Gage Roads Brewing Co Limited (ASX: GRB)

Appointed as the Official Beer and Cider Partner of Cricket Victoria- Gage Roads Brewing Co Limited is engaged in brewing, packaging, marketing and selling craft brewed beer, cider and other beverages, The Company was appointed as the Official Beer and Cider Partner of Cricket Victoria. As a result of the three-year partnership, the Group secured the rights to serve its beer and cider at the CitiPower Centre at Junction Oval and at Cricket Victoria’s official functions for the Melbourne Stars, Melbourne Renegades and at Cricket Victoria home matches and at all Cricket Victoria events. GRB expects that it will be a very exciting and important partnership and will continue with the rollout of its brand-in-hand marketing strategy and will target to increase the sales and market exposure on the east coast of Australia. This partnership will open the doors for its range of beers that are to be enjoyed at Premier Cricket clubs and community clubs across Victoria.


Company’s Craft Strategy Outlook (Source: Company Reports)

Gage Roads will provide great choices to its fans so that they can enjoy while watching the cricket at new home in St Kilda and this can be driven by the Group’s wide range of craft sales as well as a mid-strength and cider options. This strategic partnership comes after the securing of the exclusive beer and cider rights by the group at Perth’s new Optus Stadium and being named as the official beer and cider partner for the Western Force and Rugby WA, and an inaugural partner with Rugby Australia for the Sydney stop of the World Rugby 7’s Series. The Company’s contract brewing division Australian Quality Beverages executed an extension to its exclusive contract brewing agreement with Matso’s Broome Brewery and this was in line with the Company’s long-term strategy to focus on high-quality and high-value products. The stock prices were up by 34.78 per cent in last six months and by 5.68 per cent in last one month. The stock prices climbed up by 9.41 per cent in last five days but slipped by 6.45 per cent as on 29 May 2018 and this may be owing to some abrupt trading. We give a “Hold” recommendation at the current market price of $0.087 by looking at the changing demands of Australian beer drinkers which have served the Group well and it might be better to wait and watch for the impact of the strategic partnership.
 

GrainCorp Limited (ASX: GNC)

Decline in Earnings- GrainCorp, an Australia-based food ingredients and agribusiness company recorded a statutory net profit after tax (‘NPAT’) of $36.1 million for the half-year ended 31 March 2018 as compared to $90.0 million for the previous corresponding half-year. Revenue from continuing operations decreased by 19.1 per cent to $1,987 million (HY17: $2,456 million). It was worth noting that Diluted Earnings per share of the Company decreased due to a reduction in east coast Australia (ECA) crop production. The Group manages its capital to safeguard its ability to maintain an optimal capital structure so that it can continue to provide returns for shareholders and benefits for other stakeholders. The long-term debt increased from $748 million in FY17 to $753 million in HYFY18 and this increase was in line with smaller crop reducing cash flow. The group’s ROE has gone down owing to the latest performance.


Earnings Performance (Source: Company Reports)

Meanwhile, Ellerston Capital Limited and its associates, a substantial holder of the Company changed its substantial holding in the Company since 23 May 2018 and initially, it used to hold 15.08 per cent of the voting power and now holds 16.73 per cent of the voting power. Mr Mark Palmquist, a director of the Company having a direct interest in the Company acquired 10,000 shares from the market. The Group declared a fully franked interim dividend of 8 cents per share and is expecting a similar second half dividend and will be paying on 16 July 2018. The Group maintained a pay-out ratio of 51 per cent of NPAT and targets to maintain it between 40-60 per cent of full year NPAT through the business cycle. While sales volume for malt have been low, capacity utilisation is high given the demand from craft beer and distilling customers. As in May 2018, the prevailing dry conditions across most of the Australian green belt were leading to issues for grain growers, with dry-sowing occurring in many areas. The stock price thus had fallen in the last one year and were down by 24 per cent. The stock was marginally down in last five days. Despite the dip, the stock looks “Expensive” at the current market price of $7.78.

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