Coles – Valuation Review

Coles Group is under Algo Engine sell conditions following the lower high at $12.70.

The group announced their 3Q19 sales growth which came in ahead of market expectations. Food and liquor sales grew at 3.3% in 3Q19, however, management indicated that they expect to see the growth moderate back to 2%, or in line with historical growth rates.

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A review of the valuation forecasts show FY20 revenue of $40bn, EBIT $1.34bn, on EPS of $0.68 and DPS of $0.55, placing COL on a forward yield of 4.8%.

We see limited downside risk for the share price and we consider selling at-the -money-call options as an alternative to selling the underlying stock.




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