Treasury Wine Estates Limited
A Quick Look at Recent Updates: Treasury Wine Estates Limited (ASX: TWE) is in the consumer staples sector, and the company is engaged in sourcing and grape growing; wine production and marketing; and selling and distribution. The geographical segments of the company include Australia, New Zealand, the Americas, Asia, Europe, and Latin America.
The company has recently given a notice of change in the director’s interest. As stated, Garry Arthur Hounsell used to previously hold 64,000 ordinary shares (Personal superannuation fund) and 4500 ordinary shares were directly held. However, post the change on 15 February 2019, the director holds 79,000 ordinary shares (Personal superannuation fund) given acquisition of 15,000 new shares with a $16.43 being the average price per share.
Moreover, the company has reinstated its Dividend Reinvestment Plan (DRP), which will be available to Australian resident shareholders for the 2019 interim dividend to be paid on 5 April 2019. The DRP allows eligible shareholders to reinvest either all or part of their dividend in additional fully paid ordinary shares in Treasury Wine Estates, instead of receiving the dividend in cash. Participation in the DRP is voluntary.
Important Metrics (Source: Company Reports)
Net Sales Revenue increased 16.4% on a reported currency basis and 12.7% on a constant currency basis benefitting from a 1.4% increase in volume, portfolio premiumisation and price realisation on Luxury and Masstige wine.The net sales revenue stood at $1507.7 million in 1H19 compared to $1295.4 million in the prior corresponding period. The net profit after tax rose by 17.1% on a reported currency basis on the back of higher revenues.
What to Expect From TWE: The company reiterates guidance of approximately 25% reported EBITS growth in FY19. Moreover, the company expects growth in FY20 EBITS in the range of approximately 15% to 20%, which is broadly in line with consensus.
The stock is trading at $14.980 per share i.e. slightly towards its 52-week low price with PE multiple of 28.390x.
Moreover, it has generated negative returns of 16.58% over the last six months. Hence, we suggest the investors to closely watch this stock at the current price of $14.980 per share for a better entry level.
Australian Vintage Limited
Stock volatility before interim results: Australian Vintage Limited (ASX: AVG) is into the production of wine. The company is a leader in its segment. The extent of the company’s operations includes vineyards, boutique and bulk wine production, packaging, marketing and distribution.
The company will announce its half-yearly results for 31 December 2018 on Wednesday 27 February 2019.
Sales by segments (Source: Company Reports)
The revenue of the company grew by 17% approximately Y-O-Y with $264.613 million in FY 2018, as compared to $226.450 million in FY 2017 due to the continued growth in the branded products, and the sales mix has improved as the company continues to target higher margin sales and remove low margin or no margin sales.
The PAT increased significantly to ~$7.7 million in FY18 up by 79% Y-O-Y compared to $4.3 million in the prior period, mainly on the back of higher revenues.
What To Expect From AVG: The company focuses on its key strategies of growing export business, increasing brand sales and focus on cost controls going forward. Moreover, with strong operating cash flow, the company in the short term will continue investing in them to improve efficiencies, secure the future grape supply at market prices or better, and improve the already high quality of the wine.
The stock is trading at $0.490 per share i.e. it is trading slightly towards the 52-week low price. It has yielded a YTD return of 3.72%. However, it remained subdued in the recent past with negative returns of 11.36% and 9.72% over three months and six months period respectively.
Hence, considering the above factors, we give a “Speculative Buy” rating on the company’s stock at the current price of A$0.490 per share.
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