Wesfarmers reported notably weaker 1Q17 sales performance which has weighed heavily on the share price. However, excluding UK home improvement and convenience stores, overall sales rose by 3.4% to $12.9 billion.
Overall, FY17 NPAT has been marginally upgraded as positive price developments in their resources divisions offset lower revenue numbers from Target and Coles. Based on Fy17 DPS of $2.30, Wesfarmers is on 5.2% forward yield.
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The share price has dropped close to $5.00 over the last four trading sessions and posted a 3 month low of $40.00 last Friday.
We see value emerging again as the stock now trades back at a support level that has been maintained since June 2013. Buy range of $39 – $40 and sell range of $43 – $44. Using covered calls we’re able to boost the cash flow to 10%+ per annum from the dividend, franking credit and call option premium.
