Sendas Distribuidora: The Expansion Is Done, The Payoff Is Just Beginning

Summary Assaí, a Brazilian cash-and-carry retailer, is shifting from aggressive expansion to generating more cash from its 313-store network. Lower CapEx and continued debt reduction are strengthening its balance sheet, while falling interest rates in Brazil could further improve profitability. Revenue growth remains slow, but the company has room to turn its existing scale into more sustainable earnings and cash flow. A modest re-rating to 7x normalized EV/EBITDA implies roughly 26% upside, supporting a Buy rating even after the strong rally. Joa_Souza/iStock Unreleased via Getty Images Back in February, I wrote an article on Brazilian cash-and-carry retailer Sendas Distribuidora S.A. ( ASAIY ), also known as Assaí, entitled " Deleveraging Delivered, Awaiting The Macro Turn, " arguing that deleveraging, disciplined CapEx, and an This article was written by Bernard Zambonin 1.89K Followers Follow Equity Research Analyst at DM Martins Research.I cover stocks that are often undercovered, focusing primarily on Brazil and Latin America — but I also occasionally write about global large caps. My work can also be found on TipRanks, where I contribute regularly, and on TheStreet, where I was a frequent contributor in the past.- Disclaimer: All views expressed here are my own and do not necessarily reflect the views or official positions of DM Martins Research. My articles and analyses are for educational and informational purposes only and should not be taken as investment advice. Always do your own due diligence before making any investment decisions. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in ASAIY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.