Thoughts on Regal Partners (ASX: RPL) and Metcash (ASX: MTS)

Hi Octogenarian,

Metcash (MTS) – MTS has significantly outperformed the ASX 200 in 2026 and has also outperformed its major supermarket peers over the past three months, gaining +10% compared to Woolworths (WOW) at +4% and Coles (COL) at -6%. Of course, performance depends on the timeframe, with WOW undoubtedly the standout over more recent periods as it takes market share from COL.

As you mentioned, we hold MTS in our Income Portfolio, with its fully franked yield of ~5.2% comparing favourably to WOW (2.4%) and COL (3.6%). It remains our preferred pick across the sector for a combination of yield, value and growth potential.

In terms of strategy, MTS, through its IGA network, offers a differentiated approach to convenience retailing, and we genuinely think they do a very good job of it. Many of its franchise stores occupy high-value locations, providing a service that we would argue actually improves the communities in which they operate.

The valuation gap between MTS and the majors reflects the very issue you’ve raised, with MTS trading on ~13x earnings versus COL at ~23x and WOW at ~27x. You’re right that smaller scale generally means higher costs, but MTS has demonstrated it can compete effectively by offering a compelling alternative for shoppers who value convenience over price.

Ultimately, we believe IGA/Metcash has carved out a sustainable niche that allows it to coexist with the majors, rather than compete head-on. It’s a similar strategy being pursued across its hardware and tools businesses.

Our original investment thesis centred on the valuation discount narrowing, and we still believe that argument holds. We’ve therefore retained our position, which has generated around 8% p.a. since purchase, or ~40% overall.

In a recession, we suspect MTS would be somewhat less defensive than the major supermarkets, although consumer staples generally tend to outperform the broader market during periods of economic weakness.

Regal Partners (RPL) – We know Charlie well. He’s a good operator and even spoke at a Sydney Market Matters event a few years ago, although importantly, he’s not the person managing the portfolios.

When assessing fund managers, alternative or otherwise, the most important metric is almost always investment performance, and this is where RPL has struggled recently.

• Regal’s flagship Long/Short Fund declined -18.9% in the 12 months to September 2026, underperforming the ASX 300 Accumulation Index by a substantial 21.28%.

An improvement in returns is pivotal for RPL, particularly with the planned retirement of Phil King. Ultimately, funds follow performance.

Historically, Regal has demonstrated an ability to bounce back from periods of underperformance, which means advisers who understand the investment process are generally less inclined to withdraw funds at cyclical lows. However, the longer poor performance persists, the greater the risk of meaningful outflows.

One of our team recently met with a Regal portfolio manager, and the discussion didn’t leave us with the same level of confidence we’ve had following previous meetings. That has contributed to our more cautious stance.

For now, we’d classify RPL as more of a hold than a buy, with a sustained improvement in investment performance needed to rebuild our conviction.

Finally, in a recessionary environment, fund managers generally face a difficult backdrop, as falling asset prices, weaker performance and potential redemptions can combine to put pressure on earnings.

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Metcash Ltd (MTS)

LAST UPDATED 11/11/2026 13:38

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Metcash Ltd (MTS)

LAST UPDATED 11/11/2026 13:38