Metro (Symbol-MRU)

[yielder]

With the runup in price over the past three months, this one has become a hold instead of a buy. It's not a sell yet but it is expensive on a multiple and a yield basis. At a PE of 16, it is above its highest PE of the last 10 years.

Disclosure: I own MRU.SV.A

[JakeS]

At what price do you consider it to be a sell?

[yielder]

At what price do you consider it to be a sell?

I look at stocks from a 5-year perspective. While a stock may currently be trading at a multiple that exceeds it's recent historical multiple, I wouldn't sell even if that means that it is likely to sell off. I would sell if its current price reflected the multiple and five-year growth rate that I had assigned to the stock, ie, if the current price reached the price that I anticipated in five year's time. For MRU.SV.A, at current TTM, that price would have to be currently above $33 before I would think about selling and currently above $40 before I would sell. As earnings grow, that price would change.

For someone who is more of a trader than a longer term buy-and-hold investor, it's hard to say. I really have no idea of a sell price from a trader's perspective. The average high multiple over the past 10 years is 13.2; over the past 5 years, it's 13.6; the highest mutliple over the past 10 years is 15.9. Depending on what you pick, it's a sell right now. This is one of the reasons that I don't look too closely at what is happening at the moment unless it's a situation where the market is heavily discounting future growth or heavily ignoring future growth.

Mike

[JakeS]

Thanks for the reply Mike.

[yielder]

Acquires A&P Canada

Added at 9:56 - The stock opened at 32, up 16% and at 9:36 is at 30.70, up 11.6%. Very short term irrational response based on minimal information. MRU has become a far riskier stock with increased potential. The market is banking the potential and ignoring the risk.

Disclosure: I have a full weight in MRU (but will listen closely to the conf call)

[scomac]

Very short term irrational response based on minimal information.

Up, up and away!!

But, oh man, they paid alot for A&P (~10X EBITDA) with little opportunity for cost synergies.

Should we call this growth at any price.

I won't be surprised if buying opportunities present themselves, down the road, ala Coutu and Couche Tard.

My pony was the runner-up in this race. We'll have to see how much punishment the market dishes out for management being smart.

Regards,

Scott

[yielder]

I won't be surprised if buying opportunities present themselves, down the road, ala Coutu and Couche Tard.

Yep. I just sold at 30.86. I'll take my 62% + dividends since I bought in August 2003. This kind of short term reaction makes no sense for a stock that was already expensive. Integration of an acquisition of this size is not easy. It's highly likely that earnings will suffer in the short run as they work through the acquisition. As you say, possible opportunities.

Added: From the conf call -

Q. Any plans to sell the Couche Tard holding?
A. No
Q. So that's definite?
A. There are no plans at this time. We think we can keep our investment even with this acquisition.

Compared to the Jean Coutu's conf call after their Eckerdt purchase, not very much was said. The time frames mentioned are 4-5 years!!! Lots of questions about synergies, esp. procurement & marketing promotion. When asked about things that they would change as they walk through the stores, they said it's too early to say. Coutu's management on the other hand was very specific. Perhaps Eckerdt had more problems than A&P(Canada). Lots of unanswered questions!

[adrian2]

My pony was the runner-up in this race.

I presume that's Sobeys. Yesterday it opened down $4, recovered $1 to close down $3.

[yielder]

My pony was the runner-up in this race.

I presume that's Sobeys. Yesterday it opened down $4, recovered $1 to close down $3.

I don't think that a Sobey's/Metro union is out of the question down the road. Margins are so tight that you need size to help with costs when the Bentonville Brute is in the game.

[scomac]

I presume that's Sobeys. Yesterday it opened down $4, recovered $1 to close down $3.

At arms length through Empire Co which I've held since early last year. It held in pretty good in the face of what has been described as the "Deal of the Decade".

Scott

[yielder]

Pump, pump.

It's possible but SWY's numbers are a great deal better than those of GAP. But the numbers don't always tell the story.

[dakota]

But, oh man, they paid alot for A&P (~10X EBITDA) with little opportunity for cost synergies.

Let's hope they do a better job with A&P than what they did with Loebs when they bought it a few years ago.

