| NEW YORK
NEW YORK Wal-Mart Stores Inc (WMT.N), the world's biggest retailer, could expand its reach into Russia in within the next 24 months, according to a research note from UBS.
"We believe expansion into Russia rounds out Wal-Mart's 'BRIC' (Brazil, Russia, India and China) exposure," UBS analyst Neil Currie wrote in a note on Thursday.
Currie said he expected Wal-Mart to make the leap into Russia within the next 12 to 24 months, probably by taking a minority stake in a local retail chain.
"Similar to its path in China, we believe Wal-Mart may be willing take a low share position in Russia initially for a growing share opportunity in the long-run," he wrote.
Wal-Mart has said publicly that it is interested in expanding into Russia. At the company's analyst meeting in October, Chief Executive Lee Scott said Wal-Mart hoped to be in that country "at some point in the future."
Scott called Russia a "growing consumer nation." Consumers there have shown a propensity to spend, he said, while in other developing countries they tend to save.
UBS said Russia offered an attractive food retailing market with 2006 sales of $144 billion and one in which share is not highly concentrated."
The note said the top 5 players controlled only 7.4 percent of the Russian retail food market in 2006, compared with 35 percent in the United States and 60 percent to 80 percent in European countries.
But the UBS note said acquisitions within the private food retail market were no longer a bargain as share prices for local retailers like X5 Retail Group N V (PJPq.L) have risen.
"We do not see a need for an immediate rush into Russia in the next 12 months, as growth in that market has caused valuations to be at premiums," Currie wrote.
"However, if an opportunity for a meaningful entry vehicle presents itself, we believe that the market attractions are strong enough for Wal-Mart to act sooner if necessary."
Currie also said that if Wal-Mart can get its international strategy right, "the company could develop into a highly attractive long-term investment, with attributes combining fiscal prudence domestically, good cash growth and rapid growth in attractive global markets."
(Editing by Lisa Von Ahn)