(AOF) – Rexel gained 3.4% to 13.37 euros today in Paris, buoyed not only by a very buoyant environment, but also by a double news story that enabled it to significantly outperform its benchmark index, the SBF 120 (+1.74%), as well as its competitors Legrand (+0.97%) and Schneider (+1.78%). The electrical components manufacturer announced this morning the acquisition of the Canadian branch of the American company Wesco International, Wesco Canada Utility (WCU), and also received Berenberg’s support in view of its annual results on February 11.
While no amount has been mentioned regarding the acquisition of WCU, Rexel states that it will provide « better development opportunities in an attractive and resilient business sector », while complementing its product range for its existing entrepreneurial customer base and further expanding its footprint in the country.
Wesco Canada Utility operates through 4 branches across Canada and employs approximately 60 people, with sales in excess of $70 million. Its product line (pole line material, cable accessories, connectors and transformers) is used primarily for maintenance and upgrade activities. Its customer base is mainly focused on public power generation players and contractors providing services to these generators.
Rexel, which is due to present its annual results for 2020 and submit a « strategic update » next week, also saw this morning the Buy recommendation on its share confirmed by Berenberg, with an unchanged share price target of 17 euros. The broker indeed underlined the fact that the group was growing and had made « smart investments in digitisation, before and during the pandemic, which enabled it to achieve structurally higher and more resilient margins ».
Berenberg added that neither margin prospects nor growth prospects are taken into account in the valuation of the taffy. However, he expects this to change after the strategic update next Thursday. At that event, the analyst also expects Rexel to provide new medium-term margin targets above the current consensus expectation of 5.1%.
Finally, the broker forecasts a medium-term margin of 6%, a final margin of 3.5%, a final growth rate of 1.5%, and still considers that the stock has upside potential of 35%, notably due to its underperformance compared to its competitors since it raised its 2020 targets last December.
Unheard of difficulties for department stores
The sector has to face a combination of unprecedented challenges following the health crisis: closure of sales outlets, desertion of international customers and disaffection of the French for fashion. Galeries Lafayette will lose half of its sales this year (1.7 billion euros) and will suffer very significant operating losses, the highest they have ever recorded in 25 years. The return of international tourists to France should be very gradual. The group estimates that it should not return to the 2019 level until 2024. Le Bon Marché or Le BHV also suffer from teleworking and new restrictions on car use in the capital. The Printemps group, which has been granted an EMP of 150 million euros, will close seven stores in France. To recover, the players are relying on digital technology and changing their positioning by turning more towards local customers and transforming stores into living spaces.