Wesfarmers 1H24 results in line but prefer staple WOW 28's that trade wide - both SLB's

Aussie retailer conglomerate, Wesfarmers, posted a slight beat on 1H earnings with EBITDA at AUD $3.075b (c$3.01b). Kmart stores (staple clothing & basic goods retailer) driving a strong beat (+7.5% vs. c+4.25%).

Operating cash flows at $2.9b/+47% yoy also beat c$2.14b - management pointing to favourable working capital movements & Kmart earnings -it drove a fall in net debt from $4.7b to $3.9b & pushed leverage down from 2.1* to 1.8*. Interim dividend still held at $0.91 (c$0.89) - i.e. BS healthy & leaves headroom against ratings.

Wesfarmers has exposure to commodity prices through its chemicals, energy & fertiliser unit (~8% of rev's) - we prefer Aussie staple retailer Woolworths (Aus. grocery ~75% of rev's, NZ grocery ~10%) with strong BS.

WOWAU28's trade well wide for its rating (& offers larger discount vs. WES)- b/a is only 6 wide & don't see compression to FV struggling on broader spread sell-off's (historically vs. JDE Peets, Tesco on spread sell-off's).

WOW reports 1H results on Wednesday (Aus. session) - consensus (*5) looking for +4.3% headline sales growth.