Woolworths Group Limited

WOW Details

Decent Sales Growth in Q1FY21: Woolworths Group Limited (ASX: WOW) is engaged in food, general merchandise, and specialty retailing via chain store operations. The market capitalisation of the company stood at ~$49.10 billion as on 4^th November 2020. For Q1FY21, the company reported total group sales of $17.9 billion, up 12.3% on pcp. In addition, the company’s eCommerce sales stood at $1.5 billion in Q1FY21, reflecting growth of 86.7% over Q1 FY20. The Australian Food total sales soared by 12.9% to $12.03 billion, as customers consumed more at home.

Q1 FY20 Highlights (Source: Company Reports)

FY20 Financial Highlights: During FY20, WOW reported sales amounting to $63,675 million with a rise of 8.1% on a year over year basis. All businesses of the company, excluding Hotels, showcased decent sales growth during the year. NPAT from continuing operations for the period amounted to $1,602 million.

Outlook: For FY21, the key priorities of the company revolve around accelerating digital, eCom and convenience for connected customers.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the past six months, the stock has provided returns of 9.76%. The 52-week low-high range for the stock stands at $32.120 - $43.960, respectively. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with an upside of high single-digit (in percentage terms). For the purpose, we have taken peers such as Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES) and Super Retail Group Ltd (ASX: SUL), to name a few. On a technical front, the stock of WOW has an immediate support level of ~$35.96 and a resistance level of ~$39.646. Therefore, considering the decent growth in sales, priorities for FY21 and valuation, we give a “Hold” recommendation on the stock at the current market price of $38.550 per share, down by 0.670% on 4^th November 2020.

WOW Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Scentre Group

SCG Details

Growth in Rent Collection: Scentre Group (ASX: SCG) is engaged in the management and development of property with a market capitalisation of ~$11.83 billion as on 4 November 2020. Recently, the company has notified that it has priced a subordinated hybrid note issue of US$3.0 billion in the United States market. The company added that the notes issue comprises of US$1.5 billion 60-year, non-call 6-year subordinated notes with a coupon of 4.75% and US$1.5 billion 60-year, non-call 10-year subordinated notes with a coupon of 5.125%. In the month of August 2020, the company received $183 million of gross rent, which reflects 86% of monthly gross rental billings.

Gross Rent Cash Collection (Source: Company Reports)

1H FY20 Highlights: For the half-year ended 30^th June 2020, the company reported operating earnings of $361 million and Funds from Operations of $362 million. SCG achieved gross cash inflow of $1,059 million and a net operating cash surplus (after interest, overheads, and tax) of $261 million. At the end of H1FY20, the company had available liquidity of $4.4 billion, sufficient to cover all maturities to January 2023.

Outlook: The company possesses strong fundamentals, and the business is in a decent position to deliver long-term sustainable returns for securityholders via economic cycles.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: During 1H FY20, interest cover stood at 3.6x and balance sheet gearing stood at 38.4% as on 30^th June 2020. In the past three and six months, the stock has provided returns of 18.57% and 9.38%, respectively. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). On a technical front, the stock of SCG has an immediate support level of ~$1.989 and a resistance level of ~$4.092. Thus, considering the decent fundamentals, issue of notes in US Markets, modest outlook and sufficient liquidity, we give a “Buy” recommendation on the stock at the current market price of $2.330 per share, up by 2.192% on 4^th November 2020.

SCG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.