The company’s capital expenditure intentions over the next three years are twice as much as Citi anticipated, which rules out a capital return in the near term.
Given the strong position in trade hardware a return on expenditure in this division is anticipated, as the broker notes hardware is underpinning earnings growth of 4.5% in FY23.
Capital expenditure forecasts are upgraded to $170m over FY22-24. One third of this is driven by investment in joint-venture hardware stores.
Meanwhile, the broker notes underlying supermarket sales have improved over recent months, which signals independents are gaining share. Citi retains a Buy rating and $4.10 target.
Sector: Food & Staples Retailing.
Target price is $4.10.Current Price is $3.45. Difference: $0.65 – (brackets indicate current price is over target). If MTS meets the Citi target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
