Fund Manager Summary
The fund managers believe that the outlook for Metcash Ltd presents a significant investment opportunity. In their opinion, the company’s diverse earnings streams—grocery wholesaling through IGA, liquor wholesaling, and hardware retail—position it well for stability and growth. They highlight that the hardware segment, which includes Mitre 10 and Total Tools, is particularly promising, especially as residential housing construction activity recovers. The defensive nature of the grocery and liquor businesses, which are less affected by high costs associated with labour and rents, further enhances its appeal. Additionally, acquiring MTS shares at a sub 14 earnings multiple is seen as a value opportunity, making Metcash a compelling choice for investors.
Source: Trading View
Commentary From The Managers
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Antares Capital
30 Sept 2025
$3.80
Summary
- Antares Capital sold their investment due to an underwhelming sales update released during September.
- Food sales were slowing, raising concerns about the company's growth prospects.
- Hardware sales did not show the acceleration anticipated following recent interest rate cuts.
- The announcement of unspecified costs expected in FY26 added to the concerns.
- These factors collectively influenced Antares Capital to exit their position in the company.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Antares Capital
30 Sept 2025
$3.80
- Antares Capital sold their investment due to an underwhelming sales update released during September.
- Food sales were slowing, raising concerns about the company's growth prospects.
- Hardware sales did not show the acceleration anticipated following recent interest rate cuts.
- The announcement of unspecified costs expected in FY26 added to the concerns.
- These factors collectively influenced Antares Capital to exit their position in the company.
Summary
Ten Cap
30 Sept 2025
$3.80
- Metcash (MTS) has experienced share price weakness due to increased strategy and integration costs.
- The latest AGM trading update indicated a softer performance.
- Despite challenges, hardware sales are trending positively.
- This positive trend in hardware sales is expected to support earnings growth as the next construction cycle begins.
- Overall, Ten Cap continues to hold its position in Metcash due to these growth prospects.
Summary
Pendal Group
30 Sept 2025
$3.80
- Pendal Group continues to hold Metcash Ltd due to its low beta nature, making it less reactive during market volatility.
- The company is backed by a compressed and low valuation relative to its historical performance and in absolute terms.
- Approximately 50% of Metcash's business is in groceries, which is considered quite defensive.
- Despite increased price competition in groceries, the hardware segment is improving from a low base in a declining interest rate environment.
- This hardware growth is expected to offset any potential weaknesses in the grocery sector.
- The risk associated with illicit tobacco impacts the grocery side, but it represents a small portion of Metcash's overall business.
- Metcash is viewed as a steady and well-run business, making it attractive for its defensive qualities.
Summary
Maple-Brown Abbott
11 July 2025
$4.02
- Maple-Brown Abbott views Metcash as the cheaper play compared to competitors.
- Metcash is fundamentally a distributor, not a retailer, resulting in smaller margins than Woolworths and Coles.
- Agreement with Hamish on the current positioning of Metcash.
- Metcash now has three solid pillars contributing to its improved business model.
- Potential for cyclical upside if interest rates decrease as forecasted.
Summary
Maple-Brown Abbott
30 June 2025
$3.91
- Maple-Brown Abbott maintains an overweight holding in Metcash, which has increased by 24%.
- Metcash's full-year results exceeded market expectations.
- The market is beginning to recognize the improved quality of Metcash.
- The company has added higher growth businesses to its portfolio.
- There has been improved execution and cash generation within the company.
Summary
Antares Capital
30 June 2025
$3.91
- Metcash (MTS) delivered a good result for the year ended 30 April.
- Profit numbers had been preannounced in May, but the overall result was pleasing.
- Cashflow conversion was strong, with longer-term cash conversion guidance lifted to over 90%.
- Sales trading update for the first six weeks of the new financial year was ahead of expectations.
- The higher margin, but cyclical, hardware business is showing clear signs of stabilisation.
Summary
Pendal Group
30 June 2025
$3.91
- Pendal Group maintains an overweight position in Metcash (MTS, +15.7%).
- Metcash’s FY25 result exceeded expectations, with EBIT 2% ahead of consensus.
- Key positives include market share retention in Supermarkets and customer acquisition through its distribution network.
- Despite challenges in the Liquor segment, Metcash continues to grow market share.
- The Hardware division, previously a concern, is showing signs of recovery and potential operating leverage upside.
- Overall, Metcash is well managed amidst earnings headwinds and is positioned for growth from FY25.
Summary
Spheria Asset Management
30 June 2025
$3.91
- Spheria Asset Management observes a 16% share price increase for Metcash (MTS.ASX) following their full year results.
