Woolworths – Demerger

WOW:ASX is under Algo Engine buy conditions and is a current holding on our ASX model portfolio.

Post demerger Endeavour Drinks will own the largest network of retail alcohol stores in Australia with 1,630 stores. It will also have 332 hotels and 12,400 electronic gaming machines across 1,775 liquor licences.

Endeavour operates across two divisions, Retail and Hotels. Forcast FY22 revenue is likely to be around $10.5bn and EBIT $700m.

WOW shareholders will receive one new Endeavour Group share for every WOW share held at the demerger record date (25-June). Post the demerger WOW will likely consider the potential for capital management of $1.6bn-$2bn.

Woolworths – Valuation Review

Woolworths Group has been trading sideways in 2020 within the $35 to $40 price range. This provides a trading range for investors to consider or alternatively, selling calls at the upper band to generate extra cash flow.

On a valuation basis, using 10% EPS growth into 2022, it supports a 3% fully franked dividend yield and places the stock on a 34x forward PE ratio.

Coles Group – Finds Buying Support

Coles Group is under Algo Engine buy conditions and is now up 21.88% since being added to the ASX 100 model portfolio back in August last year.

We have since had a further higher low formation at $15 and new buying support is building.

We see limited upside based on the current valuation and investors are advised to apply a covered call strategy to enhance the income return.  For more details on the strategy, please call 1300 614 002.

Woolworths Group was added to the model in August 2018 and is now up 38.29%