Question 1: Is Wesfarmers a buy?
Answer: Wesfarmers reported a full-year result that beat market expectations with an improved second half. The full-year dividend of 180c per share was also higher than expected.
But with Bunnings driving two-thirds of earnings, and Kmart/Target another 15%, it is hard to get too excited about the stock because higher interest rates should act as a dampener on consumer spending. The analysts are neutral to marginally negative – 2 ‘buys’, 1 ‘neutral’ and 3 ‘sells’ from the major brokers sampled by FNArena – with a consensus target price of $47.98, about 5% higher than the last ASX price of $45.72.
On a multiple basis, the brokers have Wesfarmers trading on a multiple of 21.0x forecast FY23 earnings and 21.1x forecast FY24. These don’t look too demanding.
A hold for long-term investors. In a sell-off, a stock to consider buying for the long term.
Question 2: I own CBA shares and participate in the DRP scheme. Is it too late to change my mind about the next dividend and get the cash instead?
Answer: CBA’s next dividend of $2.10 per share will be paid on 29 September. To participate in the DRP (dividend re-investment plan), or vary an existing election, you were required to notify the Registry (Link Market Services) by 19 August. Yes, it is too late.
The issue price for the new shares under the DRP is based on the weighted average trading price of CBA shares over the 20-day period from 22 August through to 16 September.
Question 3: What is happening with the takeover of Ramsay Health Care (RHC)?
Answer: On the surface, not a lot. It looks like a bit of a stalemate between the bidder (a consortium led by KKR) and the Ramsay Board. Back in April, KKR lobbed an indicative offer that valued Ramsay at an effective $91.20 per share ($88.00, less any dividend, which Ramsay would then fully frank, taking the value to an effective $91.20).
Ramsay provided non-exclusive due diligence to KKR, but Ramsay’s 52.8% owned subsidiary, Ramsay Santé (which operates the French and Nordic hospitals), has not provided access. The consortium submitted an alternative proposal, which would see small shareholders get the cash, but larger shareholders (over 5,000 Ramsay shares) receive a smaller cash payment and an in-specie distribution of Ramsay Santé shares. The Ramsay Board thinks the alternative proposal is “meaningfully inferior” and has determined not to engage with the consortium on it. Following this, the consortium withdrew the original proposal.
With Ramsay shares now trading on the ASX at $70.00, marginally higher than the $65.00 price when the first proposal was made in April, the market is not assigning a high likelihood of an offer proceeding.
Question 4: You recently published a story from James Dunn about top uranium stocks. James didn’t mention the ETF from Betashares, Global Uranium ETF (ASX: URNM). What do you think of this ETF and the mix of companies they have selected?
Answer (by James Dunn): This ETF is a really good way to invest in the uranium/nuclear energy theme, and it was remiss of me not to mention it. It picks up so many of the major exposures.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
