Stocks’ Details

Wesfarmers Limited 

Revenues from BANZ Division Rose YoY: In FY 2018, Wesfarmers Limited (ASX: WES) ended FY 2018 by generating revenues amounting to $12.5 billion which implies the YoY growth of 8.9%. The division witnessed growth in the sales across the trading regions. On the YoY basis, the division witnessed an increase of 12.7% in the EBIT and stood at $1,504 million.

BANZ division of WES (Source: Company Reports)

With respect to the Bunnings Australia and New Zealand division, there have been deployments towards the customer value and the division also witnessed the rollout of the online transactions with respect to the special orders. The division has also witnessed enhancement towards the supply chain efficiency as well as towards the data analytics. With regards to the Department Stores division, there has been an improvement with respect to the return on capital in FY 2018 on the YoY basis. This was witnessed on the back of the focus which was maintained towards the management of working capital. However, increased earnings also supported the return on capital.  

There has also been an improvement in the key financial ratios of Wesfarmers Limited. Its gross margin improved from 31.2% in FY 2017 to 31.6% in FY 2018 which implies the rise of 0.4%. However, its EBITDA margin also improved 0.4% YoY to 8.3% in FY 2018. 

Customer Offer, Customer Services Expansion Would Help BANZ Division: As depicted by FY 2018 results presentation, the Bunnings Australia and New Zealand division happens to be in the strong position to achieve growth moving forward. In this division, the focus would be towards differentiated as well as compelling customer offer. Additionally, with respect to BANZ division, there are expectations about the enhancements with respect to value-adding customer services. As demonstrated by the FY 2018 results presentation, with respect to the Department Stores, Kmart would be focusing on the brand perception. However, Target business would be working towards the product fashionability as well as quality.  

Stock Analysis: On the daily chart of Wesfarmers, Relative Strength Index or RSI has been applied and default values have been used for the purposes. As per the observation, the 14-day RSI has just started to rebound from the oversold levels. There could be no assurance then whether this rebound would last long or not. Hence, the market players can avoid this stock at the current market price of A$31.590 per share. 
 

Coles Group Limited

Robust Balance Sheet, Generation of Cash Flow Capabilities to Support Coles: As per the information memorandum of Coles Limited (ASX: COL), the company has been carrying out the operations in the industries which possess defensive attributes i.e. the markets where growth happens to be stable in different economic cycles.This could support the company’s performance moving forward. Moreover, the company has managed to maintain a strong position with regards to the supermarket industry. The Coles convenience ended FY 2018 by generating the revenues amounting to $5.76 billion which implies the fall from $6.13 billion in FY 2017 which reflects the fall of 6.1% YoY.

Coles Store Numbers and Sales Density (Source: Company Reports)

Further, as demonstrated by Coles’ information memorandum, its robust capabilities related to cash generation might support the dividend pay-out ratio moving forward. Another factor which is expected to support Coles moving forward would be its robust balance sheet position. The company happens to possess conservative as well as robust balance sheet. Its balance sheet position would help it in achieving the objectives and it could extend support with regards to financing when it comes to dividends. Additionally, the balance sheet of Coles would also help it in terms of the investment grade credit ratings.

Let us now consider how the stock of Coles has performed. In the time span of previous one month, the stock has generated the return of -8.94% while in the previous five days, Coles has delivered -2.68% return. Additionally, the stock price of Coles is being traded towards the lower level of range. Based on foregoing, the investors need to carefully watch the stock at the current market price of A$11.700 per share. 
 

Woolworths Group Limited

Sales of Australian Food Rose YoY: The Australian Food division of Woolworths Group Limited (ASX: WOW) ended FY 2018 by generating sales amounting to $37.3 billion which implies the YoY growth of 4.3%. The sales per square metre of this division stood at $16,435 in FY 2018 which reflects the growth of 2.9% on the YoY basis primarily due to robust comparable sales growth. The gross margins of Australian Food also witnessed an improvement from 28.5% in FY 2017 to 29.1% in FY 2018 which implies the YoY rise of 63 basis points.

Australian Food Sales (Source: Company Reports)

The sales with respect to the New Zealand Food’s division amounted to NZ$6.4 billion in FY 2018 which implies 3.4% rise YoY. However, comparable sales of this division witnessed the rise of 3.4% in FY 2018 on the back of deployments which supported core business sales momentum. 

Significant opportunities Ahead to Support WOW: As demonstrated by the FY 2018 results presentation, Woolworths is expected to witness substantial growth opportunities moving forward. With respect to the New Zealand Food’s division, the company would be making deployments towards the CountdownX. Additionally, with the respect to Big W, the focus would be towards regaining the trust of customers with respect to price.

Also, with regards to Big W, there might be enhancements with respect to the shopping experience of the customers as well as related to stock flow throughout the business.  

Stock Analysis: On the daily chart of Woolworths Limited, Moving Average Convergence Divergence or MACD has been applied and default values were considered. As per the observation, the MACD line is about to cross the signal line. There are expectations that after the crossover, there could be an upward momentum. Therefore, the stock might witness a bullish momentum moving forward. As a result, we maintain our “Hold” rating on the stock at the current market price of A$28.780 per share. 


 
Stock Price Comparative Chart (Source: Thomson Reuters)
 

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