Part 2
(A). Brief Description of Companies
Woolworths Group Limited
Description BHP Group Limited (BHP)
(WOW)
Woolworths Ltd one of the major
retail company in Australia. First
established in 1924 (Woolworths
Group). They offer a variety of BHP Billiton is among the
products and services such as world's largest producers of
being one of the major liquor aluminum, copper,
distributors and also department manganese, iron ore,
Products & Services
stores. Woolworths Supermarket uranium, nickel, silver and
is also known as “Woolies” is one titanium minerals. The
of the two supermarket/grocery company also has petroleum
store in a duopoly market in and coal assets.
Australia, alongside Coles
(Sydney Morning Herald 2009).
Woolworths
Executive Officer Brad Banducci Andrew Mackenzie
Salary of Executive
AUD$7,756,090 AUD$7,123,000
Officer
Profit/Loss after Tax
(2018 Annual AU$1752m (Profit) AUD$ 4782 Million
Report)
Latest Dividend Paid 5th April, 2019 $30.10 25th September 2019, $1.56
Size by Total Assets
AUD $23.5 Billion AUD$ 146502 Million
(As of today)
Number of
202,000 62000 Plus
Employees
Share Price (52 week High = $ 38.100 High = $ 42.330
High and Low 24th
September 2019 Low = $ 27.030 Low = $ 29.062
(B) Graph- Share Prices and All Ordinaries
Date ASX 200 Index Woolworths Limited BHP Limited
22/07/2019 6781 34.50 41.34
23/07/2019 6812 34.65 41.58
24/07/2019 6862 34.93 41.33
25/07/2019 6901 35.38 40.59
26/07/2019 6879 35.23 40.85
29/07/2019 6911 35.38 40.60
30/07/2019 6928 35.48 40.83
31/07/2019 6896 35.62 40.76
01/08/2019 6871 35.58 40.26
02/08/2019 6846 35.77 38.78
05/08/2019 6710 35.59 37.38
06/08/2019 6546 34.71 37.10
07/08/2019 6588 35.50 36.75
08/08/2019 6642 35.50 37.30
09/08/2019 6663 35.40 37.29
12/08/2019 6670 35.64 37.01
13/08/2019 6648 35.88 37.01
14/08/2019 6677 35.74 37.42
15/08/2019 6490 34.78 36.39
16/08/2019 6485 34.99 36.17
Company Individual Graphs
ASX 200 Index
ASX 200 INDEX
7000
6900
6800
6700
6600
6500
6400
6300
6200
Woolworths Limited:
BHP Limited
(C) Overview of Share Performance/ Trend of Share-market
Woolworths Limited:
BHP
43
42
41
40
39
38
37
36
35
34
33
BHP
ASX 200 Index VS Woolworths Limited
36 7000
6900
35.5
6800
35 6700
6600
34.5 6500
6400
34
6300
33.5 6200
019 019 019 019 019 019 019 019 019 019 019 019 019 019 019 019 019 019 019 019
/ 2 /2 /2 / 2 / 2 / 2 /2 /2 /2 / 2 / 2 / 2 /2 /2 /2 / 2 / 2 / 2 /2 /2
/ 07 /07 /07 /07 /07 /07 /07 /07 1/8 2/8 5/8 6/8 7/8 8/8 9/8 2/8 /08 /08 /08 /08
22 23 24 25 26 29 30 31 1 13 14 15 16
Woolworths Ltd ASX 200
Woolworths Ltd.’s share prices seem to increase slightly from the 22th of July until the 25th of
July where the prices began to decrease. This could be because of the decrease of demand for the
share prices of Woolworths. Besides that, according to Harrison, Woolworths Ltd.’s share prices
were overvalued, since the supermarket margin has been declining. Sales has increased but their
earnings before tax have decreased by13.9% (Harrison 2017). It could also be decreasing
because of the increasing number of competition in the market. Newcomers like Aldi and Costco
will be one of the challenges they would have to face to survive in the growing market. Kmart
and Amazon are also some international threat for their department store Big W (Harrison 2017).
