Coles' Toy Campaign Delivers Sales Growth but Doesn't Affect Our AUD 12.30 FVE

In the third quarter, no-moat-rated Coles’ second promotional campaign of small plastic toys during fiscal 2019 had the desired effect at its supermarkets. We increase our fiscal 2019 headline food sales growth rate following better-than-expected sales, boosted by the Stikeez campaign, to 3.1% from 2.6%. However, the impact on our intrinsic assessment is immaterial, and we maintain our fair estimate at AUD 12.30. At current prices, the shares are screening as slightly overvalued.