Metro Soars as UBS Heralds Start of New Era: Frankfurt Mover

Metro AG, the German retailer ousted from the DAX Index in September after losing 60 percent of its value in less than two years, surged in trading as UBS AG analysts recommended buying the shares, predicting “a new era” under Chief Executive Officer Olaf Koch.

Metro climbed as much as 4.9 percent in Frankfurt to become the biggest gainer in the HDAX Index of 110 most highly capitalized stocks traded on the Frankfurt exchange. The stock was up 4.4 percent at 22.72 euros as of 9:33 a.m.

Koch, who took office at the start of 2012, is focusing on the Cash & Carry wholesale business and the Media-Saturn electronics unit as he cuts investment in Kaufhof department stores and Real grocery outlets. Metro agreed in November to sell its Real stores in eastern Europe to Groupe Auchan SA for 1.1 billion euros ($1.4 billion). He sold Metro’s Makro U.K. wholesale unit to Booker Group Plc in May and announced in January that the electronics chain is leaving China.

Koch “takes a more proactive stance towards portfolio rationalization than his predecessor,” UBS analysts Benjamin Peters and Mike Tattersall wrote in a report published after the market close yesterday. “His intention is to shrink Metro further over the lifetime of his contract. Any larger disposals would, in our view, improve investor sentiment substantially, as Metro morphs into a more focused company built around its Cash & Carry division.”

The analysts said they expect “a solid development” for Cash & Carry, Metro’s largest unit, which they valued at 14 billion euros. Metro said yesterday that Koch will assume responsibility for the unit this month as the company simplifies its management structure.

Further disposals could drive the stock as high as 46 euros, the analysts said.

It’s the first time since August 2011 that UBS has attached a “buy” recommendation on the stock. The broker raised its price forecast to 27.50 euros.

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