Australian Vintage Ltd

AVG Details

H1FY21 Performance Update: Australian Vintage Ltd (ASX: AVG) is engaged in the business of wine making, marketing and vineyard management. The market capitalisation of the company as on 06 April 2021, stood at ~$200.70 million. The company delivered robust financial performance with total revenues of $148.4 million during H1FY21. The sales of its four key brands comprising of McGuigan, Tempus Two, Nepenthe and BVWC grew by ~20% during the period. The NPAT grew by a significant ~127% to $13.3 million during the period, when compared to the previous corresponding period. There was an improvement in the operating cash flow to $30.9 million during the same period under consideration. There was also a reduction in the net debt by $16.2 million to $51.1 million as of 31 December 2020. It did not declare any interim dividend during the period.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company delivered decent H1FY21 results which was in expected lines. The company believes that the impact of COVID-19 has been positive on its business prospects and aided by improved production efficiencies. It expects to achieve full FY21 operating cash flow of $40 million. As per the company the early indications for the 2021 vintage suggests higher yields compared to the prior period.

Stock Recommendation: The company anticipates the full-year net profit after tax to be between $18 million and $20 million in FY21. It reported a debt-to-equity ratio of 0.37x in H1FY21, compared to the industry median of 0.21x. As per ASX, the stock of AVG is trading close to its 52-weeks’ high level of $0.760. The stock of AVG gave a positive return of ~101.388% in the past one year and a positive return of ~23.93% in the past three months. On a technical analysis front, the stock of AVG has a support level of ~$0.694 and a resistance level of ~$0.746. On a TTM basis, the stock of AVG is trading at a P/E multiple of 10.9x, higher than the industry median (Consumer Non-Cyclicals) of 9.5x. Considering the current high trading levels, valuation on TTM basis, recent rally in the stock price, higher levels of debt to equity ratio and the key risks associated with the business, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the current market price of $0.725, up by 1.398% as on April 06, 2021.

AVG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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