Logo
Registered Members Login:
   
Forgotten Your Details? Click Here To Recover +
Welcome to ShareScene - Talk Shares And Take Stock With Australia's Sharemarket Community - New Here? Click To Register >

Important Notice For All Members - ShareScene Is Moving

  
 
  
Reply to this topic

COL, COLES GROUP LIMITED.
nipper
post Posted: Yesterday, 04:37 PM
  Quote Post


Posts: 5,039
Thanks: 1878


QUOTE
Coles Group Is back on the ASX for the first time since 2007, when Wesfarmers acquired it, and Wesfarmers’ half a million shareholders will be wondering what to do with their new Coles shares.

Many Coles shareholders will also own Woolworths shares, raising the question of whether to own both or, if not, which one.

Both stocks have a role in conservative portfolios as long as they do not become overvalued. I prefer the Woolworths business for its wider profit margins, lower gearing and what is in general a more developed strategy. I’d also suggest Woolworths is making greater progress towards optimising its operations and creating a more efficient ­supply chain.

Importantly, with a looming change to franking credit entitlements if the ALP wins power, Woolworths also has surplus franking credits and is set to ­receive $1.7 billion from selling its fuel business early next year, most or all of which will be returned to shareholders.

These advantages are reflected in market pricing: Woolies at $29.23 trades on about 20 times earnings, while Coles, at $11.50, is closer to 16 times. Both stocks are fairly priced for the moment.

But Coles will catch up in coming years if management executes well. Recent history suggested that demerged companies tend to perform well as investments ­because their businesses finally receive enough board and management time, capital and growth ambition after languishing as non-core or discontinued inside the former parent company.

Food retail contributes more than 80 per cent of Coles’s earnings, so the stock is almost a pure play. Revenue growth is likely to match the sector’s low single-digit revenue growth. Liquorland has a solid market position with adjacency to Coles supermarkets, so convenience will drive performance in liquor.

Flat profit margins can be expected near term with only incremental longer-term upside given some of the efficiency gains from consolidating distribution centres and cost savings at the store level will be competed away.

But Coles has advantages over independents in scale and vertical integration, so ongoing market share gains are likely. Assuming consistent execution, Coles could increase earnings at a low to mid-single digit rate.
....
The prominence of both Coles and Woolworths increases the pressure on them to price competitively but rationally (at a profit). Coles joins the ASX as its 20th largest stock by market capitalisation and Woolworths is in the top 10, so both stocks will be in most large pooled superannuation funds and also many self-managed funds. Both groups have a role in growing Australians’ retirement assets and providing rising franked dividend income to all investors, but ­especially those depending on ­investment income to fund their retirements.

As for new competition Costco and Kaufland do not appear to be significant competitive threats because they will have relatively few stores nationally.

Online grocery ordering and delivery is a longer-term story. It will take time for supermarket chains to make online food retail profitable enough to be worth scaling, and the chains will not want to cannibalise sales through their physical stores
.
clime asset management



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Dec 5 2018, 12:01 PM
  Quote Post


Posts: 5,039
Thanks: 1878


COL $12 and WES $31 ... that's about $43, which is around the old Wesfarmers price before the demerger became news



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
ShareCafe
post Posted: Dec 5 2018, 11:26 AM
  Quote Post



Posts: 3


Added by request: Coles Group Limited (COL)

Regards,

ShareCafe Admin

 
 



Back To Top Of Page
Reply to this topic


You agree through the use of ShareCafe, that you understand and accept the TERMS OF USE.


TERMS OF USE  -  CONTACT ADMIN  -  ADVERTISING