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Please refer to important disclosures in the Disclosure Appendix.

Company Report, Resume of Coverage

March 13, 2014

Jumbo

Equalweight Previous Rating: Under Review

Strong Outlook Already Priced In

Share Price: €13.32 (close of March 13)

12M Price Target: €14.00 Previous Target: U/R Expected Total Return: 8.3%

Estimates 2012/13 2013/14e 2014/15e 2015/16e Sales (€ m) 502 541 600 653 EBITDA (€ m) 110 150 167 183 Net profit (€ m) 74 104 118 132 EPS (€) 0.54 0.77 0.87 0.97 EPS chng (%) -24.0% 41.0% 13.4% 11.5% EPS Adj.(€) 0.72 0.77 0.87 0.97

Source: Jumbo, Euroxx Research

Ratios 2012/13 2013/14e 2014/15e 2015/16e P/E Adj. (x) 7.5 17.4 15.3 13.7 EV/EBITDA (x) 6.5 11.5 10.0 8.8 EV/EBIT (x) 7.8 13.2 11.5 10.1 EV/Sales (x) 1.4 3.2 2.8 2.5 Div Yield (%) 0.0% 3.2% 2.0% 2.2% P/ BV (x) 1.1 2.4 2.3 2.0

Note: Historic ratios are computed on FY average stock prices Source: Jumbo, Euroxx Research

Stock Performance 3M 6M 12M YTD Absolute 20.2% 60.1% 97% 20.0% Difference (ATG) 3.8% 24.3% 58.6% 4.2%

Stock Data: Market Cap (€ m) 1,812 Outstanding shares (#) 136,059,759 Daily volume (#) 307,974 Low / High 52 w (€) 4.64 – 14.40 Free float 40% Bloomberg / Reuters BELA GA / BABr.AT

Company Description: Jumbo is the leading toy retailer in Greece having expanded its product mix to offer seasonal and home goods, toys, books & stationery and baby apparel. It has developed a very successful, high margin business model based on variety and low price with more than 70% of inventory sourced from Asian low cost producing countries. After establishing its presence in the domestic market, the company is expanding its geographical footprint to the wider SEE region with hyper-stores in Bulgaria, Cyprus and Romania.

Vangelis Karanikas Research Director [email protected] +30 210 68 79 322

Remarkable Resilience Despite the Crisis: Since the start of the crisis, Jumbo‟s domestic l-f-l sales fell by c24%, while reported sales and recurring group profits were flat on higher capacity. This implies a considerable outperformance given that Greek retail sales have dropped by c27%. With a leading c40% market share in Greece, Jumbo is one of the best ways of investing in the anticipated recovery of the domestic economy and consumer demand, in our view. The model is highly cash generative with estimated annual FCF >€100m or >55% of its EBITDA over 2013/14-16/17e. Beyond owning 60% of its stores it should have a net cash position of €2/share by June „17.

Sales, EBITDA and EPS CAGR of 9-10% over 2013-17e: Half of this should be driven by new Greek capacity (+16%) and recovery of Greek l-f-l by c6% (despite our cautious forecasts for the recovery to c92% of previous average levels or 77% of the peak), c30% should come from the roll-out in Romania to 12 stores and the rest from organic growth in Cyprus and Bulgaria. Our 2013/14e EPS forecasts are c10% ahead of consensus and 23-30% ahead of the consistently conservative management guidance. Beyond the payment of a double dividend in 2014, we expect Jumbo to return >30% of profits on a recurring basis, with upside risk on special returns.

What Can Go More Right – We identify up to >20% upside potential to our EPS estimates for 2015/16e from a higher-than-expected recovery of Greek consumer demand and Jumbo‟s stronger market positioning. Further 2% EPS upside could also come from a higher sales / m

2 in Bulgaria – closer to the

purchasing power parity adjusted levels of Greece- and 7% from a roll-out to 18 stores in Romania (our forecasts call for 12 stores).

Equalweight - Price Target of €14.00 – Jumbo is the only major Greek stock that currently trades close to its all-time high. Hence, current price levels imply a c58-70% premium over its historic 2004/05-12/13 average EV/EBITDA & P/E multiples of 7.2x and 10.2x respectively. Although in our view, some of the premium is justified by the earnings recovery potential and stronger market positioning in Greece and internationally, Jumbo still needs to make €177m of net profits in 2013/14e to justify the historic rating. This is 70% higher from our forecasts and more than double of what the management is guiding. The story is not without execution risks and our DCF-based valuation model returns a TP of €14.00 (WACC of 9.5%), which implies a total potential return of 8.3% from current price levels. We therefore re-initiate coverage with an Equalweight rating.

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March 13, 2014 Greece / Retail

Euroxx Research / Jumbo – Resume of Coverage 2

Summary of Financials

in € m, unless otherwise stated

Profit & Loss FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e Balance Sheet FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales 502 541 600 653 703 Non-current assets 473 498 522 543 561

change (%) 1.6% 7.8% 10.8% 8.9% 7.7% Net f ixed assets 431 456 480 502 520

Gross Profit 263 289 322 352 379 Intangible assets 0 0 0 0 0

change (%) -0.1% 10.0% 11.2% 9.5% 7.6% Other assets 42 42 41 41 41

OpEx 176 164 182 198 214 Current Assets 421 510 560 648 746

change (%) 15.3% -6.7% 10.8% 9.0% 7.8% Accounts receivable 68 80 61 67 73

EBITDA 110 150 167 183 197 Inventories 176 190 210 229 246

change (%) -17.8% 35.8% 11.3% 9.9% 7.5% Cash & cash equivalent 170 236 285 346 420

Depreciation & amortization 19 20 21 23 25 Other investments 6 4 5 5 6

Operating profit (EBIT) 92 130 146 160 172 TOTAL ASSETS 894 1,008 1,082 1,191 1,307

change (%) -21.7% 42.4% 11.7% 10.1% 7.5%

Net f inancing cost (4) (4) (7) (10) (13)

Pre-tax profit 96 135 153 170 186

change (%) -19.9% 40.8% 13.5% 11.4% 9.0% Shareholders' equity 639 743 804 901 1,005

Tax 22 30 35 38 42 Minority interest 0 0 0 0 0

% effective tax rate 22.7% 22.6% 22.6% 22.5% 22.5% Non-current liabilities 13 157 158 159 161

Net profit 74 104 118 132 144 Long-term debt 1 145 145 145 145

change (%) -24.0% 41.1% 13.4% 11.5% 9.1% Deferred tax liabilities 8 8 8 8 8

Recurring Net profit 98 104 118 132 144 Retirement obligations 4 5 6 7 8

change (%) 0.2% 7.0% 13.4% 11.5% 9.1% Provisions / other 0 0 0 0 0

EPS Basic (in €) 0.54 0.77 0.87 0.97 1.06 Current liabilities 242 107 119 130 140

EPS chng -24.0% 41.0% 13.4% 11.5% 9.1% Accounts payable 52 55 61 66 71

EPS Recurring 0.72 0.77 0.87 0.97 1.06 Liabilities for taxes 22 30 35 38 42

EPS chng 0.2% 6.9% 13.4% 11.5% 9.1% Liabilities to banks 148 0 0 0 0

DPS / Capital Return - 0.42 0.26 0.29 0.32 Other liabilities 20 21 24 26 28

change (%) -38.2% 11.5% 9.1% EQUITY & LIABILITIES 894 1,008 1,082 1,191 1,307

Cash Flow FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e Ratio Analysis FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Pre-tax profits 96 135 153 170 186 Current ratio 1.7x 4.8x 4.7x 5.0x 5.3x

(+) Depreciation & amort. 19 20 21 23 25 Acid Test 1.0x 3.0x 2.9x 3.2x 3.6x

(+) Non-cash items (0) 1 1 1 1 Liabilities to equity 0.4x 0.4x 0.3x 0.3x 0.3x

(+) Net interest expenses (10) (10) (13) (16) (19) Bank debt to equity 0.2x 0.2x 0.2x 0.2x 0.1x

(-) Taxation paid 17 24 37 38 41 Net debt / EBITDA -0.2x -0.6x -0.8x -1.1x -1.4x

Gross cash flow 87 121 125 141 152 Net Debt / (Cash) (21) (91) (140) (201) (275)

Decrease/ (Increase) in inventories 4 (14) (20) (19) (18) Return on total assets 8.4% 11.0% 11.3% 11.6% 11.5%

Decrease/ (Increase) in receivables (1) (7) 25 (4) (4) Return on equity 12.0% 15.1% 15.3% 15.5% 15.1%

(Decrease)/ Increase in payables (7) 4 8 7 7 Return on Capital Employeed 9.6% 12.4% 12.9% 13.2% 13.1%

Other (24) - - - - Return on Invested Capital 9.2% 12.0% 12.3% 12.4% 12.2%

Operating Cash Flow 60 105 138 126 138 Free Cash Flow yield 0.9% 3.9% 5.8% 5.4% 6.3%

(-) Net CapEx & Investments 44 34 32 29 24 Gross Margin 52.3% 53.4% 53.6% 53.9% 53.9%

Free Cash Flow 16 70 106 97 114 EBITDA margin 22.0% 27.7% 27.9% 28.1% 28.1%

(-) Dividends paid (27) - (57) (36) (40) Operating profit margin 18.2% 24.1% 24.3% 24.5% 24.5%

(+) Equity chng 0 0 - - - Pre-tax profit margin 19.1% 24.9% 25.5% 26.1% 26.4%

(+) Debt chng (4) (4) - - - Net profit margin 14.7% 19.3% 19.7% 20.2% 20.5%

(+) Other - - - - - Recurring net profit margin 19.4% 19.3% 19.7% 20.2% 20.5%

Change in Cash (15) 66 49 62 74 Dividend/Capital return Yield 0.0% 3.2% 2.0% 2.2% 2.4%

Cash at End 170 236 285 346 420 Payout ratio 0.0% 55.0% 30.0% 30.0% 30.0%




Table of Contents

Summary of Financials ................................................................................................................................................ 2

Investment Thesis ........................................................................................................................................................ 4

Valuation ....................................................................................................................................................................... 5

Stores’ Network - 7% CAGR in Selling Space by June’18 ....................................................................................... 7

Sales and Gross Profit CAGR of c9-10% over 2012-16e .......................................................................................... 8

Greece - At a Turning Point ......................................................................................................................................... 9

Romania: The Next Growth Catalyst ........................................................................................................................ 12

Cyprus: Crisis – What Crisis? ................................................................................................................................... 15

Bulgaria: Jumbo is Punching Below its Group Weight .......................................................................................... 17

FY’12/13-16/17e Forecasts – EPS CAGR of 10.2% .................................................................................................. 19

Our FY’13/14e EPS is 10% Above Consensus... ..................................................................................................... 22

...and 23-30% Above Company’s Guidance ............................................................................................................. 22

CapEx of c€180m in FY’13/14-’16/17e ...................................................................................................................... 23

FCF >€100m or >55% of Group’s EBITDA over 2013-17e....................................................................................... 23

APPENDIX ................................................................................................................................................................... 24

Products ...................................................................................................................................................................... 25

