Some key questions in the report from JP Morgan. Anko international revenues so far insignificant.

Even after all the market volatility, WES still trades neck and neck on a backward PE comparable to AMZN

From Yahoo Finance

WES trailing PE is 35x and forward PE is 28x

AMZN trailing PE is 36x and forward PE is 30x

AMZN no dividend but WES has dividend

AMZN is mainly ecommerce and cloud with worldwide operations. WES is bricks and mortar and industrial at national level.

Some theories why WES trades near a more desirable tech business such as AMZN

* Baby boomers sitting on huge capital gains who won't sell and farm the dividends instead till they pass away. Obviously once the baby boomer holder passes away, the beneficiaries that inherit the holding have to pay the CGT which is a win-lose situation.

* I heard on the forum from some old investors that it was good to buy buy WES when it dips/corrects down %5-10 even if it is above $60.

* More funds from overseas in AMZN so when the USD sneezes, AMZN will catch a cold

Anyway I should have listened to the old guy and bought WES at $65 and NOT wait till $55 as suggested here

[seeing this gravy train roll by]

Wesfarmers selling off Coregas

Not sure if that is the catalyst for the 5% fall today which is pretty rare. But it is coming off all time highs.

Not held unfortunately.

A few days back Wells Fargo halved the price target of AMZN sending shares down from 186 to 180. It's now back to 186.

https://finance.yahoo.com/news/amazon-cut-wells-fargo-warns-131217884.html

We should petition Wells Fargo to look at WES, HUB, NWL and PME and see if they have a case to blast the prices back to reality and stop this ridiculous doom loop of the demand curves shifting up and up :)

Not held still.

$WES posted their FY results this morning.

I just wanted to call out the retail results. In the context of everything else we've seen sp far this reporting season for Australian retail, just look at those numbers for Bunnings, Kmart, and Officeworks. What a business...or group of businesses!

Kmart obviously a beneficiary of the value conscious retailer trading down. But it's more than that ... e.g.,members of my family get clothes there by choice over higher value brands.

Not Held :-(

Over the past year, I have used Strawman to recreate my RL portfolio, to an extent. There are some companies which I have sold in RL but kept in the SM portfolio to see how they track along and if I made a bad call. One such example, unfortunately, is Wesfarmers. I am sitting on a roughly 50%pa gain for WES in SM. In real life, I sold out to take a modest gain shortly after purchasing. I believe the business is fantastic, but seems rather pricey. However, this is also what I thought long ago, and yet the share price…

This leads me to my question - what is everyone’s opinion on buying and selling businesses at arguably overpriced valuations? This question sort of applies to companies in general, so not necessarily just Wesfarmers here.

An issue that I am struggling with is trying to be a better long term thinker, whilst also having the capacity to see when a company might be overvalued, and potentially might need to be trimmed or sold out - because the offer is too good to refuse.

This debate currently takes place for me with Alcidion. A small holding - in RL I’m up about 30% because I traded in and out whereas with SM I’m down about 10% after doing nothing. I reckon Alcidion might not stick around these levels (maybe it will) but I now feel as though I should just hold it and continue along unless the thesis changes.

I suppose I am wondering what people’s thought processes are regarding their approach to holding a company and whether a particular approach should be taken depending on the fundamentals of each business or if I should generally leave things alone because I have the time factor to smooth it out.

in short, paying up for value is something I have realised is important. Sometimes, you just have to bite your tongue. But, is there a point where even cash becomes preferable if the valuation is too outstretched? What sort of leeway should be allowed between “this business will grow over the next few years” and “the growth might already be priced in here”? Overall, I know the two companies mentioned are world’s apart, but I find myself taking the same approach now - just leaving the position alone. Am I being too lazy? Should I be more vigilant and willing to take a profit if the company is smaller and less “proven”?

I reckon this is just something an investor needs to answer for themselves, but would love to hear any thoughts.

cheers

Wesfarmers released some impressive FY23 results last week.

Revenue up 18%. NPAT up 4.8%. All in a subdued retail trading environment.

Some really interesting discussion followed the results presentation regarding the Mt Holland project. I have outlined the timeline of events as per the discussion:

FY24

Commissioning and ramp up of concentrator Oct/Nov 2023.

Produce 50,000t (WES share) spodumene concentrate in FY24

FY25

Produce 190,000t (WES share) spodumene.

Commission hydroxide refinery late CY24.

Lithium hydroxide available for sale by early to mid CY25.

FY26

Lithium hydroxide refining.

Based on the above timeline, my take on the future revenues is outlined below. I am no lithium expert so please correct me if the numbers are horribly wrong.

FY24

50,000t x $4,000/t (net margin) = $200M

FY25

190,000t x $4,000/t (net margin) = $760M.

FY26

8t spodumene produces 1t lithium hydroxide, therefore

190,000t/8 = 23,750t lithium hydroxide x ($50,000/t - $7,000/t) $43,000/t net margin = $1B.

The lithium operation has the potential to increase profits by 40% in FY26.

I remember Ben Clark (TMS Capital) saying that the market is not pricing the lithium operation into the WES share price.

Based on this I would have to agree.

Lithium experts please feel free to rip this apart.

Director on-market trade for WES. Always interests me these 'relative' small trades from directors who you assume have significant wealth behind them. Maybe its false assumption....

And I say small trade in jest... as dropping $20k is significant for others....