- Overall group underlying EBIT rose 2.3%, with a strong second half growth of 4.8%.
- Supermarket ex-tobacco revenue grew by 3.2%, while liquor increased by 3.3%, both outperforming the broader market.
- Hardware segment maintained 2.4% growth, successfully maintaining market share.
- Metcash announced a merger of its hardware divisions, Total Tools and the Independent Hardware Group, to enhance strategic alignment and scale benefits.
- Sales in the first seven weeks of the quarter were positive across all business segments.
- Despite recent performance, Metcash trades at 11x EV/EBIT FY26, indicating a strong cash conversion profile.
- The company has consistently delivered returns of 20%.
Summary
Contract Asset Management
30 June 2025
$3.91
- Metcash (MTS) delivered a solid result for its financial year ending 30 April.
- The company reported resilient earnings in its Food and Liquor business.
- There are signs of green shoots in Hardware.
- Operating cash flow was strong, attributed to improved working capital management.
- The Balance Sheet has improved over the year, now in a sound financial position.
- The final dividend of 9.5 cents per share was higher than the second half of FY24.
- Shares performed well in June, increasing 16% post-results due to significant leverage to a recovery in Hardware earnings.
- Contract Asset Management continues to hold because it is challenging to understand why MTS trades at such a wide PE discount to larger peers like COL, WES, and WOW.
Summary
Contract Asset Management
31 May 2025
$3.41
- Contract Asset Management continues to hold Metcash Limited (MTS.ASX) as it remains our largest position.
- We are optimistic about resilient operating performance and valuation support.
- MTS operates as a wholesale distribution company in food, liquor, and hardware.
- It is a critical partner to independent retailers, supporting over 1,600 supermarkets, 90% of independent bottle shops, and 700 hardware stores.
- The end customers of MTS are expected to benefit from further interest rate cuts and a robust housing market.
- The stock is currently trading at a P/E of 13x next year’s earnings, significantly lower than peers like Coles, Woolworths, and Wesfarmers, which trade at 25-35 times.
- This suggests potential room for a re-rating of the stock.
Summary
Pengana Capital Group
31 May 2025
$3.41
- Metcash, one of the Fund’s largest holdings, represents a compelling investment opportunity.
- It has three earnings streams: grocery wholesaling via its IGA brand, liquor wholesaling, and hardware retail.
- The hardware division is the largest, combining franchise and company-owned stores.
- Grocery and liquor offer non-labour or rental intensive distribution business exposure.
- There is a lack of commensurate operating leverage (or deleverage) in these sectors.
- In a subdued turnover growth environment with high cost growth for labour and rents, the defensive nature of this business is appealing.
- Metcash also owns a significant hardware business, including the Mitre 10 and Total Tools brands.
- This hardware segment presents exciting upside potential as residential housing construction activity recovers.
- Acquiring MTS shares at a sub 14 multiple represents good value.
Summary
Contract Asset Management
30 Apr 2025
$3.22
- Contract Asset Management continues to hold Metcash Ltd due to its strong positioning in the consumer staples sector.
- Metcash operates through its food, liquor, and hardware divisions, supplying independent retailers like IGA, Cellarbrations, and Mitre 10.
- The company demonstrates resilience from a defensive business model and stable revenue streams.
- Its domestic focus provides insulation from global economic shocks.
- As a cornerstone of Australia’s retail supply chain, Metcash's performance during market turbulence highlights its value in a diversified portfolio.
- Metcash offers low volatility and consistent earnings, making it an attractive investment.
- Looking forward, Metcash is well-positioned to remain resilient amid ongoing market volatility.
- The company has a solid balance sheet and cash flow generation, supporting dividends and reinvestment in growth initiatives.
- Growth initiatives include enhancements in e-commerce and supply chain upgrades.
- Metcash's cost-out program will help it absorb competitive pressures from major players like Coles, Woolworths, and Aldi.
- The stock is viewed as offering attractive value with a P/E multiple below historical averages and significantly lower than its supermarket peers.
Summary
Contract Asset Management
31 Mar 2025
$3.16
- Metcash (MTS) was one of Contract Asset Management's better performing stocks in March.
- The Consumer Staples business is viewed as a relative safe haven amid wider market volatility.
- Metcash operates across three key pillars: Food, Liquor, and Hardware.
- This diversification provides resilience against downturns in any single sector.
- Each pillar caters to a large network of independent retailers (e.g., IGA, Foodland, FoodWorks, Mitre 10, etc.), ensuring a stable customer base.
- Contract Asset Management continues to find its valuation appealing, trading at a P/E of 12x.
