Analyst views mixed on Australia's Coles selling fuel and convenience unit

Waypoint REIT

22/09/2022 24:10

** Analysts believe Australia's No.2 grocer Coles  COL.AX 
selling its fuel and convenience retailing unit Coles Express to
power producer Viva Energy  VEA.AX  for A$300 million ($200.64
million) makes sense  urn:newsml:reuters.com:*:nL4N30R3WM 
    ** Brokerage Citi (A$20.10, buy) says the sale "makes sense
strategically" given No. 1 Australian grocer Woolworths Group's
 WOW.AX  earlier exit from petrol
    ** Says the sale will enable Cole's management to focus on
improving its more significant food and liquor business 
    ** Citi thinks Coles will invest sale proceeds into the
business rather than undertaking significant capital management
    ** But brokerage also says Coles will be left with an
"arguably undergeared" balance sheet, particularly relative to
Woolworths, if the deal is approved by regulators 
    ** Brokerage Jefferies (A$20.00, buy) thinks that the return
on capital improvement stemming from the reassignment of A$816
mln leases was the key motivation for Coles to sell the business
    ** Jefferies, however, sees the deal to be about 1% EPS
dilutive for Coles 
    ** Six of 15 analysts rate the stock "buy" or higher, six
"hold" and three rate it "sell"; their median PT is A$18.55 -
Refinitiv data
    ** As of last close, stock was down 7.5% this year

 (Reporting by Himanshi Akhand in Bengaluru)
 ((Himanshi.Akhand@thomsonreuters.com;))