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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CONSUMER STAPLES
It's held off on upgrade given the size of recent equity pay-outs - wants to have more time to see if Tesco operating performance holds which would allow BS to naturally delever and move in-range for an upgrade. As we said above we don't see value anymore in €Tesco BUT £Tesco curve continues to trade quiet steep; something we noted when the new 34s priced there. Flattening that 34 or 35s against the 30s looks attractive as does moving out of (higher rated) staples for +50bp pickup. In XCCY chart below light coloured are £ lines swapped over.
- It's mainly revised outlook on firm FY24 (12m to Feb) results but also on what is sees as a supportive macro environment ahead - it sees easing UK inflation helping retailer volumes.
- It has noted market share gains over last year from 27% to 27.7% - this was reiterated in Kantar data last week.
- It has little cares for the £700m Tesco bank sale proceeds going to equity holders given it didn't include bank operations in its credit metrics. It WILL include the remaining £80-100m in EBIT/yr (that was not sold) given small in size.
- It's noted co is running leverage at lower end of mgmt stated net 2.3-2.8x target (S&P eqv. 2.7x-3.2x). It needs leverage in its adj. 2.5x handle for an upgrade (Tesco reported 2.1x).
- Other assumptions its made is annual revenue to exceed £70b over next two years (for Tesco to achieve that in one year it would need +2.6% growth) and EBITDA margins to hold (around) flat yoy at S&P adj. 6.6% (consensus has small 35bp contraction in FY25).
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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