WES - Wesfarmers Limited

[skc]

Probably in the minority, but I don't think a market valuation of $50 billion plus seems unreasonable for this stock - 7-10% profit growth is not out of the question for a while yet.

Merrill released research this morning saying they could return $2/share excess capital and increased price target to $53.

That explains most of the pop today.

 

[tinhat]

I bought some today on the breakout. On the P&F chart (box 0.8, reversal 1) this is a triple top break-out. Initial target 48.80, stop-loss 41.60.

 

[Muschu]

Any thoughts on whether yesterday's surge was a breakout attempt ? I ask because of the noticeable gap in the chart going back to the day before... Thoughts welcome as I wonder whether the SP moving forward needs to retrace to the $43.16 area first.
Regards
Rick

 

[burglar]

Target Update:

Perfect timing! Read more:

Just as you were expecting a breakout, the WES management decided to release bad news!




Disclosure: Never held.

 

[tinhat]

Nice pull-back today. I re-entered with three parcels between $40.10 and $39.90 today. Stop loss $38.70. Very large volume today. Do any tech analysts have a view about where this might go in the next few days? Obviously, I'm betting that the uptrend is not over for WES in the current cycle.

 

[Sharkman]

i'm no tech analysis expert, i get it wrong just as often (probably even more often) as the next guy... but to my eyes there would appear to be a nasty bearish engulfing candle last week followed by a huge gap down and another shorter black candle, so i'm looking for a pullback to around $39, where it was well supported for much of july and that is also the level where the 180 day EMA is currently at.

i'm primarily interested in this for stripping the div (i operate out of a low tax structure - which at the moment is actually a zero tax structure as i don't make enough profit to use up all the beneficiaries' tax free thresholds yet) so i really want those franking credits. unfortunately it goes ex-div on tues, and there's a good chance it won't drop to $39 until it's gone ex-div, so i may have to pay a buck or so more than i'd like to. thinking i might do a buy-write on monday using oct calls to partially hedge the downside (seeing as i'll likely be closing the position once i've nicked the div and met the 45 day rule - might as well collect some premium on top), but will have to check where the spreads/IV are at on the options market on monday before committing to the trade.

heard there's meant to be a 50c special div as well but couldn't find any details anywhere? anyone know if that's fully franked as well, and what the ex-date for that distro is? or have they not announced the details for it yet?

 

[Ves]

heard there's meant to be a 50c special div as well but couldn't find any details anywhere? anyone know if that's fully franked as well, and what the ex-date for that distro is? or have they not announced the details for it yet?

It's not a special div. It's a return of capital, so no franking credits.

They are still awaiting the final ruling on tax treatment from the ATO, but it will be a reduction in the cost base of shares held (like any capital return) and after such ruling is received a vote for shareholder approval will be held at the November AGM.

Still looking for a long-term entry into WES myself.... but haven't quite seen my upper price limit hit for beginning to build a position.

 

[Sharkman]

It's not a special div. It's a return of capital, so no franking credits.

They are still awaiting the final ruling on tax treatment from the ATO, but it will be a reduction in the cost base of shares held (like any capital return) and after such ruling is received a vote for shareholder approval will be held at the November AGM.

Still looking for a long-term entry into WES myself.... but haven't quite seen my upper price limit hit for beginning to build a position.

ah. that reduces the appeal of the buy-write div strip a little. might still do it though if the market will let me get downside protection to the June low of $37'ish (with the help of the premium + franking credits), without having to choose a strike that's so far ITM it will gimp the profit potential. will have to see what cards we're dealt on monday.

 

[Judd]

Would appreciate it if someone would cast an eye over these calculations.

Along with the $0.50 return of capital, WES is to consolidate shares on the basis of 0.9876 for 1 (fractions rounded up to the next share) to take account of the return of capital. The return of capital is pre-consolidation.

Attempting to work out the price per share if a parcel is held before consolidation and after. Brokerage ignored for the purposes of the cost-base.

Pre-consolidation

500 shares @ $40.00 = $20,000.
RoC @ $0.50 = $250
Cost base per share = $19,750/500 = $39.50

Post-consolidation

500 shares x 0.9876 = 494 rounded-up
Cost base of parcel = $19,750
Cost base per share = $19,750/494 = $39.98

Flaws, comments, insights?

 

[Julia]

Looking for the WES price just now, Etrade (and the ASX website) is telling me it's not a valid code.
Search for the code for "Wesfarmers" shows WESDA.
Can someone explain what's going on here? Five letter codes usually imply some condition on the share.

 

[Judd]

As per ASX announcement of 5/11/2013, post consolidation WES is trading on a deferred settlement basis. Code is WESDA. The partially protected shares are trading under WESDC.

 

[McLovin]

Looking for the WES price just now, Etrade (and the ASX website) is telling me it's not a valid code.
Search for the code for "Wesfarmers" shows WESDA.
Can someone explain what's going on here? Five letter codes usually imply some condition on the share.

There's a return of capital and share consolidation, which went ex today. See Judd's post, which looks correct to me.

 

[Julia]

Thanks Judd & McLovin.

 

[Muschu]

So if someone wanted to buy and add to their "WES" holding right now then the would buy WESDA?

We hold WES now but my Commsec portfolio presently shows their value as zero... If I bought WESDA then I gather the 2 would be amalgamated in late November?

Or is this incorrect?

Comment very welcome.

Thanks

Rick

 

[Garpal Gumnut]

So if someone wanted to buy and add to their "WES" holding right now then the would buy WESDA?

We hold WES now but my Commsec portfolio presently shows their value as zero... If I bought WESDA then I gather the 2 would be amalgamated in late November?

Or is this incorrect?

Comment very welcome.

Thanks

Rick

Who knows, very badly handled for retail investors today by Comsec and Etrade today.

ASX no better.

Broker sites should have had a banner indicating how to trade Wesfarmers today on front page.

I will let Mr. Abbott know.

gg

 

[Judd]

So if someone wanted to buy and add to their "WES" holding right now then the would buy WESDA?

We hold WES now but my Commsec portfolio presently shows their value as zero... If I bought WESDA then I gather the 2 would be amalgamated in late November?

Or is this incorrect?

Comment very welcome.

Thanks

Rick

As far as I understand, and I could be wrong, those holding WES at CoB on 8 November, on Monday 11 November now hold WESDA but you have to do the calculations as to the exact figure since the algorithm for the conversion is obviously way, way too complicated for the computers at any broker, or indeed the ASX, to cope with.

Once the deferred settlement period has passed then WESDA reverts to WES and the computers will be happy little chappies again.

 

[Muschu]

I'm am ordinary investor and confused on this still. My WA newspaper tells me that WES closed at $43.88 yesterday.. altho that may be out of date.
My iPad ap tells me that it closed at $44.05 today.
Yet there is no validity to the code WES right now.
WESDA closed today at $44.15....
Comments from more informed investors would be most welcome.

With thanks

Rick

ACC

 

[Country Lad]

Rick, it is WESDA while it goes through a capital and share consolidation process.

The relevant information can be found at:

http://www.asx.com.au/asxpdf/20131108/pdf/42kqbyxvzg7yxq.pdf

and

http://www.asx.com.au/asxpdf/20131105/pdf/42kn6qczsjj16f.pdf

Cheers
Country Lad

 

[Muschu]

Many thanks CL. I'll have a good look at these links. You help is greatly appreciated.

Rick

 

[Judd]

For those who follow these things, post consolidated holdings were entered on 18 November so they should show up in the share registry.

Deferred settlement trading (WESDA ordinary and WESDC partially protected) ends on 26 November and normal trading under WES and WESN resumes on 27 November.