Goldman Sachs Downgrades Cencosud SA To Sell

Goldman Sachs Group downgraded the shares of Cencosud SA

to a Sell rating from Neutral citing the vulnerability to foreign exchange currency volatility and the unhedged USD-debt. It also reduced the price target by 4 percent for the rest of its coverage. Also, the brokerage's EPS estimation for 2016 – 18 are below consensus by 19% on an average. The brokerage said that it lowered its DCF/Multiple-based 12-month price objective by 3 percent as it slashed its adjusted EPS projection for the years 2016 – 18 by an average 6 percent on the back of first quarter results and weaker consumer backdrop in Argentina, as well as, Brazil. Goldman said, "We use a target forward adjusted EV/EBITDA multiple of 9.0X (vs. 9.9X previously following an updated historical average (to which we attribute a 10% discount) and increase our WACC to 9.4% from 9.3% on the updated CDS. Key risks Upside risks include better operational performance, faster-than expected deleverage with a potential listing of the mall operation." The investment firm said that "We believe the stock has rallied ahead of fundamentals, with the potential upside from an improved medium-term outlook in Brazil and Argentina (44% of CEN's LTM sales) fully priced in. At the same time, we believe that the company's exposure to near-term consumer weakness, especially in Argentina, is not adequately discounted." The brokerage said that Cencosud shares were already up 22% in the last three month alone, despite a low-quality earnings beat in the first quarter and the postponing of the IPO of its mall operation. The stock traded 0.12 percent higher on Monday.