Energy Stocks Versus Consumer Staples; A Look At WPL, STO, BKL, WOW

  • Sep 17, 2019 AEST
  • Team Kalkine
Energy Stocks Versus Consumer Staples; A Look At WPL, STO, BKL, WOW

Energy Sector plays key contributory role to the economy of Australia, leveraging the presence of extensive resources - both renewable and non-renewable resources. The performance of the sector can also be measured through the S&P/ASX 200 Energy (AUD).

Energy sector

The energy sector has underperformed the benchmark index S&P/ASX 200 over last one year. As per the index factsheet released by S&P Dow Jones Indices for the month ended 30 August 2019, on annualized basis, the index has corrected ~9.32% in last 1-year. Looking at the fundamentals of the S&P/ASX 200 Energy (AUD) index, trailing and projected price to earnings multiple stand at 13.03x and 13.97x, respectively with Price to book value of 1.24x.

The indicated dividend yield for the index is quite higher at 4.37%. Price to sales and price to cash flow for the index is recorded at 1.28x and 7.26x, respectively. The index comprises 12 stocks with total market capitalization of A$101,779.56 million.

Energy sector

Consumer Staples Sector

Consumer Staples Sector comprises mainly household and personal products, food, beverage and tobacco, and other staples. The sector is non-cyclical in nature due to its characteristics of “Always in Demand”. Performance of the sector can be measured with the index behavior - S&P/ASX 200 Consumer Staples (AUD).

The consumer staples sectoral index has outperformed the benchmark index - S&P/ASX 200 recently, by giving total returns of 11.36% in last 1-year. Coming to the fundamentals, trailing and projected price to earnings multiple come in at 26.11x and 25.91x, respectively. Price to book value for the index stands at 4.24x with indicated dividend yield of 2.34%. The prrice to sales and price to cash flow stand at 0.86x and 15.19x, respectively. The index comprises 14 stocks with total market capitalization of $110,666.8 million.

Consumer Staples Sector

We are picking two big players from each sector – Energy and Consumer staples to summarize the performance.

Woodside Petroleum Limited

Woodside Petroleum Limited (ASX: WPL) is engaged in the activities of exploration, development, production & marketing related to hydrocarbons, oil and gas. Below are the operating segments for the company, identified on the basis of nature and geographical presence of the business/venture:

(a) Producing - comprises Pluto LNG, North West Shelf Project, Australia Oil and Wheatstone

(b) Development - comprises Scarborough, Browse, Kitimat, Sunrise and Senegal projects

(c) Other- includes trading and shipping activities and activities undertaken in other international locations, and Unallocated items.

The company recently announced a fully franked ordinary dividend of USD 0.36 (A$ 0.53238687) per share pertaining to six months, payable on September 20, 2019 with a DRP Price of A$ 31.3447

The company recently released its first-half results for FY19, below are the highlights-

  • Net profit after tax (NPAT) stood at US$419 million, posting a decline of 23%.
  • Top-line during the period also saw a decline of 5% on pcp to US$2260 million. However, free cash flow witnessed an increase of 123% to US$869 million.
  • During the period, the company raised a $1,500 million unsecured bond with a coupon rate of 4.50% and term of 10 years maturing in March 2029.
  • The period saw the completion of first major turnaround of Pluto LNG and commenced Pyxis Hub FEED activities.
  • North West Shelf Project witnessed a strong production during the period while delivering efficiency and capacity improvements. The segment saw the commencement of GWF-3 FEED activities.
  • Australia Oil is expected to deliver over 10 MMbbl in 2020. Wheatstone witnessed an increased reliability and production rates with lower LNG unit production cost.

Woodside Petroleum Limited

At the current market price of A$33.360 as on 17 September 2019, the stock is available at the price to earnings multiple of 16.940x with market capitalization of A$30.61 billion and dividend yield of 5.51%. The stock has corrected 11.79% in last 1-year.

Santos Limited

Leading Energy player, Santos Limited (ASX: STO) has 5 operating segments, based on the nature and geographical location of the assets- Cooper Basin, Queensland & NSW, Papua New Guinea (“PNG”), Northern Australia, and Western Australia.

The company recently announced a fully franked half-yearly ordinary dividend of USD 0.060 per share, payable on September 26, 2019.

The company recently released half-yearly results for FY19, below are the highlights:

  • Product sales stood at US$ 1,974 million, a growth of 18% on pcp.
  • EBITDAX and underlying profit for the period reported record numbers coming in at US$ 1,260 million and US$ 411 million, a rise of 43% and 89% on pcp, respectively.
  • H1FY19 results saw a remarkable strength of the business with regards to cash-generative operating model along with the successful integration of the recently acquired Quadrant.
  • The Management raised the guidance on combination synergies to be in the range of US$50 - US$60 million on annual basis.

Santos Limited

At the current market price of $7.840 as on 17 September 2019, the stock is trading at a price to earnings multiple of 12.360x with market capitalization of $16.14 billion. Annual dividend yield for the stock stands at 2.26%. The stock is trading close to the higher end of its 52-week trading range of $5.145 to $8.040. The stock has gained 46.78% on YTD basis.

Blackmores Limited

Blackmores Limited (ASX: BKL) is engaged in production and sales of natural health products along with the herbal nutritional supplements with operations spreading across ANZ and Asia. There are four key strategic priorities for the business – (a) Consumer connectedness (b) Innovation & expertise (c) Global advantage (d) People & performance.

The company recently announced its full-year results for FY19 with Full year revenue of $610 million, up 1% on prior year. Below are the key highlights:

  • Witnessed domestic sales growth in all the markets except New Zealand, which saw a fall of 1% on FY18.
  • 24% fall (Yoy) in net profit after tax, reported at $53 million.
  • Underlying NPAT for the period came in at $55 million, a fall of 19% on YoY basis.
  • Final dividend of 70 cents per security, taking total fully franked ordinary dividend for the whole year to 220 cps.

Blackmores Limited

At the current market price of $81.94 as on 17 September 2019, the stock is trading at a price to earnings multiple of 27.170x with market capitalization of $1.46 billion. Annual dividend yield for the stock stands at 2.62%. The stock is inching towards the lower end of its 52-week trading range of $63.640 to $143.840. The stock has gained 25.54% in last 1 month.

Woolworths Group Limited

Woolworths Group Limited (ASX: WOW) operates in Australia and New Zealand with total 3,292 stores. Group’s reportable segments are - Australian Food, New Zealand Food, Endeavour Drinks, BIG W, Hotels, and Others.

Recently, the company notified about a change in Director’s Interest wherein Brad Banducci, Woolworths Group CEO, disposed 130,000 shares to fund expected tax payments arising from share rights vesting as part of his remuneration.

Below are the highlights of recently announced full-year results for FY19 :

  • Sales from continuing operations stood at $59,984 million, up 3.4% on YoY.
  • Net profit after tax stood at $1,752 million, posting a growth of 7.2% on FY18.
  • The period was marked by robust customer scores, especially in Q4FY19 along with improved sales and profit in H2 across the Group. The period also saw a materially improved momentum in BIG W.

Woolworths Group Limited

At the current market price of $36.910 as on 17 September 2019, the stock is trading at a price to earnings multiple of 17.580x with a market capitalization of $45.61 billion. The stock is currently trading close to the higher end of its 52-week trading range of $27.030 to $38.100. The stock has gained 32.02% in last 1-year.


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