Ann: Update on Operating Model Review-WOW.AX, page-63

just checked MS, CS, GS reports from yesterday. All seem to like the restructuring plans. TP's largely unchanged though. MS have a A$17 TP on it (but MS have poor track record in Aus/Asia reserach calls.

CS have A$24.50 TP and GS have a A$21.50 but acknowledging upside risks to their estimate.
CS expects Masters sale to be announced prior to Aug 25, with estimated 600mln.

From GS here:
What's changed WOW announced an update to its Operating Model Review. The key components were (1) A$959mn in restructuring charges across Food and Liquor, Corporate and Big W, A$571mn of which is non-cash; and (2) provision of FY16 EBIT guidance range of A$2,550mn - A$2,570mn (GSe A$2,560mn).

Implications Today’s announcement represents another step in the CEO’s plan to reinvigorate the group’s operations. While the restructuring cost is large, the new CEO’s preparedness to make difficult decisions to reposition the business for future growth is encouraging. FY16 EBIT guidance was in line with our estimate (a change versus recent downgrades) while management comments around incremental improvement in June/July trading may signal that the investment in price and service is gaining traction with customers.
We see the business turnaround as still taking some time to play out and not without execution risk. The industry remains highly competitive meaning any sustainable recovery in Food & Liquor sales/earnings is likely to be a late FY17E/FY18E story. We retain a Neutral rating.

Valuation With our FY16 EBIT forecast within management’s guidance range we have left our operating estimates broadly unchanged (minor downgrade to Big W/EziBuy fully offset by upgrade to F&L) ahead of the detailed full year results on 25 August. No change to our consolidated estimates and A$21.50 12m TP (equal weighted FY17E EV/EBITDA (on 9X) and DCF).

Key risks Key risks: Improved sales momentum in the Supermarkets business (+). Escalation of grocery competitive dynamic (-).
INVESTMENT LIST MEMBERSHIP Neutral