Woolworth Holdings Limited (WHL) is enlisted on JSE Limited Securities Exchange (JSE). WHL is one of the top 40 companies listed on the JSE Limited Securities Exchange. WHL has a strong market share in Australia, Newzeland and sub- subharan Africa.
About WHL
Max Sonnenberg established the first Woolworths store in 1931 in Cape Town, South Africa. What made Woolworths different from its competitors was its dynamic policies which attracted customers. As a result, after three years, he opened a second branch, and this time it was in Durban. After one year of opening its second branch, he opened two branches in Elizabeth and Johannesburg. In 2000, Woolworths started a joint venture with Barclays Bank and started Woolworths Financial Services, whose sole purpose was to provide financial services to its customers.
In 2014, Woolworth’s completely acquired Country Road Group, founded in 1997, evolved into a leading brand for casual accessories and homeware.
On 1st 2014, WHL bought David Jones, which is the oldest Australian departmental store. Currently, there are more than 40 branches of David Jones across Australia and New Zealand.
Currently, WHL has
- Forty-five thousand employees in more than fourteen countries.
- Seventeen million customers
- Fourteen hundred ninety-two active locations
WHL aim for long term profit growth and sustainable value for its stakeholders. In a world where COVID-19 has a major impact on the operations of every business, WHL priority to maintain stability by evolving in this new consumer ecosystem. WHL strategy is to focus on financial performance, which is certainly a very important factor for all stakeholders and work on the modern people model.
WHL Investments
WHL operates through the following subsidiaries:
- Woolworths Proprietary Limited (WSA)
- David Jones Proprietary Limited (DJ)
- Country Road Group Proprietary Limited (CRG)
- Woolworths Financial Services Proprietary Limited (WFS)
WHL Business Strategies
The company divides its business strategies into operational efficacy and geographic expansion.
Operational Segments
WHL has seven operational segments, which are as follow:
- Woolworths Clothing and General Merchandise (C&GM),
- Woolworths Food
- Woolworths Logistics
- David Jones
- Country Road Group
- Woolworths Financial Services (WFS),
- Treasury
Geographical Segments
WHL has three geographical segments:
- South Africa
- Rest of Africa
- Australia
- WHL Stock Analysis
Despite the global effect of the coronavirus on worldwide businesses, WHL revenue kept rising, making the company’s gross profit.
Cash flow from operating activities has grown exponentially in 2020, which shows the company is managing its working capital very well.
The company’s current price to earnings ratio is 29.52, while the price to earnings prevailing in the industry is 16.36. It means to earn one $ 1 in the company. A person has to invest $ 29.52 in the company. A higher price to earn is not suitable for the investor. As per Warren Buffet thumb rule, price to earnings ratio of any company should not be more than 22.5.
The company’s current price to book value is 6.3, while the price to book value prevailing industry is 2.34. It means the investor will get $ 1 against an investment of $ 6.3 in the company’s solvency. The company has a higher price to book value that is not favouring the investor. Also, the price to book value of the company is higher than the prevailing price to book value of the industry.
Long term debt to equity ratio is around 450% which is very higher than the prevailing long term debt to equity ratio of 11.83%. Higher debt to equity is very dangerous for companies going concerned. Furthermore, the current ratio is 1.1, even though it’s less than the current ratio of the industry, which is 1.5, but having a current ratio of more than 1 is a good sign from a working capital management prospect. Also, it is dividend-paying stock.
The company’s beta is 0.89, which means that the company will react slightly lower to change in the stock market. The total outstanding share of the company is 1,047,958,213, having a market capitalization of 58.3 Billion ZAR. In the last one year share has grown 81%.
The stock’s performance is linked with the performance of the company and the overall environment in which that company is performing. Currently, the stock is moving in an uptrend. The stock was at its lowest on 24th March 2020 when it was traded at 2400 ZAR per share. Afterwards, it started momentum upward and currently, it is being traded at 5565 ZAR per share.
Major Resistance lies at 6159 ZAR/share, and certainly, the stock price will challenge it. Immediate support lies at 5296 ZAR per share. Second support lies at 4742 ZAR per share. The relative strength index is 69, which shows that the stock is near to reaching its overbought zone, and certain stocks will take correction shortly. Volume is in decline in comparison with last month. The lowest price in the last 52 weeks is ZAR 2851 ZAR per share, and the highest price is 5577 ZAR per share.
It is to be noted that the monthly moving average indicator indicates a buy signal.
Bottom Line
Overall financial performance seems satisfactory. Even when the pandemic badly affected the business overall, the company showed profitability and effectively managed its working capital. Since the worst of the pandemic, the effect has been absorbed, and now companies are recovering from the bad financial situation, it is most likely that WHL will perform well in upcoming years, which is a good sign for stakeholders and certainly, with every year the confidence of stakeholders on WHL will increase. However, the retail business is a very competitive business, which means the company must be vigilant about competitors’ market strategy not to let them capture WHL’s market share.
However, high debt to equity is the only point of concern, and the company should have a plan to reduce its acceptable level.
From a technical point of view, the stock price was getting close to its resistance and mentioned above, and at the same time, price stock is about to enter the overbought zone. So, for now, the investor/ trader should wait for correction and then one can buy the share of WHL at the right price to get a good profit. Overall, WHL is a good investment opportunity that investors can have. Let’s see how it goes.
