The Point for Australia/NZ

Research evidence excerpt

The Point for Australia/NZ

better operating momentum and a more favourable currency. Our earnings

forecasts are unchanged. We retain our Buy rating and $61.00 target price.

Adrian Lemme, CFA

Coles Group Ltd (COL.AX) - A time for paws

Coles has confirmed that it is in talks with TPG to acquire Greencross. Subject to

the final price and terms, we have our concerns should the transaction proceed.

Strategically, we see challenges with the deal (details below). We are also cautious

of any PE deal, particularly considering the business has been for sale for years. We

believe a capital raising to fund the deal may lack investor appetite but there is

also the possibility it could be fully debt-funded. We've long argued in favour of

capital management to capitalise on balance sheet strength. We believe Coles

management may wish to consider the market's response today.

Collins Foods Ltd. (CKF.AX) - Downgrade to Neutral: Missing the secret recipe in

Europe

Collins is a good business (especially with the Taco Bell distraction gone), with a

strong balance sheet that should facilitate further organic and inorganic expansion

combined with a reasonably undemanding valuation. However, the business is

facing multi-year inflationary pressures in Australia which it plans to offset partly

by menu innovation (e.g., KWENCH) and daypart expansion (breakfast and late-

night trials) where the longevity of these initiatives is less clear. In addition, much

of the group’s expected store growth is in Germany where we are incrementally

more cautious following the sudden slowdown in sales. Downgrade to Neutral.

Sam Teeger

CSL Ltd (CSL.AX) - VOICE trial outcome interesting but likely only short-lived

benefit for CSL

CSL's partner, Akebia has highlighted early stoppage of a trial, (VOICE) conducted