MTS - Metcash Limited

[skc]

Re: MTS - Metcash

does anyone have any reasons for the gains since the start of the month?
up ~5% this month while the asx200 has been flat.

all i can find is this reference which gives little insight/info, seems to me like a broad assumption
"Shares in Australian grocery and liquor wholesaler Metcash Ltd. (AU:MTS 4.53, +0.02, +0.44%) rose as investors sought to uncover additional potential targets amid heightened buyout activity" market watch

i bought this stock before i knew how little i know

Perhaps you should look for information a little bit more current than the link (which didn't work btw).

Asia Markets

Nov. 23, 2006, 8:08 a.m. EST

Takeover talk lifts Sydney; region rises

http://www.marketwatch.com/story/takeover-talk-lifts-sydney-new-records-set-regionwide

 

[lukelee]

Re: MTS - Metcash

Just a quick question:
why do they say "metcash is sole monopoly wholesaler of package goods to independent retailers"?
where does woolworth and coles import their stocks? Do they import from metcash? if not, how could metcash be the "sole monopoly wholesaler of package goods to independent retailers. "?

 

[Julia]

Re: MTS - Metcash

WOW and Coles act as their own wholesalers. Put simply, they are big enough.
They deal direct with suppliers.
The small independent retailers don't have the money or the clout to do this.

 

[skc]

Re: MTS - Metcash

WOW and Coles act as their own wholesalers. Put simply, they are big enough.
They deal direct with suppliers.
The small independent retailers don't have the money or the clout to do this.

Small independents can't buy their wholesale supplies from WOW / Coles for obvious reasons. However, some suppliers can do the distribution themselves. E.g. Coke and Fosters etc have their own distribution.

So in one sense if MTS was to get too thick a margin on their wholesale operation, the larger suppliers will probably step in and mitigate that to some extent.

 

[lukelee]

Re: MTS - Metcash

Thanks guys.
Does this mean except woolworth and coles and their service station etc. All the milk bars, convenient stores, small super market, 7-11, small restaurants ... import from metcash?

 

[YELNATS]

Re: MTS - Metcash

Thanks guys.
Does this mean except woolworth and coles and their service station etc. All the milk bars, convenient stores, small super market, 7-11, small restaurants ... import from metcash?

My understanding is that all the IGA's (Independent Grocers Australia) you see around the town source most of their supplies from Metcash. IGA's are independent grocers franchised by Metcash. I believe Metcash also supply some other independent (non-IGA) retailers too.

 

[skc]

Re: MTS - Metcash

Thanks guys.
Does this mean except woolworth and coles and their service station etc. All the milk bars, convenient stores, small super market, 7-11, small restaurants ... import from metcash?

Not sure about restaurants... many of the small ones probably just walk into the supermarket or fish market etc to source their ingredients.

There are probably also further intermediaries like buying groups that sit between the corner shop and MTS...

 

[YELNATS]

Re: MTS - Metcash

Not sure about restaurants... many of the small ones probably just walk into the supermarket or fish market etc to source their ingredients.

There are probably also further intermediaries like buying groups that sit between the corner shop and MTS...

Most restaurants are supplied by "foodservice" companies such as R.M. Smith at wholesale prices, rather than pay retail - fish and meat supplies may be an exception for smaller restaurants. Some of the big food manufacturers, eg. Nestles, where I used to work, have their own foodservice divisions supplying restaurants and institutions such as hospitals, prisons, etc.

 

[JTLP]

Re: MTS - Metcash

Where's So_Cynical when you need him?

Wanted some opinions on the range of the MTS chart for the year - between $3.90 and about $4.50.

10% gain achievable (if it sticks to the range) and a yield of 6.3% for divvie.

 

[JTLP]

Re: MTS - Metcash

MTS given a fair old whacking for a mixture of dollar raising, costs incurred and just general ho hum!

Was it deserved? You'd think so - and they seem pretty intent on more acquistions? My guess is that the current price squeeze from Coles and Woolworths is putting the pinch on Metcash - and in order to grow they need to buy...

Thoughts?

 

[qldfrog]

Re: MTS - Metcash

Current SPP
retail can get share at 3.335 including the final dividend or 6.5% discount to avg price;
expected final dividend:16.5c so priced at 3.335-0.165=3.17 per share

current share price 3.19
What would you do?

 

[Tannin]

Re: MTS - Metcash

MTS given a fair old whacking for a mixture of dollar raising, costs incurred and just general ho hum!

Was it deserved? You'd think so - and they seem pretty intent on more acquistions? My guess is that the current price squeeze from Coles and Woolworths is putting the pinch on Metcash - and in order to grow they need to buy...

Thoughts?

Well, first, Metcash has been dealing with the Wollies/Coles squeeze for many, many years. I can never quite work out how they do it, but their record speaks for itself.

Counter to that, the current phoney price war between Coles and Woollies has gathered significant public mindshare and it is biting. (I say "phoney price war" because the Coles strategy has been to make spectacular cuts to things like milk and bread but balance those very public cuts with sneaky increases in almost everything else, and at the same time squeeze the farmers and suppliers 'till their noses bleed. Notice that, at least on the latest figures I have seen, Coles gross margin on items sold has gone UP, not down. Very smart marketing there.) But it would not do to overestimate the effect of the war. It's not all that far from business as usual, and Metcash is fighting back with its own campaigns. So count it as a factor but do not get carried away with it.