But from the 26th of July onwards, the share prices significantly increase to its highest price of
$35.88 on the 13th August, 2019.
Besides that, there are many factors that contribute to the prices of shares to fluctuate, increasing
and decreasing from time to time for Woolworths Ltd. Over the past few years, it was reported
that Woolworths Ltd.’s shares have fallen around 27%, but a new management team have been
appointed replacing the old one to improve the business (Rasckiewicz 2017). In April, a source
reported that Woolworths Ltd has followed the steps of Coles to pay their suppliers sooner, this
is to attain good relationship between the supermarket and their suppliers (Heffernan 2017). It is
predicted that Woolworths Ltd.’s earnings will grow 133.1% in the coming year (Bhatia 2017).
Despite that, one of Woolworths Ltd.’s branch Big W has a questionable future, as it was
forecasted to be gaining losses from $115 to $135 million (Heffernan 2017).
BHP Limited:
ASX 200 Index VS BHP Limited
43 7000
42 6900 The
41
6800 BHP
40
Group
39 6700
Ltd
38 6600
(ASX:
37 6500 BHP)
36
6400 share
35
6300 price
34
has
33 6200
1 9 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 had a
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 nasty
07/ 07/ 07/ 07/ 07/ 07/ 07/ 07/ /8/ /8/ /8/ /8/ /8/ /8/ /8/ /8/ 08/ 08/ 08/ 08/
/ / / / / / / / 1 2 5 6 7 8 9 12 3/ 4/ 5/ 6/
22 23 24 25 26 29 30 31 1 1 1 1 month
in
BHP Limited ASX 200
August, with BHP shares falling from $40.76 at the end of July to the share price of $35.34 we
see today (at the time of writing).
It’s been a very interesting 2019 so far for BHP shares, with a graph of the YTD share price
looking somewhat like a double speed bump. Early this year, a dam owned by Brazilian mining
giant Vale SA collapsed, resulting in the entire mine being shuttered. This caused an immediate
supply squeeze in the iron ore market – resulting in the price of iron ore climbing from around
US$70 a tonne to over US$120 a tonne in July – also explaining the run-up in BHP’s shares
during this time. But what goes up must come down and iron ore is trading for around US$82 a
tonne today (resulting in BHP’s shares being squeezed this month).
(D) Calculations of Gain/Profit on Portfolio
22 July 2019 16 August 2019
Company Share No. of Total Company Share No. of Total Gains
name price shares Investment name price shares Investment or
($) ($) ($) ($) (loss)
($)
Woolworths Woolworths
34.50 200 6900 34.99 200 6998 +98
Limited Limited
BHP Limited 41.34 150 6201 BHP Limited 36.17 150 5425.5 -775.5
Total 75.84 350 13101 71.16 350 12423.5 -677.5
(E) Recommendations on the Share Portfolio
Woolworths Ltd
Despite the increasing share price from where we purchased the share to the end of the date set
for us, Woolworths Ltd shows promising outcomes in time to come. It is recommended to hold
the shares and sell it later when it seemed more profitable.
BHP Limited
Among the analysts that track BHP Billiton (BHP) (BBL), 45% have given the company a “buy”
recommendation, and 10% have given it a “sell” recommendation. For Rio Tinto (RIO), 41% of
analysts are recommending a “buy” while 19% are recommending a “buy” for Vale (VALE). In
comparison, Freeport-McMoRan (FCX) and Alcoa (AA) have 11% and 41% “buy”
recommendations, respectively.
