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MTS, METCASH LIMITED
nipper
post Posted: Aug 29 2020, 05:06 PM
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Metcash competes through its affiliate IGA network with Woolworths, Coles and Aldi in groceries in a sector that we understand is aggressive but rational. In liquor, IGA is the number 2 player behind Woolworths, but ahead of Coles. In hardware, Mitre 10 competes directly with Bunnings, with both chains currently benefiting greatly from the extra spend on renovations as many people working from home take the opportunity to fix up their homes and gardens.


Our confidence in Metcash's prospects strengthened in recent months when after significant research we undertook including various channel checks and talking to many independent retailers, it became apparent to us that Metcash was not only growing its sales, helped by the increase in grocery and hardware sales during the pandemic, but that the IGA network had also picked up substantial market share from the major supermarket chains as the company benefitted from new localised shopping trends by consumers across all its businesses.


On our estimates for the company, we calculate that Metcash should report a net PROFIT after tax of slightly over AUD200 million for FY2021. As a result of all this and given that Metcash was trading on a P/E of around 14 times earnings and a 4% dividend yield (while also experiencing good growth), we have been a fairly large buyer across our funds in recent months, as we believed the company offered great value given the strength in its underlying businesses. Through our thorough research process, we also learnt that the IGA network had made significant progress in reinvesting in its stores and reducing its prices to be more competitive with Woolworths and Coles.

So when Metcash announced at its AGM on Wednesday 26 August that food sales were up 15% and liquor sales were up 11% and that its hardware sales were up 19%, we were delighted and felt vindicated by our positioning in the portfolios. These sales numbers were well above our estimates and market expectations. However, Metcash's resulting 2% share price rise on the day underwhelmed us, as the focus of investors seemed to be on more 'exciting' sectors in the market as opposed to real companies with real earnings
Anton Tagliaferro from IML
https://www.sharecafe.com.au/2020/08/28/jus...id-sharemarket/



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jun 28 2020, 09:42 PM
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Livewire Markets: Metcash on a 5 per cent fully franked yield, something to add to your grocery list?
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Simon Conn (Investors Mutual): I think Metcash is a buy. It is a good solid business. Not the most exciting thing again in the world, but a solid business. We have been eating more at home and I think that really speaks to the resilience of the business. I think actually what we've been seeing, people are buying more local, which I think speaks to your local IGA business, it is going okay. And the liquor business is a really strong one. Again, drinking more at home, so it helps them.



Livewire Markets: We have been drinking more at home. So, is it Metcash or Metcrash, Dean? Buy, hold, sell?
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Dean Fremder (Perpetual): It is a sell for me. Again, disagreeing with Simon. The wholesale business model is a structurally pressured business model. It's difficult. Metcash has lost a few of their big customers in recent times, which is going to present a further headwind for earnings in coming periods. They raised money recently which obviously puts the balance sheet in a bit better shape, but they have quite significant liabilities that you can not see on the balance sheet that they may need to fund in coming times, and so putting it all together, risk-reward does not really stack up for us, so we'll say sell.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Nov 22 2019, 03:49 PM
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Metcash shares have dropped more than 10 per cent to a four-month low after 7-Eleven chose not to renew its contract with the wholesale food and beverage supplier when it expires in August.

Metcash on Friday said its annual sales to 7-Eleven total about $800m a year, mostly in lower-margin tobacco products.

“Metcash was unable to reach agreement with 7-Eleven on its supply requirements for the east coast, including delivery routes and scheduling,” the firm said. However, Metcash said it was still in talks to continue to supply 7-Eleven stores in WA.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Mar 6 2019, 05:44 PM
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There was something for everyone in the Metcash ((MTS)) trading update and strategy briefing, expressed in a wide range of views from brokers. Metcash will spend $300m on growth across FY20-24 and management has signalled a 15% minimum return hurdle. If this is not achieved, expenditure will slow and capital management will resume.

