Tag: ASX:WOW

Woolworths will report their first quarter sales for FY18 on the 31st of October. We expect continued growth of around 5%  from the key Food and Liquor business, while Big W is likely to struggle.

FY18 total revenue if forecast to be $58b, EBIT, $2.5b delivering underlying net profit of $1.6b.

EPS $1.35 and DPS of $1.00, places the stock on a forward yield of 3.5%.

Our Algo Engine generated a buy signal in Woolworths near $25, we see this as fair value and when complimented with a covered call, we’re delivering 10 – 12% per annum in cash flow ASX:WOW

Woolworths

Shares of WOW traded down to $24.40 last Tuesday; nearly reaching the key support level of $24.20 noted in our October 5th blog.

Prices have bounced since then as wholesale food reports show that deflation is returning to the fruit and vegtable market.

Last week’s report showed a -2.3% price growth, which improves the margins on WOW’s private label brands, as well, as fresh produce.

We see the next level of price resistance in the $25.60 area and consider WOW reasonable buy/write opportunity at current levels.

Woolworths

On August 23rd, shares of WOW traded as high as $27.75. The current price of $24.60 is over 11% lower in just over a month.

Yesterday the ACCC announced that it will delay its final decision on BP’s proposed $1.8 billion acquisition of WOW’s 527 petrol station sites.

This delay isn’t a bullish factor for the company, but we expect the deal to get over the line and support the share price.

Technically, there is a support level in the $24.20 area which dates back to January of this year. This support level could be tested in the near-term.

Woolworth’s

Keep Woolworths on your radar as we’re likely to see an exhaustion to the current selling pressure and a bounce higher.

Woolworths

Short-term traders may consider buying WOW with a stop loss below yesterday’s $25.41 low.

WOW – Ex-Div on 7/9/2017 (Div 50c, Franking 100%).

We’ve been long Woolworths following the recent Algo Engine buy signal.

Through adding a $28 December covered call option we’ve boosted the annualized cashflow to 10 – 12%, which includes capturing the $0.58 September dividend.

WOW reports on the 23rd August. The stock is trading on 20x FY18 earnings and 3.3% forward yield.

FY17 EPS is likely to around $1.50 per share and the market is forecasting underlying EPS growth into FY18 of 8 %, to $1.65 per share.