The Motley Fool

Metcash Limited (ASX:MTS) shares rocket higher on AGM update

The Metcash Limited (ASX: MTS) share price has been a huge mover in afternoon trade after the wholesale distributor released its annual general meeting presentation.

At the time of writing the company’s shares are up almost 11.5% to $2.99.

What was in the presentation?

As well as providing a breakdown on its performance in FY 2018, management provided the market with an update on its performance so far in FY 2019.

According to the release, despite highly competitive market conditions, the improvement in FY 2019 Food sales that management highlighted in its full year results in June has continued, with a slow-down being seen in the rate of decline of non-tobacco sales.

Pleasingly, management has advised that the loss of the Drakes Supermarkets supply contract in South Australia is not expected to have a material impact on its supermarket earnings in FY 2019.

Things have been equally positive for Metcash’s Liquor business. It has experienced strong sales so far in FY 2019, partly reflecting the benefit of the roll forward of new contract customers. The company expects the Liquor market to continue growing modestly throughout FY 2019.

The company’s Hardware business is performing well. Hardware sales have continued to grow, though not quite as strongly as in the first half of FY 2018. However, the business is expected to see full synergy benefits realised in FY 2019.

Why did its shares rocket higher?

I suspect a good portion of today’s gain could be from short sellers closing positions after no further bad news came to light in today’s presentation.

After all, on Monday I revealed that Metcash was the sixth-most shorted share on the Australian share market with 12.8% of its shares held short.

Should you invest?

While the company’s update was quite positive, I’m still not in a rush to invest just yet. It is still early days in FY 2019 and trading conditions are far from easy. Instead, I would class its shares as a hold along with industry peers Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW)

OUR #1 dividend pick to grow your wealth now is revealed for FREE here!

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now