Research Notes

Sedmoi Kontinent's aggressive expansion strategy make it possible to boost turnover by more than 40% a year. Regional expansion launched last year should enable the retailer to gain a strong foothold on promising markets, using its “Our Hypermarket” new format sales outlets. We would like to point to the retailer's strong development prospects, although according to our estimates, at present Sedmoi Kontinent stocks are fairly valued by the market.

• The Russian retail market has exhibited impressive growth rates over the past several years and one can expect that in the next few years the market will not reach saturation.

• Further development of the retail sector is primary attributable to the regions where most Moscow-based retail chains have rushed in.

• Sedmoi Kontinent is one of the leading supermarket chains on the Moscow market. As of year-end 2005 the company ran 111 stores with four sales outlet formats.

• The company's turnover continues to rise every year, its 2005 sales surged 44% and we expect to see the retailer's turnover grow by an average 22% in 2006-2013.

• In 2005 Sedmoi Kontinent began to roll out a new hypermarket format. First two stores under the Our Hypermarket brand were opened in Moscow. The diversity of formats will allow the retailer to target various consumer segments.

• Last year Sedmoi Kontinent launched regional expansion by acquiring Kaliningrad-based retail chain Altyn. This year the company plans to open hypermarket chains in Chelyabinsk, Ryazan and St. Petersburg which should allow Sedmoi Kontinent to gain a strong foothold on promising markets.

Clients of Finam Investment Company may receive full versions of analytical research reports translated into English by sending requests to the International Trading Department.

Olga Samarets

* Short overviews of equity research reports and sector reports are posted on the website http://www.finamrus.com with a 1-day delay after their full versions are emailed to the company’s clients. To get overviews on the day of their release, please contact your manager at Finam to sign up for full versions of research reports.