- The stock offers a dividend yield near 6%, representing a significant discount to its peers.
Summary
Contract Asset Management
31 Dec 2024
$3.10
- Metcash Limited (MTS) delivered its interim FY2025 results, showing resilience in a challenging market.
- Food (ex-tobacco) and Liquor divisions performed well, contributing positively to overall results.
- However, Hardware faced weaker demand and promotional challenges, impacting performance.
- Contract Asset Management considers MTS to be a well-managed business that has effectively implemented cost management initiatives in response to market conditions.
- The Food division, which represents 45% of EBIT, achieved a 3.2% increase in Supermarkets and Convenience revenue.
- Overall revenue increased by 10% following the Superior Foods acquisition.
- The shares closed the month 2% higher despite a weak market environment.
- Contract Asset Management continues to hold MTS as it remains an important portfolio holding, offering a forecast FY2025 grossed up yield of 8.4%.
Summary
Contract Asset Management
31 Oct 2024
$3.06
- Contract Asset Management updates its investment thesis on Metcash Ltd (MTS).
- Food and Liquor businesses are performing admirably.
- There is a noticeable deterioration in the Hardware business.
- Like-for-like sales at Mitre 10 and Home Hardware are down nearly 4% FYTD.
- Despite promotional activity, building activity has decreased across all segments.
- Housing approvals are not replenishing quickly enough to drive demand.
- MTS remains attractive at 12x earnings with a grossed-up yield > 8%.
- Contract Asset Management continues to hold due to these factors.
Summary
Contract Asset Management
30 June 2024
$3.56
- Metcash (MTS) delivered a reasonable full year result in a challenging market.
- Trading conditions for consumer-facing businesses are getting tougher.
- Food and Liquor divisions have maintained significant step up in profitability compared to pre-COVID numbers.
- Total Tools continues to drive profit growth and is holding its own in a competitive market.
- Management is pleased with the business performance, particularly against peers.
- Strong cash flow and robust return metrics (e.g., ROIC).
- Contract Asset Management continues to hold because MTS management is doing an admirable job in a tighter market.
Summary
Contract Asset Management
31 Mar 2024
$3.93
- Contract Asset Management attended the Metcash (MTS) Investor Day and Site Tours in Melbourne.
- Metcash operates through three key pillars: Food, Liquor, and Hardware.
- Key brands include IGA, Cellarbrations, Mitre 10, and Total Tools.
- The trip reinforced that MTS has strong positions in attractive markets and is positioned for continued growth.
- Total Tools currently has 115 stores with a target of 170 stores, rolling out 10 stores annually.
- Total Tools is the largest retailer of professional tools in Australia.
- MTS is exploring consolidation opportunities across its key addressable markets.
- The new CFO provided insights into a financial framework focused on maintaining a strong Balance Sheet.
- There are opportunities to optimize free cash flow through working capital initiatives.
- The trip reinforced a positive view on the stock.
- Contract Asset Management remains impressed with the management team.
- They consider the stock cheap compared to Coles, Wesfarmers, and Woolworths, which trade at a c.50% higher P/E multiple than MTS.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
In a world of economic uncertainty, the multifaceted revenue streams of Metcash Ltd. appear to offer a resilient shield. With its grocery, liquor, and hardware segments, it seems poised for growth, especially as housing rebounds, making its current valuation a potentially savvy bet.
Last Updated: 30 Sept 2025
Query The Data
Frequently Asked Questions
Who is investing in Metcash Ltd (ASX:MTS)?
Fund managers including Pengana Capital Group, Maple-Brown Abbott, Contract Asset Management, Pendal Group, Antares Capital, Spheria Asset Management and Ten Cap have invested in Metcash Ltd (ASX:MTS).
Why do fund managers invest in Metcash Ltd?
Fund managers invest in Metcash Ltd due to its diversified earnings streams from grocery wholesaling (IGA), liquor distribution, and a robust hardware retail segment, which includes Mitre 10 and Total Tools. The company's defensive business model offers stability in a challenging economic environment, while its hardware division presents growth potential as residential construction rebounds. Additionally, acquiring shares at a sub-14 earnings multiple is seen as a favorable valuation.
What happened to Metcash Ltd (ASX:MTS)?
Fund managers are investing in Metcash Ltd due to its defensive characteristics, particularly its grocery segment, which is stable despite current price competition. The hardware division is expected to benefit from a declining interest rate environment, supporting overall earnings growth. Although recent sales updates have raised concerns, the company’s low beta and relatively low valuation make it an attractive option for risk-averse investors.