WES - Wesfarmers Limited

[noirua]

I wouldn't be surprised at all if they have to cut their divvy to pay down debt. I think that would be prudent.

Maybe they hope the dividend reinvestment plan will draw the crowds. The 1% discount is very mean as CSR used to give 5% in the 1990's.

 

[chops_a_must]

Fair comment chops, I wouldn't be surprised either......but I'm happy with my purchase for now.......not quite bottom drawer material in this climate.

MB

I prefer it to WOW certainly, for my own reasons.

But I'll be looking below sub 25 for bottom draw purchases. If it doesn't get there, no big deal.

 

[ROE]

I prefer it to WOW certainly, for my own reasons.

But I'll be looking below sub 25 for bottom draw purchases. If it doesn't get there, no big deal.

$20 is where I'm seeing it heading... with their high debt position any movement in resource price will impact them pretty hard.

PE of 16 is fairly high for bear market and with a dog flea like Coles

 

[dan-o]

This is heading toward the $20 mark mentioned in the previous post. Do people think this is great value or just good value because of the market drop?

 

[michael_selway]

$20 is where I'm seeing it heading... with their high debt position any movement in resource price will impact them pretty hard.

PE of 16 is fairly high for bear market and with a dog flea like Coles

lol good point

Earnings and Dividends Forecast (cents per share)
2008 2009 2010 2011
EPS 179.5 260.9 264.0 260.0
DPS 200.0 210.0 228.5 219.3

thx

MS

 

[ROE]

This is heading toward the $20 mark mentioned in the previous post. Do people think this is great value or just good value because of the market drop?

I have my eye on WOW rather than WES .. I look at WES when they can prove to me they can change the Culture of Coles.

Speaking of culture I run into a building maintainable guy at one of the Coles building (owned by Coles) a few weeks ago. The door has been broken for months (3 months or more) and they stick a piece of paper said close the door after you enter and exit and make sure it close.

One day I walk out and forgot to close it cos something was on my mind and I didnt pay too much attention to the notice, the guy hassle me and said why don't you do what the sign said.

He had me fire up and I response, I said dude you got a problem here it been happening for months and you don't fix it and you try to pass the buck to someone else and make them close the door? we argue for five minutes and I keep repeating, it's your building, it's your problem, fix it, take ownership.

He walked away wasn't too happy and curse the hell out of me

And the door still broken last time I check 2 days ago
So the culture still as bad as ever.

Company cant be doing good when you have work force that doesn't give a damn about their job.

WOW is still expensive in my book so until they dropped further I rather buy WOW.

 

[blinkau]

I think your quite right with Coles ROE but at what price is WES so low that it discounts the Coles businesses. You could argue that as WOW trades at such a premium that its price in fact makes it a speculative investment. I agree that at say $45 Wesfarmers was expensive and had no real room for error with its high interest bill and the fact that it still had yet to turn around the business.

You can now buy Wesfarmers at a discount to its book value. With commodities coming off, the Coles purchase receiving negative publicity and the general market trending downwards wouldn't this be a decent time to take a closer look at it. This is not to say that it will turn around or that even at its current value its cheap but it might be worth an in depth look.

 

[ROE]

I think your quite right with Coles ROE but at what price is WES so low that it discounts the Coles businesses. You could argue that as WOW trades at such a premium that its price in fact makes it a speculative investment. I agree that at say $45 Wesfarmers was expensive and had no real room for error with its high interest bill and the fact that it still had yet to turn around the business.

You can now buy Wesfarmers at a discount to its book value. With commodities coming off, the Coles purchase receiving negative publicity and the general market trending downwards wouldn't this be a decent time to take a closer look at it. This is not to say that it will turn around or that even at its current value its cheap but it might be worth an in depth look.

I see it differently, WES was a good company before they took over Coles.
Coles can be a massive liability to them if they don't do it right and could even bring WES down.

Because of Coles they have massive interest Bill, their share holders is diluted
their return on equity is decline at a rapid pace.

and Coles distract them away from their other business that are doing well.

To me Coles is a liability not an asset so unless it trades around PE of 10 or below in this market it's too risky .

So unless WES is run by Jack Welch, Goyder is a bit of a gamble

 

[chops_a_must]

I see it differently, WES was a good company before they took over Coles.
Coles can be a massive liability to them if they don't do it right and could even bring WES down.

Because of Coles they have massive interest Bill, their share holders is diluted
their return on equity is decline at a rapid pace.

and Coles distract them away from their other business that are doing well.

To me Coles is a liability not an asset so unless it trades around PE of 10 or below in this market it's too risky .

So unless WES is run by Jack Welch, Goyder is a bit of a gamble

I agree.

