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Metcash Rallies 26% In Today’s Session

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

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)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.


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