The European Toys Market ....................................................................................................................................... 25

Strong Q2’13/14 Results On Improving Trends ...................................................................................................... 27

IMPORTANT DISCLOSURES ..................................................................................................................................... 28



Re-initiate coverage with an Equalweight rating

Despite the 24% drop in l-f-l sales, since2009, Jumbo’s

strong business model resulted in flat recurring

bottom-line results

We expect sales and recurring EBITDA / EPS

CAGR at 9-10% over 2016/17

There is an up to >20% upside risk to our 2015/16e

EPS from a better than expected recovery of the

consumer and Jumbo’s stronger market positioning

in Greece

Greek macro environment, freight costs, EUR/USD

parity & strong dependence on the founder are the key

risks

Shares close to all-times high levels- trade at a c58-

70% premium over its historic 2004/05-12/13

average EV/EBITDA & P/E multiples

Investment Thesis

We resume coverage on Jumbo with an Equalweight rating and TP of €14.00. Jumbo is a best in class Greek retailer of seasonal and home products, toys, books & stationery and baby products. It has developed a very successful, high EBITDA margin business (>27%) based on huge variety and low price with most of its inventory sourced from Asia. Beyond a strong and growing presence in the domestic market (52 PoS), it has built a very strong franchise in Cyprus (4) and has recently added Bulgaria (8) and Romania (2). The latter is a key growth area – with Jumbo targeting 12-18 stores in the next five years. With a leading c40% market share in Greece, Jumbo is one of the best ways of investing in the anticipated recovery of the domestic economy and consumer demand. The model is highly cash generative with estimated FCF >€100m or >55% of its EBITDA over 2013/14-16/17e, and beyond owning 60% of its stores Jumbo is also expected to have a net cash position of €91-275m over the same period. We expect strong sales and recurring EPS CAGR of 9-10% over 2013/14-16/17e but we believe the current price levels (only major Greek stock at historic highs) with the stock trading at a 2013/14e P/E of 17.4x fully price such growth (historic average at 10.2x).

Since the onset of the crisis group‟s l-f-l sales dropped by as much as c24% (Jul. „09-Jun ‟13), outperforming the decline in Greek retail sales of c27%. Nevertheless, the group‟s unabated investment activity in 2008/09-„12/13 (18 new stores) combined with a less labor intensive stores‟ structure (average cost/employee down c10%) helped the group‟s recurring sales and bottom-line remain flat. At the same time Jumbo is coming out of the Greek crisis with a strong balance sheet, c65% more selling capacity and high profitability at c€104m for 2013/14e.

Over 2013/14-16/17e we expect sales and recurring EBITDA / EPS CAGR at 9-10%, half of which should be driven by new Greek capacity (+16%) and recovery of Greek l-f-l by 6%, c30% should come from the roll-out in Romania (12 PoS) and the rest from organic growth in Cyprus & Bulgaria. Our 2013/14e EPS forecast is c10% above consensus and 23-30% ahead of the consistently cautious management guidance.

Similarly to the Troika‟s estimates, we expect a 0.6% economic recovery in Greece from 2014e onwards that should pick up pace to 2.9-3.7% in 2015-16e, initially led by investments and eventually by private consumption. During the crisis Jumbo lost c24% of its l-f-l sales/m

2. Beyond the weak consumer demand, this was also a

function of the c30% higher selling capacity in Greece. While we remain cautious on our forecasts for the recovery of l-f-l sales/m

2 in Greece to c92% of previous average

levels or c77% of the peak, we identify up to >20% upside risk to our EPS forecasts for 2015/16e from a higher-than-expected recovery of domestic demand and Jumbo‟s stronger market positioning. Further 2% EPS upside could also come from a higher l-f-l sales/m

2 in Bulgaria– closer to the purchasing power parity adjusted levels of

Greece -c7% from a roll-out to 18 stores in Romania (our forecasts call for 12 stores).

Among the key downside risks to our earnings and valuation we identify the fragile economic conditions / recovery potential of Greece, any increases in the $ denominated freight costs, or the Dollar to Euro parity (>90% of the buying is in dollars), execution risks from the expansion in Romania and the strong dependence on Mr Vakakis, who is the company‟s founder, key shareholder (27%) and Chairman.

With shares up c97% in the last 12 months, Jumbo is the only major Greek stock that currently trades close to its all-time high, implying a c58-70% premium over its historic 2004/05-12/13 average EV/EBITDA & P/E multiples of 7.2x and 10.2x respectively. While some of the premium is justified by the earnings recovery potential and stronger market positioning in Greece and abroad, applying the historic P/E multiple of 10.2x on 2013/14e earnings, implies €177m of net profits to justify the rating. This is 70% higher to our forecasts for 2013/14e and more than double of management guidance. Our DCF-based valuation model returns a TP of €14.00 (WACC of 9.5%), which implies a total potential return of 8.3% from current price levels. Hence we re-initiate coverage with an Equalweight rating.



Equalweight rating and TP of €14.00

c20% upside risk to our EPS estimates from better

l-f-l in Greece…

…with an additional 2.4% from Bulgaria…

…and 7% from Romania

Trades at significant premium over historic

multiples

Valuation

We value Jumbo through a two-stage DCF model. We form an explicit set of forecasts for the period up to FY‟19/20e, after which we assign a terminal growth of 2.5%. Our WACC has been set at 9.5% based on a market beta of 1.0, a risk-free rate of 1.64% (German 10-year Bund Yield) and a risk premium of 8.9% (weighted blended mix reflecting country risk exposure).

Our DCF-based valuation returns a TP of €14.00 per Jumbo‟s share, which implies a 5.1% upside potential from the current share price level. Including the FY‟13/14e DPS/Capital return of €0.42 (yield 3.2%) the implied total potential return sets at 8.3%. Hence, we resume coverage on Jumbo with an Equalweight rating on the stock. Table 1. Jumbo Valuation & Sensitivity

Upside risk to our Equalweight rating and forecasts derive from:

1 A potential return of Jumbo‟s l-f-l sales to the pre-crisis peak level of c2,300/m2 in

FY‟08/09 (or 30% higher than our estimate) in 2015/16e on stronger-than-expected domestic private consumption. This would result in a c20% upside potential to our group EPS forecasts and valuation.

2 A potential convergence of the sales/m2 in Bulgaria with the related Greek levels –

adjusted for the purchasing power parity – i.e. at 60% of Greek sales or c40% higher than our current estimate of €758/m

2.This would lead to c2.4% upside

potential to our group sales and EPS estimates for 2015/16e.

3 A potential roll-out to 18 stores in Romania in 2015/16e would lead to an upside risk potential of c7% to our EPS estimates.

Jumbo is the only major Greek stock that currently trades close to its all-time high. This also means that it trades at a c58-70% premium over its historic 2004/05-„12/13 average EV/EBITDA & P/E multiples of 7.2x and 10.2x, respectively. Even if we exclude the recent crisis years, the historic P/E multiple does not exceed 13x – with

Assumptions in % FY'14/15e FY'15/16e FY'16/17e FY'17/18e FY'18/19e FY'19/20e Terminal

Sales growth 10.8 8.9 7.7 4.8 3.7 3.8 2.5

EBIT margin 24.3 24.5 24.5 24.5 24.5 24.5 24.5

Tax rate 22.6 22.5 22.5 22.5 22.5 22.5 22.5

Working capital delta (sales %) (2.1) 2.4 2.0 1.3 1.0 1.0 0.7

CapEx (sales %) 7.5 6.8 6.1 5.9 4.6 4.1 3.0

Depreciation (sales %) 3.6 3.6 3.6 3.6 3.7 3.8 3.8

Cost of Capital 9.5 9.5 9.5 9.5 9.5 9.5 9.5

Valuation (in € m) FY'14/15e FY'15/16e FY'16/17e FY'17/18e FY'18/19e FY'19/20e Terminal

Sales 600 653 703 737 764 793 813

EBIT 146 160 172 180 187 194 199

Less: Adjusted Tax 33 36 39 41 42 44 45

NOPAT 113 124 134 140 145 151 154

Non-cash adjustments 21 23 25 27 29 30 31

Working capital delta (13) 15 14 9 8 8 6

CapEx 45 44 43 44 35 33 24

Cash Flow to the Firm (FCFF) 102 87 101 114 130 140 160

Present Value of Cash Flows 93 73 77 79 83 81 1,330

Terminal Value % of EV 73%

Enterprise Value 1,816

Less: Net Debt (FY'13/14e) (91) TP Sensitivity to WACC and Long-term Growth

Other (FY'13/14e) - WACC

Value of Equity 1,907 1.5% 2.0% 2.5% 3.0% 3.5%

8.0% 15.62 16.63 17.83 19.28 21.05

Number of shares (mio) 136.1 9.0% 13.56 14.28 15.11 16.08 17.23

Current Price (€) 13.3 9.5% 12.70 13.31 14.00 14.81 15.75

Value of share (€) 14.00 11.0% 10.82 11.23 11.68 12.18 12.76

% upside potential 5.1% 12.0% 9.88 10.19 10.54 10.93 11.36

Source: Euroxx Research Source: Euroxx Research

Long-term Growth



the stock currently trading at 17.4x June 2014 earnings. While, in our view, some of the premium is justified by the earnings recovery potential and stronger market positioning in Greece and internationally, it is difficult to see any upside on the shares based on how the market has historically valued Jumbo. If one applies the historic P/E multiple of 10.2x it would suggest that Jumbo needs to make €177m of net profits to justify the rating. This is 70% higher to our forecasts for 2013/14e and double of what the management is guiding for the current financial year.

Table 2. Jumbo Historic Multiples

Historic Multiples FY'04/05 FY'05/06 FY'06/07 FY'07/08 FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13

Period Start 01-Jul-04 01-Jul-05 01-Jul-06 01-Jul-07 01-Jul-08 01-Jul-09 01-Jul-10 01-Jul-11 01-Jul-12

Period End 30-Jun-05 30-Jun-06 30-Jun-07 30-Jun-08 30-Jun-09 30-Jun-10 30-Jun-11 30-Jun-12 30-Jun-13

Average Market Cap (€m) 331 575 1,117 1,417 787 966 690 487 734

EPS (€) 0.29 0.40 0.54 0.65 0.76 0.59 0.70 0.72 0.54

Recurring EPS (€) 0.29 0.40 0.51 0.62 0.72 0.74 0.70 0.72 0.72

EBITDA (€m) 64 83 106 126 140 145 135 134 110

Average Share Price (€) 2.43 4.23 8.21 10.41 5.78 7.10 5.07 3.58 5.40

Enterprise value (€m) 408 645 1,183 1,505 861 982 687 456 714

Note: Enterprise value is defined as Average Market Cap (Avrg. Share Price * no of Shares) + Net Cash(Debt).

