Treasury Wine Estates Limited

TWE Details

Interim Dividend Payment on April 05, 2019: Treasury Wine Estates Limited (ASX: TWE) is into consumer staples sector and engaged in sourcing and grape growing; wine production and marketing; and selling and distribution.Recently, the company stated that one of its substantial holders, The Capital Group Companies Inc has upwardly revised its voting power in the company from the erstwhile 8.6337% to the current 9.6508%. Moreover, the Board of Directors declared a fully franked interim dividend of 18 cents per share which will be paid on April 05, 2019. It equates 20% higher than the prior corresponding period.

1HFY19 Financial Performance (Source: Company Reports)

Net Sales Revenue (NSR) increased by 16.4% to $1,507.7 million in 1HFY19 on a reported currency basis and by 12.7% on a constant currency basis, which represents the strongest organic growth in the company’s history, primarily driven by 1.4% increase in volume, portfolio premiumization and price realization on Luxury and Masstige wine. The company reported EBITS of $338.3 million, up 19.4% on a reported currency basis compared to prior corresponding $283.3 million in 1HFY18 on the back of stronger revenues, and 17.8% on a constant currency basis, with EBITS margin up 0.9 ppts to 22.4%. The ROCE of the company was up by 0.7 ppts to 13.3% in 1HFY19, indicating strong returns while investing in growth. The investment grade credit profile of the company was maintained with Interest Coverage of 13.9x and Net Debt to EBITDAS at 2.0x.

Strong EBITS guidance: The Company reiterates guidance on reported EBITS growth of ~25% in FY19, with a balanced earnings outcome across the fiscal year to reflect the even phasing of Luxury shipments between 1H19 and 2H19. TWE expects growth in F20 reported EBITS in the range of approximately 15% to 20% which is broadly in line with consensus.

The stock has generated a YTD return of 7.43% and is currently trading at a PE multiple of 28.88x. Hence considering the strong organic growth, improved cash conversion cycle in 1HFY19 as compared to the prior six months, and decent EBITS guidance for FY19E and FY20E, we give a “Buy”recommendation on the stock at the current market price of $15.40 (down 2.346% on March 21, 2019).


TWE Daily Chart (Source: Thomson Reuters)
 

Australian Vintage Limited 

AVG Details

Strong revenue and bottom-line growth: Australian Vintage Limited (ASX: AVG) is a leading player in the Australian wine market. The company’s brand portfolio includes Miranda, Nepenthe, Tempus Two, Passion Pop and Mcguigan Wines. It has several operations including vineyard management, contract processing & packaging, bulk wine production, packaging and supply. Recently, the company has announced that AVG stock, as per March 2019 Quarterly Rebalance of the Ordinaries S&P Dow Jones Indices, was added to All Ordinaries, effective from March 18, 2018.


1HFY19 Consolidated P&L (Source: Company Report)

The revenue of the company went up by 8% to $143.1 million in 1HFY19 compared to $132.3 million in the prior corresponding period of 1HFY18, with improved sales in the key segments of Australasia/North America and UK/Europe. Even allowing for increased wine costs from the 2017 and 2018 vintages, EBIT increased by $2.5 million or 27% to $11.8 million. UK/Europe segment contributed 67% of the increased EBIT due to the ongoing improved sales mix through the expansion of the McGuigan Black Label brand. The Net Profit after tax was $6.5 million compared to $4.4 million in the prior period, an increase of 46.3% on PCP basis, although the result was hindered by lower than expected forecasted yields from the vineyards of AVG in 2019. The gearing ratio of the company remains at a comfortable 27% as compared to 26% as of 30 June 2018.

Decrease in yield from uncertain weather conditions: As reported at the November 2018 AGM, there was frost in some grape growing regions which will result in a lower than expected yield from the vineyards of AVG. The combined impact of this frost coupled with the recent extreme weather is expected to impact the full year SGARA result of $3.0 million to $5.0 million (before tax) against expectation.

Meanwhile, the share price of the company has delivered a return of -2.04% and -1.54% in the past three months and one month respectively. The stock is trading close to the lower level. Hence considering the robust half-yearly result with strong revenue and bottom-line growth and looking at the current trading level, we give a “Speculative Buy” recommendation on the stock at a current market price of $0.480.


AVG Daily Chart (Source: Thomson Reuters)
 

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.