Stocks’ Details

Treasury Wine Estates Limited

Wine Australia Export Data: Treasury Wine Estates Limited (ASX: TWE) is into international wine business having a portfolio of luxury, premium and commercial wines. The market capitalisation of the company stood at A$10.94 Bn as on 9^th July 2019. Recently, the company, via a release dated 1^st May 2019, updated the market about Asia Depletions & Australian Vintage. The company stated that the company notes the release of Wine Australia export data for the quarter ended March 2019. In recognition of historical investor interest in Wine Australia export data, and to ensure consistent communication to all shareholders, the company has re-iterated its caution against using this data set as a direct read through to Treasury Wine Estates Limited’s trading performance. In the release dated 14^th February 2019, the company had reinstated Dividend Reinvestment Plan. The DRP enables the eligible shareholders to reinvest either all or part of their dividend in additional fully paid ordinary shares in the company, instead of receiving the dividend in cash.

The company’s net assets increased by $121.3Mn on a reported currency basis on the back of an increase in net working capital, which was primarily driven by higher inventory reflecting intake from the high quality, high volume 2018 vintage in California. The company reported return on capital employed of 13.3%, reflecting a rise of 0.7ppts in 1H FY19.


Balance Sheet (Source: Company Reports)

What to Expect: The company reiterated the guidance for reported EBITS growth of around 25% in the financial year 2019. It is expecting EBITS growth rate in the ambit of around 15%-20% for FY20. The company added that the prospects for the growth in Asia happens to be highly attractive and it also added that it is expanding distribution and growing market share in the imported wine category, which would support the company’s future prospects.

Stock Recommendation:Treasury Wine Estates Limited stated that the Asia region continues to deliver the strong as well as sustainable growth. On the stock’s performance front, it witnessed a rise of 2.98% and 5.92% in the time span of three months and six months, respectively.

Considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price ofA$15.630 per share (up 2.761% on 9^th July 2019).
 

Coles Group Limited

Growing Long Term Shareholder Value:Coles Group Limited (ASX: COL) is a retailer of products like groceries, liquor, household goods through online and stores. The market capitalisation of the company stood at A$18.21 Bn as on 9 July 2019. The company stated that the cost of doing business is rising faster than its sales and it witnessed online growth but at a lower margin. The company added that customer expectations & behaviors are changing faster than ever.

In the release dated 14^th June 2019, S&P Dow Jones Indices had made an announcement about the changes in S&P/ASX indices which had become effective at the open of trading on June 24, 2019.Coles Group Limited has been removed from the S&P/ASX 20 Index. The company reported supermarket sales revenue of $7,272 Mn in Q3 FY 2019 in comparison to $7,049 Mn in the same period of the previous year, which reflects a growth of 3.2%.


 
Supermarkets Performance Review (Source: Company Reports)

Future Prospects:The company is focused on meat export. COL has meat export business with around $400 Mn in annualised revenue throughout 40+ countries. The company is investing more than $1Bn in Witron and Ocado supply chain automation.

Stock Recommendation: COL has strong cash generation, balance sheet, and attractive dividend payout ratio. The company reported current ratio stood at 0.74x at the end of December 2019, reflecting YoY growth of 20.4%. With respect to the stock’s past performance, it generated returns of 11.79% and 16.47% in the time span of three months and six months, respectively. Based on the foregoing and decent outlook in the business, we give a “Buy” recommendation on the stock at the current market price of A$13.920 per share (up 1.978% on 9^th July 2019).
 

Domino's Pizza Enterprises Limited

Updates on Class Action: Domino's Pizza Enterprises Limited (ASX: DMP) is a food retailer which operates pizza chain which is having the market capitalisation of A$3.32 Bn as on 9^th July 2019. As per the release dated 28^th June 2019, the company has received an unsealed copy of documents which are said to have been filed in Melbourne Registry of the Federal Court of Australia. The documents have alleged that Domino’s misled the franchisees who, in reliance upon Domino’s representations and conduct, paid their employees in accordance with a number of industrial agreements rather than under the Fast Food Industry Award 2010. However, Domino’s had confirmed that it did not mislead its franchisee employers as to their employee payment obligations.
 

Product Feedback (Source: Company Reports)

Future Aspects: Domino's Pizza Enterprises Limited mentioned that it still has a long runway to open new stores and to be the leader of the internet of food in every neighbourhood. It is planning to open 1000 new stores by 2025-2028.

Stock Recommendation: Domino's Pizza Japan is currently using DPE’s proprietary OneDigital platform for online ordering. On the stock’s performance front, it yielded negative returns of 1.65% and 13.23% in the time span of one month and three months, respectively. The annual dividend yield of the stock stood at 2.9% as per ASX.  As per ASIC dated July 3, 2019, 10.96% of total product in issue has been reported as short positions. Hence, considering the aforesaid facts and current trading level, we put our wait and watch stance on the stock at the current market price of A$40.320 per share (up 4.052% on 9th July 2019).


Comparative Price Chart (Source: Thomson Reuters)      

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