Treasury Wine Estates Limited 

TWE Details
 
Strong Guidance to Drive Business Growth:Treasury Wine Estates Limited (ASX: TWE) offers a range of international wine such as luxury wines, premium wines and commercial wines to the consumers.
 
H1FY20 Operational Highlights:TWE announced its half-yearly results, wherein the company reported net sales at $1,536.1 million in 1HFY20 as compared to $1,507.7 million in H1FY19. The business witnessed strong performance across Asia, ANZ and EMEA regions, which was led by Luxury and Masstige growth. However, US wine market remained challenging during 1H20. Cost of goods sold came in at $868 million, up 1.9% on pcp basis. Luxury and Masstige NSR witnessed a growth of 6.8% as compared to H1FY19 which represents ~73.1% of Group NSR. The company reported higher EBITS margin of 23.9% as compared to 23% in the previous corresponding period. The company reported net profit after tax at $211.4 million, down by 1% from H1FY19.


H1FY20 Income Statement Highlights (Source: Company Reports)
 
Guidance: The company expects its FY20EBITS to grow within the range of 5% to 10% on y-o-y basis while FY20 full year cash conversion ratio is expected to be in-line with FY19. For FY21, the business expects its EBITS growth within the range of 10% to 15% on y-o-y basis, driven by growth across the Luxury and Masstige portfolio, across all the markets.
 
Valuation Methodology: Price to Book Value based Methodology
 

Price to Book Value based Methodology(Source: Thomson Reuters)

 Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of TWE is quoting at $13.030 with a market capitalization of $9.36 billion. The stock made a 52-week low and high of $12.35 to $19.47 and currently, the stock is trading at the lower band of its 52-week trading range. The business is looking for the investment in Luxury production assets to boost the next phase of TWE’s premiumisation journey. The business reported cash conversion ratio of 85.1% during H1FY20. Considering the above factors, we have valued the stock using a price to book based relative valuation method and arrived at a target price with higher single-digit upside (in % terms).  Hence, we give a “Buy” rating on the stock at the closed price of $13.030, up 0.231% as on 31 January 2020.

 
TWE Daily Technical Chart (Source: Thomson Reuters) 
 

Bubs Australia Limited

BUB Details
 
Gross Revenue Increase by 21% on pcp: Bubs Australia Limited (ASX: BUB) is engaged in the processing of premium range of infant nutrition products.
 
Q2FY20 Operational Highlights:BUB recently announced its December Quarter highlights, wherein the company reported gross revenue of $14.54 million, up 21% on pcp terms. The business witnessed robust performance from Bubs® Goat Infant formula, representing a 118% growth on pcp terms. Bubs Infant reported a growth of 77% from Q2FY19. During the quarter, the company focused on improving its retail presence in China and collaborated with Alibaba for cross border e-commerce channel. The company’s Australian business witnessed benefits from its strategic collaboration with Chemist Warehouse. 
 
Cash Flow Highlights:  During the period, the company reported net cash used in operating activities of $12.485 million and reported net cash inflow from financing activities of $33.665 million. Cash and cash equivalent stood at $39.130 million at the end of Q2FY20.
 
Guidance:The company expects total estimated cash flow for the Q3FY20 at $26.043 million which includes product manufacturing and operating costs of $19.467 million, advertising and marketing expense of $3.056 million, and administration and corporate costs are expected at $2 million.
 

Q3FY20 Estimated Cash Outflows (Source: Company Reports)
 
Stock Recommendation:The stock of BUB is trading at $0.81 with a market capitalization of $521.07 million. The stock has a 52-week low and high of $0.425 to $1.615 and currently is trading at the lower band of its 52 weeks trading range.The stock has corrected 21.19% and 32.61% in the last three months and six months, respectively. The products of the company have witnessed robust demand in Q2FY20 while its strategic collaborations are likely to drive business growth in coming quarters. Considering the recent price movement, trading levels and business prospect we recommend a “Speculative Buy” rating on the stock at a market price of $0.810, down 12.093 % as on 31 January 2020. The stock was down due to 32% de-growth in the Chinese market, which represents 15% of the gross sales.

 
BUB Daily Technical Chart (Source: Thomson Reuters) 

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