Metcash result is out, a little soft, at the margin. Hardware remains under pressure, given the decline in building approvals (associated with the very sizeable uplift in interest rates, and thus decreased activity) and MTS has a sizeable exposure through IHG and Total Tools (hardware is ~40% of the EBIT, food is 40%, liquor is 20%).

Food and liqour was “fine”, but even food is a little challenged given how cost sensitive the consumer appears to be.

Managements’ framing was a lot more upbeat than our summary above, peppering their update with the words “strong” and “healthy”.

Our view, MTS has a good balance sheet (~0.5x ND/EBITDA ex operating leases) and is performing well overall. It’s in defensive industries (food) and cyclical growth industries (hardware, given the fairly desperate need to build new houses).

Those growth industries are probably a little wobbly, at the moment, given building approvals are down so much, but, balancing that out, MTS are on 12x earnings, which is quite cheap, a sizeable discount to the broader market. The comments on the earnings call, and from the accompanying slide deck regarding market share are well taken.

Cashflows, as highlighted above, were indeed quite good.

So that’s probably all okay, on balance.

More to follow.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Receive our investment insights

Something went wrong. Please check your entries and try again.