From a Technicality Analysis point of view, yes it probably is. Wesfarmers is classed as a conglomerate, but it has over many years managed the diversity of its businesses successfully.
Renowned quality retail ventures, such as Bunnings, Officeworks, K Mart, Target and Coles. The other divisions are:
- One Digital
- Chemicals, energy, fertilizers
- Industrial and safety
- Other financial investments
Preparing for a renewable energy future
Wesfarmers has embarked on a joint venture with the Chilean global mining firm SQM, which has a significant involvement in supplying lithium for electrical batteries, forming Covalent Lithium.
It will be part of Wesfarmers’ integrated Mount Holland Lithium project. Mount Holland, one of Australia’s biggest undeveloped hard-rock lithium deposits, will be open-pit mined, and processed before being refined at a facility to be constructed at Kwinana, 15km south of Fremantle.
We do not know how much Wesfarmers will have to spend for the production to be profitable. It is likely, however, to become in time, a lucrative business indeed. Lithium is an essential component for the manufacture of lithium ion batteries for electric vehicles, and is also required for making storage batteries for electricity derived from renewable sources.
The advisory company Atlam Group considers the refinery could produce 50,000 tonnes of lithium hydroxide a year, and have the capacity to build batteries for up to one million electric vehicles a year. With the ACT now requiring new vehicles to be electric, and other states/territories likely to follow suit, the demand is only likely to grow.
Today (July 20) the share-price at close was $46.80, having been hovering just below $47 for most of the day.
This compares with the 120 period exponential moving average price today of $48.05, which can be considered a market endorsed “fair price” for Wesfarmers.
Technical analysts will note that, as shown on the chart above, there has been a V-shaped reversal after coming off a $15, or 27%, fall in share price from $55.60 to $40.60 in the past six months.
Bullish for investors is the fact that the rise has continued and when on July 12 it moved above the previous high, the start of an uptrend could be declared from a technical perspective.
The next two targets, if the uptrend continues, is at a support/resistance level at $47.50, followed by penetration of the ema (exponential moving average) plot currently at $48.
Investors taking a position, now will benefit from a fully-franked dividend yield of 3.7% at present, and will be positioned to profit from any re-rating of the share-price upwards, if the lithium project meets expectations.
Readers are reminded that this post is based on present information of a general nature. They should always seek qualified advice specific for their needs before making investment decisions.
Categories: Chart Review