Safmar Group of Russian billionaire Mikhail Gutseriev has completed a secondary public offering in major electronics retailer M.Video-Eldorado, selling 24.5mn shares, or 13.5% of capital, at RUB725 per share and raising RUB17.6bn ($240mn).

As reported by bne IntelliNews, most recently M.Video has set the guidance to double its gross merchandise volume (GMV) in five years, from RUB0.5 trillion in 2020 to RUB1 trillion ($13.5bn) by 2025. The company posted solid 2H20 IFRS results.

The share of Safmar in M.Video decreased from 73.5% to 60%, with the free float up from 10.4% to 24%. The SPO was carried out at 9.3% discount to the pre-announcement share price of March 9.

German Media-Saturn-Holding GmbH, which holds 15% of the company, confirmed that it does not have any plans for significant share sales during the lock-up period.

Sova Capital on March 12 reiterated that the SPO is seen as positive, making M.Video a more liquid and investable story, helping it to unlock the fundamental upside potential on profitable e-commerce exposure, solid growth and attractive dividends. 

Sova analysts therefore return the stock to the list of top picks and reiterate the Buy call on M.Video.

As followed by bne IntelliNews, the company is likely to further boost its online sales channels, as recently Russia's largest bank Sberbank signed a memorandum of intent on the joint development of its marketplace Goods.ru. 

Sova estimates that after a 16% correction in its share price from its local high, the stock looks inexpensive again, trading at a 2022 estimated Enterprise Value/Ebitda of 5.2x and 2022 estimated Price/Earnings of 9.0x, with a 2H20 dividend of RUB37.8/share (dividend yield of 5.2%).

The analysts also believe that as the SPO size was somewhat smaller than expected, this "should keep the door open to more placements similar to Sistema’s series of sales of Detsky Mir shares." 

While Sova admits there are overhang risks in the mid-term, the analysts argue that more placements could further improve M.Video’s liquidity and attract a wider range of international investors.

To remind, M.Video of the Safmar Group completed a mega-merger with rival Eldorado in March 2018 to form the biggest consumer electronics retail chain in Russia, and become a top ten European player.