They changcd the Belleville store to Super C, now the decor is all red including the shopping carts. It used to be a fairly busy store but since they changed it, it is rare to see a dozen cars in the parking lot, in contrast to the No Frills down the street.

[yielder]

Wal-Mart's presence has not only caused this reaction from Loblaws, but it has caused a chain reaction that now has Sobeys and Metro slashing prices and making less money in the process.

Metro's earnings have been growing at an increasing rate since the A&P acquisition.

[investor99]

My mistake, I should have said 'Sobeys', alone which I know is cutting prices in response. Although I would be suprised if Metro is not doing the same. I think right now their earnings are gettinga boost from A&P and synergies from A&P.

I will be interested to see Metro's earnings after the A&P acquisition is compared year over year. They seem to be doing a pretty good job, however I am still pessimistic about their growth going forward.

[yielder]

I will be interested to see Metro's earnings after the A&P acquisition is compared year over year.

Based on trailing twelve month earnings, the comparison should be positive although they have little room to stumble because of the debt they took on to buy A&P.

They seem to be doing a pretty good job, however I am still pessimistic about their growth going forward.

Perhaps but they have some strong brands:



and significant diversification in an unrelated and rapidly growing business. Rather than pessimistic, I'd say it's more of a coin toss whether the US experience of Wal-Mart superstores vs grocery stores will be repeated in Canada. If it is, then high end, quality will be a part of the Canadian grocery landscape. That will pit Sobey's against Metro which will be an interesting struggle. With the screw-up at Loblaw, it's no longer clear what Loblaw plans to do. The three year time frame to sort things out that management has mentioned is an eternity. Expecting to beat Wal-Mart at Wal-Mart's game always suggested that they had a chutzpah special in aisle y and a hubris special in aisle z. Part of the US grocery store problem may have been the fact that there were too many grocery chains: Winn Dixie failed but Publix thrived.

[scampbell]

I'm hunting around for some Canadian defensive stocks, and noticed the numbers on this one (MRU.A) are looking interesting. I'm fairly new at this, so I'm not sure if I should be very concerned about a falling ROE?

[twocentsworth]

Anyone looking at Metro these days? Down to 30 bucks...

[scomac]

Anyone looking at Metro these days?

Yup. It hit my radar last week.

[twocentsworth]

At what price do you consider it to be a sell?

Conversely, at what price do you consider it to be a buy?

[Peculiar_Investor]

On Nov 5th, A&P announced:

NEW YORK, Nov 5 (Reuters) - Supermarket chain The Great Atlantic & Pacific Tea Company Inc (GAP.N: Quote, Profile , Research) said on Monday it intends to sell all its 11.7 million shares of Canada's Metro Inc (MRUa.TO: Quote, Profile , Research) to minimize its indebtedness in A&P's planned $690 million acquisition of Pathmark Stores Inc

This, along with the general market malise, has been putting downward pressure on the stock. Earnings are due on Wed. Nov 21st.

[brad911]

I continue to follow the stock closely. I'll most likely wait until after the earnings release to see if their results match my anticipated targets. If they don't, then I'll likely add to my Empire position since those damn Weston's can't seem to get their act together!!!!

[brad911]

10M shares switching hands today....am I the only one who thinks this is one HELL of a cheap price for Metro to be picking them up from A&P-US for?

There's only ~1.7M left it seems to complete the transaction.

[Peculiar_Investor]

10M shares switching hands today....am I the only one who thinks this is one HELL of a cheap price for Metro to be picking them up from A&P-US for?

There's only ~1.7M left it seems to complete the transaction.

See METRO acquires part of the METRO shares to be sold by A&P US.

MONTREAL, Nov. 26 /CNW/ - METRO Inc. was advised that The Great Atlantic & Pacific Tea Company ("A&P US") confirmed the sale of all of its 11,726,645 METRO shares.

[scomac]

10M shares switching hands today....am I the only one who thinks this is one HELL of a cheap price for Metro to be picking them up from A&P-US for?

No.

I've been pre-occupied trying to buy preferred shares all day. I had no idea that the whole transaction was going to take place on a single trading day. I wonder if the price will settle back when volume returns to normal?

[jay]

Any thoughts on MRU.A?
Do you consider it cheap at these levels?