Multiples FY'04/05 FY'05/06 FY'06/07 FY'07/08 FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13Historic

AverageCurrent

Current

vs

Historic

P/E 8.3x 10.6x 15.3x 16.0x 7.7x 12.0x 7.3x 5.0x 9.9x 10.2x 17.4x 70%

EV/EBITDA 6.3x 7.8x 11.2x 12.0x 6.2x 6.8x 5.1x 3.4x 6.5x 7.2x 11.5x 58%

Source: Euroxx Research



66 PoS – 60% owned – selling capacity CAGR of

11% over 2008-12

Hyper-stores combine a wide range of products

under one roof and sufficient parking space

Greek stores network to mature at 58 stores and not

50 as originally expected

We expect Jumbo to operate a total of 82 PoS by

YE’2017-18e – with selling space CAGR of 7%

Stores’ Network - 7% CAGR in Selling Space by June’18

Jumbo currently has 66 PoS, of which 52 are located in Greece (Attica 25, Province 27), 4 in Cyprus, 8 in Bulgaria and 2 in Romania. The network expanded rapidly in the last five years (selling space CAGR of 11%), reaching a total gross surface of 530k m

2, of which c320k m

2 or two thirds are “clean” retail space. Jumbo owns c60% of this

space while the rest is under long term leases.

Chart 1: Gross Surface Breakdown Evolution


Such capacity increase has been combined with a structural shift in Jumbo‟s store characteristics. In order to provide customers with the best possible experience, the group has established the „hyper-stores” concept. This type of destination stores is characterized by much bigger surface space (10-13k m

2) so as to carry a wide range

of products under one roof, and have sufficient parking space to improve accessibility.

For H2‟13/14e, management guides for the opening of one more (owned) store in Northern Greece (Iasmos – Komotini), and it now targets a domestic network of c58 stores within the next 2 years (i.e. +6 new stores). To note, this is significantly higher to the 50 stores that the market once perceived as a mature network size for Jumbo in Greece. Beyond the store expansion, the group announced that it will gradually proceed with the renovation of its old stores in Greece. The other big area of network growth is Romania, where apart from the 2 newly introduced PoS in Q2‟13/14, Jumbo plans to increase its retail network to 12-18 stores in the next 5-years. We assume that Jumbo will operate a total of 82 stores by June ‟18, of which 58 will be in Greece, 4 in Cyprus, 8 in Bulgaria and 12 in Romania.

Chart 2: Y-o-Y Store Evolution


Table 3. Evolution of Space in Jumbo’s Retail Network

Greece Cyprus Bulgaria Romania Total Group FY 2012-13 2017-18

CAGR 2012-13 2017-18

CAGR 2012-13 2017-18

CAGR 2012-13 2017-18

CAGR 2012-13 2017-18

CAGR Year End Jun’13 Jun’18 Jun’13 Jun’18 Jun’13 Jun’18 Jun’13 Jun’18 Jun’13 Jun’18

Gross m2 380.7 445.7 3.2% 36.8 46.8 4.9% 112.5 112.5 0.0% 0.0 147.0 n.m 530.0 752.0 7.2%

Retail m2 244.3 283.3 3.0% 20.9 26.4 4.8% 55.3 55.3 0.0% 0.0 82.2 n.m 320.4 447.1 6.9%

W/H m2 136.4 162.4 3.6% 16.0 20.5 5.1% 57.3 57.3 0.0% 0.0 64.8 n.m 209.6 304.9 7.8%


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Greek operations to remain the key growth driver for

both Sales and gross profit at 50-55% of incremental growth, with Romania at

c30%

Greek operations to decline to 73% of total sales in

2016/17e

Sales and Gross Profit CAGR of c9-10% over 2012-16e

Over FY‟12/13-16/17e we expect the economic recovery in Greece, the strong l-f-l growth in Cyprus and the roll out in Romania, to fuel the c9-10% CAGR in revenue, gross profit and EPS. On our estimates, Greek operations will remain the steam engine of growth, accounting for as much as 50-55% of the incremental sales and gross profits over FY‟12/13-16/17e. Also important will be the contribution from the expected roll-out to 12 stores in Romania (c30% of incremental growth). Cypriot and to a lesser extend Bulgarian operations are also expected to provide support. The charts below show the expected evolution of sales and gross profit over FY‟12/13-16/17e.

Chart 3: FY’12/13 – FY’16/17e Euroxx’s Sales Bridge by Country Estimates


Chart 4: FY’12/13 – FY’16/17e Euroxx’s Gross Profit Bridge by Country Estimates


Until 2008 >90% of Jumbo‟s turnover was generated in Greece, with the remaining in Cyprus. However, following the group‟s expansion in Bulgaria (2008) and now in Romania, domestic operations‟ should account for c73% of sales by FY‟16/17e.

Chart 5. Sales Breakdown Evolution


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100%

Greece Cyprus Bulgaria Romania



A best in class Greek retailer commanding a 40%

market share in core product categories

Greek GDP down c21% in real terms in 2009-13…

with retail sales down 27%

and Jumbo’s l-f-l down 24%

Greece - At a Turning Point

Jumbo is the largest domestic retailer commanding a 40% market share in core product categories. It currently operates 52 stores in Greece of a gross surface equal to 392k m

2 (64% retail space), with the total invested capital in the country since

FY‟04/05 amounting to c€230m, on our estimates. The domestic operations should remain the key driver for the group‟s top line and operating profitability. Domestic sales / gross profit, now at 82-83% of group‟s total, should still account for 73-74% by FY‟16/17e (dilution due to Jumbo‟s expansionary strategy in Romania). Chart 6. Jumbo with 40% market share (*) Chart 7. Domestic Sales breakdown YE'12/13

*Note: Market share refers to core product categories Source: Jumbo, Euroxx Research Source: Jumbo, Euroxx Research

The group‟s aggressive expansionary strategy since early-1990‟s, combined with the strong marketing promotion and low-pricing policy helped Jumbo to increase its market share in core product categories (toys, stationary and baby products) to 36% in FY‟08/09 from 28% in FY‟03/04.

The strict Economic Adjustment Program (EAP) imposed by the Troika (IMF/EC/ECB) since FY‟09 and the significant primary fiscal adjustment of >10.9% of GDP in FY‟09-13, has led the economy shrinking by c21% in real terms. As a result of this deep recession, private consumption contracted by c22% over the same period, with domestic retail sales down by as much as 27%. Jumbo has outperformed this weak consumer cycle, with domestic l-f-l sales down by 24% to €1.734/m

2 in YE‟12/13. This compares with a high of €2.297/m

2 in YE‟08/09.

Chart 8. Jumbo Outperformed The Weak Greek Consumer Cycle

Source: Euroxx Research, European Commission (Econ. Forecast Winter ’14)

Chart 9. Evolution of Greek Sales per Adjusted m2


44% 46%50% 52%

35% 34% 31% 30%

14% 13% 11% 10%

7% 7% 8% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012

Seasonal Toys Baby products Stationary

Jumbo; 40%

Mom & pop shops; 28%

S/M & H/M; 23%

Other ; 9%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2007 2008 2009 2010 2011 2012 2013e 2014e 2015e

L-f-l sales Retail sales Private Consumption

2,194 2,297 2,2412,091

1,9011,734 1,702 1,734 1,776 1,830

0

500

1,000

1,500

2,000

2,500

FY'07/08 FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13 FY'13/14eFY'14/15eFY'15/16eFY'16/17e

We expect sales/adj. m2 to star heading north from FY'14/15e onwards



Jumbo invested in 27% more retail space in Greece during the crisis – helping it achieve flat domestic sales

Competitors at a disadvantage because of

their less diversified product mix and smaller size

Economic outlook is improving with estimates calling for a positive GDP

growth as of FY’14e…

…driven by the strong rebound in gross fixed

capital formation & private consumption

Nevertheless, the company‟s unabated investment activity (10 new stores in the 2009-2012 period or a 27% increase in retail space m

2) combined with a strong

product mix, less labor intensive stores‟ structure (average cost/employee down 10%), strong operating profitability and healthy FCF generation helped Jumbo see its market share in core product categories rise further to c40%. Hence, domestic sales have remained relatively flat since the start of the crisis and gross profit has posted a -2.3% CAGR over the same period. Domestic Competition is Shrinking Specialty retailers, namely toy retailers, compete with Jumbo at a disadvantage because of their less diversified product mix and smaller size. Jumbo‟s available selling space of c245k m

2 in Greece, for product display and promotion offers a huge

competitive advantage, especially if one considers that advertising products for children are subject to several regulatory restrictions (e.g. air time). Furthermore, specialty retailers are more exposed to the broader risks associated with a toy business (demographics, seasonality, etc.). Mass merchants, such as supermarkets and large discount stores, on the other hand, allocate the majority of their space to food & drink products, with less effective selling space on categories that compete with Jumbo. For example, if a hypermarket allocates 3m

2 of selling space on pet

accessories, Jumbo would probably allocate 15m2.

Chart 10. Market Share Evolution


Leading Indicators Point Towards an Economic Recovery in Greece The latest leading indicators continue providing a more optimistic outlook on the Greek economy and point towards economic recovery in Greece from 2014: PMI climbed to 51.3 in February from 51.2 in January- the first back-to-back reading above 50.0 for almost 4.5 years- while economic sentiment improved to 94.8 in February –the highest since October „08. To this end, the EC and the IMF now expect a moderate GDP growth of 0.6% in FY‟14e, mainly driven by investment and exports, accelerating to 2.9-3.7% in 2015-16e. The accelerating GDP growth is a function of the double-digit growth in gross fixed capital formation (relates to public investments i.e. infrastructure works, state buildings etc.) and the rebound in private consumption (up 1.4% y-o-y in 2015), as per the table 4 below, that should be led by the c100bp annual fall in the unemployment rate for each of 2014-15e from the current level of 28%. This is also our house view. Table 4. Key Economic Indicators in Greece (% change)

2012 2013 2014e 2015e 2016e

Private consumption -9.1 -6.0 -1.6 1.4 2.2

Public consumption -4.2 -4.1 -4.0 -1.2 -4.0

Gross fixed capital formation -19.2 -12.8 5.3 11.3 14.5

Exports -2.4 1.8 4.6 5.5 4.7

Imports -13.8 -5.3 -1.3 2.7 2.7

(PPP) per capita GDP ($'000) 24.3 23.6 24.2 25.5 27.0

Change (%) -4.6 -2.6 2.5 5.2 6.0

GDP -6.4 -3.9 0.6 2.9 3.7 Source: ELSTAT, EC (Economic Forecast Winter ’14), IMF (World Economic Outlook Database,Oct.’13)

28% 31% 32% 33% 36% 36% 36% 39% 40% 40%

30% 30% 30% 28% 28% 28%

24% 24% 24% 24% 23% 23%

72% 69% 68% 67%

10% 10% 10% 9% 9% 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Jumbo Mom & pop shops S/M & H/M Other



Chart 11. Sales per Adjusted m2 vs Private Consumption

Source: Euroxx Research, European Commission –Econ. Forecast (Winter ‘14)

Chart 12. Greek Sales & Gross Profit Evolution


L-f-l domestic sales to start heading north from

FY’14/15e onwards- in tandem with private

consumption recovery

Gross profit margin is seen at 54.7% in FY’16/17e from

52.9% in FY’12/13

Sales and Gross profit in Greece to generate a c6% 4-year CAGR In 2012/13 group sales reached €414m, marginally higher y-o-y, with gross profit at €219m, down by c1% y-o-y, (gross margin at 52.9% from 53.7% a year ago).