The growth expenditure is matched with $550m of potential funding capacity from retained cash flows and debt. This implies upside to estimates and UBS, along with several other brokers, welcomes the decision to invest more in stores and improve the network quality. There is also a $50m cost reduction program over FY20-21 to offset cost inflation. Implementation costs are calculated to be 25% of the savings. Macquarie disputes whether the savings can be considered as outright upside to net profit but acknowledges the positive aspects.

The strategy may be well-crafted but Credit Suisse believes the positive implications for shareholders are less obvious. Moreover, the stock is likely to trade on near-term earnings guidance while capital is being committed for growth. Credit Suisse makes no material changes to forecasts resulting from the update, although acknowledges proposed cost savings have now been pinned down. As a negative impact on valuation would arise from including $300m in capital expenditure without a commensurate earnings uplift, the broker refrains from including the additional growth expenditure in its forecasts.

Citi retains a Sell rating (along with Deutsche Bank which is yet to update on the strategy) and continues to envisage downside risk to earnings forecasts. Citi cites the structural challenges for growth in grocery and cyclical headwinds in hardware, as well as an increase in capital intensity, as reasons to be cautious. The broker considers the growth outlook, following this strategy update, is largely neutral and not sufficient to overcome the numerous structural challenges the company faces. The elevated capital expenditure profile will also weigh on free cash flow, as the broker calculates the cash flow yield will drop to 7.9% by FY24. In the absence of more material investment, or a return to elevated inflation, the broker asserts that, while some of the negatives are factored into the price, a wider margin of error is required.

UBS believes the outlook for the Australian supermarket sector is improving, supported by easing deflation, reduced promotional intensity and a focus on differentiation. This outlook is supportive of independent grocers and Metcash will benefit by being the most leveraged to deflation and the main supplier to independents.

Macquarie
finds the outlook still challenging, noting FY20 growth will be affected by the loss of the Drakes contract. The broker also notes the company has called out intense competition in food, price deflation and the impact of Aldi. Metcash will focus on the fresh and private-label food business, acknowledging it is under-indexed in this area and this has hurt the business. However, the bulk of capital expenditure allocated to food is for the trial in corporate liquor, and the company has flagged additional capital will be required following a decision to roll out further.

Morgan Stanley observes the company continues to close a sales growth gap to the major supermarkets as its strategy gains traction, while second half sales growth, ex tobacco, was in line with first half trends. The broker also finds significant opportunity in the liquor business, as convenience trends, corporate store trials and private-label all drive growth.

Credit Suisse is surprised by the trial of a corporate liquor store, given the success of the current independent brand network. The broker suspects the company maintains a belief it needs to participate in retail liquor to be a better wholesaler. There are three pilot stores currently in operation with 10 targeted by December.

In hardware, trends have slowed but sales growth remains positive. There is still significant rationalising of distribution centres to come over the next two years. NSW will close by September and WA on exploration of the lease. This will be supported by the conversion of more HTH stores to the Mitre 10 banner. The company’s aim is to return to three distribution centres in total.

Even though retailer sales growth may turn negative as the housing cycle worsens, Morgan Stanley believes cost reductions can limit the impact. Macquarie assesses the company is better placed to deal with a downturn in DIY versus peers, including Bunnings ((WES)), which have around 90% earnings exposure to the segment. Tasmania is the bright spot, with sales growth of around 20%, although less material to group earnings.

The company will spend $90m on its hardware initiatives over the next three years, on refurbishing the existing network and also promoting products that are not available at Bunnings. The company does not believe Bunnings is materially competitive on price, nor that Bowens will start a price war. The hardware strategy has also meant more corporate stores ,although Credit Suisse does not believe this is such a change in view, given these have been a large part of the segment for some time.