WES was a great company, and still may well be, before they took over Coles.

It's pretty clear they well and truly over paid for Coles. It has left them with a lot of debt, and doesn't allow for the fact Coles may need significant capital in the future to turn it around. There was no margin for error with the take over, and now there is no margin for error with the turn around.

By the way, what is, and how do you calculate its book value? Doesn't make a whole heap of sense to me as future liabilities are not very clear at this stage.

 

[blinkau]

It appears true that they overpaid and that I agree can damage them. However they have also stated that the turn around plan is 5yrs isn't it? I mean its hard to judge their success so soon. I do see that they have wrecked their return on equity and have diluted share holders while pulling up a huge bill and overpaying for a business. They have made a mistake however the interesting thing will be to see where the company is in say 6 years from now.

Its difficult to infer that because a door is damaged in a Coles shop and there are some cranky people that the business is doomed. I mean how many people complain about the employees at supercheap, the service at CBA etc. Each business has its own problems.

I haven't done an in depth analysis and I do agree it doesn't appear to be a good investment but I think the frequent Wes/Coles debate may at some stage be overdone. I will be very interested to see if and how it corrects itself only time will tell.

Isn't Costco due in Australia at some time as well?

 

[ROE]

By the way, what is, and how do you calculate its book value? Doesn't make a whole heap of sense to me as future liabilities are not very clear at this stage.

Book value are crap these days I wouldn't put too much faith into them unless they have a lot of cash to back it up.

look at seven last week it trades below the available cash it has on hand in the bank now that what I called a below book value stock

company trades below 1.2B and it has 1.3B CASH in the bank.

Accounting over the year has change and book value now account a lot of it to goodwill (Premium you pay for take over or brand name)

all is good if you have a decent brand like Coca Cola or Porsche where the brand carries a premium on the price you sell and stands for quality...

but majority of goodwill I call them wasted money and shouldn't be in the book value at all.

 

[ROE]

It appears true that they overpaid and that I agree can damage them. However they have also stated that the turn around plan is 5yrs isn't it? I mean its hard to judge their success so soon. I do see that they have wrecked their return on equity and have diluted share holders while pulling up a huge bill and overpaying for a business. They have made a mistake however the interesting thing will be to see where the company is in say 6 years from now.

Its difficult to infer that because a door is damaged in a Coles shop and there are some cranky people that the business is doomed. I mean how many people complain about the employees at supercheap, the service at CBA etc. Each business has its own problems.

I haven't done an in depth analysis and I do agree it doesn't appear to be a good investment but I think the frequent Wes/Coles debate may at some stage be overdone. I will be very interested to see if and how it corrects itself only time will tell.

Isn't Costco due in Australia at some time as well?

I predict Coles will do more harm to WES than good, I give credit to Coles Chairman to extract the most values for Coles share holders from WES knowing it's a dog of a company and there is company stupid enough to pay a high premium for it and that stupid company is WES and its CEO/CFO and Chairman.

Remember WES couldn't refinance(or the lender want high teen for their interest) last year so they go to share holders for more money in equity raising and look what happen to that $29

..more share holder value is destroyed..they got a few more Billion to go toward 2009

and look like who ever want to refinance wants more than 11% they charged last year for 600 Mill they borrow because the company is getting worse each day..

so they may force to go back to share holders for more money
but who the hell stupid enough to give them the cash? knowing $29 bucks you gave them last year now worth $22 bucks.

Unless their share price goes back to Mid 30s they facing a prospect of much higher debt and bugger all extra equity raising with existing share holders.

do you see the risk now ...better stick to proven WOW if it drops to $20 or below

and the broken door and simple trip to the Coles store is sometimes the best information you
will ever get into the running of a company and whether they run a good ship or not.
you may not use it but I do a lot and it works extremely well for me over the year

I give you an example sometimes 1 or 2 years ago DMP was doing crab, everyone discard them, analyst doesnt like it.. then one day I went to a DMP store to pick up some pizza, the damn store was full of people queuing buying pizza, then a few weeks later I went to the coast damn I saw the same thing there, came back to the store I bought a week later still chock block full.

Well enough for me to discard the bad news around Dominos and start to look at the number
I bought in at $2.27 but nothing but good news since then

 

[Garpal Gumnut]

Woolies is better to shop at than Coles, I hold both WOW and WES.

I still think its too early to count WES out yet. Coles was stuffed by Fletcher and Co , so it may take a bit longer to turn things around.

gg

 

[Pager]

Next on the chopping block ?, or nothing to worry about ?


http://www.bloomberg.com/apps/news?pid=20601081&sid=aewy5nxLTAjI&refer=australia


Oct. 14 (Bloomberg) -- Wesfarmers Ltd., Australia's second- largest retailer, owes A$1.26 billion ($878 million) in borrowings that are due for repayment in less than a year and remains within all its debt covenants.

