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Kick Off: Wesfarmers Ltd vs Westfield Group

Retail behemoth Wesfarmers Ltd (ASX: WES) will today try their luck against global shopping centre giant Westfield Group (ASX: WDC) in their ASX World Cup first round match.

Westfield will go into the match as a crowd-favourite after its convincing win against Coca-Cola Amatil Ltd (ASX: CCL), while Wesfarmers will fight to keep its chances alive after going down to rival Woolworths Limited (ASX: WOW) in a 2-1 defeat.

Here’s how the pair line up

Wesfarmers Ltd Westfield Group
ASX:WES ASX:WDC
Recent Price $41.25 $10.82
Market Capitalisation $47.2 billion $22.5 billion
Forecast Dividend Yield 4.7% | 100% 4.8% | 0%
Projected P/E ratio 19.8 15.6
Price-Book ratio 1.58 1.48

Wesfarmers Ltd

Wesfarmers has been a truly great stock for shareholders over the last five years, delivering a return of 94% over that time (not to mention the dividend distributions). However, while it is now trading on a projected P/E ratio of just under 20 times, it needs to be asked whether it has run its race.

Although Wesfarmers’ enormous cash balance (set to expand after the sale of its insurance underwriting business for $1.85 billion) could allow the business to make a major acquisition in the near future, the company may still struggle to live up to its earnings expectations. The risk of underperforming is increased by the government’s horror budget which will likely impact the performances of Wesfarmers’ Bunnings, Kmart and Target businesses.

While the company has struggled to score all day, it snuck a late goal through the net thanks to its very attractive fully franked dividend yield.

Westfield Group

Unlike Wesfarmers, Westfield Group has performed dismally in recent years. In fact, without accounting for dividends, it has returned just 3% in the last five years. However, the company will come into this match firing after finally managing to pass its $70 billion restructure bid by shareholders last week.

The restructure will see Westfield Group completely exit Australia and New Zealand to instead focus on its international operations which are mainly located in the US and UK. This is looking like an exciting play by Westfield, particularly as the American and European economies continue their strong recoveries.

While the confidence of Westfield’s fans over the last few years has been tested by the rapid rise of the online retail sector, Westfield could certainly prove them wrong over time as it continues to redevelop its strongest assets and solidify its balance sheet. While they haven’t proven easy, Westfield has managed to score 2 impressive goals leading into the final minutes of game time.

Full Time

Wesfarmers certainly put in a gallant effort but seemed to run out of legs late in today’s match, allowing Westfield to get over the line with a 2-1 win. With momentum like this, Westfield could certainly be one to watch as it progresses to the later stages of this tournament…

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Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil Ltd.

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