Credit Suisse assesses the de-merger of the retail liquor & hotels business, Endeavour Group, is an important catalyst for Woolworths. The broker removes the business from its forecast for Woolworths from FY22 onwards, valuing this as a discontinued operation.
The rating is therefore downgraded to Underperform from Neutral, largely on valuation, while the target is lowered to $37.98 from $38.05.
Credit Suisse points out Endeavour Group has a varied profit history and reinvestment rates for the retail side have been considerably lower than in Woolworths supermarkets, while the hotels have received higher levels of investment despite achieving low returns.
Sector: Food & Staples Retailing.
Target price is $37.98.Current Price is $43.45. Difference: ($5.47) – (brackets indicate current price is over target). If WOW meets the Credit Suisse target it will return approximately -14% (excluding dividends, fees and charges – negative figures indicate an expected loss).