Metcash Limited

MTS Details
Profit fall in 1H FY 17: Metcash Limited (ASX: MTS) in the first half of FY 17 has reported only 0.3% growth in the sales revenue to $6.63 bn. The group EBIT performance was also under pressure which declined 4.2% to $128.1 million due to the lower earnings in Food & Grocery and weaker earnings in the Convenience business. As a result, the underlying profit after tax declined 4.7% to $82.8 m. Moreover, there will be no interim dividend in FY 17 and it is expected that the dividend payments will restart in FY18.

 

1H FY 17 Financial Performance (Source: Company Reports)
 
Meanwhile, MTS stock has fallen 3.76% in the last three months (as of December 06, 2016) and we believe the weak sentiment on the stock would continue. Although the group seems to exceed annualised savings target of $100 million over three years, there seem to be better retail exposure than MTS. Even the market share losses are expected to continue for MTS given the competition in the grocery market business and Aldi expanding its footprint while Amazon is set to bring in grocery business in Australia. We give a “Sell” recommendation on the stock at the current price of – $ 2.05

 
MTS Daily Chart (Source: Thomson Reuters) 

Macquarie Group Ltd

MQG Details
S&P has changed the outlook from stable to negative for MQG: Macquarie Group Ltd (ASX: MQG) has planned the takeover of Central Petroleum Limited through the acquisition of 100% of the issued capital of Central by way of a scheme of arrangement at 17.5 cents per share. MQG has made an unsolicited, indicative and non-binding proposal. MQG is currently a shareholder and a principal financier to Central. On the other hand, Standard and Poor’s (S&P) has affirmed the ratings of the Macquarie Group of companies and changed the outlook from stable to negative as a consequence of its assessment of Australian economic conditions. MQG reported for a 2% fall in 1H17 net profit of $1,050 million over 1H16 but the same was up 6% on 2H16. 1H17 earnings per share was 4% down against 1H16 but up 6% on 2H16. The group reported that the short-term outlook remains subject to challenges related to market conditions, and regulatory and tax uncertainties while FY17 results seem to be in line with FY16. The stock moved up 12.19% in the last six months (as at December 06, 2016) and is now trading close to its 52-week high price. We give a “Sell” recommendation on the stock at the current price of – $ 82.76

 
MQG Daily Chart (Source: Thomson Reuters) 

Surfstitch Group Ltd

SRF Details
Undertaken a renewal process: Surfstitch Group Ltd (ASX: SRF) stock is up 3.12% on December 07, 2016 and sank 50% in last six months (as at December 06, 2016). The group lately announced for a shake-up in the board wherein Harry Hodge (founder and former chairman of Quiksilver Europe) has joined as Non-Executive Director, who has more than 30 years of experience in apparel, board sports and fashion sectors with strong connections in surfing industry. On the other hand, executive influence from company co-founder Lex Pedersen and Justin Stone, founder of Surfdome has been curbed as they set to retire from the board as Executive Directors by end of December and will focus solely on executive roles within the group. Even Stephen Goddard and Jane Huxley will step down from the board. The group’s Chairman said that the changes are part of the renewal process. These seem to come as a respite under a move to address shareholders’ concerns regarding directors’ approvals on group’s overpriced acquisitions of the past. It has been said that the group is likely to record bottom line loss in FY17 as well. There has been pressure on cash position owing to legal costs associated with ASIC request for information and investigation, on-going litigation by Coastalwatch and members of the Crown Group, and cash requirements of payment gateway provider in Europe. The group has thus increased the FY17 forecast decline in cash from operations from a range of $6 million to $7 million to a range of $9 million to $10 million. In November 2016, the group announced that Stage 2 of its Strategic Review has been commenced and 333 Capital was engaged to advise SRF on strategic options. We maintain a “Hold” recommendation on the stock at the current price of – $0.16

 
SRF Daily Chart (Source: Thomson Reuters)

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