With private consumption resuming its upward trend from 2015 onwards, we expect FY‟13/14e to be the last year of l-f-l domestic sales contraction, with sales per adjusted m

2 start heading north from FY‟14/15 onwards (+1.9% y-o-y to €1,734/m

2)

and gradually moving towards €1,830/m2 by FY‟16/17. This is still 8% lower to the

pre-crisis average historic levels of c€2,000/m2 .

or 20% lower to the peak of FY‟08/09. We chose to be rather cautious in our forecasts at this stage largely due to the high unemployment rate at 28% and the dilution of the l-f-l recovery capacity from the higher market penetration. By FY‟16/17e, Jumbo would have expanded its domestic retail space by 47% (or 90.7k m

2) compared to FY‟09/10.

All in, we expect domestic sales to show a 5.7% CAGR driven by both the recovery of l-f-l and the 7 new stores, which we expect to be deployed within the next four years (total retail space to reach 283k by FY‟16/17, or 16% higher than FY‟12/13).

Gross profit is seen settling at €282m in FY‟16/17e from €219m in FY‟12/13, i.e. on a 4-year CAGR of 6.6% (see chart 12 above). On our estimates, the roll out of the new stores together with the stable freight rates and EURO/USD parity above 1.35 (currently at 1.37) should support the expected 180bp recovery in gross profit margins to 54.7% by FY‟16/17 (from 52.9% in FY‟12/13- and 140bps above the historic average of 53.3%).

A return of sales/m2 to

2008-09 peak levels of 2,300/m

2 implies upside

potential of c21% to our current group EPS forecast

Table 5. Greek Operations – Key P&L drivers FY’12/13-FY’16/17e

FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales (in € m) 414 425 456 486 516 Change (y-o-y %) 0.4% 2.7% 7.3% 6.7% 6.1% % of Total 82.4% 78.5% 76.1% 74.5% 73.4% CoGS 195 194 207 220 234 Gross Profit 219 231 249 266 282 Change (y-o-y %) -1.0% 5.4% 7.7% 7.1% 6.0% Gross Profit Margin 52.9% 54.3% 54.5% 54.7% 54.7%

# of Stores 51 53 55 57 58 Retail space (in '000 sq. m.) 244 256 267 278 283 Change (y-o-y %) 6.7% 4.9% 4.2% 4.0% 1.9% Adjusted Capacity (in '000 sq. m.) 239 250 263 274 282 Change (y-o-y %) 10.0% 4.6% 5.4% 4.2% 3.0% Sales / Adjusted m

2 (in €) 1,734 1,702 1,734 1,776 1,830

L4L proxy(%) -8.8% -1.9% 1.9% 2.4% 3.1% Source: Jumbo, Euroxx Research

Upside Risk of c21% to Group EPS if Sales/m2 Return to Historic / Peak Levels

Should private consumption prove stronger-than-expected and l-f-l sales return to the pre-crisis average historic levels of c€2,000/m

2, (or 13% higher than our estimate of

c€1,776/m2) in FY‟15/16e, this would imply an upside potential of c9% to both our

group sales (to €715m) and EPS estimates (to €1.05). The same sensitivity analysis but by reference to the peak level of c2,300/m

2 in FY‟08/09 (or 30% higher than our

estimate) would lead to an upside potential of c21% to our current group EPS forecasts (to €1.17).

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2007 2008 2009 2010 2011 2012 2013e 2014e 2015e

L-f-l sales Private Consumption

We expect l-f-l sales growth to converge with recovery in private consumption

420 430 418 412 414 425456

486516

230 235 224 221 219 231 249 266 282

0

50

100

150

200

250

300

350

400

450

500

550

FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

In €

m

Greece - Sales Greece - Gross Profit

Sales CAGR -0.3%Gross Profit CAGR -1.2%

Sales CAGR 5.7%Gross Profit CAGR 6.6%



Jumbo entered the Romanian market in

Q2’13/14e aiming at a total network of 12-18 stores by

YE’17/18e

Retail stock in Romania remains high…

…yet access & location …

…together with sufficient provision of parking space

are of crucial importance for the performance of the

asset

We account for 12 PoS vs Jumbo guidance for 18

Romania: The Next Growth Catalyst

Jumbo engaged in the Romanian market in Q2‟13/14 through the opening of two leased hyper-stores of total surface space of 27,000m

2 (c60% relates to retail space,

on our estimates). More specifically, the group opened its first store in Timisoara in October ‟13 (13,000m

2), that was followed by a store in Bucharest (14,000m

2) in

November ‟13. It is also worth noting that Jumbo in early-2007 paid €4.7m to buy land of 46K m

2 in Romania that is likely to be used for the development of new store(s). So

far the only public communication by Jumbo regarding Romania is that the expansion in the country will be channelled through leased stores. Jumbo targets a network of 12-18 stores in Romania within the next 5-year period. This is an ambitious but in our view achievable target but we cautiously assume 12 stores at this stage. Below we examine the real estate dynamics of Romania in more detail.

Real Estate Dynamics On one hand, the expansion of the group‟s retail network in Romania is supported by a current retail stock of c3m m

2 in the country, with shopping centre vacancy rate

ranging from 5 to over 10%. According to a September ‟13 research report of CBRE Real Estate Consultancy, c55% of this stock refers to shopping centres, c34% to retail parks, c10% to hypermarket stand-alone units and c1% to outlet centres. Most of the modern retail space is located in Bucharest and other major cities with high retail penetration and above country average salaries, while some cities with lower income levels are noticeably underdeveloped in terms of retail space. We therefore believe Jumbo will find it easier to locate empty / suitable space to be leased in Romania than, for example, it has been able to do so in Bulgaria.

On the other hand, the access and location are of crucial importance for the performance of the retail asset. According to a study conducted by PWC and Sonae Sierra, small size shopping centres located in the cities – close to subway stations- fare better in this respect than large or very large schemes, which in most cases are located on the boundaries or outside the city where in many cases the existing road infrastructure is poor. Moreover, in crowded areas such as Bucharest the absence or insufficient provision of parking space is also a very significant factor that can deter customers from visiting the shopping centre. This influence will become more dominant with increasing competition. Finally, it is usually very difficult to improve or enlarge existing parking facilities.

For these reasons we have accounted for the opening of 12 stores in total in Romania, i.e. at the low-end of group‟s target. This suggests one store per 1.8m population – which compares with 216-220k in Greece and Cyprus and 906k in Bulgaria). Chart 13. Distribution of Romanian Modern Retail Stock (% of GLA)

Source: PWC, Sonae Sierra estimates, Press release



Real GDP growth surged by 3.5% y-o-y in 2013 ….

…and expected to hover around 2.5% in the

medium term

Economic Activity Grows at Fastest Pace in Two Years in 2013 Real GDP growth in Romania settled at 3.5% in 2013e, as per the European Commission‟s latest forecasts, driven mainly by a stellar export performance on a robust automotive industry and the good harvest that added more than 1.4% to Romanian GDP– positively affected by the favourable weather conditions. These positive developments, however, mask the subdued domestic demand, with private consumption expected to remain flat y-o-y in 2013e and public investments seen contracting by 2.7% y-o-y (see table 6 below). Going forward, real GDP growth is expected to decelerate in 2014e, to 2.3%, before slightly recovering to 2.5% in 2015 to reflect an improved consumer confidence and supportive international conditions but also the rewards of product and labour market reforms implemented under the recent financial support programmes. Table 6. Key Economic Indicators in Romania (% change)

2012 2013e 2014e 2015e

Private consumption 1.1 0.9 1.5 2.5

Public consumption 1.7 -1.5 1.8 1.5

Gross fixed capital formation 4.9 -2.7 3.4 4.5

Exports -3.0 13.6 5.7 6.3

Imports -0.9 2.9 5.0 7.3

((PPP) per capita GDP ($'000) 12.7 13.2 13.7 14.4

Change (%) 2.7 3.6 4.0 4.8

GDP 0.7 3.5 2.3 2.5 Source: European Commission (Economic Forecast Winter ’14), IMF (World Economic Outlook Database,Oct.’13)

Chart 14. Sales per Adjusted m

2 vs Private Consumption


Chart 15. Romanian Sales & Gross Profit Evolution


Sales per adjusted m2 to

exhibit a negative 3-year CAGR of 11%...

…and expected to be notably higher than the

related Bulgarian figure to the extent of a bigger

economy

Romania to Account for c9% of Both Group Sales and Gross Profit in FY’16/17e. On our estimates, divisional sales per adjusted m

2 are seen at €1,049 in FY‟16/17e

generating a 3-year negative CAGR of c11% to reflect Jumbo‟s network expansion in cities with comparably lower salaries/income levels than those of Bucharest and Timisoara. Divisional l-f-l sales are expected to settle c43% below Greece‟s respective figure, but c34% higher than that of Bulgaria, with the latter being justified by the bigger economy and market opportunity in Romania. Turning to operating profitability, we forecast gross profit to reach €34m in FY‟16/17e from c€6m in FY‟13/14e, with related margin hovering around 53.7% over the same period- and broadly in line with group estimated average of 53.4%. We expect the Romanian operations to account for c9% of both group sales and gross profit in FY‟16/17e. Upside Risk of c5% to our FY’17/18 EPS if the Number of Stores reaches 18 Should Jumbo‟s store network reach 18 PoS by 2017/18e versus our estimate for 12 PoS, there is an upside potential of c5% to our EPS estimates (to €1.18).

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2008 2009 2010 2011 2012 2013e 2014e 2015e


We expect l-f-l sales to generatie a 3-year CAGR of -10% to reflect the network expansion in

cities with comparably lower salaries/income than Bucharest and Timisoara

12

28

47

64

6

15

25

34

0

10

20

30

40

50

60

70

80

90

FY'13/14e FY'14/15e FY'15/16e FY'16/17e

In €

m

Romania - Sales Romania - Gross Profit

Sales seen at €64m in FY'16/17e accounting for c9% of group's total.Gross profit expected at c€34m in FY'16/17e capturing c9% of group total,

with related marging at 53%



Table 7. Romanian Operations – Key P&L drivers FY’12/13-FY’16/17e

FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales (in € m) 12 28 47 64 Change (y-o-y %) 129.3% 70.0% 35.1% % of Total 2.2% 4.6% 7.2% 9.1% CoGS 6 13 22 29 Gross Profit 6 15 25 34 Change (y-o-y %)

130.3% 71.7% 35.1%

Gross Profit Margin 53.0% 53.3% 53.8% 53.8%

# of Stores 2 5 8 10 Retail space (in '000 sq. m.) 16 36 56 62 Change (y-o-y %)

122.2% 55.0% 11.8%

Adjusted Capacity (in '000 sq. m.) 8 24 44 61 Change (y-o-y %)

197.4% 81.5% 36.5%

Sales / Adjusted m2 (in €) 1,467 1,131 1,060 1,049

L4L proxy(%) 0.0% -22.9% -6.3% -1.0% Source: Jumbo, Euroxx Research



Jumbo operates a network of 4 stores in Cyprus with sales per store at 2x the

average of those in Greece.

