Sonae, SGPS, S.A. (SON.LS) | Investment Case

1. Company Snapshot

1.a. Company Description

Sonae, SGPS, S.A. engages in retail, financial services, technology, shopping center, and telecommunications businesses.The company operates hypermarkets under the Continente brand; convenience supermarkets under the Continente Modelo and Continente Bom Dia brands; franchised supermarkets under the Meu Super brand; cafeteria under the Bagga brand; healthy food supermarkets and restaurants under the Go Natural brand; book shops and stationery under the Make Notes and Note! brands; health, well-being, and eye care centers under the Well´s brand; and dental and aesthetic medicine clinics under the Dr. Well's brand, as well as provides dog and cat products and services under the ZU brand.It also offers clothing, footwear, and accessories under the MO brand; baby and children clothing, footwear, and accessories, as well as childcare products under the Zippy and Losan brands; and jeans, clothing, and accessories under the Salsa brand.

In addition, the company sells consumer electronics and entertainment products under the Worten brand; and mobile telecommunications products under the Worten Mobile brand, as well as develops real estate properties.Further, it engages in the investment management activities; the provision of financial services, including money transfer and cross selling, as well as various cards; and operates sports retail stores under JD, Sprinter, and Size?brand names.

Additionally, the company provides telecommunication services to residential, personal, corporate, and wholesale markets.It operates in Portugal, Spain, France, the United Kingdom, Germany, Italy, Romania, Brazil, Mexico, the Netherlands, and internationally.Sonae, SGPS, S.A. was founded in 1959 and is headquartered in Maia, Portugal.

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1.b. Last Insights on SON

Recent news highlights Sonae SGPS SA's robust revenue growth driven by retail expansion and strategic acquisitions. The company's nine-month 2024 earnings report showed strong turnover growth, despite facing challenges in profitability and increased net debt. Additionally, Sonae SGPS has been identified as a promising small-cap company with robust fundamentals and potential for growth, amidst current economic trends. The company's appeal lies in its potential to provide regular income streams, making it an attractive option for investors seeking stable income sources.

1.c. Company Highlights

Last Price	1.56
Change Percentage	0.52%
Open	1.55
Previous Close	1.55
Market Cap ( Millions)	3016
Volume	383516
Year High	1.56
Year Low	0.88
M A 50	1.42
M A 200	1.24

FCF Yield	11.62%
Dividend Yield	3.81%
ROE	7.77%
Debt / Equity	99.22%
Net Debt / EBIDTA	348.21%
Price To Book	0.81
Price Earnings Ratio	12.07
Price To FCF	8.6
Price To sales	0.28
EV / EBITDA	6.34

2. Transcript Summary

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3. NewsRoom

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.54%)

6. Segments

MC

Expected Growth: 2.5%

Sonae's 2.5% growth is driven by its diversified business portfolio, strong retail presence in Portugal, and expanding e-commerce platform. The company's focus on digital transformation, cost optimization, and strategic investments in growth areas such as food retail and telecommunications also contribute to its growth momentum.

Worten

Expected Growth: 2.8%

Worten's 2.8% growth is driven by its strong omnichannel presence, effective cost management, and strategic investments in e-commerce and digital transformation. Additionally, its focus on customer experience, loyalty programs, and competitive pricing strategies have contributed to its growth. Furthermore, Worten's diversified product offerings and partnerships with leading brands have also supported its growth momentum.

Zeitreel

Expected Growth: 2.2%

Zetreel's 2.2% growth is driven by increasing demand for omnichannel retail solutions, strategic partnerships, and investments in digital transformation. Additionally, the company's focus on enhancing customer experience, expanding its product offerings, and improving operational efficiency have contributed to its growth momentum.

Sierra

Expected Growth: 3.2%

Sierra's 3.2% growth is driven by its diversified retail portfolio, strong presence in Portugal, and strategic expansion into adjacent markets. The company's focus on omnichannel retailing, investments in digital transformation, and cost optimization initiatives have also contributed to its growth momentum.

Other, Eliminations and Adjustments

Expected Growth: 1.8%

Sonae's 1.8% growth in Other, Eliminations and Adjustments is driven by improved operational efficiency, effective cost management, and strategic investments in digital transformation, leading to enhanced productivity and reduced expenses. Additionally, the company's focus on sustainability and innovation has contributed to increased revenue from new business initiatives.