FNArena’s database SHOWS three Buy ratings, two Hold and two Sell for Metcash. The consensus target is $2.75, suggesting 0.4% upside to the last share. The dividend yield on FY19 and FY20 forecasts is 5.6%.
https://www.sharecafe.com.au/2019/03/05/met...ers-for-growth/



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
wolverine
post Posted: Dec 4 2017, 07:53 PM
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In Reply To: terrine's post @ Dec 4 2017, 09:38 AM

Yo Terrine...

I have a belly full of these from $2.20 in two accounts. Pretty chuffed as well.



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TOO MANY CHIEFS

NOT ENOUGH INDIANS
 
blacksheep
post Posted: Dec 4 2017, 10:11 AM
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In Reply To: terrine's post @ Dec 4 2017, 09:38 AM

QUOTE
o, ye of little faith


Not me - I'm not the shorter, but agree they won't be happy with todays news biggrin.gif Shows they don't always get it right
https://www.shortman.com.au/stock?q=MTS

QUOTE
Hardware helps drive up Metcash profit
Petrina Berry
Monday, 4 December 2017 10:28AM
Grocery wholesaler Metcash's liquor business and Home Timber & Hardware chain have underpinned its 24 per cent lift in half-year profit.
While its supermakets' business, as the supplier of IGA and Foodlands stores, continued to come under pressure amid Woolworths and Coles' price cuts and the aggressive expansion of Aldi into South Australia and Western Australia.
Net profit grew to $92.9 million during the six months to October 31, up from $74.9 million a year earlier.
Sales revenue rose 7.6 per cent to $7.1 billion, up from $6.6 billion in the prior year largely due to a full half-year contribution from Home Timber & Hardware (HTH) that it acquired from Woolworths in October, 2016.
The first half of the 2017 financial year had included only one month of sales from HTH.
Outgoing chief executive Ian Morrice said both liquor and hardware had performed strongly, including a turnaround in HTH in a relatively short period.
"We are now half way through our three-year Working Smarter program, and the initiative is delivering significant benefits, particularly in our supermarkets business," Mr Morrice said in a statement to the ASX on Monday.
"The savings achieved have been a key factor in supermarkets maintaining its earnings, despite the significant headwinds that include a continuing high level of deflation."
Hardware, which includes the group's Mitre10 chain, contributed $1.06 billion in revenue for the half, up from $581.6 million a year ago.
The group's liquor sales, which includes Cellarbrations, The Bottle-O and IGA Liquor networks, rose 5.1 per cent to $1.64 billion.
Food sales for the half dropped 1.4 per cent to $4.36 billion compared to the same period a year ago.
The group said food sales continued to improve across the eastern seaboard but remained weaker in SA and WA due to Aldi's aggressive rollout in those states and WA's challenging economic conditions.
The IGA retail network recorded a 1.1 per cent fall in the key like-for-like sales.
HARDWARE & LIQUOR UNDERPIN METCASH PROFIT:
* Net profit up 24 pct to $92.9 million
* Revenue up 7.6 pct to $7.1 billion
* Fully-franked interim dividend of six cents per share v. no dividend in prior year

https://thewest.com.au/business/markets/har...it-ng-s-1805451
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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 

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terrine
post Posted: Dec 4 2017, 09:38 AM
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In Reply To: blacksheep's post @ Nov 23 2017, 11:18 AM

o, ye of little faith
very pleasing first 1/2 result

 
blacksheep
post Posted: Nov 23 2017, 11:18 AM
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Notable short sales alert - Wed 22nd Nov, 2017 6,753,797 975,641,876 0.69% 3,091,527 218.46% - is that the "Amazon" fear factor bet?
https://www.shortman.com.au/stock?q=MTS
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--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
alonso
post Posted: Jun 26 2017, 03:17 PM
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In Reply To: terrine's post @ Jun 26 2017, 02:00 PM

Could be. . .lol



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"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 
terrine
post Posted: Jun 26 2017, 02:00 PM
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In Reply To: alonso's post @ Jun 26 2017, 01:55 PM

...their profit may have been better if it wasnt for you then wink.gif

 
 


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