All investments have risks. What you mentioned are fair but more of a boiler plate analysis. There are a lot more to them and how Dino is equipped / or not equipped to compete.
IMHO, the competition risk isn't the highest due to the differentiation of Dino's SKUs among other things, and it's not 'overlooked' by bullish reports. Operating in food retails, you have got to know the competition very well.
Let me add as I also included a link to this Seeking Alpha write-up in my post today as I have never heard of this Portuguese retailer that is also operating in Poland + Colombia - sounds interesting:
🇵🇹 🇨🇴 Jeronimo Martins: Steeped In History And Reliant On Emerging Markets (Seeking Alpha) $
- Jeronimo Martins SGPS SA (ELI: JMT / FRA: JEM / OTCMKTS: JRONY / JRONF) is a multinational food distribution and retail group operating in Portugal, Poland, and Colombia.
- The company has a strong focus on regional scale, creating cost advantages in purchasing, distribution, and marketing.
- Poland represents the majority of Jeronimo Martins' business, while Colombia is a rapidly growing market for the company.
Thank you for your comment! Poland's largest retailer Biedronka belongs to Jeronimo Martins. It would also be interesting to do an analysis of this company.
Its already late for me and I have not read either of your posts too closely, but this was what and the concerns I had posted as a comment on another Substack post about the stock a few weeks ago (plus reposted as a comment on here):
1) The funds got into Dino Polska early and lately they have been profit taking...
2) Alot of podcasters and Substackers etc have been talking about the stock compared to other so-called EM stocks just as the "smart money" is getting out or taking profits...
3) Its not clear where future growth will come from. At some point, they will have Poland saturated - if not already as they already have one store for every so many Poles (sorry, can't remember the figures I have seen...). Expansion eastward to Russia and Belarus is probably out along with Ukraine given its a war zone rapidly loosing population.... Germany, Czech, Slovakia etc would be completely new markets with probably different retail laws even though they are EU...
4) At some point, the stores will need to be remodelled by somebody e.g. landlord, tenant or Dino if they are the owner... Same with any refrigeration etc equipment as it will need to be replaced - not sure the lifespan of such equipment...
With that said, they do have the right business model when it comes to format size. Here in Malaysia, Speedmart and K.K. no frills smaller format chain stores have saturated every neighbourhood and housing estate selling mostly the shelf stable basics (and it seems like at higher prices than supermarkets!) while Indomaret and Alphamart have done the same in Indonesia (albeit there is still room for growth there given Indonesia's size and they have multiple formats + the latter expanded into the Philippines)... And of course, the USA has its dollar store chains...
Thank you very much for your feedback on my analysis of Dino Polska! I am confident that my approach, while concise and not delving into excessive detail over thousands of words, captures essential insights that are crucial for an investor-friendly read. I strive to continuously improve in delivering clear and concise analyses, and I believe I have accomplished this with my latest article, especially as I aimed to highlight critical issues and adopt a contrarian view on such "hype" stocks.
As I have noted, Dino Polska has indeed experienced impressive growth; however, I also believe that the risks are increasing and that growth opportunities may be limited. Regarding the SKU differentiation you mentioned, I must admit I am puzzled. Dino Polska offers many of the same products as its competitors, just fewer of them. This might aid in management and increase inventory turnover, but I am skeptical about it providing a competitive edge.
I understand that you have included Dino Polska in your 'Sleep Well' investment portfolio, and I genuinely wish you and all other investors continued success with this choice. My perspective is intended to shed light on potential risks that could impact the investment unfavorably, complementing the more positive views and ensuring a well-rounded investment strategy.
True! But if you take food inflation that they report and filter out increase in store space, you’ll get price increases (above inflation) and/or volume growth.
Its already late for me and I have not read your post closely, but this was what and the concerns I had posted as a comment on another Substack post about the stock a few weeks ago:
1) The funds got into Dino Polska early and lately they have been profit taking...
2) Alot of podcasters and Substackers etc have been talking about the stock compared to other so-called EM stocks just as the "smart money" is getting out or taking profits...
3) Its not clear where future growth will come from. At some point, they will have Poland saturated - if not already as they already have one store for every so many Poles (sorry, can't remember the figures I have seen...). Expansion eastward to Russia and Belarus is probably out along with Ukraine given its a war zone rapidly loosing population.... Germany, Czech, Slovakia etc would be completely new markets with probably different retail laws even though they are EU...