Bright Pixel

Expected Growth: 3.5%

Bright Pixel's 3.5% growth is driven by increasing demand for digital transformation, expansion into new markets, and strategic partnerships. The company's focus on innovation, customer experience, and operational efficiency also contribute to its growth. Additionally, Sonae's strong brand reputation and financial backing provide a solid foundation for Bright Pixel's continued expansion.

7. Detailed Products

Continente Hypermarkets

A chain of hypermarkets offering a wide range of products including food, clothing, and household goods

Continente Markets

A chain of supermarkets offering a wide range of food and non-food products

Continente Bom Dia

A chain of convenience stores offering a range of food, beverages, and daily essentials

Well's

A chain of health and wellness stores offering a range of health supplements, cosmetics, and pharmaceutical products

Worten

A chain of electronics stores offering a wide range of electronic products including TVs, computers, and mobile phones

MO

A chain of fashion stores offering a wide range of clothing, accessories, and footwear

Sonae Sierra

A real estate company specializing in shopping centers and retail parks

Nos

A telecommunications company offering a range of fixed and mobile telecommunications services

8. Sonae, SGPS, S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Sonae, SGPS, S.A. operates in a sector where substitutes are available, but they are not a significant threat to the company's business. The score is 3, indicating a moderate threat.

Bargaining Power Of Customers

Sonae, SGPS, S.A. has a diverse customer base, which reduces the bargaining power of individual customers. The score is 2, indicating a low threat.

Bargaining Power Of Suppliers

Sonae, SGPS, S.A. has a moderate dependence on its suppliers, but it has implemented strategies to mitigate this risk. The score is 3, indicating a moderate threat.

Threat Of New Entrants

The retail sector is highly competitive, and new entrants can easily enter the market. The score is 4, indicating a high threat.

Intensity Of Rivalry

The retail sector is highly competitive, and Sonae, SGPS, S.A. faces intense competition from established players. The score is 4, indicating a high threat.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	31.86%
Debt Cost	5.65%
Equity Weight	68.14%
Equity Cost	8.59%
WACC	7.65%
Leverage	46.75%

11. Quality Control: Sonae, SGPS, S.A. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Sonae

A-Score: 7.2/10

Value: 8.6

Growth: 5.6

Quality: 3.0

Yield: 8.1

Momentum: 9.0

Volatility: 9.0

1-Year Total Return ->

Rainbow Tours

A-Score: 7.0/10

Value: 7.8

Growth: 9.2

Quality: 7.0

Yield: 9.4

Momentum: 5.5

Volatility: 3.3

1-Year Total Return ->

Puuilo

A-Score: 6.8/10

Value: 3.2

Growth: 8.1

Quality: 6.7

Yield: 6.9

Momentum: 9.0

Volatility: 6.7

1-Year Total Return ->

Atal

A-Score: 6.5/10

Value: 6.0

Growth: 3.6

Quality: 5.6

Yield: 10.0

Momentum: 7.0

Volatility: 6.7

1-Year Total Return ->

Debica

A-Score: 6.3/10

Value: 8.7

Growth: 3.9

Quality: 4.1

Yield: 8.1

Momentum: 3.5

Volatility: 9.7

1-Year Total Return ->

Elopak

A-Score: 5.6/10

Value: 5.1

Growth: 6.4

Quality: 5.2

Yield: 4.4

Momentum: 6.0

Volatility: 6.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-9.45%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.65%

Sonae, SGPS, S.A. - PTSON0AM0001

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SON

1.c. Company Highlights

Less Volatile

Cheaper

Higher Yield

Earnings Beats

Revenues Beats

Earnings Miss

Revenues Miss

Strong Momentum

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.54%)

6. Segments

MC

Expected Growth: 2.5%

Worten

Expected Growth: 2.8%

Zeitreel

Expected Growth: 2.2%

Sierra

Expected Growth: 3.2%

Other, Eliminations and Adjustments

Expected Growth: 1.8%

Bright Pixel

Expected Growth: 3.5%

7. Detailed Products

Continente Hypermarkets

Continente Markets

Continente Bom Dia

Well's

Worten

MO

Sonae Sierra

Nos

8. Sonae, SGPS, S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Sonae, SGPS, S.A. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

0.02$

Current Price

0.02$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA