Question 1: Given the current negativity driving Woolworths (WOW) lower, is it now in the buy zone and if so, when do we expect to see a recovery?
Answer: Woolworths looks to be forming a base around $30.00, but I am not sure where the catalyst might come from to take it much higher. The brokers (according to FN Arena) are fairly neutral on the stock with a consensus target price of $32.83, about 4.3% higher than the last ASX price. The range is a low of $27.50 through to a high of $39.00. Most currently prefer Coles to Woolworths.
In terms of public disquiet about Woolworths and Coles pricing practices/treatment of suppliers etc, most of the “political” enquiries are out of the way. However, the ACCC’s review of supermarkets, which runs for a year, has really only just kicked off with public submissions closing on 31 May. It’s due to present an interim report by 31 August, with a final report due by 28 February 2025. Another challenge for Woolworths is that Coles is doing “relatively better” in sales performance, and until this changes, puts a dampener on the share price with new institutional monies tending to favour Coles. I guess I am on the sidelines with Woolworths. I can’t see an immediate catalyst for a re-rating. Patient capital. Waiting.
Question 2: I am interested in your thoughts regarding Audinate Group (AD8). It has lost approximately 35% of its value in less than 3 months. Is it just a case of running up too hard, too fast, or is there a more fundamental issue involved in the decline?
Answer: Yes, I think the run-down in price is just a reversal of the run-up in price. If anything, the run-up was even bigger, going from around $15.00 to almost $24.00 in around 6 weeks. The run-up was driven by a positive response to Audinate’s half year results, plus inclusion in the S&P/ASX 200 index. The latter is important, because Audinate is not widely held.
Hard to find any reason for the run-down, apart from the end of index fund buying, and perhaps profit taking on a view that Audinate was super expensive. According to FN Arena, the consensus target price is $20.72, about 30.3% higher than the last ASX price of $15.90. The range of target prices is a low of $17.90 through to a high of $23.00. While wary of the valuation and the lack of liquidity in the stock, I think Audinate looks interesting at these levels.
Question 3: Does the Government still match personal super contributions with a $500 grant, and how do I qualify?
Answer: For low income earners, the Government matches a personal super contribution on a 50% basis (known as a super co-contribution). This means that for each dollar of personal contribution, the Government makes a co-contribution of $0.50, up to an overall maximum of $500. (For a $1,000 personal contribution, it chips in a further $500)
To be eligible, there are 4 tests. The person’s total income must be under $43,445 (it starts to phase out from this level, cutting out completely at $58,445), they must be under 71 at the end of the year, they can’t have more than $1,900,000 in super at the start of the year and most importantly, at least 10% of their income must be earned from an employment source.
While you may not qualify for the co-contribution, this can be a great way to boost a spouse’s super or even an adult child. For example, if your kids or grandkids are university students and doing some part time work, you could potentially make a personal contribution of $1,000 on their behalf – and the Government will chip in $500!
Question 4: Why did Xero’s (XRO) share price drop about 5% on Wednesday?
Answer: Xero raised funds through a convertible note issue. As part of this exercise, the lead managers to the transaction needed to hedge their exposure. This was done by placing 2.4m Xero shares (worth about $300m) with institutions at a price of $126.85. The share price on the ASX fell in response to the new supply.
