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In reply to: Mark M on Thursday 16/10/08 06:41pm

Mark M,


Cheers for that, i agree caution is the key in this market. I only jumped in for a tiny trade, will either make a few hundred or lose a few hundred on the trade.


Will be watching with interest over the coming months to see how WES performs.


Good luck to all that Hold currently.



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In reply to: The Pro on Thursday 16/10/08 06:50pm

Closed my little trade out at the open, little bit of drinking money. http://www.sharescene.com/html/emoticons/wacko.gif


The debt levels are certainly waying the share price down, which is unfortunate. Coles will take time to turn around, but i believe that this will happen, again patience is the key.

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  • 3 weeks later...

wesfarmers the great conglomerate


Mr Goyder ---- why not some more add ons to you empire ?


I have one for you in the "early education" (childminding) field


ABC Learning -- going cheap but government guaranteed cash flow


could bolt it on to Bunnings - kids are just an inventory item booked in each day, processed , inspected and checked out



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In reply to: Ratfink on Friday 07/11/08 03:14pm

just being a bit cynical about WES's continuing strategy of bolt ons if they meet hurdle rates


you hit it on the head though as WES has some significant debt already so any more would be very expensive


they have a fair bit to refinance as well $1.26Bn within a year


net debt:equity 50%

interest expense cover 4.3 times


(see WES October Investor briefing)

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In reply to: db76 on Friday 07/11/08 10:56pm


Debt markets seem to be recovering somewhat so hopefully it shouldn't be too much trouble refinancing. Interest cover is OK. I do like the way they debt is presented ie. Debt / Equity, and question why any company would use any other method.


Pity WES is so capital constrained because it's raining bargains out there.

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In reply to: Ratfink on Saturday 08/11/08 08:13am

Goyder says he is comfortable with (net debt/equity) of about 50%


this equates to a gearing (debt/debt+equity) of 33%


not too bad but in this environment not so good


S&P and Moodys have them on BBB+(negative watch) and Baa1 (stable)


net debt is $9.276Bn - very significant in this environment


for all his assurances it is almost certain that there will be another capital raising at a big discount to wipe off some more debt


wesfarmers is no longer the same after swallowing Coles


the ability of Resources (Coal) to keep up the cash flow to service debt while coles is being revamped will be tested - interest expense cover is only about x4.3 (WOW has about x11)


note also that the Remuneration report at the AGM was rejected - not too many happy shareholders so any capital raising will be met with hostility


Ref: Investor Briefing 14/10/08

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I also went to the AGM yesterday and came away concerned about the SP.


Whilst it seems that WES are in no danger of going down they certainly are in need of a reduction in their debt levels.


At the meeting they said that their preception of the market was that it was concerned about:


- Coal prices

- Debt levels

- Coles turnaround


They said that they could do little about the first (coal prices) but it became apparent during the meeting that the current contract lasts until next year but they are contemptlating a large reduction in coal price on the contract is renewed. At least this keeps the revenue coming until next year.


On debt levels as others have said they have managed to roll over loans to date but clearly the banks see a need to reduce debt and two questions on another capital raisiing were asked and both times they avioded answering the question. In my book their aviodance of an answer means that another capital raising is probable.


The other question was on the continuation of the divvy at $2; weasel words were the response to this question. Aterwards i had a talk with one of the directors and he told me that on this they clearly could not give any guidance since times were so uncertain. He also stated that currently their was a review of the goodwill asset value of the company going on and in this context there may be "impairments" which could include a writedown of the goodwill assets. If that happened their profit could be significantly degraded and that in these circumstances (if they occured) could cause a reduction (or even elimination) of the divvy for a period. The fact that he was so frank on this to me means that there is a strong possibility of the divvy reduction - only my opinion. Any reduction in the divvy would IMO have a serious impact on the SP. If this happens it's clear to me that the capital raising will preceed any reduction in the divvy - so as to get the best return to the company. It was also pointed out to me that the people who got the best return from the last capital raising were those that sold their rights (they evidently got $10 a share for their rights) and did not participate.


There was also a lot of discussion on the Coles turnaround. The point was made by questioners that they saw no reason why the turnaround would take 5 years - all they needed to do was go out and copy WOW. Quite correctly IMO the directors pionted out that the objective was to do better that their competition and the copying was not going to acheive this. Ian Mecleod (the new pommy guy who is taking over Coles) was at the AGM but Eastwood said that it was not appropriate for him to speak to the meeting.


I was concerned that Ian Mecloed was said to be living on an airplane so I fail to see how he could give Coles all his attention. I was also concerned that the new chairman (now taken over from Eastwood) seems that have a number of other distractions (Boral etc) so again not giving WES all his attention.

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  • 4 weeks later...

In reply to: zog on Friday 14/11/08 12:14pm

considering the hurdles OZL is now being made to jump by the banks


WES - market Cap about $11Bn with $9Bn debt


(cf. BHP - market cap about $88Bn with about $9.7Bn net debt)


by Dec09 they will have to refinance $2.91Bn


what can we conclude ?


KRudds manna from heaven may give us some altitude to bail out

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