Q: Hi there, can you tell me exactly how much of a discount George Weston is trading at relative to market and book value? I'm interested to know your thoughts on whether the discount can be broken down into any distinct components, and what the prospects are for future break up of the company so that investors can hold the investments in Loblaws, Choice REIT, etc. directly. Thank you.
5i Research Answer:
WN trades at about a 15% discount to its holdings. The calculation becomes fairly complicated as tax burdens are not known exactly. On a book value basis, though, it is still at a large premium (4.6X) because of the low book value of its legacy assets. The discount is 'probably' too high, but it varies and has been in place a very long time. A break up would make sense to us, and Loblaw/WN have taken some steps towards this in the past. But new initiatives seem slow in coming, and we do not like 'counting' on corporations to do such activities.