Metcash (ASX: MTS) rallied 26% today, following yesterday’s aggressive sell-off, where the ASX dropped 6.5% in the first 30 minutes of the session. Investors expected similar sell-off today after heavy losses in the US markets last session. Especially, since new cases of Coronavirus are popping every day causing panic and fear in the market. However, instead of seeing a sea of red, we saw several companies recover from yesterday’s session. The rally today could be a result of the stimulus plan and support from China with the supply of masks and testing kits.
Metcash is an Australian wholesaler of grocery, alcohol, and hardware, most notably IGA and Mitre 10. The company recorded a profit after tax of 95.7m which was lower than last year's 1H19 by 4%. For the group, EBIT fell by $8.4m to $149.7m which came from Food and Hardware. Only liquor was the standout with EBIT increasing by $0.5m to $29.6m, a result of high sales. These results also stem from the contract loss with 7-11 where the EBIT is expected to be impacted by ~$15m for the next reporting. The overall outlook for the company looks bad and as a result, the share price has struggled to regain attraction.
Whilst, the company in the eyes of investors seems unattractive after reporting its 1H20. The coronavirus pandemic has seen to massively benefit the Metcash group in short-term sales. Panic buying and FOMO (fear of missing out) have seen customers demand highly for goods such as toilet rolls and long-lasting non -perishable goods. This has caused IGA to limit the number of goods people can purchase at one time. For the next reporting, the Metcash group is expected to do well with the ongoing coronavirus pandemic.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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