Facing off in the retail pool, Woolworths Limited (ASX: WOW) will take on Coca-Cola Amatil Ltd (ASX:CCL) in a match that Coca-Cola must win in order to keep its ASX World Cup hopes alive.
Pre-match commentary and stats
Woolworths owns the eponymous supermarkets, as well as a network of pubs, liquor stores, poker machines and petrol stations. It has recently ventured into hardware but has yet to achieve great success in that regard.
Coca-Cola Amatil is a bottler and distributor of carbonated fizzy drinks and water and is currently moving back into beer. The company's core business is in Australia and it has thus far failed to generate significant growth from its Indonesian business. Ironically, the company's revenue shrunk in 2013 in part due to the supermarket duopoly – half of which is Woolworths – squeezing its margins.
| Woolworths | Coca-Cola | |
| Market Capitalisation | $44.5 billion | $6.97 billion |
| Forecast FY 14 P/E ratio | 18.24 | 16.3 |
| Forecast FY 14 Yield | 3.89% fully franked | 5% fully franked |
| FY 2013 Cashflow Yield | 6.18% | 10.5% |
| Net interest cover | 9.63 | 6.68 |
Notes: Thompson Consensus Forecasts, and based on last FY reports.
GAME ON
When it comes to price, Coca-Cola is a clear winner. Due to poor performance in FY 2013 spooking investors, the company is trading on a historically high cashflow and dividend yield. Meanwhile, Woolworths is priced for strong growth despite the fact that the duopoly has already covered the vast majority of Australia.
Coca-Cola Amatil scores with a early header, surprising the crowd: the score is 1 – 0!
Debt is a different matter, with Woolworths demonstrating significantly better interest cover, and lower gearing than Coca-Cola Amatil. Worse still, Coca-Cola recently had its debt downgraded by Standard and Poor's
Woolworths equalises, bringing the score to 1 – 1. After the restart Woolworths scores again making it two goals resulting from Coca-Cola's relatively high debt. The score is 2 -1 to Woolworths at the end of the first half.
Coca-cola looks energised at the start of the second half thanks to superior growth prospects over the long term. Whereas Woolworths is said to be increasingly cannibalising existing customers with new stores, Coca-cola is moving into different products (such as beer), and new jurisdictions (such as Indonesia). A return to profit growth looks more than likely in the short term.
And Coca-Cola Amatil scores from outside the box bringing the score to 2 – 2!
A decent chunk of Woolworths' profits come from those who are addicted to poker machines – and as a result of this, Woolworths fouls the new Coca-Cola striker (and Managing Director) Alison Watkins inside the penalty box. She lines up for the penalty shot but misses as a result of the fact that Coke's main products are bad for teeth, weight and can contribute to diabetes.
The score ends at a 2 – 2 draw, a lucky escape for Woolworths will see the company well placed to progress to the knock-out stage.
