Metcash Limited

MTS Details
· Strong first half result and positive outlook lifted the stock sentiment: Metcash Limited (ASX: MTS) stock surged over 4.3% on November 28, 2016 driven by the group’s better than estimated first half of 2017 performance. MTS EBIT loss was over 4.2% year on year (yoy) to $128.1 million in the first half of 2017 against $133.7 million in the prior corresponding period due to ongoing pressure of Food & Grocery division but their Liquor and Hardware pillars offset this pressure to a certain extent. Underlying profit after-tax also fell over 4.7% to $82.8 million due to pressure from Convenience business despite the group’s efforts of cost cutting from Working Smarter program. However, Metcash enhanced their operating cash flows to $130.6 million during the first half from $3.1m in prior corresponding period, generated from their non-core assets sales. Consequently, net debt fell to $197.6 million during the period. MTS is focusing on their Hardware pillar which has the potential to be a second major market participant. HTH integration is on track by FY18. The group issued a positive outlook and reported an ongoing fiscal year of 2017 performance as per expectations. Liquor pillar momentum is forecasted to continue in the second half while Home Timber & Hardware contribution would be there for Hardware division. On the other hand, the group expects pressure for their core Food & Grocery pillar division even during the second half of 2017.

· Recommendation: We give an “Expensive” recommendation on the stock at the current price of  $ 2.06
 

Segment performance (Source: Company Reports) 

Gateway Lifestyle Group

GTY Details
· Boosting capital position: Gateway Lifestyle Group (ASX: GTY) stock surged over 3.98% on November 28, 2016. The group raised funds to acquire 6 Manufactured Home Estates (MHE) and replenish debt to boost their financial position. GTY raised over $40.2 million in March 2016 via placement with over 16.8 million securities.

· Recommendation: GTY stock lost over 16.6% in the last three months (as of November 25, 2016) due to lower than estimated outlook for the group in fiscal year of 2017. We believe this pressure in the stock could continue in the coming months. We give an “Expensive” recommendation on the stock at the current price of $ 2.35 

Rental growth over the years (Source: Company Reports)

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