Jean-Pascal Rolandez of The L.T. Funds presented his in-depth investment thesis on Distribuidora Internacional de Alimentación (Spain: DIA) at European Investing Summit 2017.
DIA is a $4 billion Spanish mid-cap with a free float of 100%. Basically, DIA is the “Aldi/Lidl” of the Iberian world. It used to be owned by Carrefour, which spun it off to shareholders after bleeding it with a EUR 1 billion dividend payout. The company, which has its own formats and corporate culture, is diligently paying down that debt and has finally reached the point where it is able to invest again in stores and develop new formats. Carrefour dragged DIA into several countries in which the format did not work for various reasons. DIA is now refocusing on Spain (81% of sales), Portugal (4%), Brazil (10%), and Argentina (4%). Jean-Pascal expects 6% annual organic growth in EBITDA. Meanwhile, the stock recently traded at a 20% discount to European food retail peers, which exhibit average organic growth of ~2%. DIA shares recently traded at 7x EV 2017-18E EBITDA compared to 11x for Portuguese rival Jeronimo Martins (same 6% growth rate derived from Portugal, Poland and Colombia, with no debt). DIA is a terribly boring company (you probably would not like to shop in most of its stores) in one of the few growing retail segments (discount food retail). It is cheap and unloved (one of the most heavily shorted mid-caps in Europe). However, DIA should deliver, thanks to multiple growth drivers.
About the instructor:
Jean-Pascal Rolandez is the manager of The L.T. Funds, a Geneva-based investment firm focused on a buy and hold strategy based on a limited number of European stocks with a 5+ year investment horizon. Jean-Pascal has more than 25 years of equity investment experience and has founded the first investment club at the leading French business school ESSEC. Prior to establishing The L.T. Funds, Jean-Pascal held various executive positions at BNP Paribas for 22 years, including as Paribas’ French equity strategist.
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