Metcash has confirmed the loss of one of its largest customers, 7-Eleven. While the $800m in wholesale sales is much larger than that of the Drakes contract loss, Citi calculates a similar earnings impact.
The broker expects Metcash will retain around 10% of the contract in Western Australia and selected categories.
The broker upgrades to Neutral from Sell and raises the target to $2.80 from $2.60 as earnings downgrades are offset by revised cost assumptions and a re-rating in global comparable multiples.
Sector: Food & Staples Retailing.
Target price is $2.80.Current Price is $2.83. Difference: ($0.03) – (brackets indicate current price is over target). If MTS meets the Citi target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).
