With the rise in Australia’s wine exports to China (including Hong Kong and Macau) as seen in the last 12 months ending March 2018, wherein the exports worth AU$1.04 billion represented about 50% of the total AU$2.65 billion worth of exports, some stocks have come under the lens for a review.
 

Stocks’ Details
 

Australian Vintage Ltd

Robust 1HFY18 Performance: Australian Vintage Ltd (ASX: AVG) is one of the largest wine producers in Australia. Recently, AVG disclosed to ASX that one of its directors, Naseema Sparks who has a direct interest in the Company, acquired 23,720 shares for a consideration of $0.5925 per share. Additionally, Peter James Perrin who has an indirect interest has recently acquired 27,100 shares for a consideration of $0.59 per share. On the other hand, the group delivered strong revenue growth of 18.1% Mn to $140.9 Mn in 1HFY18. The revenue surged up due to increased sales across the segments.  EBIT increased by $4.4 Mn or 88% to $9.3 Mn due to product mix growth during the same period. Net profit after tax (NPAT) registered splendid growth of 177% to $4.4 Mn in 1HFY18 as compared to 1HFY17. As a result, the basic earnings per share amounted to 1.6 cents per share for the half-year as compared to 0.7 cents in half year ended at December 2016. The group also reported for cash and cash equivalentsto $7.17 Mn as of December 2017, up from $2.61 Mn as of June 2017, representing healthy cash position of the company. Further, the company signed an extension to the existing funding facility to September 2020 and with a positive operating cash flow, reflecting solid financial position of the company. The company continues to focus on growing its three key brands, McGuigan (distributor in China), Tempus Two and Nepenthe, while the last 12 months have been challenging due to the unfavourable conditions. Nonetheless, for the 12 months to December 2017, the sales to China rose by 57% against 2016 and this supports the overall wine industry sales growth to China. During the challenging period, the group’s first 4 months of FY18 witnessed a 12% rise in packaged sales by sales value and 13% by sales volume, with improved sales in both the Australasian/ North America and UK/Europe segments. Based on the solid first half year performance, the Group expects 2018 result to be at least 40% up on the 2017 result. Despite the positive developments and performance, AVG has been removed from All Ordinaries S&P/ ASX Index effective March 19, 2018, as per the latest S&P Dow Jones Indices rebalance. Meanwhile, AVG stock has climbed up 30.11% in past three months as on April 16, 2018. We give a “Buy” recommendation on the stock at the current price of $ 0.600.
 

1H FY18 Financial Performance (Source: Company Reports)
 

Treasury Wine Estates Limited

Appointment of Matt Young as Chief Financial Officer, effective from 1 May 2018: Wine maker company, Treasury Wine Estates Limited (ASX: TWE) has announced the appointment of Matt Young as TWE’s Chief Financial Officer (CFO), formerly Deputy CFO, effective from 1 May 2018. He replaces Gunther Burghardt, who is transitioning upwardly from CFO to the new role of Executive Vice President, Operations - Americas. In his new role, Mr Burghardt will have accountability for leading all corporate and supply chain functions in the Americas, allowing Robert Foye (President Americas and Chief Operating Officer) to focus on sales, marketing, customer and distributor management, and ensuring the successful implementation of the recently announced route-to-market changes in the US. Besides this, the Group undertook an on-market share buy-back program under while about 7983255 shares were subsequently cancelled for a total consideration of $137288096.49, in the month of February 2018. During the first half of the year, the Group has delivered Net Profit After Tax (NPAT) growth of 37% to $187.2 million, EPS growth to 25.6 cents per share and EBITS growth across all regions. As a result, the group has declared an interim dividend of 15 cents per share, 75% franked, which is an increase of 2 cents per share (+15%) and represents a 54% payout ratio. Further, net finance cost is higher than the previous corresponding period, principally driven by increased average borrowing. Major driver of the movement in borrowing includes share buyback program, increased tax, and higher inventory balance. The stock has risen 18% in three months as on April 16, 2018 and is trading at higher P/E. We maintain our “Expensive” recommendation on the stock at the current price of $ 17.520.

Inventory Performance- Segment wise (Source: Company Reports)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.