Divisional sales and gross profit to account for 11% of

group total in FY’16/17e

Real GDP contraction accelerated to 5.7% y-o-y

in 2013 yet, lower than expected….

Cyprus: Crisis – What Crisis?

Jumbo is active in the Cypriot market since 2001, when it opened its first store in Limassol of 8,000m

2 total surface. The company now operates a total network of 4

stores, with the latest leased-store in Paphos opening in mid-November ‟13 (total surface of 10,000m

2– 55% retail space, on our estimates). Cyprus has been a hugely

successful expansion model for Jumbo – with sales per store at 2x the average of those in Greece. In our model, we have not accounted for any new store additions in the island, due to the high economic uncertainty (real GDP to fall by 7.5-6.3% over 2013-14e) and further fiscal adjustments underway. That said, we expect the contribution of Cypriot operations to group numbers to remain broadly at FY‟12/13 levels (i.e. divisional sales and gross profit accounted for 10-11% of group‟s respective figures), with the risk lying on the upside, should the economic recession in Cyprus proves less deep than anticipated. Economic Recession Comes Softer-than-Expected in 2013 Real GDP contraction settled at 2.4% in 2012 and accelerated to 5.7% in 2013 (much better than initial IMF‟s forecasts of -8.7% and even the revised EC forecasts of -6.0%). During 2013 consumer confidence and business sentiment indicators hit historically low levels following the bail-in of depositors in the two biggest banks in March „13 and the agreement of an economic adjustment programme in April „13. Economic recession is expected to continue in 2014 (real GDP forecasted at -4.8% by the EC), as the Cypriot economy will continue to face several headwinds, i.e. domestic demand will continue to fall, amidst declining credit and wage growth alongside further fiscal consolidation.



Chart 17. Cypriot Sales & Gross Profit Evolution


…and to turn on positive grounds in 2015, as private

domestic demand regains strength

The official sector (IMF/EC) expects 2014 to be the last year of recession in Cyprus and real GDP growth should resume gradually its upward trend in 2015 (+0.9% y-o-y), reflecting mainly the recovery of private domestic demand. As the EC notes, private domestic demand is seen regaining strength supported by the restoration of a sound and well-capitalized banking sector that is expected to gradually loosen current tight credit conditions. Moreover, exports are forecasted to grow on a proportionately higher pace than the marginal growth expected in imports. Table 8. Key Economic Indicators in Cyprus (% change)

2012 2013e 2014e 2015e

Private consumption -2.5 -7.5 -6.3 0.7

Public consumption -3.1 -6.0 -1.5 2.7

Gross fixed capital formation -19.6 -24.0 -18.1 1.3

Exports -2.7 -4.8 -2.7 1.9

Imports -6.4 -14.7 -7.2 0.2

(PPP) per capita GDP ($'000) 26.8 24.5 23.7 24.2

Change (%) -1.8 -8.5 -3.4 2.1

GDP -2.4 -5.7 -4.8 0.9 Source: Statistical Service of Cyprus, EC (Economic Forecast Winter ’14), IMF (World Economic Outlook Database,Oct.’13)

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2007 2008 2009 2010 2011 2012 2013e 2014e 2015e


We expect l-f-l sales to rebound in 2013/14e, despite the expected decline in private consumption

3742

5255 54

65

75 78 80

1821

26 28 2733

38 40 41

0

10

20

30

40

50

60

70

80

90

100


In €

m

Cyprus - Sales Cyprus - Gross Profit


Sales CAGR 10.2%Gross Profit CAGR 10,9%



The Cypriot paradox - sales per adjusted m

2

growth to be restored as of 2013- and despite the

deep economic recession in 2013-14….

…due to the new store and the extension of the stores’

opening hours and days

Reported sales and gross profit in Cyprus to exhibit a

2012-16e CAGR of c10-11%

Cyprus has a lower gross profit margin when

compared to Greece, on increased transportation

costs, but the highest EBITDA margin among all

geographies on significantly lower SG&A

expenses

Cypriot Sales and Gross Profit to Exhibit a 10-11% CAGR Over 2012-16e Despite the fact that the official sector calls for a deep economic recession in 2013-14 and against a total anticipated contraction of c14% in private consumption over the same period, we expect divisional sales per adjusted m

2 to increase by 5.6% y-o-y to

€2,749 in FY‟13/14e (after declining by 1.2%v y-o-y in FY‟12/13). This is mainly due to the extension of the stores‟ opening hours (from 05:00am to 10:00-11:00pm during Monday to Saturday) and the opening on Sundays (from 09:00-11:00pm on Sunday) that was imposed by the Cypriot Employment Ministry in July ‟13 and is still in effect. Divisional sales/adjusted m

2 are superior to all other markets, as Cyprus enjoys high

private consumption and purchase power per capita and despite the comparably small size of its economy.

We expect sales in Cyprus to achieve a 4-year CAGR of 10% that will be mostly front loaded (new store in Paphos and opening hours). Especially for FY‟13/14e, the Cypriot top-line is seen settling at €65m, 19.6% higher y-o-y, vs the 1.2% y-o-y drop in FY‟12/13, with the results so far showing sales growth of 19% y-o-y in 2Q or 16% y-o-y in 1H. Gross profit is expected at €41m in FY‟16/17e from €27m in FY‟12/13e (CAGR of 10.9% over 2012-16e), with related margin hovering around 51% over the same period- and lower than the Greek margin of 54.7% owing to increased inventory transportation costs. This is because inventories are firstly imported in Greece and then distributed to other geographies (i.e. Bulgaria and Romania), with Cyprus bearing the highest freight/transportation costs. However, on an EBITDA margin level Cyprus traditionally enjoys the highest margins among group‟s operations (at 30% vs the group average at c27%) due to the significantly lower distribution (advertising/marketing) expenses (as % of sales) of c13% on average over 2008/09-2012/13 compared to c26% for Greece and c28% for Bulgaria, respectively. Table 9. Cypriot Operations – Key P&L drivers FY’12/13-FY’16/17e

FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales (in € m) 54 65 75 78 80

Change (y-o-y %) -1.2% 19.6% 16.2% 3.0% 3.0%

% of Total 10.8% 12.0% 12.6% 11.9% 11.4%

CoGS 27 32 37 38 39

Gross Profit 27 33 38 40 41

Change (y-o-y %) -3.2% 20.5% 17.0% 4.0% 3.0%

Gross Profit Margin 50.2% 50.6% 50.9% 51.4% 51.4%

# of Stores 3 4 4 4 4

Retail space (in '000 sq. m.) 21 26 26 26 26

Change (y-o-y %) 0.0% 26.4% 0.0% 0.0% 0.0%

Adjusted Capacity (in '000 sq. m.) 21 24 26 26 26

Change (y-o-y %) 0.0% 13.3% 11.6% 0.0% 0.0%

Sales / Adjusted m2 (in €) 2,603 2,749 2,862 2,948 3,036

L4L proxy(%) -1.2% 5.6% 4.1% 3.0% 3.0% Source: Jumbo, Euroxx Research



Jumbo is active in the Bulgarian market since 2008 through 8 owned

stores

The Bulgarian economy expanded by 0.6% in

2013e…

Bulgaria: Jumbo is Punching Below its Group Weight

Jumbo is active in Bulgaria (population of 7.6m) since 2008, when it opened its first store in Sofia. Since then the group has opened another 7 new stores, and now has gross surface space of 112.5k m

2. The last of these stores were opened in December

2012, in Sofia. The stores are spread throughout Bulgaria with 4 in Sofia and one each in the main towns of Russe, Burgas, Plovdiv and Varna. Jumbo invested a total of €100m in Bulgaria since 2008 and it owns all of the stores. We believe any further expansion in the store network in Bulgaria will be opportunistic if any and we do not factor any such expansion in our forecasts. Arguably, there is one Jumbo store per 906k population (216K in Greece and 220k in Cyprus) – leaving scope for further expansion.

In FY12/13 Bulgaria had sales of €34m – or 7% of group total on a gross margin 48.7% that is 360bps below the group average. At the EBITDA level, margins stand at 27.2% –broadly in line with group average- with the lower SG&A costs offsetting the lower gross margins from the lower selling prices.

On our estimates, sales per adjusted m2 of the Bulgarian franchise stand 60% lower

than the related Greek figure. To our understanding, this is partly justified by the c40% lower purchasing power per capita of Bulgarian consumers vs Greek ones. Also, Jumbo only launched a nationwide advertising campaign in Bulgaria in 2013 and the full benefits of this should be more visible in the following years.

Economic Growth to Accelerate Marginally from 2014 Onwards According to the European Commission‟s latest available data (Economic Forecast – Winter ‟14), GDP growth in Bulgaria is expected to have reached 0.6% y-o-y in 2013, primarily driven by net exports and a surge in public expenditure. This despite the weaknesses of the labour market, the continued deleveraging of the corporate sector and a downsizing in the construction sector.



Chart 19. Bulgarian Sales & Gross Profit Evolution


…and seen accelerating to 1.7% in 2014e and 2.0% in

2015e…

According to the EC, GDP growth is expected to remain in a positive trajectory going forward (+1.7%) in 2014e, (+2.0%) in 2015e -see table 10 below, with economic recovery, though, being somewhat slower compared to many other converging economies, given that the significant population decline (due to ageing and emigration) continues to erode the growth potential and the consumption base. Household consumption and private investment are expected to increasingly contribute to growth, after an extended period of rebalancing following the economic crisis, on sustainable stabilization of the labor market over the coming years. As the EC notes, the most significant downside risk lies with a potential weaker-than-expected recovery in household consumption, given that the Bulgarian labor market and household sentiment are still fragile. However, as observed over the recent years, in periods of weaker domestic demand the Bulgarian economy has been able to partly compensate with higher exports and gains in global market shares.

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

2008 2009 2010 2011 2012 2013e 2014e 2015e


We expect l-f-l sales to move in tandem with private consumption

1215

20

27

34

39 40 4243

6 810

1417

19 20 21 21

0

5

10

15

20

25

30

35

40

45

50


In €

m

Bulgaria - Sales Bulgaria - Gross Profit


Sales CAGR 6,1%Gross Profit CAGR 6.5%



L-f-l Bulgarian sales to grow by 2.3% y-o-y in

FY’13/14 after declining by 13% y-o-y in FY’12/13…

Reported sales and gross profit in Bulgaria to

generate a c6%CAGR over 2012/13-16/17e…

Table 10. Key Economic Indicators in Bulgaria (% change)

2012 2013e 2014e 2015e

Private consumption 2.6 -0.4 1.4 1.7

Public consumption -1.4 3.1 2.2 2.3

Gross fixed capital formation 0.8 1.7 2.4 4.2

Exports -0.4 8.2 5.6 6.4

Imports 3.7 5.0 5.5 6.8

(PPP) per capita GDP ($'000) 14.1 14.4 15.0 15.8

Change (%) 3.2 2.4 3.8 5.1

GDP 0.8 0.6 1.7 2.0 Source: European Commission (Economic Forecast Winter ’14), IMF (World Economic Outlook Database,Oct.’13)

Reported Sales and Gross profit in Bulgaria to generate a c6% 4-year CAGR We expect Bulgarian sales per adjusted m

2 to rebound in FY‟13/14e exhibiting a 2.3%

y-o-y growth vs the 13% decline in FY‟12/13 (that was mostly due to the expansion of the network). The expected recovery in l-f-l sales is a function of the accelerating GDP growth and purchasing power per capita from 2013 onwards. As per the EC, the purchasing power of consumers will be buoyed by the projected growth in real wages in a low inflation environment and the discretionary hike of over 9% in pensions in April „13 that have been frozen over the previous years.

