Stocks’ Details
 

Metcash Limited (ASX: MTS)

Growth story continues while there are some headwinds:Metcash (ASX: MTS) is Australia’s leading wholesale distribution and marketing company with sales of over $14 Bn as reported for FY17. During the first half of FY18, the company has reported sales growth of 7.6% to $7058.4 Mn (including the acquisition of HTH) from $6559.3 Mn in 1HFY17. The Group EBIT grew 18.7% to $152.0m in 1H FY18 against $128.1 Mn in 1HFY17. The Group EBIT includes the earnings from Home Timber & Hardware (HTH) acquisition, growth in the underlying Hardware business and growth in Liquor business segment. The Group reported profit after tax growth of 24% to 92.9 Mn in 1HFY18 over $74.9 Mn in 1HFY17. The group maintained their fully franked interim dividend of 6.0 cents per ordinary share. On the balance sheet front, the group has reduced the debt by 94.8 Mn and average net debt from 1HFY18 is approximately $280 Mn compared to approximately $375 Mn in 1HFY17. The Group net operating cash flow reached $161.4 Mn in 1HFY18 due to the cash generation across the pillars, tight working capital management and settlement of the Huntingwood DC insurance claim compared to $130.6m in 1H17. In second half of the year, there is some uncertainty over the impact of the recently introduced Container Deposit Scheme in NSW, and the roll out to other states for Liquor division. Positive sales momentum is expected to continue in 2HFY18 for hardware division and it is expected to deliver between $20-$25 Mn of annualised gross synergies from the acquisition of HTH. In Food business, the external headwinds including stiff competition, particularly in South Australia and Western Australia are continuing.

Recently, the company has appointed Scott Marshall as a Chief Executive of the Supermarkets & Convenience segment of Metcash’s business. Meanwhile, MTS stock has fallen 4.35% in last one month with a 11.2% rise in last six months, as on March 20, 2018. Based on some level of uncertainty in the market scenario, we maintain an “Expensive” recommendation on the stock at the current price of $3.12
 

Debt Maturity Profile at 1HFY18 (Source: Company Reports)
 

Seek Limited (ASX: SEK)

Overall portfolio performs well: Recently, the Group disclosed the transactions that were undertaken by Andrew Bassat, CEO and Co-Founder. The transactions were related to the sale of 500,000 ordinary shares to raise payments in relation to the exercise of long-term incentive (“LTI”) options and personal tax obligations. After this transaction, Mr Andrew Bassat holds 14,443,168 shares and remained a significant long-term shareholder of the Company. Recently, Pinnacle Investment Management Group Limited and Pinnacle Investment Management Limited became the substantial holder of the Group since 09 March 2018 by holding 29,779,964 shares with 8.45 per cent of the voting power.
 

Total Shareholder Return (Source: Company Reports)
 
SEEK Limited had entered into a binding agreement to increase its ownership in SEEK Asia from 86.25% to 100% by acquiring the remaining 13.75% of shares from News Corporation. This transaction did not change SEEK’s FY18 guidance which was provided with its 1HFY18 results as it was funded by its existing debt facilities. For 1H18, SEK reflected a strong organic growth of Revenue and EBITDA that is of 26 per cent and 20 per cent, respectively, which was particularly driven by ANZ business. On the other hand, there is a threat developing from the entry of Google for Jobs. The stock price rose by 19.21 per cent in six months and was down by 2.47 per cent in the past one week. The stock looks “Expensive” at the current market price of $20.16, in view of the higher trading levels and developing competition.

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