30-May-2023: 2023 Strategy Briefing Day Presentation

View The Webcast: https://edge.media-server.com/mmc/p/6iyimda9

02-May-2023: Macquarie Australia Conference Presentation and Address by MD, Rob Scott

For all the latest WES results and presentations: Results & presentations (wesfarmers.com.au)

Today's 2023 Strategy Update (top link above) is long - at 104 slides - so I'm just going to reproduce the 4 that sum up this company best - in my opinion:

So this isn't your average microcap or nanocap stock that is largely under the radar and could go to zero or multibag. No, this one is a large cap that just keeps grinding higher over time. The best way to check how a company has looked after their shareholders is to look at their TSR - Total Shareholder Return - which include share price appreciation and dividends, and assumes that all dividends were reinvested back into the company using their DRP. In this case they also assume full participation in all of WES' capital management initiatives over the years.

Their TSR has well and truly outperformed the All Ordinaries Accumulation Index (XAO) which is represented there by that grey line. In fact, they've absolutely smashed it. Over that period, the All Ords Accumulation Index has performed almost identically to the ASX200 Accumulation Index (XJO). They both include reinvested dividends - that's the "accumulation" bit. Over shorter time periods there can be a little bit of divergence between the XAO and the XJO Indices, but they tend to have very similar returns to each other over decent time periods, like decades. WES, however, has done a LOT better than both of them.

Disclosure: I hold WES shares in real life and here on Strawman.com.

OK, one more slide:

How's this for a mission statement: Their primary objective is...

Tick.

Wesfarmers today announced that it has received confirmation from the Australian Competition and Consumer Commission (ACCC) that it will not oppose Wesfarmers’ proposed acquisition of Australian Pharmaceutical Industries Limited (ASX:API). Deal expected to go through end of Q1 2022.

Finally moving ahead. WES wasting too much effort back and forth on this acquisition IMHO but yes pharma is a rapidly growing space with all the COVID fears, ageing population, vitamin supplement market.

Disc: I hold.

Curious. I'm wondering if they are trying something broader with this.

Woolworths Group (ASX: WOW) has today thrown its hat in the ring to acquire Australian Pharmaceutical Industries (ASX: API) for $872 million, representing a 13 per cent premium to the offer on the table from retail rival Wesfarmers (ASX: WES).

https://www.businessnewsaustralia.com/articles/woolworths-takes-on-wesfarmers-in-bid-for-priceline-with--872m-offer.html?utm_medium=email&utm_source=www.thewebconsole.com&utm_campaign=BNA+News+-+December+2+2021&utm_content=36711756&c=31988872&_c=28572bc43df62bd249f97794373d8a18

What? I thought this was a done deal already?

WESFARMERS Returning $2 per share ex18/11/21

Flybuys loyalty program (linked to many credit cards), are now to be offered at Bunnings and Officeworks. Probably the future priceline too.

Interesting move, in my opinion a wasted opportunity for Wesfarmers.... unless Flybuys are offering some sort of deal where points are traded for lawnmowers and laptops?

Through a deal with Kitchenwarehouse.com.au, Bunnings is offering online purchases of kitchen equipment and utensils from crockery to blenders.  Basically Bunnings is becoming an Amazon marketplace.

This is going to be interesting. It won't be a stretch to be selling washing machines, bed linen, kids toys, laptops through Bunnings.

Bunnings is offering their carparks as vaccination centres.  When will they open a pharmacy in the corner of their stores?  Or maybe it's Officeworks that needs the pharmacy for the busy professionals to pick up a script with their replacement printer?

Business acquisitions are good if synnergistic.  Aust Pharmacy should be one of these.

However I'm actually more excited by their investment in Artifical Intelligence into the business.  This should allow strong insights into product segmentation, customer spend, distribution economies of scale of merchandise and dare I say it staff,

Artificial Intelligence PLUS synnergy of merchandise base PLUS massive reach of physical stores, WES is a winner in my opinion. 

PE currently 27.7, quite high though.

Disc: I bought at $55

04-Aug-2020:  COVID-19 update - Trading restrictions in Victoria

[I hold WES shares]

22-May-2020:  Kmart Group update and expected FY20 significant items

Kmart Group update

• First phase of Target review has identified actions to accelerate the growth of Kmart and address the unsustainable financial performance of Target
• Actions include the conversion of suitable Target stores to Kmart stores, the closure of a number of Target stores and a restructuring of the Target store support office
• Redeployment opportunities in Kmart and other Wesfarmers businesses will minimise the effect of these changes on Target team members

Significant items expected in the 2020 full-year results

• Restructuring costs and provisions in Kmart Group of approximately $120 to $170 million before tax, primarily reflecting Target store closure costs, inventory write-offs and a restructure of the Target store support office  
• Non-cash impairment in Kmart Group of approximately $430 to $480 million before tax, including an impairment of the Target brand name
• Non-cash impairment in the Industrial and Safety division of approximately $300 million before tax, primarily relating to the impairment of goodwill
• Pre-tax gain on sale of 10.1 per cent interest in Coles of $290 million, and one-off pre-tax gain of $221 million on the revaluation of the remaining Coles investment  
• The estimates of the significant items remain subject to auditor review

[...click on link above for further details...]

Disclosure:  I hold WES shares.

28-Apr-2020:  COVID-19 update

31-Mar-2020:  WES: Wesfarmers sells 5.2 per cent of Coles Group

Also:  COL: Sale by Wesfarmers of 5.2 per cent of Coles Group

Following the sale, Wesfarmers retains a 4.9 per cent interest in Coles and has agreed to retain its remaining shares in Coles for at least 60 days from today.

COL & WES also remain 50/50 JV partners in Flybuys and will continue to work together.