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  "documentTitle": "Groupe Casino Guichard-Perrachon SA (CO FP)",
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  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2015-12-16 00:00:00",
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  "notes": "The slide critiques S&P's lease accounting methodology and details the sum-of-the-parts valuation approach for Casino's assets.",
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      "text": "The residual value that is left is the Casino equity value: €6.91 per share.",
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      "text": "equity value: €6.91",
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      "text": "EBITDA is the main metric driving the enterprise and equity valuations. Casino has both listed public company investments and private wholly owned investments.",
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      "text": "We believe that S&P should assume that Casino renews the leases required to generate the level of EBITDA necessary for the rating. To illustrate the absurdity of S&P's approach in this situation, take an example of two identical retailers.",
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      "text": "For the wholly owned Vietnam retail operation, we apply a multiple that reflects the health of the business (10x), and subtract the net debt to arrive at an equity value of €468 million.",
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      "text": "We calculate the EBITDA for the wholly owned France Retail operation, adjust to remove an estimated financial engineering contribution of €165 million in 2014, apply a multiple that reflects the health of the business (8x), and subtract the net debt to arrive at an equity value of €5.7 billion.",
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      "text": "We then take the sum total of all of the equity values for the wholly owned and partially owned businesses (€4.5 billion), and add non core assets (€1 billion) to arrive at a value that is distributable or applied to cover the parent debt and financial obligations. The residual value that is left is the Casino equity value: €6.91 per share.",
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      "text": "S&P's BBB- rating is based in large part on the leverage ratio. S&P uses December 31, 2014 numbers, which in Casino's case, are significantly better than its LTM numbers.",
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      "text": "eight in order to adjust for the debt they represent. S&P discounts Casino's contracted lease expenses to the present. The problem is that Casino nominally has short-term leases, but Casino obviously needs to renew the leases to continue operating its business.",
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