Some thoughts on Metcash (MTS)

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Question asked 16/03/2023

Some thoughts on Metcash (MTS)

FYI, the reason why I like Metcash is because they supply grocieries to all the IGA stores in Australia. I can only speak for my experiences here in WA but every smaller rural town in the wheatbelt of WA has an IGA supermarket and no other. If residents want to buy at Coles or Wollies, they must travel 50 to 100+ km which obviously entails a cost in fuel and vehicle wear and tear, so IGA have got a virtual monopoloy in those towns and are price setters. To my mind, a very important reason why they will continue to do well over the next few years.

Answer

Hi Bernie,

Metcash (MTS) definitely dominates in the rural market place but it also performed strongly in the major cities during COVID as people shifted from large supermarkets to the more convenient community supermarkets of IGA. This transition is slowly being reversed as COVID takes a backseat to almost all news stories however the original transition to MTS has been pretty resilient despite the economic reopening over the last 24 months, highlighting the stickiness of the consumer.

Current expectations have the stock trading on a 12.1x FY23 valuation while its estimated to pay a dividend yield of around 6.7% fully franked over the next 12-months, these attractive numbers are why it resides in our MM Income Portfolio.

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Metcash Ltd (MTS)

LAST UPDATED 16/03/2023 11:52

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