WES - Wesfarmers Limited

[doctorj]

Re: WES surprise the market?

Hi, Something interesting is happening to WES at last. Worth a lot more in pieces are Wesfarmers.

Depends what your investment objectives are. Sure if Wesfarmers was subject to a LBO and split up and relisted, the offer would be for a good whack more than its current market cap. If the takeover of coles is successful, it should take WES off the market for a little while as higher debt levels will make WES appear less cheap and the implications of the Coles takeover is processed.

I have to be honest, I like Wesfarmers, a lot. Their greatest asset is their culture and management. Their goal is simple, to get a good return on shareholder's funds.

I've had the opportunity to process the idea more over the course of the day and I believe that I was accurate earlier when I said it is likely to be a good thing for WES holders but not without significant challenges. The success of Myer after being bought suggests that experienced retailers with good supply chain management can extract significant value from the old CML businesses. WES has both in buckloads in their proven success with Bunnings.

 

[noirua]

Hi doctorj et al, WES seem to have a mix of interests now that vary from selling a loaf of bread to a tonne of thermal coal. It seems, imho, that seperating the mining operations could advantage shareholders.

 

[doctorj]

Hi doctorj et al, WES seem to have a mix of interests now that vary from selling a loaf of bread to a tonne of thermal coal. It seems, imho, that seperating the mining operations could advantage shareholders.

They've had the variety of business lines for some time, but I agree coal should go. It wouldn't surprise me if it does either. Coal was split from their energy division several months ago (refer to their website). Distinct reporting lines/management and performance assessment makes it not only easier to sell, but easier to justify the sale now its poor results aren't diluted by the rest of the energy division.

 

[noirua]

The market appears happy with the Wesfarmers tie up and moves above $39. Interest could stick around for quite sometime.

 

[Garpal Gumnut]

The market appears happy with the Wesfarmers tie up and moves above $39. Interest could stick around for quite sometime.

I agree.
I believe WES to be in the beginnings of a wave 3 which will take it well above its high of $42.

 

[Sean K]

I agree.
I believe WES to be in the beginnings of a wave 3 which will take it well above its high of $42.

Great call. Looks like it's about to breakout, or already has broken out on the 3yr weekly. Indicators are looking good.

The Coles buy must be seen to be a good thing here.

Any EW updates on this?

 

[theasxgorilla]

Kennas, we must be watching a number of the same shares!

I'm not sure about the E/W count on this one, but the trend is UP. Breakout from consolidation into new all-time-high territory probably suggests that we've seen a Wave 4 and the manoeuvring of the last few weeks has been a wave i, ii, and now a wave iii of one lesser degree.

On a weekly and monthly chart WES has never closed this high. We're still around the middle of the month, so it will be interesting to see if it can maintain this strength over the next could of weeks. Super bullish if it can.

 

[noirua]

The recent $3 jump by WES may have more to do with the likelyhood of getting CGJ at a cheaper price than was first thought. The Bunnings sale and leaseback probably helped the joy a little.

 

[Kauri]

Todays West Australian... Southern cross at it again...


Wesfarmers surges on coal price, good outlook


16th June 2007, 9:15 WST

Wesfarmers shares soared to a record high yesterday amid resurgent coal prices and a bullish research note predicting they could top $60 if the $20 billion takeover of Coles Group succeeds.

The shares jumped $1.50 to $42.39, outpacing a firmer all ordinaries and in the process eclipsing Wesfarmers’ twoyear-old record close of $42.37.

Already WA’s biggest industrial stock, Wesfarmers’ market capitalisation has soared by $1.5 billion this week to last night value the company at $16.5 billion.

Whereas most of this week’s gains were attributed to stronger coal prices (coal contributes about 40 per cent of Wesfarmers’ gross profits), broker Southern Cross Equities helped fuel investor interest by claiming that “Wesfarmers is the natural owner of Coles”.

In a note to clients, the broker said a successful takeover of Coles could add $5 to Wesfarmers’ longer-term share price, which should be boosted in any case because of an improved 2008 profit outlook for the WA company’s inherent divisions, including coal and Bunnings.

“This could support upside valuations of Wesfarmers above $60 a share,” Southern Cross said.

Wesfarmers and its private equity partners have already flagged that any offer for Coles would include a sizeable Wesfarmers scrip component.

Bids are due in the week starting June 25. A Coles spokesman said yesterday the timetable remained unchanged, despite the Texas Pacific Group-led consortium rivalling Wesfarmers asking for a bid deadline extension.
PETER KLINGER

 

[Garpal Gumnut]

Looks like it's about to breakout, or already has broken out on the 3yr weekly. Indicators are looking good.

The Coles buy must be seen to be a good thing here.

Any EW updates on this?

Yes I would be interested in EW updates on WES.

Have been in $34-35 over last 6 months and am looking to pyramid up on it.

I have read that :
it has been more aligned to coal price,
funds are low on it and are now getting in as if WES gets CGJ they will be underweight,
it is the frontrunner for CGJ

However it is not a done deal that it will get CGJ and WOW is a powerful competitor and may increase the ante for CGJ.

I tend to long term accumulation of upward trending stocks and am more of a chartist than a fundamentalist. I'm more excited by its punch up through last few months consolidation on increasing volume, than anything else ,as per your above charts.

