Deep Concern, page-2

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gc2016

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16/11/22

12:15

Post #: 64805036
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Originally posted by dbrown87: ↑

I'm deeply concerned with Metcash and their performance.

I understand that their volumes would have been impacted post lockdown as people moved from home back to restaurants, but I find their latest results extremely disappointing.

I'm seeing a lot of positive headlines like "Metcash wins market share as shoppers go local to IGA", "Metcash Profits Soar".

But when I look at the numbers, it just doesn't show that, unless I am missing something?

Sure, headline group revenue boasts "6.4% revenue growth", but did y'all miss that inflation is at 7.3%, and shortly to print +10%?
Therefore, it was below inflation.... in fact, when I look at their grocery business it is even more concerning....

Supermarkets are up 3.9%... below inflation.... it would have been a better investment to buy canned food and dried pasta.
Convenience stores are down 16.7% in revenue which makes sense as people have escaped the cities and likewise with tourists, I thought this would have been up. When you look at slide 34 it's even more concerning though, as hidden in here it shows that really it was just 1.9% growth once you exclude week 53 (i.e. like for like)....

Slide 27 in their preso is also concerning, new world record inventory holdings, whilst massive capital expenditure, forcing them into big debt... which they don't really seem to have locked in for long term at low rates, so once this recalibrates, it is going to get very expensive very quickly.

On top of this, slide 36 was interesting. Core IGA stores went from 1084 to 1096. Surely these additional stores should have had a greater impact on the retail sales number? An additional 12 stores is sizeable... yet numbers don't seem to reflect that.

I believe it is just a matter of time before they follow the Sainsbury Share Price.

16 PE is way too high for this business... even though it is at a discount to Coles & Woolworths.

Does anyone have any insights why this business is worth investing in?

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Might be time to sell then !, just saying you seem to have done a thorough DD

MTS Price at posting: $3.95 Sentiment: Buy Disclosure: Held
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