We expect sales in Bulgaria to generate a 4-year CAGR of 6% on the expected increase in sales per adjusted m

2 by c3% over the same period- and in line with the

increase in the domestic private consumption, as discussed above. Gross profit is seen settling at €21m in FY‟16/17e from €17m in FY‟12/13, exhibiting a 6.5% CAGR over the same period, with related margin at 49.4% from 48.7% in FY‟12/13.

Upside Risk of c2.4% to Group EPS on Convergence of Bulgarian Sales/m2 to

Greek standards – adjusted for purchasing power parity Should sales/m

2 in Bulgaria reach the same level as in Greece – adjusted for the

purchasing power parity – i.e. at 60% of Greek sales and not 40% - this would suggest €1,062/m

2, or c40% upside to our current estimate of €758/m

2.This would lead to

c2.4% upside potential to our group sales and EPS estimates for FY15/16e. Table 11. Bulgarian Operations – Key P&L drivers FY’12/13-FY’16/17e

FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales (in € m) 34 39 40 42 43

Change (y-o-y %) 25.7% 15.0% 3.0% 3.5% 3.5%

% of Total 6.8% 7.3% 6.7% 6.4% 6.2%

CoGS 18 20 21 21 22

Gross Profit 17 19 20 21 21

Change (y-o-y %) 21.6% 14.9% 3.4% 4.6% 3.5%


# of Stores 8 8 8 8 8


Change (y-o-y %) 37.3% 0.0% 0.0% 0.0% 0.0%


Change (y-o-y %) 44.5% 12.3% 0.0% 0.0% 0.0%

Sales / Adjusted m2 (in €) 695 711 733 758 785

L4L proxy(%) -13.0% 2.3% 3.0% 3.5% 3.5% Source: Jumbo, Euroxx Research



Group sales to grow by 7.8% y-o-y in FY’13/14e

benefited by the 2 new stores in Greece, the 1 in Cyprus and another 2 in

Romania

FY’12/13-16/17e Forecasts – EPS CAGR of 10.2%

For FY‟13/14e we expect that the strong l-f-l growth in Cyprus and the potential recovery in Bulgaria should offset the anticipated c1.9% drop in domestic sales per adjusted m

2. All in all, we expect group l-f-l sales to drop marginally by 1.2% this year.

Top-line should be supported by the 2 new stores in Greece, the 1 in Cyprus and the 2 in Romania, with group sales expected to grow by 7.8% y-o-y to €541m (+8.2% reported in H1‟13/14). Over 2014-17 we expect the economic recovery in Greece, the maturing of the new hyper-stores, alongside with the roll out in Romania, to lift the top-line growth above capacity expansion to c8-11% (see table and charts below). Table 12. Group Operations – Key P&L drivers FY’12/13-FY’16/17e

FY'12/13 FY'13/14e FY'14/15e FY'15/16e FY'16/17e

Sales (in € m) 502 541 600 653 703

Change (y-o-y %) 1.6% 7.8% 10.8% 8.9% 7.7%

CoGS 239 252 278 301 324

Gross Profit 263 289 322 352 379

Change (y-o-y %) -0.1% 10.0% 11.2% 9.5% 7.6%


# of Stores 62 67 72 77 80


Change (y-o-y %) 10.4% 10.5% 8.6% 8.0% 2.9%


Change (y-o-y %) 13.6% 9.1% 9.6% 8.4% 6.1%

Sales / Adjusted m2 (in €) 1,627.220 1,607.081 1,624.405 1,632.805 1,657.139

L4L proxy(%) -10.6% -1.2% 1.1% 0.5% 1.5% Source: Jumbo, Euroxx Research

Chart 20. Sales vs Adjusted Capacity Change

Source: IMF, EC, Euroxx Research

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Greece

Sales change (%) Adjusted Capacity change (%)

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

Bulgaria


0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

FY'14/15e FY'15/16e FY'16/17e

Romania


-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Cyprus


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Total




CoGS and OpEx - the key profitability parameters

Gross Profit margin at to reach 53.9% in FY’16/17e-

50bp below the pre-crisis margin levels

Gross Profit Margin to Settle at 53.9% in FY’16/17e from 52.3% in FY’12/13 In H1‟13/14 Jumbo managed to increase its gross margin by 112bp y-o-y despite the upward movement of freight costs (see chart 21 below) that was more than offset by the strong Euro against USD (+5.5% y-o-y) and the improvements in the product mix. We expect such improvement to be maintained in H2 and look for gross margin to grow to 53.4% from 52.3% in FY‟12/13. Further ahead we see further group gross margin expansion to 53.9% 2016/17e, helped by the strong buying power of Jumbo, the favorable product mix (increasing contribution of higher margin seasonal and home products- at 52% group‟s product mix in FY‟12/13 from 44% in FY‟08/09) and the strong EUR/USD parity. This will still be c50bps lower than its pre-crisis margin levels of 54.4% in FY‟08/09.

Chart 21. Shanghai Containerized Freight Index

Source: Bloomberg, Euroxx Research

Chart 22. EUR/USD Rate


OpEx (as % of sales) at c29.3% from FY’14/15e

onwards on increased marketing costs in Bulgaria and fixed charges resulting

from group’s aggressive store rollout in Romania …

A Less Labor Intensive Network Supports Profitability Operating expenses (as % of sales) are expected to remain c180bps above the group‟s historical average of 27.5% and hover around 29.3%, mainly due to increased costs associated with marketing efforts to boost sales/brand name in Bulgaria and fixed charges resulting from the group‟s store rollout in Romania. That said, as retail is a labor intensive industry and related costs account for the major part of Jumbo‟s OpEx (c50%) we highlight the group‟s successful cost-cutting efforts on this front with average cost per employee down by as much as 10% since 2008/09. Such tight management of labor expenses is likely to be maintained, hence providing support to operating profitability over 2014-17e. Chart 23. Since FY'08/09 Average Cost/Employee is down c10%


800

900

1,000

1,100

1,200

1,300

1,400

1,500

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Shanghai Containerised Freight Index

1.15

1.2

1.25

1.3

1.35

1.4

1.45

1.5

1.55

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

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-11

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-12

Ap

r-1

2

Jul-

12

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-12

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Ap

r-1

3

Jul-

13

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-13

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-14

EUR/USD rate

21,090

20,572

20,24120,449

18,971

17,500

18,000

18,500

19,000

19,500

20,000

20,500

21,000

21,500

FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13

Av

era

ge

Co

st

/ E

mp

loye

e (

in €

)



Higher financial income to support profitability

Recurring net profit up by 7% y-o-y in FY’13/14e and

by 13% y-o-y in FY’14/15e…

…and Jumbo reinstating its

dividend policy this year, with DPS forecasted at

€0.42

Distributes 1 new share for every 22 old for free

Recurring EBITDA CAGR of 10% over 2012/13-16/17e Bringing it all-together, we expect group 2013/14e EBITDA to settle at €150m (up 35.8% y-o-y), with related margin at 27.7%. We remind that following the Cypriot bail-in of depositors at Bank of Cyprus, the 47.5% of the group‟s uninsured Cypriot bank deposits (€58m in Bank of Cyprus in H1‟12/13) were impaired resulting in a net loss of €23.6m that burdened group 9M‟12/13 results. Excluding the aforementioned one-off charge, the group‟s FY‟13/14e recurring EBITDA is seen up by 12% y-o-y – which is in line with the 13% growth that was achieved in 1H13/14.

Further down the P&L, we expect group earnings to be positively affected by higher financial income courtesy of its cash generating business model. Jumbo announced that it targets the full repayment of the €145m bond maturing in May ‟14, while during the group‟s EGM on February 12, shareholders approved the issuance of a new common bond loan of an equal amount (included in our model).

Recurring EPS at €1.06 in FY’16/17e from €0.72 in FY’12/13 – CAGR at 10% We expect the group to report recurring net profits of €104m this year (up 7.0% y-o-y) before reaching €118m in FY‟14/15e (13% higher y-o-y). As a result, recurring EPS is seen for this year at €0.77 (+7.0% y-o-y), with 2012/13-„16/17e CAGR at 10%.

Following the decision to not distribute a dividend in FY‟12/13 (courtesy of the Cyprus bail-in loss), management recently announced that it will proceed with the distribution of a “double” dividend for the FY‟13/14e, which we estimate at €0.42 per share. Overall, we expect Jumbo to follow a >30% distribution policy – leading to DPS of €0.26 to €0.32 over 2013/14-16/17e. Finally, the group‟s EGM of February 12 approved a €7m share capital increase through capitalization of reserves and distribution of 1 new common share for every 22 old common shares. Following the ATHEX approval, 5,915,642 new shares were issued, increasing the group‟s total number of outstanding shares to 136,059,759 (included in our model).

