"For my money Wesfarmers is a stock you want as a core holding, I will be accumulating the stock at these levels.
Wesfarmers reported in line with expectations, the key takeaways are, Coles is a 2011 story, Wesfarmers are well and truly moving on turning around this company and in due course we fully expect to see Coles achieve the efficiencies of Woolworths.
There will be some difficult times during this transformation; the next 12 months will throw up a number of challenges as the retail purse tightens. The other key take away is Coal; the risk is clearly to the downside. With coal negotiations only just commencing and demand softening in key markets there is considerable uncertainty as to their second half result.
Despite these issues there has been strong underlying support for the $2.8 billion capital raising, these funds will go towards paying down debt; they have also cut their dividend again with these funds also going towards debt reduction.
This will improve their over all operation, cash flow and free cash flow giving Wesfarmers a good base to ride out the current turbulent market conditions.
The main story is the turn around of Coles; this will take until 2011 so for the longer term investor Wesfarmers is a better growth story than Woolworths at these levels.
For my money Wesfarmers is a stock you want as a core holding, I will be accumulating the stock at these levels.