Question 1: Would it please be possible to get a view of WOW. i.e. what are the broker updates / any thoughts on upcoming reviews still underway etc. Is it attractive at current prices?
Answer: Woolworths (WOW) seems to be forming a base in the very low thirties, and it has certainly cheapened compared to Coles. Historically, Coles has traded about 25% cheaper to Woolworths, but on forecast PE multiples, this gap has narrowed to around 10% (Woolworths 22.7 times, Coles 20.2 times). The brokers are by in large supportive. According to FN Arena, of the major brokers, 2 have “buy” recommendations, 2 have “neutral” recommendations and 2 have “sell” recommendations. The consensus target price is $32.83, about 5.2% higher than the last ASX price of $31.20. The range of targets is a low of $27.50 from Morningstar/Ord Minnett through to a high of $39.00 from Citi. However, the “enquiries” are still to come. Governments have commissioned something like 6 separate enquiries…….so far, only 2 have reported. And Woolworths has been hit on the sales front, with Coles outperforming. The question is whether all the bad news is out, or fully priced into the share price? My inclination is that the share price may have further to fall. If you have the resources, maybe you pick up a little now and keep some powder dry for a second go.
Question 2: I don’t understand why over the last few months, the UK market has done so much better than the ASX. We have a pretty ordinary Labor Government, but the Conservatives in the UK are heading for oblivion. Our best play would have been to simply buy the FTSE but that’s in retrospect. Are we here, in Australia, so much worse off than the Poms?
Answer: I think the timing of interest rate movements has had more to do with the movement rather than any political assessment. In Australia, there has been a discussion on whether the next interest rate movement is up (rather than down), while in the UK, it is universally agreed that an interest rate cut isn’t too far away. The Australian market is also heavily influenced by commodity prices (not really a big factor in the UK).
Question 3: My wife and I each have a privately owned share portfolio in addition to superannuation. When one of us dies, is capital gains triggered on that person’s share portfolio, or can it be transferred to the surviving spouse?
Answer: Death by itself does not trigger a capital gains tax event. So, if the shares are transferred (in accordance with the will) from one party to the other, there is no capital gains tax to pay. In this situation, the surviving spouse “inherits” the deceased spouse’s cost base, and ultimately pays CGT when he/she then sells the shares. If the Estate, however, sells the shares and distributes the cash proceeds to the beneficiaries, the Estate pays capital gains tax on the difference between the sale price achieved and the deceased’s cost base. Like all matters involving tax, always good to check with your accountant.
Question 4: How long can a company stay suspended for on the share market?
Answer: Chapter 17 of the ASX Listing Rules cover trading halts, suspensions, and removal from the official list. I can’t find a “maximum” period for suspension, but typically, it would be less than 12 months. You can download the rules on the web.
