UBS Maintains a 'Neutral' on SUPERVALU (SVU); Debt Burden May Cause Disconnect with Potential Buyers

August 24, 2012 9:55 AM EDT
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Price: $4.17 +1.46%

Rating Summary:
    3 Buy, 15 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 19 | Down: 19 | New: 13
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UBS maintains a 'Neutral' on SUPERVALU (NYSE: SVU) price target of $2.20 (from $4.00).

Analyst, Jason DeRise, said, "The current Supervalu 13FYe EV/EBITDA is 4.9x compared to debt/EBITDA of 4.6x (includes on and off balance sheet pensions). But, a sum of the parts analysis reveals a problem: the market implied supermarket division EV/EBITDA of 3.9x is below this division’s 4.4x debt/EBITDA (UBSe). SVU cannot offload its supermarkets at any valuation; it can only sell it for a premium (otherwise debt/EBITDA goes up). We believe potential buyers are unlikely to bid at a premium. Therefore, we see low chance of SVU being bought (part or whole)...A gradual turnaround is the most likely scenario: but stay on the sidelines."

FY13 EPS estimate lowered from $0.63 to $0.62 and FY14 from $0.64 to $0.56.

For an analyst ratings summary and ratings history on SUPERVALU click here. For more ratings news on SUPERVALU click here.

Shares of SUPERVALU closed at $2.12 yesterday.

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