BME LN

Publicly traded companies mentioned herein: B&M European Value Retail SA (BME LN), CarMax Inc (KMX), Dollar General Corp (DG), Dollar Tree Inc (DLTR)

Highlights

The presenter is long shares of B&M European Value Retail SA (BME LN), the leading variety goods value retailer in the UK. Many investors think of BME as the Dollar General (DG) of the UK, but the presenter notes they are not entirely similar. BME is slightly more of a big box retailer with more discretionary spend; its discretionary/consumables mix is 50/50, whereas DG’s mix is 30/70. Still, BME shares many positive characteristics with the US discounters. These include a highly sticky customer base that make frequent trips to the store and an attractive customer LTV curve. In addition, BME and US discounters benefit from recessions. Despite the similarities, BME’s ~15x EPS multiple is materially lower than DG’s ~24x valuation. The presenter acknowledges the fact that UK investors are less infatuated with the discount format than US investors, but also notes that the discount to US peers is as wide as it has ever been. He therefore believes BME could benefit from multiple expansion but states there is material upside even on the current multiple, as he expects ~20% annual earnings growth over the next few years.