MTS +1.13%: Out with 1H24 results this morning that were marginally above consensus at the group level driven by a better outcome in Food & Liquor, however, their hardware division was a negative surprise and is struggling to show growth outside of acquisitions. 1H sales of $9bn was up +1.6% and inline with market expectations with reported net profit after tax (NPAT) of $141m ~1% ahead of expectations. An 11cps dividend was declared which was a smidgen better than the consensus of 10.6cps. The main drag came from hardware with EBIT -11.8% if we exclude acquisitions, rising costs the main issue there without enough growth to offset them. They said sales for the first 4 weeks of the 2H were up +0.8%, again, inline with expectations.
- The stock is cheap trading on 12x while yielding 5.8% fully franked, however, their growth engine (Hardware) is spluttering. Aside from yield, our premise for owning MTS is that over time, hardware will become a larger proportion of the pie and drive a re-rate of the group multiple, for now, it looks like patience is needed!
MM remains cautiously long MTS, with yield as the primary driver for now
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