Table 13. Group Operations – Key P&L drivers FY’12/13-FY’16/17e

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17

in € m Actual Actual Est. Est. Est. Est. delta delta delta delta delta

Greece 412.2 413.7 424.9 456.0 486.5 516.2

0.4% 2.7% 7.3% 6.7% 6.1%

Cyprus 54.9 54.3 64.9 75.4 77.7 80.0

-1.2% 19.6% 16.2% 3.0% 3.0%

Bulgaria 27.2 34.2 39.3 40.5 41.9 43.4

25.7% 15.0% 3.0% 3.5% 3.5%

Romania 0.0 0.0 12.1 27.7 47.1 63.7

129.3% 70.0% 35.1%

Sales 494.3 502.2 541.1 599.6 653.1 703.2

1.6% 7.8% 10.8% 8.9% 7.7%

Gross Profit 263.0 262.8 289.1 321.6 352.1 379.1

-0.1% 10.0% 11.2% 9.5% 7.6%

OpEx 146.0 171.2 158.7 175.9 191.9 206.8

17.2% -7.3% 10.8% 9.1% 7.8%

EBITDA 134.4 110.5 150.0 167.0 183.5 197.3

-17.8% 35.8% 11.3% 9.9% 7.5%

EBITDA Adj. 134.4 134.0 150.0 167.0 183.5 197.3

-0.3% 11.9% 11.3% 9.9% 7.5%

EBIT 117.0 91.6 130.4 145.6 160.3 172.3

-21.7% 42.4% 11.7% 10.1% 7.5%

EBIT Adj. 117.0 115.2 130.4 145.6 160.3 172.3

-1.6% 13.2% 11.7% 10.1% 7.5%

Pre-tax Profit 119.5 95.7 134.8 153.0 170.4 185.7

-19.9% 40.8% 13.5% 11.4% 9.0%

Pre-tax Adj. 119.5 119.3 134.8 153.0 170.4 185.7

-0.2% 13.0% 13.5% 11.4% 9.0%

Net profit 97.3 74.0 104.4 118.4 132.0 144.0

-24.0% 41.1% 13.4% 11.5% 9.1%

Rec. Net Inc. 97.3 97.5 104.4 118.4 132.0 144.0

0.2% 7.0% 13.4% 11.5% 9.1%

Margins

Gross profit 53.2% 52.3% 53.4% 53.6% 53.9% 53.9%

(89)bp 111 bp 20 bp 29bp (1)bp

EBITDA 27.2% 22.0% 27.7% 27.9% 28.1% 28.1%

(520)bp 573bp 13 bp 24bp (4)bp

EBITDA Adj. 27.2% 26.7% 27.7% 27.9% 28.1% 28.1%

(51)bp 104bp 13 bp 24bp (4)bp

EBIT 23.7% 18.2% 24.1% 24.3% 24.5% 24.5%

(543)bp 586 bp 19 bp 25bp (4)bp

EBIT Adj. 23.7% 22.9% 24.1% 24.3% 24.5% 24.5%

(74)bp 117 bp 19 bp 25bp (4)bp

Pre-tax profit 24.2% 19.1% 24.9% 25.5% 26.1% 26.4%

(511)bp 585 bp 60 bp 58bp 33bp

Pre-tax Adj. 24.2% 23.8% 24.9% 25.5% 26.1% 26.4%

(42)bp 116 bp 60 bp 58bp 33bp

Net profit 19.7% 14.7% 19.3% 19.7% 20.2% 20.5%

(496)bp 456 bp 45 bp 47bp 27bp

Rec.Net Inc. 19.7% 19.4% 19.3% 19.7% 20.2% 20.5%

(26)bp (13)bp 45 bp 47bp 27bp




Jumbo guides for sales of €522-533m (up 4-6% y-o-y)

and rec. net profit of €80-85m (down 18-13% y-o-y)

in 2013/14e…

….but management has been proven conservative

We stand 2-4% above Jumbo’s top-line guidance,

and 23-30% higher at the recurring net profit level.

Our FY’13/14e EPS is 10% Above Consensus...

Over 2013/14-15/16e our top-line and EBITDA forecasts are broadly in-line with consensus estimates. However, we stand c6-10% higher than market estimates at the bottom-line / EPS most probably on lower financial expenses. Table 14. Euroxx vs Consensus Estimates

...and 23-30% Above Company’s Guidance

In early December, the company proceeded with an upward revision of its FY‟13/14 estimates and guided for sales growth of 4-6% y-o-y (from 2-4% before) to €522-533m, with recurring net profit seen down by 18-13% to €80-85m (previously at €70-75m, down by 28-23% y-o-y). Jumbo also guides for gross profit margins of 48% in the medium-term. This was re-iterated in February after the release of H1 results. During the course of the years although Jumbo‟s management has been conservative on its guidance for both top-line growth and profitability margins, group‟s strong product mix, favourable EUR/USD parity and a low pricing policy have all helped the company to exceed its guidance. Taking into consideration that H1‟13/14 sales grew by 7.2% y-o-y (Jumbo at 4-6% for the full year) with gross profit margin at 50.9% (+c300bps higher than group‟s medium-term target), we believe that group guidance for €522-33m of sales and €80-85m of recurring net profits will be beaten to the upside for once more and we expect revenues of €541m (+7.8% y-o-y, 2-4% above guidance and in-line with consensus) and recurring bottom-line results of €104m (+7.0% y-o-y, 23-30% above guidance and c10% ahead consensus). Table 15. Jumbo Consistently Beats Guidance to the Upside

FY'11/12

(in €m) Jumbo Actual Act. Vs Jumbo

Sales 490 495 494 1% 0%

Net Profit 95 97 2.4%

FY'12/13

(in €m) Jumbo Actual Act. Vs Jumbo

Sales 494 499 502 2% 1%

Net Profit 70 98 39.3%

FY'13/14e

(in €m) Jumbo Euroxx Euroxx. Vs Jumbo

Sales 522 533 541 4% 2%

Net Profit 80 85 104 30% 23% Source: Jumbo, Euroxx Research

FY'13/14e FY'14/15e FY'15/16e

in € m Cons Exx Cons Exx Cons Exx vs. Cons vs. Cons vs. Cons

Sales 540.0 541.1 587.2 599.6 640.0 653.1 0.2% 2.1% 2.1%

Gross Profit 285.7 289.1 308.6 321.6 332.8 352.1 1.2% 4.2% 5.8%

EBITDA 148.4 150.0 164.3 167.0 178.5 183.5 1.1% 1.7% 2.8%

EBIT 129.0 130.4 141.5 145.6 159.3 160.3 1.1% 2.9% 0.7%

Pre-tax Profit 124.2 134.8 143.8 153.0 162.4 170.4 8.6% 6.4% 4.9%

Net profit 95.2 104.4 110.0 118.4 125.0 132.0 9.6% 7.6% 5.6%

Margins

Gross profit 52.9% 53.4% 52.6% 53.6% 52.0% 53.9% 53 bps 108 bps 192 bps

EBITDA 27.5% 27.7% 28.0% 27.9% 27.9% 28.1% 24 bps (12) bps 20 bps

EBIT 23.9% 24.1% 24.1% 24.3% 24.9% 24.5% 21 bps 19 bps (34) bps

Pre-tax profit 23.0% 24.9% 24.5% 25.5% 25.4% 26.1% 192 bps 102 bps 71 bps

Net profit 17.6% 19.3% 18.7% 19.7% 19.5% 20.2% 166 bps 101 bps 68 bps


FY'13/14e FY'14/15e FY'15/16e



We see CapEx averaging €45m p.a. in the next 4-

year period

Balance sheet remains strong with gearing <0.5x

CapEx of c€180m in FY’13/14-’16/17e

Jumbo has been consistently increasing its capital expenditures over the past 4 years in order to support its store network expansion. Going forward, we have accounted for c€45m p.a. (vs group guidance of €35-40m) of CAPEX to account for the expansion of group‟s network both in Greece and Romania, as per the chart 24 below. Chart 24. CapEx Evolution


FCF >€100m or >55% of Group’s EBITDA over 2013-17e

Despite Jumbo‟s unabated investment activity (CapEx of c€285m in 2008-12) towards the expansion of its retail network (+18 new stores, or 107k m

2 of net retail space),

the group has also managed to maintain both a positive FCF position and strong balance sheet, with a net cash position in the last three years. We believe that Jumbo will generate an estimated 2013/14-16/17e average FCF >€100m per annum, which implies an average cash conversion ratio of >55% over the same period. Jumbo should maintain a net cash position of €91-275m over 2013-17e – peaking to €2 per share in 2017, that could suggest upside risk on capital returns.

Table 16. Key Balance Sheet & Cash Flow ratios


Current ratio 3.1x 3.2x 3.6x 4.1x 1.7x 4.8x 4.7x 5.0x 5.3x

Acid test 1.5x 1.8x 2.0x 2.3x 1.0x 3.0x 2.9x 3.2x 3.6x

Leverage (Total Liab. / Equity) 0.9x 0.6x 0.5x 0.4x 0.4x 0.4x 0.3x 0.3x 0.3x

Gearing (Debt / Equity) 0.5x 0.3x 0.3x 0.3x 0.2x 0.2x 0.2x 0.2x 0.1x

Debt to assets 0.3x 0.2x 0.2x 0.2x 0.2x 0.1x 0.1x 0.1x 0.1x

Net Debt / (Cash) (in €m) 74 16 (2) (31) (21) (91) (140) (201) (275)

Net Debt (Cash) / EBITDA 0.5x 0.1x (0.0x) (0.2x) (0.2x) (0.6x) (0.8x) (1.1x) (1.4x)

RoA 16% 11% 12% 12% 8% 11% 11% 12% 12%

RoE 30% 20% 19% 17% 12% 15% 15% 15% 15%

RoIC 20% 14% 15% 13% 9% 12% 12% 12% 12%

FCF (in €m) 40.6 42.9 43.3 56.0 16.0 70.3 106.0 97.1 113.7

FCF over Sales 8.7% 8.8% 8.8% 11.3% 3.2% 13.0% 17.7% 14.9% 16.2%

FCF over EBITDA 29% 30% 32% 42% 15% 47% 63% 53% 58%

OCF (in €m) 85.4 103.9 92.4 95.9 59.8 104.7 138.0 125.8 137.8

OCF over Sales 18% 21% 19% 19% 12% 19% 23% 19% 20%

OCF over EBITDA 61% 72% 68% 71% 54% 70% 83% 69% 70%


54

69

55 53

34

45 45 46 45

0

10

20

30

40

50

60

70

80


(in

€m

)

Investments of c€265m in FY'08-12

New Investments of c€180m for the roll-out of new stores in

Greece and Romania



APPENDIX



Despite changes in the mix, toys remain the 2

nd largest

top-line driver

Demographics and regulation are a major

concern throughout the industry

Products

Seasonal/Home Products Category Exhibits the Highest Growth The group‟s core business comprises of three product categories: Toys, Baby products, Stationery. Moreover, in an effort to reduce seasonality, streamline volumes throughout the year and address unfavorable demographics, Jumbo, introduced in 2004 the Seasonal and Home products category. Since its introduction the new product category has turned into the fastest growing segment (8-year CAGR of 23%) accounting for c52% of total turnover in FY‟12/13 (from 21% in FY‟04/05).

25k active SKUs per hyper-store with an average price of €5 Jumbo hyper-stores currently carry 25,000 active stock keeping units (SKUs), with an average price of c€5. Every store carries a similar product mix, which is easily adjusted according to the needs of the season. A Seasonal Business - 48% of Group’s Turnover is Generated in 3 months Based on FY‟12/13 data, 48% of the group turnover is generated in three months: (a) In Easter (10% of group annual sales), (b) In September (start of the school year -10%) and (c) In December (Christmas - 28%). The other nine months account for c5-6% of group turnover each. Finally, according to the group, the branded vs non-branded products ratio stands at 45/55, with the later exhibiting higher gross margins. This is more pronounced in the seasonal and home product category which is mostly on-branded products that increased its contribution to 52% of the group‟s product mix in FY‟12/13 from just 21% in FY‟04/05. Chart 25. Product Mix Evolution

Note: (*) For simplicity and comparability reasons we have unify Seasonal and Home products into one category Source: Jumbo, Euroxx Research

The European Toys Market

Although the product mix has changed significantly over the years, Toys remain a significant part of Jumbo‟s sales (see chart above) and the product that has been more closely tied with the brand name over its 20-year life. Apart from their significant contribution to Jumbo‟s top-line (30% of group turnover in FY‟12/13), Toys are in effect the main business driver attracting families and customers in the stores. Once the adult is in the store they are bound to impulse shop in several other product categories.