Metcash can't see much organic growth in the next few years. Like Wollies and Coles, Metcash reckon that the Australian market has plenty of supermarkets already and the only way for them to expand much is to diversify. All three have already done that with liquour and hardware and (for the two majors) petrol and even banking and insurance. Metcash has found its own answer with the car parts business (a very smart buy in my view) and also with their upcoming undisclosed $90 million purchase. (Well, we hope that one is as smart a move as the car parts one was - we will have to wait and see.)

The Mitre-10 purchase (they already owned half) makes sense. It is returning decent profits, so why not have more of it? And having a hardware chain can be seen these days as a necessary defensive asset if you want to sell groceries. Woollies certainly see it that way - look at the vast sums they are pouring into their Masters adventure.

The last main factor I'm going to consider is the regulatory environment. On the plus side, things could get a bit fairer. Some of the worst of the anti-competitive Colesworth real estate rorts have been clamped down on. Also on the plus side, the big two are very much on the nose in regulation-land - the Greens and about half the Labour Party are alarmed at the consumer effects of their nastier monopolistic practices and want to take action, the National Party is even more alarmed because of their evisceration of the supply chain (count the Greens in on this one too); only the Liberals are still stuck in let-'er-rip mode. On the minus side, politicians practically never actually do anything, and the government body responsible for actually taking action, the ACCC, has a shameful history of bending over and taking it from Colesworths (this is how we got to an 85% duopoly problem in the first place, remember, gutless inaction from the ACCC) and (apparently) an unexplained down on the only serious candidate to shake the duopoly up (Metcash) - look at their absurd and costly stance which led to the Franklins court debacle. Overall, call the regulatory environment even, neither good news nor bad for Metcash.

current share price 3.19 What would you do?

I see a solid company with some relatively minor problems and growing pains being sold for 20% less than fair value. It has good prospects and lower risk than a lot of things most of us invest in. Back when it was 4.00 or so I often thought about buying some as a dividend stock, but always wound up getting something else instead. But when it dropped to not much over $3.00 it became compelling value. I bought in at about $3.20. The way I see it, it's an excellent chance to go back up to somewhere around the $4.00 mark in perhaps a year or two, and if it does I have a very nice little capital gain. And if it doesn't, well, I still have my $3.20 and I've been paid three or four very nice fat fully-franked dividends. The risk that Metcash will just go down and down and leave me out of pocket is there, of course, same as with any company, but it seems to me to be quite a small and manageable risk to set against a double-chance benefit of fat dividends and capital growth. I only bought a modest parcel but if I can find some spare cash lying around I might get a bit more.

 

[notting]

Re: MTS - Metcash

I thought the reason WOW got into the hardware area was to create a strategic squeeze. Bunnings success has enabled WES to leverage against it and flog WOW in the supermarket area.
Hence the Metcash copy cat strategy seemed stupid. The CEO even said, well the others are doing it so we are too
Not strategic just copying because it looks like the thing to do.:silly:
But if MTS really did take out the rest of M10 because it was actually a really good acquisition then that's great.
Hard to believe however given the amount of competition coming on.
By the way I went to one of the Woolies new hardware things and the service was incredible and it was warm!!
I almost wanted to ask for a job there. Love toy shops!
Is the retail offer underwritten because no one is going to take it up given MTS is trading below it.
Disclaimer, I have been buying it. I think people will still have to eat.

 

[tinhat]

Re: MTS - Metcash

I'm putting MTS onto my watch list. I'll go back and read this thread from start later today. One thing I know about Metcash is that there is something about how they do their accounts that some analysts don't like. For example, I know that Lincoln Stock Doctor don't give MTS a financial health rating (which is the heart of what Stock Doctor is about - fundamental analysis of balance sheets) because of some anomaly with their accounts. That's all I can remember. Will go and do my homework. Yield is certainly attractive. Interesting to see a "defensive" income stock getting beaten down in the current environment.

 

[qldfrog]

Re: MTS - Metcash

ended up applying for half the max..will seee how it goes,
It seems cheap but that would not be the first time I say that to be proven wrong; the positive is that institutions did get much more at a higher price so maybe a good sign for retail..
time will tell

 

[JTLP]

Re: MTS - Metcash

At current price ($3.48) MTS is yielding 8%. Seems to be stuck in that band of $3.40 - $3.60 atm.

I would love to see how the M10 full acquisition sits on the books - I fear these smaller type guys getting pushed out by WES and WOW hardware stores.

Thoughts from other observers?

 

[skc]

Re: MTS - Metcash

At current price ($3.48) MTS is yielding 8%. Seems to be stuck in that band of $3.40 - $3.60 atm.

I would love to see how the M10 full acquisition sits on the books - I fear these smaller type guys getting pushed out by WES and WOW hardware stores.

Thoughts from other observers?

Looks good on yield but I don't remember the last time I shopped at an IGA. Whether it's their shop layout, the discounts on offer or whatever, they just don't entice me to enter their shop.

 

[kid hustlr]

Re: MTS - Metcash

Looks good on yield but I don't remember the last time I shopped at an IGA. Whether it's their shop layout, the discounts on offer or whatever, they just don't entice me to enter their shop.

I think its the lighting.

I was in one yesterday and it just felt seedy

 

[skc]

Re: MTS - Metcash

I think its the lighting.

I was in one yesterday and it just felt seedy

You know what I think you nailed it!

It would be hilarious if MTS management read this and improve their lighting and achieve 15% sales growth

 

[JTLP]

Re: MTS - Metcash

Fair points indeed!

MTS always seems to hang around there...guess we can see where it is heading in 2 weeks when HY results are due.