4) At some point, the stores will need to be remodelled by somebody e.g. landlord, tenant or Dino if they are the owner... Same with any refrigeration etc equipment as it will need to be replaced - not sure the lifespan of such equipment...
With that said, they do have the right business model when it comes to format size. Here in Malaysia, Speedmart and K.K. no frills smaller format chain stores have saturated every neighbourhood and housing estate selling mostly the shelf stable basics (and it seems like at higher prices than supermarkets!) while Indomaret and Alphamart have done the same in Indonesia (albeit there is still room for growth there given Indonesia's size and they have multiple formats + the latter expanded into the Philippines)... And of course, the USA has its dollar store chains...
Thanks for this contrarian take on this Fintwit favorite. Anytime I see on twitter or Substack a company mentioned more than once as a “compounder” or “quality” I take a more critical view and anticipate it being overvalued by the market. I have no doubt that the company has done a great job in the past, but as you note the store’s s-curve growth story may be decelerating. And other financial metrics seem to be returning to earth. You also rightly note that the grocery segment is brutally competitive in developed markets so there’s every reason to expect competition to increase in Poland.
Thank you for your thoughtful response and for supporting the contrarian perspective presented in my analysis of this Fintwit favorite.
I completely agree with your approach—when a company is frequently hailed on platforms like Twitter or Substack as a “compounder” or “quality” investment, it definitely warrants a more scrutinizing look to assess whether it is potentially overvalued by the market.
Indeed, as mentioned in the article, while the company has demonstrated commendable performance historically, there are signs that its growth trajectory might be tapering off, as evidenced by the slowing s-curve. This deceleration, alongside other financial metrics that are "returning to earth," suggests that investor expectations might need tempering to reflect the emerging realities of the business's operating environment.
All investments have risks. What you mentioned are fair but more of a boiler plate analysis. There are a lot more to them and how Dino is equipped / or not equipped to compete.
IMHO, the competition risk isn't the highest due to the differentiation of Dino's SKUs among other things, and it's not 'overlooked' by bullish reports. Operating in food retails, you have got to know the competition very well.
Interested reader can find more here - https://open.substack.com/pub/sleepwellinvestments/p/dino-polska-an-open-book-success?r=8u09c&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true
Lastly, I would love Dino share price to go to your fair valuation at 230 PLN, 10x PE would be a no brainer investment to me.
Let me add as I also included a link to this Seeking Alpha write-up in my post today as I have never heard of this Portuguese retailer that is also operating in Poland + Colombia - sounds interesting:
🇵🇹 🇨🇴 Jeronimo Martins: Steeped In History And Reliant On Emerging Markets (Seeking Alpha) $
- Jeronimo Martins SGPS SA (ELI: JMT / FRA: JEM / OTCMKTS: JRONY / JRONF) is a multinational food distribution and retail group operating in Portugal, Poland, and Colombia.
- The company has a strong focus on regional scale, creating cost advantages in purchasing, distribution, and marketing.
- Poland represents the majority of Jeronimo Martins' business, while Colombia is a rapidly growing market for the company.
Thank you for your comment! Poland's largest retailer Biedronka belongs to Jeronimo Martins. It would also be interesting to do an analysis of this company.
I linked to both your posts (you don't have the comments open on your Substack...) in my post for today - Emerging Market Links + The Week Ahead (April 15, 2024) https://emergingmarketskeptic.substack.com/p/emerging-markets-week-april-15-2024
Its already late for me and I have not read either of your posts too closely, but this was what and the concerns I had posted as a comment on another Substack post about the stock a few weeks ago (plus reposted as a comment on here):
1) The funds got into Dino Polska early and lately they have been profit taking...
2) Alot of podcasters and Substackers etc have been talking about the stock compared to other so-called EM stocks just as the "smart money" is getting out or taking profits...
3) Its not clear where future growth will come from. At some point, they will have Poland saturated - if not already as they already have one store for every so many Poles (sorry, can't remember the figures I have seen...). Expansion eastward to Russia and Belarus is probably out along with Ukraine given its a war zone rapidly loosing population.... Germany, Czech, Slovakia etc would be completely new markets with probably different retail laws even though they are EU...
4) At some point, the stores will need to be remodelled by somebody e.g. landlord, tenant or Dino if they are the owner... Same with any refrigeration etc equipment as it will need to be replaced - not sure the lifespan of such equipment...