A Stable Market with Asian Imports Dominating The Toy market in Europe is the largest in the world, meeting the diverse and evolving demands of the EU‟s c78m children. According to the “Toy Industries of Europe” (TIE) organization, the European toy market has maintained a growth of 3-6% over the past 8 years, despite a decline in some SEE countries. That said, the economic recession together with unfavorable demographics, the shrinking child population, and regulatory changes such as product specification requirements and marketing restrictions for toys becoming increasingly stricter while the EU moves

45%

33%28%

38% 36% 34% 32% 31% 30%

24%

22%

19%

14%13% 13% 12% 11% 10%

10%

10%

9%8%

7%7% 8% 8% 8%

21%

35%44% 40% 44% 46% 48% 50% 52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY'04/05 FY'05/06 FY'06/07 FY'07/08 FY'08/09 FY'09/10 FY'10/11 FY'11/12 FY'12/13

Toys Baby Products Stationery Seasonal/Home



towards harmonization, have led the market into stagnation in 2012 (the most recent year of available data), with toys-related sales amounting to €16.5bn. Imports of €5.5bn with more than 95% of the imports originating from Asia (over 70% of Jumbo‟s inventory comes from Asian low cost producing countries as well). China supplied c90% following a steadily increasing trend from c63% in 2002. Hypermarkets & Discounters Fight-It-Out With Toy Specialists for Market Share Distribution has changed significantly over the years yet, toy specialists continue to be the prime channel, with mass merchants (hypermarkets, discounters etc.) such as Carrefour and Tesco being the second major distributers. This model, however, is most representative of the developed countries in the EU, with mass merchants not yet fully penetrating the developing European economies to the same extent. This kind of distribution model is similar in Greece, with the one big difference being Jumbo. Its main competition comes from effectively the smaller high street / mamas and papas retailers (rapidly shrinking market) and from hyper-markets.



Top-line growth exceeds annual target of 4-6% for a

2nd

consecutive quarter

Gross profit margin at 53.5% in Q2 +120bps y-o-y

Strong Q2’13/14 Results On Improving Trends

The positive top-line momentum witnessed in Q1 (sales up by 5.8% y-o-y to €131.2m) further accelerated further with sales growing by 8.2% y-o-y to €185.5m from €171.4m in Q212/13-and above the upper-end of the annual management target of 4-6%. This was attributed to the double-digit growth of Cypriot (up 19% y-o-y to €22.2m) and Bulgarian operations (up 20% y-o-y to €15.9m), the positive contribution of Greek activities (up c3% y-o-y to €143.1m) and the strong start of Romanian operations that recorded sales of €4.3m at their first quarter of operations –and significantly better than group‟s initial expectations. The growth in Cypriot operations was a result of the opening of the new store in Paphos in Q2 and the decision of local authorities for a 7-day operational week. The growth in the Greek top-line growth was a result of new capacity.

On a l-f-l basis we were particularly pleased with the performance of the Greek operations that on our calculations should have marked a strong recovery from -11% in Q2‟12/13 to just -2% in Q2‟13/14. Cyprus maintained the positive momentum of Q1 (l-f-l sales up by c12%) exhibiting an increase of c7% (vs -3.5% in Q2‟12/13). The Bulgarian operations seem to have turned into a positive pace as, on our calculations, divisional l-f-l performance stood at 2.3% from -11% a year ago.

Going down the P&L, EBITDA increased by 14.7% y-o-y to €58.2m (vs €50.7m a year ago) driven also by a stronger y-o-y gross margin of 53.5% (vs 52.3% a year ago). However, net profit grew by just 4.0% y-o-y to €40.9m (vs €39.3m a year ago) negatively affected by lower net financial income and an increased tax rate for the deferred tax in Greece (corporation tax rate increase from 20% to 26%).

Management guided for sales growth of 4-6% y-o-y in FY‟13/14, with net profit seen between €80-85m. As Q2 is traditionally the strongest indicator for the full year performance -it includes the all-important Christmas season and accounts for c35% of annual sales -we believe that group guidance may prove conservative. We forecast 7.8% growth in sales (€541m) and recurring net profit of €104m (+7.0% y-o-y) –with consensus at €95m.

Table 17. Q2-H1’13/14 Results

(in € m) Q2'12/13 Q2'13/14 y-o-y H1'12/13 H1'13/14 y-o-y Sales - Greece 139.4 143.1 2.7% 241.9 249.4 3.1% Sales -Cyprus 18.7 22.2 18.6% 32.5 37.7 15.9% Sales - Bulgaria 13.3 15.9 19.9% 21.0 25.4 20.7% Sales - Romania 0.0 4.3 n/m 0.0 4.3 n/m

Greece % of group 81.3% 77.1%

81.9% 78.7%

Cyprus % of group 10.9% 12.0%

11.0% 11.9%

Bulgaria % of group 7.8% 8.6%

7.1% 8.0%

Romania % of group 0.0% 2.3%

0.0% 1.4%

Sales 171.4 185.6 8.2% 295.4 316.74 7.2% CoGS 81.7 86.2 5.5% 148.2 155.4 4.8% Gross Profit 89.7 99.3 10.7% 147.2 161.4 9.6% OpEx 43.7 46.4 6.2% 81.2 86.3 6.3% EBITDA 50.7 57.8 13.9% 75.3 84.6 12.5% Depreciation 4.7 4.9 3.6% 9.2 9.6 3.5% EBIT 46.0 52.9 15.0% 66.0 75.1 13.7% Pre-tax Profit 46.7 52.6 12.6% 67.5 75.9 12.4% Net Profit 39.3 40.9 4.1% 56.5 59.0 4.5% Recurring Net Profit 39.3 40.9 4.1% 56.5 59.0 4.5%

Margins

Gross profit 52.3% 53.5% 119 bps 49.8% 50.9% 112 bps OpEx 25.5% 25.0% (48) bps 27.5% 27.3% (23) bps EBITDA 29.6% 31.1% 156 bps 25.5% 26.7% 124 bps EBIT 26.9% 28.5% 167 bps 22.3% 23.7% 135 bps Pre-tax profit 27.2% 28.3% 111 bps 22.9% 24.0% 111 bps Net profit 22.9% 22.0% (89) bps 19.1% 18.6% (49) bps Net profit Adjusted 22.9% 22.0% (89) bps 19.1% 18.6% (49) bps Source: Jumbo, Euroxx Research



IMPORTANT DISCLOSURES

Analyst Certification The analyst identified on the front page of this report and the Head of Research (Certified Analyst) certify that the written views about each company and security they cover reflects only their personal opinions and estimates and their compensation are not linked to any investment banking services provided by Euroxx.

Risks and sensitivity The views and recommendations for all the companies that Euroxx Securities covers or refers to in the daily report have various levels of risk depending on company, industry and market events. Furthermore, our estimates for each company we cover are affected by various factors such as interest rates, inflation, local economic environment, market volatility, currency, management continuity or other company specific events. Investors should be informed that the investment strategies discussed or recommended in these reports may not be realised and each company may fail to reach its targets or the analyst‟s targets.

Recommendation System Our recommendation system is based on the unbiased personal views of our analysts. The target prices have a time horizon of one year. Euroxx Securities S.A. aims in updating the covered companies on any new future material that may lead to a different recommendation but does not have a regular policy to update reports

Investment recommendations are determined by the ranges described above at the time of initiation or review of coverage. Furthermore, the aforementioned ratings and target prices are subject to constant changes. Any unauthorised use, disclosure, copying, distribution, or taking of any action in reliance on these reports is strictly prohibited. Euroxx Securities S.A. and its employees are neither liable for the proper and complete transmission of these reports nor for any delay in their receipt. Euroxx Securities S.A. and its employees do not guarantee the accuracy of the research reports or daily report, while they are not responsible for any possible errors or omissions.

Under no circumstances Euroxx suggests any buying or selling activity through this document. In producing its research reports, Euroxx Securities SA research departments may have received assistance from the subject company such as access to the company‟s sites, visits to certain operations of the subject company, meetings with management or employees and the handing by them of historical data regarding the subject company, as well as of all the publicly available information regarding strategy and financial targets.

Other Important Regulatory Disclosures The information and opinions in this report were prepared by Euroxx Securities S.A., which is member of the Athens Exchange S.A. and regulated by the Hellenic Capital Market Commission. There is a separate location of analysts from Investment Banking, Capital Markets and Sales and Trading employees and research reports are produced away from them. The communication between the Research Department and the other departments of Euroxx Securities S.A. is restricted between the different departments. Note that "EUROXX Securities S.A. is regulated in Greece by the Hellenic Capital Market Commission, License No. 45/23.06.95/3”.

Valuation Method We value Jumbo through a two-stage DCF model. We form an explicit set of forecasts for the period up to FY‟19/20e, after which we assign a terminal growth of 2.5%. Our WACC has been set at 9.5% based on a market beta of 1.0, a risk-free rate of 1.64% (German 10-year Bund Yield) and a risk premium of 8.9% (weighted blended mix reflecting country risk exposure). Disclosure checklist for companies mentioned in this report 1. As of the aforementioned date, Euroxx Securities S.A. does not own 5% or more of any common equity securities. 2. As of the aforementioned date, no listed companies own 5% or more of a class of common equity securities of Euroxx Securities S.A. 3. Euroxx Securities S.A. does not act as a market maker for any listed company. 4. Euroxx Securities S.A. has made underwriting for the prior 12 months of the aforementioned date for the stock GPSB. 5. Within the last 12 months, Euroxx Securities S.A. did not have a contractual relationship or has not received compensation for financial advisory services from any listed company, except Postal Savings Bank 6. Euroxx Securities S.A. has not sent the research report to the company prior to publication for factual verification. 7. Following 6, Euroxx Securities S.A. has not changed the contents of the initially sent research report. 8. Euroxx Securities S.A. has not received compensation from the company for the preparation of this research report.

Rating ExplanationCoverage Universe (#) in

the last quarter

Coverage

Universe (%)

% Companies covered that are

investment banking clients

Overweight Expected total return >10% 7 28% 0%

Equalweight Expected total return betw een -10% and +10% 4 16% 0%

Underweight Expected total return < -10% 0 0% 0%

Under Review Recommendation and Target Price are subject to revision 14 56% 0%

*The target price and rating have a time horizon of one year



Rating History

Date Rating Share Price Target Price

1/3/2010 Overweight 6.94 9.30

6/4/2010 Equalweight 7.60 7.60

25/5/2010 Equalweight 5.56 6.20

1/10/2010 Equalweight 4.94 5.80

22/11/2010 Equalweight 5.35 5.80

26/9/2011 Overweight 3.80 4.80

28/9/2011 Overweight 3.86 4.80

28/3/2013 Under Review 5.30 U/R

13/3/2014 Equalweight 13.32 14.00

Research Vangelis Karanikas +30-210-6879322 [email protected] Maria Kanellopoulou +30-210-6879363 [email protected] Tolis Paschalis +30-210-6879492 [email protected] Sales George Polites +30-210-6879520 [email protected] Lambros Papadopoulos +30-210-6879523 [email protected] Ilias Dimitros +30-210-6879485 [email protected] George Lymberopoulos +30-210-6879494 [email protected] Christina Papakastrisiou +30-210-6879480 [email protected] Euroxx Securities S.A

7 Paleologou Str. 15232, Athens www.euroxx.gr

mailto:[email protected]

mailto:[email protected]

http://www.euroxx.gr/

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