Part 3
(A) Key Financial data:
Information Woolworths Limited BHP Limited
Revenue / Sales $ 56726 Million $ 56319 Million
Interest Expense $ 154 Million $ 1405 Million
EBIT $ 2548 Million $ 20065 Million
Net Profit Before Tax $ 2394 Million $ 18848 Million
Net Profit After Tax $ 1676 Million $ 4782 Million
Current Assets $ 7181 Million $ 26704 Million
Total Assets $ 23558 Million $ 102414 Million
Current Liabilities $ 9196 Million $ 10368 Million
Total Liabilities $ 12709 Million $ 51767 Million
Total Equity $ 10849 Million $ 50647 Million
(B) Ratio Analysis:
Profitability Ratios Woolworths Limited BHP Limited
1) Return on the Total Assets (%): - $ 1676 $ 4782
$ 2,3558 $ 102414
NPAT
Total Assets = 0.07 = 7% = 0.05 = 5%
2) Return on Equity (%): - $ 4782
$ 1676
$ 50647
$ 10849
NPAT
Equity = 0.15 = 15 % = 0.09 = 9%
Stability Ratios Woolworths Limited BHP Limited
$ 12709
3) Debt Ratio (%): - $ 23558 $ 51767
$ 102414
Total Liabilities = 0.54 = 54%
Total Assets =0.51 = 51 %
4) Equity Ratio (%): -
$ 10849 $ 50647
Total Equity $ 23558 $ 102414
Total Assets
= 0.46 = 46% = 0.49 = 49%
Liquidity Ratios Woolworths Limited BHP Limited
5) Current Ratio (%): -
Current Assets $ 7181 $ 26704
Current Liabilities $ 9196 $ 10368
= 0.78 = 2.58
6) Quick Ratio:
Current Assets−Inventory $ 7181−$ 4233 $ 26704−$ 3906
Current Liabilites $ 9196 $ 10368
= 0.32 = 2.19
The Reasoning to why there are differences between the Companies’ Ratios
The three main ratio analysis are profitability ratio, stability ratio and liquidity ratio. The ratio
differences are significant because all these companies are in different industries in the market.
Woolworths Ltd is a large scale retail company that offers various products and service. BHP
Billiton is among the world's largest producers of aluminum, copper, manganese, iron ore,
uranium, nickel, silver and titanium minerals. The company also has petroleum and coal assets.
The ratios are used to understand their performance and comparing them between companies
within the same industry. The benchmark set by companies within the industry will determine
whether the company is doing better or worse or even the same as the other company that is
being compared.
Investment Recommendation:
As mentioned earlier, the BHP share price has now fallen 15% in August and now sits closer to
the 52-week low ($30.31) than the 52-week high ($42.33). However, I still don’t think BHP
shares are a screaming buy right now. Although BHP is paying out record dividends this year, I
think the shares are decidedly in a ‘mid-cycle’- phase and further moves down in the short to
medium-term are more likely than not.
The time to buy resources stocks is when commodity prices are at or near record lows and today,
this is not the case. To put this into some perspective, in 2016 you could pick up BHP shares for
under $16. That would have been a great time to strike, but I don’t see today’s prices of around
$35 as a fabulous entry point.
Therefore, based on the ratio analyzation of the two companies, Woolworths Limited seems to be
the most profitable company to invest in. Their profitability ratio is significantly higher
compared to BHP Limited.
References:
Bentley, A 2016, Top 10 stocks Australians are buying, The Australian Securities Exchange,
viewed 25 September 2019, <http://www.asx.com.au/education/investor-update-
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asxwow-poised-for-long-term-success/> [Accessed 25 September 2019].
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gclid=Cj0KEQjw6LXIBRCUqIjXmdKBxZUBEiQA_f50PhtO0Hl4wigcm9FvOe6naGyFGe4g2
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Low, C 2017, ‘Gerry Harvey says ‘people are just making things up’, The Sydney Morning
Herald, 21 March, <http://www.smh.com.au/business/retail/gerry-harvey-says-people-are-just-
making-things-up-20170321-gv2ulj.html>
Woolworths Group, 2018. Brad Banducci - Managing Director and Chief Executive Officer -
Woolworths Group. [online] Woolworthsgroup.com.au. Available at:
<http://www.woolworthsgroup.com.au/page/about-us/our-leadership-team/board-of-
directors/Brad_Banducci_Chief_Executive_Officer_and_Managing_Director_Managing_Directo
r_Woolworths_Food_Group/> [Accessed 1 May 2017].
Woolworths Group, 2018. Payments - Woolworths Group. [online] Woolworthsgroup.com.au.
Available at: <http://www.woolworthsgroup.com.au/page/investors/shareholder-
information/payments>.
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