.
Technical Analysis
Open: €25.24
High: €25.24
Low: €24.72
Close: €24.72
Moving Averages (EMA):
EMA 20: €25.52
EMA 50: €26.05
EMA 100: €26.42
EMA 200: €26.54
Jumbo's stock price is below all major moving averages, indicating a downward trend in the short, medium, and long-term horizons.
Relative Strength Index (RSI):
RSI (14): 31.23, indicating that the stock is in the oversold zone.
MACD:
Histogram: 0.0070
MACD: -0.3640
Signal: -0.3711
The MACD indicates bearish momentum, with the MACD line below the signal line.
Pivot Points
Support Levels:
S1: €24.82
S2: €24.30
S3: €23.84
Resistance Levels:
R1: €25.89
R2: €26.26
R3: €26.78
The stock price is near the first support level, indicating potential reversal points.
Financial Data
Key Statistics:
Market Capitalization: €3.43B
Trading Volume: 123.75K (30-day average volume: 173.45K)
P/E Ratio: 11.3x (below the Greek market average)
Revenue Estimate: €34.14
Analyst Forecasts:
Highest Estimate: €38.00
Lowest Estimate: €31.10
Average Estimate: €34.14
Analysts predict a 38.12% increase in stock price over the next year, based on current performance and future prospects.
Valuation Estimate
Jumbo's stock appears undervalued compared to its intrinsic value, based on analyst forecasts and market prices.
Future Growth
Key Information:
Earnings Growth Rate: 5.8% annually
Revenue Growth Rate: 7.1% annually
Expected Return on Equity: 23.8% in 3 years
Recent Updates:
Target price increased by 7.7% to €33.89 (May 23)
Target price increased by 7.3% to €33.76 (May 6)
Target price increased by 8.1% to €28.50 (August 11)
Target price increased by 8.4% to €27.64 (June 27)
Past Performance
Key Information:
Earnings Growth Rate: 14.2% annually
EPS Growth Rate: 14.2% annually
Revenue Growth Rate: 6.2% annually
Return on Equity: 22.8%
Net Margin: 28.0%
Jumbo has shown strong performance in previous years, with steady earnings and revenue growth, and high return on equity.
Jumbo S.A. demonstrates solid performance and has good growth prospects. Despite the recent drop in stock price, analysts remain positive about the company's future, with predictions for significant stock price increase over the next year. The company continues to invest in new markets and improve the efficiency of its existing operations, making it an attractive choice for investors.
