Business SummaryMetcash Limited (MTS) is a wholesale distribution and marketing companyspecializing in grocery, fresh food, liquor, hardware and automotive parts &accessories. MTS operates in Australia and a smaller liquor business in NewZealand.

Food & Grocery: The division's activities comprise the distribution of drygrocery, perishable and general merchandise supplies to retail outlets. MTShave Supermarket and Convenience divisions supplying to independentstores including 1,365 IGA branded stores, 117 Foodland stores, 484FoodWorks stores and 245 Lucky 7 (convenience) stores. Within theConvenience division there are Campbells Wholesale and C-StoreDistribution which service businesses around Australia.

Liquor: The division's activities comprise the distribution of liquor products toretail outlets and hotels. Australian Liquor Marketers (ALM) is Metcash'sbroad-range liquor wholesaler supplying more than 12,000 hotels, liquorstores, restaurants and other licensed premises across Australia. ALM alsosupports independent retail brands through Independent Brands Australia(IBA) which offers marketing support and variety of retail services. The fournational IBA retail banners are Cellarbrations, IGA Liquor, Bottle-O andBottle-O Neighbourhood.

Hardware The division's activities comprise the distribution of hardwaresupplies and automotive parts & accessories to retail outlets. Mitre 10 is ahome improvement and hardware wholesaler which distributes its productsthrough independent and local retail networks.

Disinvestment: The Automotive business was sold during the currentfinancial year. On 31 July 2015, the Group sold its entire holding in MetcashAutomotive Holdings Pty Ltd to Bursons Group Limited

Latest ResearchHeavy Lifting by Hardware - 1H18 Result

EPS boosted by acquisition — Metcash reported a double-digit increase in1H18 EPS, reflecting the boost from its acquisition in hardware. The Food& Grocery business performed slightly better but it was largely a lowearnings base in the pcp. We raise our EPS by 4% in FY18e and 3% inFY19e, helped by lower corporate costs in 1H18 and higher Hardwaresynergies over the next two years.

For more information see full research report 06 Dec 2017.

GICS - Food/Staples

Metcash Limited

ASX Code: MTS Price: $3.45 12 Mth Target Price: $2.90 Rating: Neutral

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

9 May 2018$3,366m975.6m$3.66$1.97

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral$2.90-16.7%6.2%-10.5%

Investment FundamentalsFYE 30 Apr 2017A 2018F 2019F 2020F

Profit $m 195.0 214.0 223.0 224.0Profit (norm)* $m 195.0 214.0 223.0 224.0

EPS* ¢ 20.0 22.0 23.0 23.0EPS Growth % 5.3 10.0 4.6 0.0P/E* x 17.4 15.8 15.1 15.1P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 5.0 13.0 15.0 16.0Yield % 1.4 3.7 4.3 4.6Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A

Sales Revenue 12,977 13,393 13,626 13,541 14,122Total Revenue ex. Int. 13,087 13,526 13,750 13,666 14,225EBITDA 509 476 397 344 370Depreciation & Amort. -61 -70 -72 -60 -64Goodwill Amortisation -- -- -- -- --EBIT 448 407 325 284 306Net Interest -62 -57 -55 -27 -26Profit Before Tax 386 350 270 257 281Income Tax -116 -98 -76 -68 -65Outside Equity Int. -3 -2 -1 -2 -2Profit after Tax 207 240 193 225 214Significant Items after Tax -1 -70 -577 -8 -42Reported Profit after Tax 206 169 -384 216 172Preferred Dividends -- -- -- -- --

Cash Flow ($M)2013A 2014A 2015A 2016A 2017A

Receipts from Customers 14,181 14,653 14,946 14,865 15,459Funds from Operations 670 807 633 244 380Net Operating Cashflow 300 389 232 166 305Capex -133 -104 -85 -65 --Acquisitions & Investments -127 -127 -42 -16 -240Sale of Invest. & Subsid. 4 -- -- -- --Net Investing Cashflow -179 -212 -75 237 -199Proceeds from Issues 375 -- -- -- 93Dividends Paid -246 -209 -56 -6 -1Net Financing Cashflow -152 -202 -98 -460 -36Net Increase Cash -31 -26 59 -57 70Cash at Beginning 52 50 25 83 26Exchange Rate Adjust. -- -- -- -- --Cash at End 20 25 83 26 96

Ratios and Substantial Shareholders2013A 2014A 2015A 2016A 2017A

Profitability RatiosEBITDA Margin % 3.92 3.56 2.91 2.54 2.62EBIT Margin % 3.45 3.04 2.39 2.10 2.17Net Profit Margin % 2.06 1.87 1.42 1.38 1.52Return on Equity % 16.49 15.77 16.80 13.71 13.16Return on Assets % 7.64 7.05 6.32 6.45 6.44

Debt/Safety RatiosNet Debt/Equity % 46.71 51.16 66.98 21.44 5.72Interest Cover x 7.27 7.11 5.90 10.51 12.02

Top 5 Substantial ShareholdersBT Investment Management Limited 16.3%Allan Gray Australia Pty Ltd 10.5%Dimensional Entities 6.0%UBS Group AG and its related bodies corporate 5.0%The Vanguard Group Inc. 5.0%

Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A

Cash & Equivalent 50 25 83 26 96Receivables 1,013 1,038 1,014 981 1,137Inventories 754 744 712 674 759Other Current Assets 31 16 14 11 14Current Assets 1,895 1,863 1,850 1,724 2,025Prop. Plant & Equipment 278 308 276 252 242Intangibles 1,708 1,766 1,284 1,128 1,153Other Non-Current Assets 91 66 39 27 30Non-Current Assets 2,238 2,341 1,917 1,624 1,631Total Assets 4,133 4,204 3,767 3,348 3,656Interest Bearing Debt 809 840 858 320 190Other Liabilities 1,700 1,769 1,752 1,659 1,828Total Liabilities 2,509 2,610 2,610 1,979 2,018Net Assets 1,624 1,594 1,157 1,369 1,637Share Capital 1,519 1,542 1,626 1,626 1,719Reserves -7 -3 -1 -6 -3Retained Earnings 107 47 -476 -260 -88Outside Equity Int. 5 8 8 8 9Total Shareholders Equity 1,624 1,594 1,157 1,369 1,637

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Julie Hutton

Directors

Mr Robert (Rob) Andrew Murray(Non-ExecutiveDirector,Non-Executive Chairman)Mrs Fiona Elizabeth Balfour(Non-Executive Director)Mr Patrick Newton James Allaway(Non-Executive Director)Ms Anne Bernadette Brennan(Non-Executive Director)Ms Tonianne Dwyer(Non-Executive Director)Ms Helen Elizabeth Craig Nash(Non-Executive Director)Mr Murray Jordan(Non-Executive Director)Mr Jeff Adams(Chief Executive Officer,Executive Director)

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