With that said, they do have the right business model when it comes to format size. Here in Malaysia, Speedmart and K.K. no frills smaller format chain stores have saturated every neighbourhood and housing estate selling mostly the shelf stable basics (and it seems like at higher prices than supermarkets!) while Indomaret and Alphamart have done the same in Indonesia (albeit there is still room for growth there given Indonesia's size and they have multiple formats + the latter expanded into the Philippines)... And of course, the USA has its dollar store chains...
Thanks for linking to my article in your post! I really appreciate it. And thanks for your insights! I appreciate such a valuable comment.
Thank you very much for your feedback on my analysis of Dino Polska! I am confident that my approach, while concise and not delving into excessive detail over thousands of words, captures essential insights that are crucial for an investor-friendly read. I strive to continuously improve in delivering clear and concise analyses, and I believe I have accomplished this with my latest article, especially as I aimed to highlight critical issues and adopt a contrarian view on such "hype" stocks.
As I have noted, Dino Polska has indeed experienced impressive growth; however, I also believe that the risks are increasing and that growth opportunities may be limited. Regarding the SKU differentiation you mentioned, I must admit I am puzzled. Dino Polska offers many of the same products as its competitors, just fewer of them. This might aid in management and increase inventory turnover, but I am skeptical about it providing a competitive edge.
I understand that you have included Dino Polska in your 'Sleep Well' investment portfolio, and I genuinely wish you and all other investors continued success with this choice. My perspective is intended to shed light on potential risks that could impact the investment unfavorably, complementing the more positive views and ensuring a well-rounded investment strategy.
Good analysis, much better than most did out here on substack.
Thank you very much for this comment! That really makes me delighted and also motivates me!
I do think that one part is wrong and that’s about sales volume. Dino provides the number but sales volume growth LFL should be positive.
Thanks, I will look into that and check it again. But what Dino is definitely not doing is separating his LFL growth into price and volume growth.
True! But if you take food inflation that they report and filter out increase in store space, you’ll get price increases (above inflation) and/or volume growth.
FINALLY, a critical view! I linked to your post in my post for today - Emerging Market Links + The Week Ahead (April 15, 2024) https://emergingmarketskeptic.substack.com/p/emerging-markets-week-april-15-2024
Its already late for me and I have not read your post closely, but this was what and the concerns I had posted as a comment on another Substack post about the stock a few weeks ago:
1) The funds got into Dino Polska early and lately they have been profit taking...
2) Alot of podcasters and Substackers etc have been talking about the stock compared to other so-called EM stocks just as the "smart money" is getting out or taking profits...
3) Its not clear where future growth will come from. At some point, they will have Poland saturated - if not already as they already have one store for every so many Poles (sorry, can't remember the figures I have seen...). Expansion eastward to Russia and Belarus is probably out along with Ukraine given its a war zone rapidly loosing population.... Germany, Czech, Slovakia etc would be completely new markets with probably different retail laws even though they are EU...
4) At some point, the stores will need to be remodelled by somebody e.g. landlord, tenant or Dino if they are the owner... Same with any refrigeration etc equipment as it will need to be replaced - not sure the lifespan of such equipment...
With that said, they do have the right business model when it comes to format size. Here in Malaysia, Speedmart and K.K. no frills smaller format chain stores have saturated every neighbourhood and housing estate selling mostly the shelf stable basics (and it seems like at higher prices than supermarkets!) while Indomaret and Alphamart have done the same in Indonesia (albeit there is still room for growth there given Indonesia's size and they have multiple formats + the latter expanded into the Philippines)... And of course, the USA has its dollar store chains...
Thanks for this contrarian take on this Fintwit favorite. Anytime I see on twitter or Substack a company mentioned more than once as a “compounder” or “quality” I take a more critical view and anticipate it being overvalued by the market. I have no doubt that the company has done a great job in the past, but as you note the store’s s-curve growth story may be decelerating. And other financial metrics seem to be returning to earth. You also rightly note that the grocery segment is brutally competitive in developed markets so there’s every reason to expect competition to increase in Poland.
Thank you for your thoughtful response and for supporting the contrarian perspective presented in my analysis of this Fintwit favorite.
I completely agree with your approach—when a company is frequently hailed on platforms like Twitter or Substack as a “compounder” or “quality” investment, it definitely warrants a more scrutinizing look to assess whether it is potentially overvalued by the market.
Indeed, as mentioned in the article, while the company has demonstrated commendable performance historically, there are signs that its growth trajectory might be tapering off, as evidenced by the slowing s-curve. This deceleration, alongside other financial metrics that are "returning to earth," suggests that investor expectations might need tempering to reflect the emerging realities of the business's operating environment.