Huntleys' Stock of the Week

Recommendations: Accumulate

WOW's current stock prices

Making it look easy but getting harder

Investment Rating

WOW has an enviable track record with well above average EPS and DPS growth driving exceptional total returns over the past decade. This reflects well on management´s operational and shareholder focus. Project Refresh is a great success capturing $7.3bn in cumulative savings with another $2.0bn to come through logistics and development initiatives. WOW is a defensive growth stock with a solid balance sheet and an imposing moat surrounding its economic castle. WOW deserves a premium multiple.

Result Description

- Results for the 53 weeks ending June 29, 2008.

- NPAT increased 25.7% from $1,294m to $1,626.8m. Group sales rose 10.7% from $42.5bn to $47.0bn. Diluted EPS increased 23.8% to 133.6c.

- Final dividend increased from 39c to 48c per share fully franked taking the FY08 DPS to 92c with the payout ratio steady at 69%. Ex-dividend August 29 and payable October 3, 2008.

Impact

- NPAT of $1,626.8m is slightly above our $1,610.0m estimate. Final dividend of 48˘ per share was as expected. With FY08 sales data already known it was just a matter of 2H margin performance as to the extent of the overall increase NPAT for the full year.

- FY09 guidance is for sales growth in the high single digits, EBIT growing faster than sales and NPAT growth of 11% to 14% on a 52 week comparative basis and 9% to 12% on a 52 week versus 53 week basis.

- We reduce our FY09 NPAT estimate from $1.87bn to $1.83bn and our FY10 forecast becomes $2.035bn.

- Fair value increases slightly from $33.45 to $34.10.

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