Garpal

 

[Sean K]

Yes I would be interested in EW updates on WES.

Have been in $34-35 over last 6 months and am looking to pyramid up on it.

I have read that :
it has been more aligned to coal price,
funds are low on it and are now getting in as if WES gets CGJ they will be underweight,
it is the frontrunner for CGJ

However it is not a done deal that it will get CGJ and WOW is a powerful competitor and may increase the ante for CGJ.

I tend to long term accumulation of upward trending stocks and am more of a chartist than a fundamentalist. I'm more excited by its punch up through last few months consolidation on increasing volume, than anything else ,as per your above charts.

Garpal

I think there's some private equity/break up premium factored into the price also at the moment, which leaves me a little cautious, but that certainly might be the play which would add 30% (approx) to it's current sp. Maybe.

 

[Sean K]

Oustanding breakout I think on the 3 yr chart. Was a short term break a few days ago on the daily. Touched $44.00 today. Anyone actually own this?

I don't. I've been spectating.

 

[chops_a_must]

Oustanding breakout I think on the 3 yr chart. Was a short term break a few days ago on the daily. Touched $44.00 today. Anyone actually own this?

I don't. I've been spectating.

I do.

Traded the breakout and looking at a target of around $48. Might be one to trade to free carry kennas, as it pays good dividends... Nicely run company and I'm not exactly sure why it hasn't joined in the run since the end of last year...

The $48 is the 261 extension of the recent low to its previous high.

ORG looks good as well while we're talking blue chips kennas. Not holding yet though.

Cheers,
Chops.

 

[theasxgorilla]

Oustanding breakout I think on the 3 yr chart. Was a short term break a few days ago on the daily. Touched $44.00 today. Anyone actually own this?

I don't. I've been spectating.

Yes, since the initial breakout (my definition) in December last year. Given confirmation of new high and blue sky, I may add to my position.

 

[CanOz]

Yes, since the initial breakout (my definition) in December last year.

Thats interesting...your B.even stop must have just held on...assuming you use one...that was quite a retracement after the channel breakout.

Cheers,

 

[theasxgorilla]

Not even!

I had no new major low, so I never moved my initial stop. As far as open equity is concerned on this trade, back then, I was in the red-ink. But there were a few factors to consider...

. most of the time when I buy a breakout I wait quite a while for confirmation that its the McCoy. When you buy at this point you have to expect a retracement and an initial stop must accomodate this.

. second I had no new major low to use as an intelligent next stop level.

. third, we had Feb 28 shenanigans putting excessive (artificial/distorting) downward pressure on the market.

. at the bottom of that low, on a daily chart, we had a big outside bar (respect the outside bar...at tops and bottoms)

. on a weekly chart a tail formed...probably all those clever people who said, "if it gets down to $35.00 again I'm buying".

As chops said, this one pays a great dividend yield (not as good as it did in December ), although it's an ASX20, $40 share, so my expectations are realistic. To have a 16% price gain in 6 months is still only matching the XJO for the same period...hardly staggering.

 

[Garpal Gumnut]

Not even!
To have a 16% price gain in 6 months is still only matching the XJO for the same period...hardly staggering.

Mate,

If I could have a 16% gain in six months, every six months over a trading lifetime I'd be more than comfortable with it.

It is a staggering return over six months.

Live through a good bear correction like 87, see the market go nowhere for 5-6 years and you wouldn't be so dismissive of 16% in six months.

Garpal

 

[CanOz]

Great reply G'rilla, incidently was that a CFD trade?

I think i would have got stopped out...probably went too tight with it.

Many thanks.

Cheers,

 

[theasxgorilla]

Great reply G'rilla, incidently was that a CFD trade?

I think i would have got stopped out...probably went too tight with it.

Many thanks.

Cheers,

Cash and margin trade, not CFD. I think that time for a swing trade with CFDs has passed for now.

As for being stopped out, psychologically its not easy to give your positions 10-15% wiggle room, but its seemingly necessary to participate in the big trends.

 

[chops_a_must]

Re: WES surprise the market?

I've had the opportunity to process the idea more over the course of the day and I believe that I was accurate earlier when I said it is likely to be a good thing for WES holders but not without significant challenges. The success of Myer after being bought suggests that experienced retailers with good supply chain management can extract significant value from the old CML businesses. WES has both in buckloads in their proven success with Bunnings.

I may be wrong... but didn't WES own FAL at one stage? I seem to remember something about that.

Anyway... it appears WES are now a shoe in to get Coles:

Ownership review update
Coles Group said that TPG, Carlyle and Blackstone have advised today
that they will not be submitting any offer or proposal in relation to the
company on Saturday June 30, 2007.
However, the consortium has also advised the company that it has not
withdrawn from the process, and that it has indicated an interest in
discussing with Coles an alternative investment structure.

As Homer would say, "the two sweetest words in the English language, de fault, de fault!"

Hard to see how the coles board or shareholders could refuse now. WES would have the power to block any splitting. And I wonder if WES are buying anymore on this weakess below their offer? I'd say yes. What a savvy and intelligent board. Another coup for WA. We can't do anything wrong at the moment.

Oh... and also... the WES SP is going ok.

Cheers,
Chops.