Wesfarmers needs to repay or refinance the bank loans, commercial paper, bank bills and bonds as part of more than A$9.5 billion of total borrowings as of June 30, the Perth-based company said today in an investor presentation filed to the Australian stock exchange.

 

[drsmith]

Looking at the Wesfarmers balance sheet recently I noted the high level of goodwill. It will be interesting to see how debt refinancing plays out and whether like some property trusts new equity has to be raised at a deep discount to the current share price.

I don't hold Wesfarmers shares directly but I do have an indirect interest through ownership of shares in Milton Corporation.

 

[ROE]

Coles is just too big and too bad for WES, I said game over man, game over.

When a good company takes on over a sh*t company, what left over is usually
the sh*t and nothing else.

 

[blinkau]

ROE I think you are making some very bold statements in relation to the future of Wesfarmers upon what appears little analysis of the companies financial position. I haven't thoroughly analysised Wesfarmers and hence wont make any strong statements for or against it. I do believe the Coles part is overdone and yes it appears they have overpaid for it just as Suncorp overpaid when they took on their new insurance business. I would be very keen to know why they paid what they did for Coles and on that date it appears they where victim to speculation. If anyone purchased at $40~ when they had Coles it was now in hindsight foolish to hold on however I believe it would be wise to take another look at the company as at some price it must become 'cheap' Lets hope so anyway!

Its very easy to make a strong argument against Wesfarmers however in five years I will be very interested to see if they did manage to turn it around. I most certainly wouldn't make it the only stock in my portfolio.

 

[ROE]

ROE I think you are making some very bold statements in relation to the future of Wesfarmers upon what appears little analysis of the companies financial position. I haven't thoroughly analysised Wesfarmers and hence wont make any strong statements for or against it. I do believe the Coles part is overdone and yes it appears they have overpaid for it just as Suncorp overpaid when they took on their new insurance business. I would be very keen to know why they paid what they did for Coles and on that date it appears they where victim to speculation. If anyone purchased at $40~ when they had Coles it was now in hindsight foolish to hold on however I believe it would be wise to take another look at the company as at some price it must become 'cheap' Lets hope so anyway!

Its very easy to make a strong argument against Wesfarmers however in five years I will be very interested to see if they did manage to turn it around. I most certainly wouldn't make it the only stock in my portfolio.

Dont mind me too much I go off sometimes I like WES a lot and that was before Coles this my takes on comic WES.

With all their business is firing (boom, bang, slam) with exceptional profit, along comes the Joker Coles and ruin the party and drag WES down... along with its debt.

Because it's other business is doing so well, what happen if Joker Coles partying Culture has not stop and the ship is too heavy to turn and WES fatherly love give too much attention to Coles and start desert other good kids in the family.

Other business may start to lag and then wham bam comes holy batman WOW and take on sidekick Mitre 10 and start implement their batman magic culture on Mitre 10.

Mitre 10 then send off to fight the Gotham's Penguin Bunnings who just about to own the hardware business.

It could be a good fight and when WOW fight someone they like to win
(due to their culture of breeding exceptional in house executives)

people shop at bunnings may go to WOW's Mitre 10 knowing it's low price every day where WES slogan is lowest price is just the beginning and that all there is just the beginning, not every day

with debt heavy on there WES side, WOW has little debt it's going to be one hell of a battle and WOW may turn the tides with Bunnings

like with they did with their fore father Coles some decade earlier. History tend to repeat itself in business like the stock market bust and boom.

good bedtime comic story and wouldn't it be funny if it was true

PS: this is another true scuttle butt ... I was at Bunnings over the weekend picking up some garden hose, in the garden section. This nice old gentleman was a bit lost with all the selection so he grab a Bunnings employee walking by for help..she said I cant help you I don't work in this section and walk off... The Gentleman make the point that even if she doesn't work in this section she should at least help him or get someone to help him...she refuse to help and walk off.

I feel sorry for that gentleman and was pissed off myself at that attitude as well...maybe Coles cancer catch on, who knows.

 

[sammy84]

Whilst coles is a dog, its still a dog in a duopoly. I'm would be happy to have a horse come second in a two horse race if second prize still pays well

 

[chops_a_must]

Whilst coles is a dog, its still a dog in a duopoly. I'm would be happy to have a horse come second in a two horse race if second prize still pays well

I think you'll find MTS is beginning to feast off the carcass that is the Coles market share, in certain areas.

So no, I don't think it really is a duopoly any more.