Woolies trading update, looking good

Woolies also released a trading update this morning, and it looks good to me, Mr. Market has the stock flat at the beginning of the day, so you could say that this was anticipated to some extent. The share price has been on an absolute tear, but so has the sector. Over the last 12 months the stock is up a whopping 70 percent. Wow. But this might seem a little light for Mr. Market as they digested it through the morning, the stock eventually took some tap. Here is the TRADING UPDATE AND TRADING STATEMENT from their website SENS portal. So expectations are for a 20 to 30 percent increase in both HEPS and EPS for the 52 week period to end June 24 2012. Remember at the half year stage, when we wrote up about Woolies: Woolies results look good, our expectations back then were for around 270 odd cents per share for the full year.


In the middle of the range (25 percent increase) we should expect earnings to be 269 cents per share, which means at the current share price of 52 odd Rands, the stock trades on 19.3 times earnings. With expectations pretty lofty, and seeing that the market is looking for 20 odd percent increase in earnings next year (and 17 odd percent the year after) the valuations seem just fine to me. What people are paying up for though is the yield, they are a very generous crowd. The prospective yield is around three and a third of a percent to June this year and rises to beyond four percent the year after AND nearly touches 5 percent the year after that, 2014.


But, the shareholder makeup is not the same as Shoprite and as per the 2011 annual report major shareholders are South African. The PIC owns (owned, as at June 2011) 17.22 percent of the business. And Woolworths holdings limited (the staffers) are the second biggest holders of the stock, with over 6 and a third of a percent of the business. So, I am just guessing here, but it is not going to get the same market rating as Shoprite. Perhaps they would do well to attract a different subset of shareholders, what about a road show? Ian? Buddy?