Australian Vintage 

Record Cash Flow: Australian Vintage Ltd (ASX: AVG) has posted encouraging numbers for the financial year 2018 with Net profit after tax of $7.7 million compared to the $4.3 million in the prior period. Revenue for the company has come in at $264.6 million, an increase of $38.2 million from the previous year. The company has achieved the highest cash flow from operating activities in 12 years at $26.7 million, up $12.7 million from the previous year. Continued focus on the UK market has been a major growth driver for the Australian Vintage, adding $5.4 million in sales. Segmental revenue has been positive for all the segments of the company. Besides this, the company pegs the capital expenditure for the next financial year around $19.0 million to be in line with the current financial year at $19.5 million. The major part of the capital would be spent on the development of Buronga Hill Winery, the benefit of which would be realized in the long run and add value to the shareholders.


Segmental Revenue (Source: Company Reports)

Stock Performance: After falling recently from the highs of $0.660, the stock has retraced close to 50% of the total fall, indicating fresh buying at the lower levels. The stock is trading above its near-term Exponential moving averages suggesting the continuation of the positive momentum. Level of about $0.55 is acting as a crucial resistance level for the company and a breakout above that level would take the stock higher. We maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.540, considering financial performance and encouraging prospects while wine exports from Australia have been on the rise.
 

Gage Roads Brewing Co 

5 Year Strategy Pays off: Gage Roads Brewing Co Limited (ASX: GRB) has posted Net Profit after Tax for the year ended 30 June 2018 at $2.06 million, up 54% from the adjusted NPAT of $1.34 million in FY17. With the continued performance, the company is in the right direction towards achieving the increased profitability through a strategy shift. Focusing on the proprietary brands and other high margin products, has paid for the Gage Roads in the financial year 2018. The company has managed to remain debt free with debt facilities at an approved limit of $6 million. Among other brands, the Single Fin Summer Ale has registered the maximum growth of 123% to become the company’s highest selling individual brand.

The company has capitalized on its unique geographical advantage in Western Australia by launching new core range products into the market. Gage Roads is the only regional brewer with the capacity to produce high quality, high volume lager beer in Western Australia (WA). Matso’s acquisition is in line with the company’s growth strategy as the iconic West Australian flavored beer maker has seen the volume growing to approximately two million liters per annum. Moving ahead, the company is expected to ramp up its distribution and sales growth options in the independent channel. We expect that the current developments and the future plans of the company are in line with its 5-year strategy.


5-Year proprietary Brand Strategy (Source: Company Reports)

Stock Performance: Stock has reflected the sound health of the company with the price moving upwards after breakout in April. The stock in the past has made higher highs and higher lows suggesting strong underlying momentum. In fact, momentum indicator on relative strength shows that there is still considerable upside left in the stock. 21 days Exponential moving average has also been a strong support for the price. We maintain “Hold” rating on the stock at the current price of $0.135.
 

Treasury Wine Estates 

Decent Performance in FY18: Treasury Wine Estates Limited (ASX: TWE) reported consolidated revenue of $2,496.4 Mn in FY18 against $2,534.2 Mn in FY17. While there has been a significant rise in the Net profit after tax for FY18 at $360.4 Mn, up 33.5% from FY17 at $269.9 Mn. Based on the performance, the company has declared the final dividend of 17 cents per share, fully franked which brings the FY18 full-year dividend to 32 cents per share, higher 23% on prior corresponding period. Treasury Wine is committed to continuing its investment in the brand portfolio initiatives to achieve incremental growth in sales and EBIT margin.

Cash has depleted in the financial year 2018 for the company primarily due to $300 million share buy-back, higher dividends, high working capital and tax paid. There has been a continued growth in two important metrics from shareholders’ point of view – EPS (before material items and SGARA) and ROCE over five years. While the NSR has declined in the Americas region due to flat wine volumes across the Industry, it has been compensated by growth in Asia and Australia, where the market remains attractive.

 

Stock Performance: The stock has generated YTD return of 22% and continues to move higher. There is a potential upside in the stock but at the current levels, it looks expensive, trading around its 52 weeks high. Level of $20 might be a crucial level for the stock to cross and correction is in the sight if the stock fizzles down before that level. At the moment, the Risk-reward ratio is to be watched out. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 19.470.

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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.